Amway: The Untold Story

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Amway Asia Pacific crisis continues. Company loses $3.4 million compared to net profit of $8.5 million same quarter last year.
Amway Corp.'s latest report on the financial status of Amway Asia Pacific paints a grim picture indeed—net sales are down 30%, and net profits plunged almost 150%. "The Company recorded sales declines in all markets", stated Steve Van Andel. chairman of Amway Asia Pacific. Distributor renewals also declined in all AAP countries except Australia and New Zealand, which saw "slight increases."

Amway's press release places all the blame for the declining revenues and recruitment on the Asian economic crisis, but as already reported here, less biased observers have pointed also to Amway's horrid reputation.

Posted 1/9/99

Falling number of new U.S. Diamond and Emerald distribs provides further evidence of Amway U.S. decline.
Dick DeVos' characterization in a 1994 U.S. World News & World Report article of U.S. growth as "slowing" may have been an understatement. If the number of new Diamond and Emerald level distributors is any indication, Amway's U.S. distributor force may actually be shrinking. Charles Midgett, whose web site "The Other Side of the Plan" contains a wealth of revealing data, has been tracking the number of new Diamond and Emerald distributors announced in the U.S. Amagrams. The number of new pins for 1998 was the lowest in the past seven years, with new Diamonds down to 19 from a 1996 peak of 49, and new Emeralds down to 72 from a 1993 peak of 150. Obviously it's not only in Asia that Amway is in trouble, and one has to wonder if Amway's new "I-mall" venture is a desperate attempt to save a sinking ship (or a collapsing pyramid).

Posted 1/9/99

FACTnet includes Amway in list of "cults, groups and individuals that are alleged to be using coercive persuasion mind control techniques." Amway in distinguished company...Scientology, Unification Church, Heavens Gate also on list.

"Mind control is psychological coercion. Mind control techniques stifle individuals' ability to think independently and rationally. For individuals under the influence of mind control, freedom of religion, free speech, and other freedoms of expression which derive from free thought, are literally impossible. Without freedom of thought, all our freedoms become enfeebled or meaningless."

—FACTnet mission statement

Based in Boulder, CO, FACTnet's board of directors includes world-renowned cult expert and counselor Margaret Singer, author of "Cults in our Midst"; entertainer Steve Allen; and Patricia Ryan, whose father Congressman Leo J. Ryan was murdered in 1978 by the followers of Jim Jones. (Phil Kerns, author of "Fake It 'Til You Make It: Inside Amway", also lost family at Jonestown, and in his book comments on the similarity between Amway and the People's Temple.)

FACTnet's October-December newsletter featured the following article on Amway:

"Amway. Financial independence, personal power, and a life of luxury—all alluring parts of the touted American dream, craved by many but attained by few. It's the kind of life that Amway Corporation promises its distributors. However, as those who have been involved in the company all too often discover, that promise doesn't come with a money-back guarantee. 'They love people who are broke because they're weak,' says Lori Mauldin, according to FW Wire [July 13, 1998]. Mauldin had a brief but memorable experience with Amway. 'They really prey on the desire of materialism. They constantly show the material gain and say, 'You can have this too.' When you're recruiting people, they tell you to ask people what their dreams are. They love to find the people who want the Mercedes, the boats, the big houses. That's exactly what they're looking for." Despite its success, Amway's track record is one with a high dropout rate, low average incomes, and lawsuits from competitors, regulators, and its own distributors. Amway is often referred to as a cult and considered a pyramid scheme (despite a 1979 Federal Trade Commission ruling to the contrary. "Amway is a cult. There's no getting away from that," Brock Akers, a Houston attorney representing 29 distributors in a $200 million suit against the company, told FW Wire. "My clients, who are very high up in the Amway system, just now are realizing some of things. They're getting deprogrammed. And they can't believe some of the things they have done. I think the Internet may ultimately cause the demise of Amway. Anyone who is thinking about getting into Amway, who has a computer and has a clue can check it out. And they're going to find a lot of unhappy people out there." Amway detractors are many and yet it remains a fascinating mystery of the business realm. Indeed, the superhighway is strewn with tales of money, dreams and friendships lost in the treacherous waters surrounding Amway. Most are in the process of rebuilding their lives; some are attempting to mend broken marriages. All are bitter and more than a little angry with themselves for being duped."

FACTnet's web site is an excellent resource for those researching cultism and mind control.

Posted 12/26/98

Texas Distributors Being Punished for Defying Yager? The latest lawsuit filed by the plaintiffs in the Morrison case alleges that Ted Fish and Andy Andrews, two popular Amway motivational speakers, bowed to pressure from Dexter Yager and reneged on their agreements to appear at rallies sponsored by Team Resources.
In their original lawsuit, the Morrison plaintiffs claim they were improperly cut off from the support of the Yager/Wilson organization and, as a result, were forced to create their own support system on short notice. Here the plaintiffs claim that Team Resources, the support system they created, contracted with motivational speakers Fish and Andrews, but that both speakers refused to fulfill those contracts for fear of "alienating" Yager. Yager, of course, is Amway's single most powerful distributor, and his considerable influence is well known.

