Former high level Amway distributor Eric Scheibeler, author of Merchants of Deception, offers this perspective on the Amway “business” and whether it can really be considered a good opportunity:
Amway Global: Fact, Fiction or Business Opportunity Fraud?
Perhaps you have seen the television commercials for Amway global promoting that Amway operates in “50 different countries and helps put over 3 million people into business for themselves… we are a company of opportunity.” Do the “Independent Business Owners (IBO’s) actually own an independent “business”?
They certainly are induced to “invest” in their own business but there are quite a few differences. First, IBO’s have no control over the cost of their own business products, which high level leaders have described in court documents as “hopelessly overpriced”. Second, you could spend a decade investing in “your own business” and building a network of people and if you decide to leave for more lucrative opportunity and bring the organization you developed (your equity) with you, chances are you may be litigated against and find that Amway/Quixtar (and its well funded legal teams) considers your downline line of sponsorship their property.
You also can have your income literally stopped on a day’s notice while your legal expenses are being driven through the roof. In what truly “Independent Business” can someone else literally shut off your income and claim your “business” after a decade of work and investment?
The documentation seems to support a nearly 99% loss rate for IBO’s in the US. Documentation also supports that Amway Senior management has known that deceptive practices were being utilized upon its trusting distributor force as far back as the early 1980’s. See additional details located at The Amquix Smoking Gun.
Assistant Wisconsin Attorney General Bruce Craig prosecuted Amway in the early 1980’s and stated “tax returns (obtained for this litigation) of all active Wisconsin Direct Distributors, the company’s top 1%, showed an average net income of minus $900.” I was shocked to learn that it was almost identical tactics that were utilized upon myself and our organization decades later.
Justice Norris, in the recent MOD initiated and supported UK Government case against Amway reported in 2008 that out of an IBO population of 33,000, “only about 90 made sufficient incomes to cover the costs of actively building their business.” If this is accurate, that seems to be close a 100% loss rate for those investing in the Amway UK “business opportunity”.
I personally advised senior management of, in my experience, the 99% loss rate for IBO’s when I terminated my distributorship on August 8, 2003. I advised the corporation that I could not accept “blood money” that was generated from new people who were systematically being deceived. The shocking events that followed are detailed in my book “Merchants of Deception”.
The corporation and its high level motivational recruiters have been plagued with lawsuits and/or arbitrations for decades yet continue to recruit new consumers to “invest in the opportunity”. This is despite full knowledge of losses for almost all participants, similar in some ways to the actions of Bernie Madoff, the infamous Wall Street Swindler. New consumer investors are simply recruited to replace almost all who have lost and drop out, with much of the money being transferred from those at the bottom to those at the top of the pyramid (the corporation and a small percentage of high level distributors).
The movement of products simply camouflage the transfer of funds from new investors on up.
Hear audio of Amway executives talking about how wonderful the Amway – Quixtar opportunity is on Eric’s site:
http://www.merchantsofdeception.com/emails/MODemail2.html
Scheibeler continues to peddle his inaccurate and inflammatory position in order to justify his failure in the Amway biz. He has lost in court and been forced to reverse several of his key accusations/positions.
For less than $150, you can register your business with Amway… and yes you have certain rules to follow that are enforced by Amway and the IBOAI. However, these rules are a heck of a lot less onerous than spending $1.3 million for a McDonalds Franchise. With that deal you’re told where you can put your restaurant, what’s on the menu, how much to charge, what to wear, forced to buy food and supplies from the McDonalds Crop… and if you don’t follow McDonalds many rules, your franchise can be yanked…
Has Amway somehow hoodwinked 50 governments in order to be legal in 50 countries around the world? I don’t think so. In North America, has Amway somehow deceived the legal teams of over 600 partner stores that make up our shopping mall?… I don’t think so. Did Amway just reduce prices on many of its products (by 10-25%) in order to make us even MORE competitive in the market place? Yes, they did!
Moreover, Amway added $70 million do the IBO compensation plan in 2008… and in 2008/2009 is spending over $500 million on brand and image awareness.
As for litigation… yes Amway is in court from time to time protecting itself and our businesses. But that’s the way of business these days. At any given time, Walmart has up to 1000 lawsuits and other legal actions it is working. That’s just the way it is!
My wife and I make some great money in our Amway business… way more than it costs to run our business… and we profit by serving our downline and our customers.
Eric, give it a rest and go find something else to do.
Ah, yes, Chris… You’re parroting the standard lines you’ve been fed.
