Kerala (India) issues guidelines for direct selling firms such as Amway

As per my previous post Amway India has been having challenges in that country with some poorly worded laws and a lack of regulation for the direct selling industry. Amway is implementing some changes from November 1, including removing all joining fees. The changes were a response to the Indian state of Kerala issuing some guidelines for direct selling firms. This is a great step forward for the industry in India! The guidelines are a prelude to proper legislation, which will hopefully be implemented nationwide.

Definitions

1. Direct selling

Direct selling means marketing of consumer products/services directly to the consumers generally in their homes or homes of others, at their work place and other places away from the permanent retail locations, usually through explanation or demonstration of the products by a direct seller or by mail order sales.

2. Direct selling Entity

Direct selling Entity means a business entity which sells or markets products with its trademark or services mark or nay other identifying mark through a direct selling individual or organisation .

3. Direct seller

Direct seller means a person who is a member of a distribution system of the direct selling entity engaged in direct selling. Continue reading

Amway India now free to join

I reported a couple of weeks ago about Amway India’s legal challenges, with two states (Andhra Pradesh and Kerala)  and an Indian federal body, “The Enforcement Directorate” investigating them. As I noted I thought the claims against Amway were frankly bizarre, but nevertheless Amway can’t afford to do anything but take such cases seriously. Well, now they’ve made a move that they hope will put a stop to the investigations – they’ve removed all registration fees, it’s now free to join with Amway in India. A similar move was made in the United Kingdom during the BERR vs Amway UK case.

The allegations against Amway in India revolved around a law called The Prize Chits & Money Circulation Schemes Banning Act (1978). Like many laws the text is unfortunately almost indecipherable, even for experts, but the claims against Amway revolve around allegations it is a “Money Circulation Scheme”, which is defined in the act in this way –

(c) “money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions;

The act then goes on to ban such schemes –

3. Banning of prize chit and money circulation schemes or enrolment as members or participation therein.

No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme.

Breaking down the definition, a money circulation scheme is thus either of the following –

  1. a scheme “for the making of quick or easy money”
  2. receiving money or something of value for promising to pay money for enrolling people in to a scheme (whether from entry fees or subscriptions)
These are both clearly very broad definitions. For example, if I say to you “I’ll give you 50 rupee if you pop down the corner and post this letter for me“. Quick and easy money! Is it a “scheme” though? What about if I add “and do this every time I have a letter to send” – that’s a “systematic plan of action”, a scheme, and under this law is a “money circulation scheme” and, if you consider it “quick and easy”, it’s illegal! Absolutely ridiculous. What’s even more ridiculous is that “quick and easy” is entirely subjective, nowhere defined in the act. In an early case, brought by Amway against the State of Andhra Pradesh a few years ago, the court was of the opinion that money a Diamond earned after many many years of effort building a business asset was “quick and easy money”.

By this definition virtually any income in India that is not straight trading of “rupees for hours” is illegal. Income from a business, Bollywood royalties, share market dividends, heck even inheritance! All illegal “money circulation schemes”! Ridiculous, I’m sure you’d agree. Do people actually bother to read these laws they write before they enact them? Sometimes I think it’s all just a plot … or should I say scheme … by lawyers to ensure they have a lot of profitable work! Hopefully not quickly or easily.

It’s possible that somewhere along the line there is some case law that has been created by Indian courts that refine this ridiculous “definition”. If there is, let me know!

The second part of the definition, as I’ve interpreted it above, is a bit more akin to normal illegal pyramid scheme definitions around the world. It’s illegal to receive money (or something of value) for promising to pay people for enrolling them in a “scheme” where you (and they) will earn money by enrolling others. A classic pyramid scam in other words.

But wait …. in India it’s not that simple. That’s not all the definition says. It says it’s illegal to collect money for promising to pay money not only for enrolling others, but also “on any event or contingency relative or applicable to the enrolment of members into the scheme”. What exactly does that mean? Well, “contingency” can be interpreted as any related future event, or it can be a future event dependent on the current event. Think about standard multi-level marketing – using the first defintion, a downline purchasing products might be considered a “contingency relative or applicable to the enrolment”, and (assuming you qualify) you might get paid for it. That could therefore be illegal. In the same Andhra Pradesh case I mentioned earlier, the Supreme Court suggested this may be their view. I’d argue that the second definition of “contingency” is what is meant, that an event dependent on enrolling is what is necessary to satisfy the definition. You don’t need to enroll anyone to earn money selling Amway products, and you don’t need to enroll to buy Amway products, so earning an income from sales of products is not contingent on enrolling people. It can happen with or without it.

Still, it’s pretty much at the whim of whatever judge(s) you may have, so it’s prudent of Amway to completely clear this second definition of “money circulation scheme” off the table. With the removal of registration fees, no money (or item of value) is received for promising to pay people for enrolling others  – or anything related. That issue is now gone.

I can’t imagine that anyone (apart from the diehard anti-Amway zealots) would pursue the ridiculously broad “quick and easy money” definition, so Amway India should now be free to continue with, as the US State Department recently described it -

“building up the business acumen and human capital of independent distributors; fostering entrepreneurship; recruiting locally, investing in building its workforce abilities, promoting its management staff from within; and fostering an environment of volunteerism.”

Amway Watch Lives!

A few years back I set up the website Amway Watch, with the idea of collating all PR and news media reports about Amway around the world. Unfortunately over the last couple of years the site was put to one side and not updated. Well, now Amway Watch is back! There’s an enormous back log of articles I’d like to post, keeping it as an historical repository, but that will take a while. In the meantime I’ve started in the last few days to post recent stories from around the world, such as these –

There’s lot of great news from the world of Amway nearly every day, subscribe to my twitter account and you’ll get a notification every time I update the site. Eventually I’ll setup an email notification or newsletter system as well. If you know of a story, either one you see in the media or on an Amway website, or you work for Amway or an affiliated company, feel free to email it to me at [email protected].

