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.
  • “a person who joins as distributor is required to enroll six persons and each of the six persons would enroll four persons who in turn would enroll three persons each and, in this manner, the strength of the entire group becomes 103″
    This makes no sense at all, even just as a stand alone statement! If distributors are “required to enroll six persons” then why the heck are those six enrolling four, not six, and those four enrolling three, not six? And doesn’t that mean those last three aren’t enrolling any? It’s not only factually incorrect to claim distributors are required to enroll six people, it’s idiotic to simultaneously claim some kind of fixed 6-4-3 model.
  • Complete sponsoring a group of 103 people (ie 6 who sponsor 4 who sponsor 3) and  other incentives are added
    Really? Can anyone, anywhere point to where this happens in the Amway compensation plan? These idiots, and sorry for being harsh, I rarely am but this is truly idiotic, are taking one simplified example to demonstrate the bonus scheme and claiming it’s a requirement, completely ignoring the actual wholesale and retail sales of products, and focusing entirely on the recruiting part as if that’s where the money is made. If you think perhaps I’m misinterpreting, I’m not. Read the document yourself and then go over to Shyam Sundars’ misnamed “Corporate Frauds Watch” blog and point out that 6-4-3 is merely and example and see how he responds. Sundar has spent years harassing Amway distributors and pressuring Indian police with this kind of garbage. I suspect the recet Kerala actions may result from the rubbish he’s been telling officials there.
  •  A Diamond “is illustrative of a person earning fabulous income without doing anything after he accomplishes his task of enrolling the required number of persons as members into the scheme.”
    This is not just wrong, it’s downright insulting. Elsewhere in the allegations it’s considered evidence of “quick and easy money”. You work for years to build a business, for little return, and then start to earn the rewards and that means it’s “quick and easy”? I’d like to see one of the people making this claim spend some time just getting to platinum and then tell us how “quick and easy” it is. Of course it also means that the whole concept of royalty incomes, or corporate dividends etc etc may very well also be illegal in India!
  • “the money which the member at the top of the line gets depends upon the members whom he enrolls or the members enrolled by him enroll”
    Again more blatant ignorance. The money you earn depends upon the products that are sold through the distribution chain – no different to any other business! Yes the final amount you earn will be affected by the actual structure of that distribution chain, but that’s the case whether you’re a Coca-Cola distributor or an Amway distributor! If  income was dependent on enrollment, then two distributors with the same shaped network would earn the same money, and distributors with no enrollment would make nothing. This isn’t true, as a multitude of real world examples can show.
  • Once a person becomes a distributor in a scheme of this nature where the sops in the shape of commission are so luring, it would be very difficult for a member to withdraw from their membership to avoid payment of the annual renewal subscription fee …. From the whole analysis of the scheme and the way in which it is structured it is quite apparent that once a person gets into this scheme he will find it difficult to come out of the web and it becomes a vicious circle for him
    So …. Amway distributors of India, and the world … tell me, is the “shape of commission” so luring that it’s really difficult for people in your group to quit? They’re all “forced” to buy 50PV a month, right? Happens in every group, everyone is sucked in and can’t leave and keeps buying stuff every month ! …. I’d fall of my chair laughing if this claim wasn’t so utterly ridiculous. Ironically of course, Amway critics elsewhere in the world claim the fact that the majority of Amway distributors don’t do much at all, and indeed a majority “withdraw from their membership” in the first year, as evidence that Amway’s a scam. In India they apparently think the opposite – nobody quits and that’s why it’s a scam.

These are esentially the basis of the claims that Amway is illegal in India. You’re forced to enroll people, you make money from enrolling people, they’re forced to buy products, and you can make money without doing anything.

If real people, working diligently and professionally, weren’t getting damaged by these ridiculous assertions then they would be laughable. But they are being damaged, this is serious stuff. As mentioned The Directorate of Enforcement is reportedly now investigating Amway, supposedly with this ridiculous allegation –

  • ED officials claim the modus operandi of companies like Amway, with limited liability, is that they collect an entrance fee from new members, bagging half the collected fee and distributing remaining among the chain or network. Senior officials, who get a lion’s share, are based in the United States and other countries. 