1. It doesn’t cost much to start an Amway “business” so people aren’t really losing money. The fact is that almost everyone DOES lose money in businesses like Amway because of the minimum purchases required to move up the pyramid plus the wide range of expenses to be involved. Sure, those expenses are voluntary, but so many elect to pay them because they think it’s their ticket to the top. Whatever the reason, the vast majority of people are still losing money in Amway.
2. Amway’s process must be legal and moral if they haven’t been shut down. Anyone who has studied MLMs knows that they are on the fringes of what’s legal. And, more importantly, the morality of a “business” that is nothing more than a deceptive transfer from the bottom of the pyramid to the top is the issue. Lies and deception by Amway employees and kingpins is the key problem.
3. Amway paid out [put in large-sounding number] in commissions. How great is that? The real number that are important are the ones related to how much each distributor is making. It’s next to nothing for all but a tiny fraction of one percent at the top of the pyramid.
Amway is legal yes, but so what? Amway’s profits or legality has no relationship with the business of an IBO. Amway’s products are very highly priced. Any neutral price comparison would clearly reveal this fact. IBOs justify the high prices with the argument about “quality”. Quality is subjective and in fact, a consumer report some time ago rated Amway laundry products as decent, but not any better than the big name brands.
Also, IBOs do lose tons of money. Just look at a function where say 25,000 IBOs are there. Keep in mind that there are many many functions across the country and happening all the time. These IBOs are all overspending to do their defacto 100 PV quota. They are also likely on KATE (voicemail), standing order and the costs of travel and the functions. These expenses guarantee that the IBO group as a whole, suffers massive losses with a select few reaping in the rewards. Amway also wins as these “dedicated” IBOs will self consume their PV.
If this business and the products were so good, why are so few products sold to non IBOs and why to IBOs stop buying if their focus is no longer “going diamond”? It’s because the products only have value to an IBO when that IBO still thinks they will create passive residual income. Once they realize it’s not happening, their desire for Amway products disappears and they go back to WalMart or Costco.
Amway hasn’t hoodwinked all the governments where they have sought to do business. Hold the press!
What about India? In a majority opinion, two high justices in the ‘world’s largest democracy’ have decided that Amway violates India’s laws against pyramid schemes, which they term money circulating, prize chit schemes. In spite of this landmark ruling, Amway India continues in operate outside of Indian law. Operating the Amway scheme in India makes one a law breaker, and any Indian citizen may book charges against anyone engaging in the Amway swindle there.
With all the talk about Amway surviving their ‘roll up’ in Great Britain, isn’t it significant that Amway has no presence in France? David Brear has detailed how Amway was handled by the French authorities. In short Amway Diamond Jean Godzich was convicted in absentia and received a term in prison, although he had fled to the United States to avoid that problem.
To claim that Amway is legitimate because it operates in over 50 countries fails to mention that it has been determined to be illegal as well. As I have pointed out, Amway can be arrested in India. Amway has been shut down in France. In Great Britain, information garnered from the recent efforts to roll Amway up, showed that nearly all distributors–save a very few–lost money.
In the United States, nearly all IBO distributors conveniently disregard the 70% selling rule and therefore must represent a ‘lie’ in order to receive any commission payment (which actually acts more like a rebate than a commission). Therefore Amway as it currently operates in the US is a ongoing fraud! Operating outside of the FTC’s own rules.
The products are for all intents and purposes unsellable, therefore the small number of sales to non-distributor customers of less than 5% represents the only profits that can truly be divided amongst all levels of compensation. I must ask Cindy Coenen how this 5% (or less) in retail sales can be divided up to pay all the Amway middlemen and how can lavish lifestyles be created on such a small margin? How insane is this?
How can profit be generated by consuming ones own inventory? How can any circumstance of this nature even be called a business? Amway operates a carefully constructed “closed market swindle,” and obviously succeeds in finding people who believe in insane pseudo-mathematics. At the moment, Amway seeks to flim-flam folks outside of their North American operations like the Chinese Communists. The ‘American Way’ is now the ‘Chinese Communist Way’ to the significant shame of all Americans.
Amway has carefully baited the trap, and seemingly can find an ever increasing number of naive people to fall for their ‘closed market swindle.’ Calling a Amway’s swindle legal only makes it easier for the authors to avoid being held to account. Actually, Amway’s supposed legality only works to make it more difficult for the ‘taken’ to find redress. Amway has instituted a Nazi-like arbitration system that prevents the swindled from seeking redress in the courts. Those following the arbitration system usually find themselves effectively ‘gagged’ by any settlement agreement. Recently courts have found these arbitration rules to be ‘unconscionable’.