Additionally on Amway Watch I’ve set up an Amway video library hooked into youtube. It’s a simple place to find Amway related videos, all in relevant categories. Well … all eventually – there’s around 200 posted already, I haven’t yet classified them all!

ETA: You can now also keep up with Amway news from Amway Watch on Facebook! “Like” the page to get the latest news.

1222 new Founder Platinums and above for Amway North America!

I saw a tweet from Jody Victor earlier today that was so incredible I had to confirm it before posting about it here –

What I needed to confirm was this was just for Amway North America. It seemed too small for Amway globally, but an almost unbelievable result for just Amway in North America. Well, Jody confirmed it. Amazing.

Just for fun, let’s see just how accurate that a certain prolific anti-Amway blogger and obsessive has been over the past year –

Sep 1 2010 – I believe that Amway is shrinking in North America

Nov 29 2010 – It sure looks like Amway in the US and Canada is shrinking

Feb 11 2011 – it appears that Amway is shrinking in the US and Canada

Feb 12 2011 – I believe Amway is alreadu [sic] shrinking

Feb 28 2011 – it appears that Amway is shrinking in the US

May 24 2011 – especially in North America where Amway appears to be shrinking instead of growing.

June 23 2011 – I have heard recently that Amway and WWDB is shrinking in the US.

But don’t hold your breath expecting a little thing like reality to change his tune.  You’ll note three of the quotes above, in February 2011, were made just days after Amway revealed North American growth the previous year had been 5%. Who are you listening to?

Exciting times for Amway IBOs in North America – 1222 new Founders Platinums and above! Wow!

Updated Amway IBO average income statistics, plus an important clarification

For the last decade, whenever Amway has published income data for the Amway business they have also reported, based on a survey in 2000, an “average income” for “active IBOs” –

The average monthly gross income for “active” IBOs was $115.

Approximately 66% of all IBOs of record were found to be “active.”

“Active” means an IBO attempted to make a retail sale, or presented the Amway Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2000.

“Gross income” means the amount received from retail sales, minus the cost of goods sold, plus the amount of Performance Bonus retained. There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

Amway critics have often latched on to this “average income” and claimed (by falsely assuming all these IBOs are working hard and have business expenses) that virtually all IBOs are losing money and that it’s a poor business opportunity. In reality it’s a very poor and virtually meaningless statistic. There’s a reason why if you google “average income” you’ll be hard pressed to find it. What you’ll find instead is “median income”, which is altogether different statistic. “Average” only really works when you have a group that is homogenous, or members are similar to each other.  The group used by Amway is “active IBOs”, and as per their definition includes everyone from the handful of US Founders Crown Ambassadors who have been building their businesses for decades and earn millions, through to the 19yr old college student who joined a few months back and  asked their brother if they wanted to buy an XS – and the brother said “no”, and they never did anything again.

Clearly the statistic doesn’t tell us much at all! I can only surmise that Amway keeps publishing it at the behest of their lawyers, who want to keep on the good side of the FTC and ensure nobody can complain Amway gave them an overly optimistic view of their chances of making money with Amway.

So, we’re left with a lousy, misleading, statistic. At least now though, we’re not left with an old lousy, misleading statistic. Recent issues of Amway’s Achieve Magazine have been reporting new data, based on a survey from 2010 – Continue reading

The bizarre world of Amway in India

For some years now I’ve been trying to write a post about the trials and tribulations of Amway India, and I never quite manage to get one done. It’s a struggle  just to sort through the bizarre allegations, unreadable and confusing legalize, and the truly bizarre misinformation of Amway’s critics.

Anyway, I’m trying again. As many readers might know, back in 2006 police in the Indian state of Andhra Pradesh raided and closed several Amway offices citing the “The Prize Chits & Money Circulation Schemes” law. Amway appealed to the courts, successfully, to remain open but their attempt to get the courts to once and for all declare the Amway business model legal and tell the police to stop harassing them failed. The court refused, instead stating that if the police allegations were correct, then the law would apply, so they ordered the police to complete their investigations within six months so their original allegations could be heard. Five years later that still hasn’t happened, and Amway critics in the country have spent the intervening time claiming the courts decision means Amway is illegal in India and lobbying for action. Of course, they conveniently ignore the part about the allegations needing to be correct! Unfortunately, similar events, and allegations, have now been made in the state of Kerala, and today it’s been reported that “The Enforcement Directorate” is investigating money laundering charges against Amway.

So what exactly are these allegations? It’s frankly a nightmare trying to sort through all the very oddly worded legal documents, but as best I can find from the original court hearing, here are some of them –

  • Amway’s membership fees are “quick and easy money” and no services are provided to distributors in return.
    Apparently the products and literature that come with the kit, the www.amway.in website, telephone support staff, dozens of  product centers throughout India, Media advertising, 14,000 support stuff throughout the world etc, etc etc don’t exist)
  • prescription of minimum level of 50 PV to qualify for getting commission is sufficient inducement for the members to relentlessly strive for maintaining the PV level at or above the said minimum levels.
    This requirement, which much of the world (including the FTC) cites as a reason that Amway is not a pyramid scheme, is to the Andhra Pradesh police a reason why it’s illegal! Having retail customer volume provides evidence that an MLM company has real products with real world demand. In the bizarro world Amway India lives in, it “forces” distributors to buy Amway products, giving Amway “automatic” income. The fact the vast majority of Amway distributors don’t actually do this thing it’s claimed they’re “forced” to “relentlessly strive for” is apparently irrelevant. Continue reading