Amway’s letter to IBOs in the UK and Ireland

The following letter was sent this week to Amway Independent Business Owners – now to be known as Amway Business Owners (!) in the United Kingdom and Ireland –

RE: Transition from IBO to ABO

To all existing Business Owners,

As we have previously advised all IBOs the Department of Trade and Industry has brought legal proceedings against Amway seeking to wind up the company. The DTI has in particular raised issues as to the manner in which the business is promoted and the sale and promotion of BSM.

It was as an immediate reaction to those proceedings that the company took the steps that it did on 4 May 27 to impose a moratorium on the registration of new IBOs and to ban the sale and promotion of BSM.

Amway is continuing to defend the proceedings that the DTI have brought but at the same time it has undertaken a fundamental review of the manner in which the business operates in the UK and Ireland. It is hoped that the new business model will address the concerns of the DTI. Key aspects of the new model include a continuing ban on the sale and promotion of third party BSM. (Amway may subsequently introduce a licensing system under which it can control the quantity, quality and pricing of any third party BSM.) There will also be much greater focus on ensuring that new IBOs properly understand the Amway business opportunity.

However, in addition to seeking to address issues raised by the DTI, the company has also taken the opportunity to introduce other changes to the business which are both exciting and transformational. Accordingly, Amway United Kingdom and Republic of Ireland are preparing to launch the “new” Amway in October 27.

The changes that are planned for October are:

• A new three level qualification system: Retail Consultant, Certified Retail Consultant and Business Consultant

• A new “One Price For All” strategy

• Dramatic price reductions on Home Care and Personal Care products for easier retailing.

• New Amway On-Line web site to offer increased support for IBO’s and their customers.

• Modifications to the Sales & Marketing Plan to increase the focus on retailing and income growth.

• Increase and improved training for ALL our IBO’s.

• Renewed focus on product demonstrations and product support.

• New training program on product retailing.

• New SIP/NCA program focused on rewarding income growth.

All of these positive changes have been shared with UK leaders and will be explained in detail at the Autumn Expo.

This is just the first step to transform Amway UK/RoI into a company where our IBO’s can retail with confidence, provide products to customers and then train and support other IBO’s to do the same.

In order to implement the new business model, Amway needs to transition all IBOs who are interested in continuing their business to a new contract as “Amway Business Owners” (“ABOs”). All IBOs are therefore required to sign a transitional application form to confirm their desire to join Amway under the new mode of operations. This document must be signed and returned to Amway in Milton Keynes before you can begin conducting any type of business again associated with Amway. If you are interested in getting pre-certified before the official October launch, we will have the new transitional application ready and available for the first time at the EXPO. If you have not already registered for EXPO then you can do so at www.zibrant.co.uk/amway.

If you decide that you do not wish to be a part of the new Amway, you do not need to take any further action and your current contract will automatically expire on 15 October 27. Accordingly, this letter constitutes the formal 3 days notice of the termination of your existing contract with Amway required under Clause 8 of the Amway Terms and Conditions of Registration.

As you are aware, there is currently a moratorium on sponsoring activity (including promoting the Amway business to prospects) which we announced on May 4 and extended on May 24 pursuant to undertakings we gave to the Court. We had originally intended ending the moratorium around the end of September, but we have reconsidered this approach in view of the likelihood that the winding-up petition of the DTI will proceed to a hearing in November and continue into December and given the comments made by a number of Platinum IBOs at a recent seminar in advance of the EXPO. Accordingly, although we will be implementing the other changes to the model, including those referred to above, in October, we have also decided to continue the moratorium on sponsoring until after the hearing.

We feel that extending the moratorium on sponsoring is prudent and in the best interest of all parties given the uncertainty that inevitably exists when a case is taken to court. In such circumstances it is much fairer to potential ABOs to wait until the case is successfully resolved before inviting them to take up the great business opportunity that Amway offers. This will provide you all with the time necessary to fully understand the dynamics of the new business model, to develop a solid customer _base_ and to strengthen your own retailing skills and will also give us the opportunity to educate the DTI and the Court about our business model. In this way, we hope to demonstrate both the viability of the new business model and our collective determination to operate it in the public interest.