Chris, you indeed pal-parrot the Amway official line. This doesn’t guarantee success as the authors of these lies want all to believe. You therefore must make a Eric Scheibler out to be a loser liar. The loser liars are IBOs who still want to believe the unbelievable!
Replying to Joecool: that is a valid point. Most do not stay at a prosumer level after their ambition for Ruby, Diamond, or whatever level, has gone. This might also be due to the fact at that point they just want to make a clean break. I think some of the products are good, I’ll go that far and say some of them are good ( some of the cleaning stuff lasts for forever and works well, one of the facial cleansers works well and I liked the variety of the XS drinks although I didn’t feel I got much kick out of them ). They are however, more expensive, definitely not meant to compete with Walmart. Yet all the IBO’s get mad when you decide that they are not in your price range even if you thought the product was ok. Some people want convenience and quality, for others that’s just not important, especially with the economy right now.
The whole prosumer “save a few thousand a year” thing always bugged me, especially when I would track what I would have spent at Safeway versus buying online was less. You would have to have expensive buying habits for a Prosumer business to be cheaper for you (the few tax exemptions aren’t going to cover it). Anyway, just wanted to throw that in there.
Quixtarisacult: The whole 70% rule is odd. Nobody follows it and nobody, the FTC most prominently, does not seem to care. I guess it would be too much of a hassle to change or shut down half the MLM’s. Plus there are other political things there as well ( Amway is a major political contributor). Even with Amways new resurgence about selling, the most important thing is still the Ditto profile, consuming. If everyone followed the 70% rule, I think it would be pretty obvious that the opportunity would not generate any substantial returns, save for a few who were good salesmen and wanted to earn a little extra money selling ( I do know a few who were very good sales people and could make $500-600 from sales alone ). The rest would fall though. They better hope that the FTC doesn’t ever decide to look at that ruling again, otherwise it’s all over for a lot of people. Either that, or they need to state explicitly about how a prosumer business is legal.
the opinions stated in this section only represents very small percentage of people who have their strong or negative opinion of Amway. How about the millions of happy customers who keep on buying year after year without anybody forcing them at gunpoint? if u ask the people of Malaysia whether their current Prime Minister is a murderer and liar, more than half will strongly agree. But he is still the Prime Minister…there will always be negative people, but the numbers are very small comapared to the millions of satisfied customers. Remember, the products and the business opportunity are all 100% money back guarantee. Nobody should lose any money…
Lester, there aren’t millions of Amway customers. Amway reports that less than 4% of their good are sold to people who are not IBOs. There is about one customer for every 4 IBOs. Can you explain how you concluded that there are millions of customers?
Lester,
You understand that there are products being bought (and therefore sold) and some how view this as distributor success; but you must consider that nearly all of these customers are describing themselves as ‘independent business men’, and since only such a small percentage of these ‘business operators’ ever sell any significant amounts of product, their warehouse is significantly being robbed, all by the business man himself? (How insane is that?)
This supposed ‘business owner’ can never ever claim a profit! He ‘assumes’ the ‘bent over’ customer position and backs up to the only profitable business owner involved here, the Amway Corporation in Ada, Michigan. Amway products, probably the most marked up of all goods anywhere, support the mistaken idea that Amway is paying a commission, while these minuscule checks represent only a ‘rebate’ to their loyal customers, the ABOs and IBOs themselves. Amway business men are buyers of mostly mundane goods all coming with a extremely premium price tag.
The only ‘real’ profit that can be made in Amway comes from the small margin markup on the outside sales representing only about 4% of Amway’s Gross total sales. Amway doesn’t participate in these minuscule profits, although they benefit by their significant ability to fix a monopoly price. I must point out that many of the pitiful retail sales are made the distributor’ cost, so the distributor actually realizes a net loss from these transaction, all in the mistaken belief that these sales qualify one to remain viable in Amway long term closed market swindle.
Almost signed up for Amway. I couldn’t understand the huge mark up of products and convinced my partner out of it. I’m surprised though, how no one has intervened and stopped Amway from distributing.
Unfortunately I’ve seen the worst of Amway. My friends still spend time pushing the business and denying that they are broke.
I find this site very interesting. Does anyone out there know anything about a diet plan called Health Pointe 2.0? It comes accompanied with Amway dietary supplements, and clearly is a way for Amway to make more money. Can anyone shed some light on this?