Posted 12/24/98

Six Counts in P&G's Texas Lawsuit Dismissed. Seven counts remain.
According to an Amway press release, the judge in the Texas Procter & Gamble case dismissed six of the claims brought against Amway by P&G. Dismissed were of unfair competition; negligence and negligent supervision; and three alleged violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act. The remaining counts include business disparagement; defamation; injury to business reputation or trade name or mark; section 43(a) of the Lanham act; tortious interference with prospective business relations; vicarious liability; and fraud. I'm working on obtaining a copy of the judge's decision and will post it here at the earliest opportunity.

Posted 12/24/98

Amway to Open "Internet Mall"?  Amway prohibits its distributors from using the web to advertise product or solicit recruits for "their" businesses. Is it because Amway saw yet another opportunity to milk them for cash?
For the past couple of months the grapevine has been buzzing with the news that Amway will be branching off into the "I-Mall" business. A recent announcement posted on the INA web site would seem to confirm this:

Few details are known at this point. I've put together a page for some of the comments I've gotten from distributors.

It should be emphasized that at this point that none of this has yet been confirmed—with the exception of the announcement on the INA web site—and some or all of it may turn out to be untrue. And while the INA announcement is big on the usual Amway hype and puffery, it says nothing about how the average distributor will participate in and benefit from this venture.

At present, Amway's rules regarding the use of web sites by distributors highly restrictive. This is just one more example of how Amway, while constantly trying to represent to the courts and to the public that its distributors are "independent", exerts a degree of control over them that can only be described as oppressive. You would think that a truly independent business owner would have a high degree of control over their own business, including the freedom to determine how and where products could be sold, to whom products could be sold, what marketing methods to invest in, etc. And you would be right. The problem, of course, is that Amway distributors are anything but "independent" and have little or no control over significant aspects of their businesses. Any real business owner is free to take advantage of the new opportunities offered by web-based marketing, opportunities that by all accounts are becoming increasingly important. Amway distributors, on the other hand, are restricted to using web sites only to provide additional information  to persons who have already been contacted on a "face-to-face" basis.

All this raises a very significant question: how will the average distributor's participation in Amway's proposed I-Mall differ from what they are currently allowed (or not allowed) to do on the web? One possible answer is that distributors will be allowed to take better advantage of the web's potential, but only if they pay Amway for the privilege. If this is the case, then it would appear that Amway has devised a blatant scheme to charge its distributors for something that they could easily and cheaply (almost every service provider offers free space for a web site) obtain without Amway's assistance. And of course if distributors who participate in the I-Mall are not allowed to take better advantage of the web, then why would they want to bother? There's also the question of what "taking better advantage of the web's potential" will mean, if indeed that turns out to be the case. What will a customer be confronted with upon entering the Amway I-Mall? Hundreds or thousands of distributor sites, each one offering the exact same products? What would be the point, and why would any distributor want to bother?

Yet another important question is whether or not anyone besides Amway distributors are going to be interested in buying Amway products, which are for the most part notoriously uncompetitive and consumed almost exclusively by distributors themselves, who are exhorted to do so as a means to achieve their "dreams."

We'll just have to wait and see what Amway has in mind.

UPDATE 12/7/98: Looks like the I-mall, even though it's at least nine months away from becoming a reality (barring unforeseen delays or a possible scrapping of the entire plan), is already being used as bait to hook the hapless victim. Here's a recruiting pitch someone received via email and forwarded to me. The mark had previously asked this distributor the dreaded "is this Amway?" question...notice the response. At this point we have no way of knowing if the I-mall will indeed be a "totally new entity," or if this and the other claims are just more of the usual exaggeration and misrepresentation.

Posted 12/3/98

Plaintiffs in Texas Lawsuits Appeal Order to Arbitrate. Attorney charges that Amway cooked up arbitration "agreement" when it realized that a potentially embarrassing and damaging lawsuit was probable.

Following a judge's ruling that they must go through Amway's mandatory arbitration process, the plaintiffs in three Texas lawsuits have decided to not sit back and allow Amway to unilaterally deprive them of their constitutional rights. In the appeal, filed on 10/23/98, plaintiff's attorney Brock Akers raises a number of reasons why Amway's arbitration "agreement" is invalid, including:

1. Only six of the original 30 plaintiffs signed the arbitration agreement.
2. At the time the agreement was signed, the rules of arbitration had not even been drafted, and therefore the plaintiffs could not possibly have known what they were agreeing to even had they signed it.
3. The events in question all occurred before the existence of the arbitration agreement, so the plaintiffs could not possibly have agreed to resolve them through arbitration.
4. The mandatory arbitration agreement is not merely a change to Amway's rules, but a change to the distributor contract itself, and therefore cannot be forced on one party by the other.

