China Bans Amway like Multi-Level
Marketing Compensation Plans



As reported in two separate articles in the Shanghai Times, the Chinese government has made Amway type Multi-level Marketing pyramided compensation schemes illegal as of November 1, 2005.

Commissions will be paid commissions only on individual sales and not on a commissions schedule that includes sales from those distributors they recruit. 

In addition, the article stated that Amway China will reduce its prices 20% and increase their commissions.  The article gave me the impression that Amway prices will be the former distributor cost and the "suggested retail" price will be eliminated.  The article stated most distributors were unable to command the suggested retail prices and only sold at distributor cost.

The article stated that sales commissions would be increased to compensate for the loss of income from downline sales from the pyramided compensation plan, no doubt to give distributors incentive to sell more product instead of recruiting more distributors.   Amway will be increasing its sales commission to between 9 and 30 percent, up from 3 and 21 percent earlier. Amway's foreign subsidiaries typically pay 3 to 21% of BV for distributors at or below the platinum level.  Total bonus reach about 30% of the product BV.

It will be interesting to see how Amway China's sales fare in the future.  The main allure of Amway is its pyramided compensation plan.  Few people would be interested in direct selling as an occupation, especially with a premium priced product line like Amway's.  In the North American market most Amway/Quixtar sales are to the distributors themselves.  Sales at retail prices rarely happen, and many Amway products are sold on E-bay for less than distributor cost.  

I suspect without the ability for people to build their own personal pyramid scheme using the Amway pyramided compensation plan that Amway China's sales will take a long and steady fall.  I am sure the Amway lobbyists are working overtime to try to get the new rules overturned. 

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