We also hope that with your support we can demonstrate to the DTI that you are as committed to and enthusiastic about the new business model as we are.

We want to assure you that Amway is dedicated to the United Kingdom & Republic of Ireland markets and will continue to focus on making the Amway business better for all business owners. The changes we are making in October reflect this commitment but this is only a small first step in providing each of you with a business opportunity that you can be proud to build and promote in the future.

If you have any questions with regard to the content of this letter, then please contact the Amway Business Services Team on 198 6294.

Yours faithfully,

Tom Denham
Director and General Manager
Amway UK and RoI Ltd.

There’s somethings about these changes I like, others seem like quite dramatic changes to the Amway business model. What has me curious is the following:

In the letter, Amway says –

The DTI has in particular raised issues as to the manner in which the business is promoted and the sale and promotion of BSM.

On the Amway blog, Amway says today

the immediate spark for action was a “winding-up” petition from the UK Department of Trade and Industry, which had taken serious issue with some BSM sales and the way certain individuals and organizations were promoting the business to prospects. (source)

and back in May

The heart of the DTI’s position, as we understand it, is that the business opportunity is promoted by incorporated and unincorporated organizations in a manner that does not reflect the financial rewards people are likely to earn when they participate in the Amway business.

The DTI also objects to the manner and frequency in which meetings and BSMs are promoted by the sales organizations in conjunction with the Amway business opportunity.

Amway’s fault, according to the petition, lies in our failure to take sufficient action to prevent these abuses from occurring.

To prevent immediate action by the DTI, Amway immediately stopped all sponsoring and banned the use of all non-authorised BSM – which was all of it, since they removed the authorisation on previously authorised BSM.

It’s clear that Amway believes, or at least is claiming, that the problem is essentially with the "system" companies and how they’ve been promoting the business. The question is – if this is all there was to the complaint, why all the dramatic changes to the Amway business model, and why is the DTI continuing with it’s action, since the BSM companies are no longer in the picture?

NONE of the changes listed above are to do with the BSM companies. There is still no sponsoring allowed, the normal "plan" has been transformed into a 3-level "retail consultant" plan and there is an enormous new focus on retailing. What’s more I hear that the new GM used to work for AVON – a company with more of a door-to-door selling modus operandi.

All of this indicates the DTI’s problem isn’t with the BSM companies per se. It’s with the whole idea of networking and multi-level marketing. Otherwise, why the changes to become so extremely focussed on retailing? Now, I for one think there has not been enough focus on retailing in the past – but as Rich DeVos is fond of pointing out – it’s about a balance. This is a dramatic shift in that balance.

The UK DTI has for several years received a barrage of complaints against Amway and MLMs, directed and encouraged by the like of Scott Larsen, Eric Janssen, and Robert FitzPatrick. It appears clear to me that the problem the DTI has "with the way the business is presented" is a problem with network marketing – it’s a problem with the Amway business plan, not with the BSM companies per se. FitzPatrick in particular believes that, by definition, all MLMs are illegal pyramids.

Has he convinced the DTI of this?

Are other Network Marketing and Multi-level Marketing companies aware of the potential seriousness of this case? Amway is clearly trying to spin this as a problem caused by the BSM companies, yet is making dramatic changes unrelated to BSM. If I am correct, this is a threat to the entire industry, and Amway’s attempt to deflect "blame" is likely to make it worse, as other companies are unlikely to be undertaking the kind of lobbying they should be doing.

Amway – come clean – it’s obviously not just about BSM – what’s the full story?

Post a comment below or Discuss this post on Amway Talk

UPDATE: A few folk around the place are attacking this post on the basis that BSM effectively has been banned in the UK, so how can I claim the changes have nothing to do with BSM? Well – BSM was banned nearly 5 months ago – it’s out of the picture. Yet the DTI is still pursuing it’s "wind-up" petition against Amway and Amway has just introduced all these new major changes that have nothing to do with BSM. So there’s two options – all these changes have nothing to do with the DTI action, or the DTI action is about a lot more than just BSM. Either way, Amway needs to come clean.

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