Akers also points to the inherent unfairness of the arbitration process as designed by Amway:

That raises an excellent point, one all potential (and current) distributors should pay close attention to. While it's obvious that Amway is forcing you to give up your constitutional rights, it is much less obvious what these rights are being replaced with. How much do you know about the workings of Amway's mandatory arbitration process? How, and by whom, is the arbitrator chosen? Who are the potential arbitrators? Can the arbitrator even be an Amway distributor who has been the subject of complaints similar to yours? What "rights" do you have if you don't think the arbitrator is fair and unbiased? How much will the arbitration process cost you? (Yes, it will cost you.) What is Amway doing to insure that distributors are fully informed of the facts before signing away their rights?

Attorney Akers also raises another significant point: why does Amway, who consistently claims that distributors like Yager and Britt are "independent" from Amway, force distributors to not only arbitrate disputes with Amway Corp., but also arbitrate tools-related disputes that involve their uplines but not Amway Corp.?

Good question. It would seem that Amway, in addition to providing a seemingly legitimate "front" for Yager and his ilk to operate behind, is also eager to protect them from the legal consequences of what Amway has already admitted is an illegal and unethical business.

Posted 11/22/98

Amway Files Lawsuit Against Procter & Gamble. Complaint riddled with accusations Amway knows to be false.
P&G reponds that suit is "a desperation move by Amway as we advance both of our cases against it in Houston and Salt Lake City ... Amway has attempted to pursue this ridiculous claim in the Utah action, and the Federal court there dismissed it...This suit is really without any substance and we are going to move immediately to have it dismissed."
In an apparent attempt to resurrect the charges in its countersuit thrown out by the Utah court, Amway Corp. has filed a lawsuit against P&G in Michigan. Featured prominently in the suit is this web site, which Amway accuses P&G of paying for and using to spread "false statements, half-truths and distortions."

Amway's hysterical accusations are nothing new. In September of 1997 I spent an entire day being deposed by Amway's attorneys. They were told that:

1. I had been researching Amway and sharing the results of that research on the internet for at least six years prior to setting up "Amway: The Untold Story."
2. I was not contacted by P&G's attorneys until the site had been up for almost a year.
3. P&G's attorneys asked me to provide them with copies of my considerable collection of information, and to advise them on how Amway really works. I was paid $25 an hour for my time. (The total amount of money paid to me by P&G over the course of a year was less than $2000.)
4. I asked P&G's attorneys to provide me with copies of publicly available court documents, and they did.
5. Neither P&G nor anyone else has ever paid me to set up or run my web site, or told me what to post or not post on it.

Despite this sworn testimony, and having nothing to contradict it, Amway has continually insisted on lying about my relationship with P&G, both in public statements and in court filings. The reason for this is obvious: Amway has never been able to show that anything on this site is false, malicious, or misleading. They have never once backed up their sleazy accusations with even ONE specific example. They have never sued me, or asked or demanded that I change or remove anything on my site. Indeed, the only specific example of these alleged "false statements, half-truths and distortions" that Amway manages to come up with are statements from someone else's web site. Yes, you read that right...Amway's "evidence" of their accusations concerning this site is that I have a link to a web site which contains statements that Amway also claims are disparaging. As if that weren't pathetic enough, Amway has never shown (to my knowledge), that these statements from the other web site are false.

I'll be responding in more detail to Amway's latest pack of lies. In the meantime, here is a letter I wrote to Scott Leith at the Grand Rapids Press in response to an article he wrote about this lawsuit. You can also read Sleazeway's previous attacks on me and my detailed responses.

Posted 11/11/98

Judge Declares Texas Lawsuits Stayed Pending Arbitration
Having been unable and/or unwilling to put an end to unethical and illegal practices, Amway instead attempts to hide its problems by depriving distributors of the right to pursue justice through court system or to even publicly discuss disputes.

UPDATE: The text of the judge's decision is now available on AUS.

On October 15, a judge for U.S. District Court in the Southern District of Texas ruled that the plaintiffs in the Morrison, Musgrove and Pruitt lawsuits must pursue their complaints through the arbitration process that Amway now forces on all its distributors. (I believe that the Griffith lawsuit was also similarly stayed, but I haven't yet confirmed this.)

Amway long ago acknowledged that the tools business is illegal and unethical, that distributors are being seriously abused, and also that Amway has been unsuccessful in controlling these problems. Until recently, Amway could count on the relative secrecy of the many lawsuits and distributor complaints it has had to deal with. With the advent of the internet and web sites like this one, however, that situation has changed dramatically; Amway's dirty laundry is now aired in public, and each new lawsuit brings additional embarrassment and makes it more difficult for Amway to deny the facts.

As part of the settlement of the Hanrahan class action lawsuit, Amway enacted additional rules that were supposedly aimed at curbing the tools abuses. Rules, of course, are useless unless enforced. Amway has had rules in place since long before the Hanrahan lawsuit, and it could not be more clear that these rules are unenforced and/or ineffective. Amway's own corporate counsel have, in fact, admitted in an interview with a Baton Rogue Advocate reporter that Amway does not even enforce the critical "retail selling" rule that supposedly makes Amway a legitimate business rather than another illegal pyramid scheme, and went on to state that the FTC "does not require Amway to monitor compliance with this [the retail selling rule] or any other rule." We can only assume that "any other rule" would include rules regarding the representation and sale of Business Support Materials.