This is the modus operandi? Money laundering of membership fees? Realty check – Amway globally is reportedly on track for close to $10 billion in sales this year. In 2010 Amway India alone did 17900000000 Indian Rupees (INR) sales, around US$360 million. Amway India membership fee is INR995. For even half of Amway India’s revenues to be from membership fees (which I suppose you’d need as a minimum for it to be the “modus operandi”!) , Amway India would need around 10 million members, and Amway globally (assuming equivalent membership fees) would need around half a billlion members!

India is well known for it’s brilliance in some fields, and has great education systems and universities, it’s truly growing in to a power house of the 21st century. I honestly cannot imagine that there are people of this stupidity in positions of power in Andhra Pradesh, Kerala, and within the Enforcement Directorate. I sadly can only infer that perhaps Amway is refusing to grease the wheels of corruption in India, a country where in the last few years alone more than 500 parliamentarians have been charged with criminal corruption, where the entire organizing committee of the 2010 New Delhi Commonwealth Games is in jail for corruption, were more than half of Indians report having to pay bribes each year to government officials to get things done and nine out of ten Indians believe their Police are corrupt and getting worse.

Amway India and the Indian Direct Selling Association has for years been trying to get the Indian Government to implement laws that clearly delineate between pyramids schemes and other scams and legitimate direct selling companies like Amway. Right now there are no clear regulations and they are effectively left to the whims and vices of local administrators. I suggest Amway India distributors, indeed representatives of all direct selling companies, needs to start get organised and seriously lobbying their politicians to get this fixed.

Indians of all kinds, direct sellers or not, don’t let your country be weakened by the corrupt and ignorant, instead take your place as a leader of integrity in the world and do justice to your great history.

24 thoughts on “The bizarre world of Amway in India”

  1. Hello everybody
    i just noticed that many persons are asking about commissions etc. I am in this business from last five years AND EARNING. Why dont you ask these questions to your sponsors (In business we call them Upline)?

  2. HI,
    Great blog! I was not aware that problems in Andhra Pradesh still going on. Probably Amway India has not been able to engage any legal representative from the finest lot of legal minds. Recently when entire world thought that Indian tax authorities will extract 15 thousand CR from vodafone, Harish salve, (one of the finest legal mind of India) came for the rescue of Vodafone and all the efferts of the Indian authorities were scrapped in the highest court of the land!
    Everybody was of the opinion that this case has no marrits. But one person fought hard and won.
    This is the problem of the Indian judiciary. When you engage the lawyer from the top 10 lot of country, judge has no choice but to listen it. though thought matters a lot, but what really matters is who propagates it.

    Hopefully Amway India will do homework in this field and resolve the issue quickly.

    =====================
    Akhilesh Dahiya,
    Advocate (Delhi high court).

  3. Ya. Nice piece. But, can u tell me as to if it is not possible to retail any product in a given month despite a leader’s team garnering up a few thousand GPVs, Will she still enjoy the commissions???

    1. Rules on this vary from country to country and depend on the leader’s level. In general though, a leader will have developed a sizeable customer base over time, and most of these are people purchasing consumables, ie they repurchase. As such a “leader” will be getting regular orders so “not possible to retail” doesn’t really make sense. Even if they’re on holidays a leader (or indeed any IBO!) should be arranging for upline or downline to service their customers for them.

  4. THIS IS A BUSINESS. BUYING AND SELLING. SELLING PROFIT AND GROUP SELLING PROFIT. THERE IS NO FREE LUNCH. THIS IS AN OPPORTUNITY FOR THE MIDDLE CLASS PEOPLE TO GO OVER HIGHER CLASS PEOPLE.
    THIS IS YOUR CHOICE TO GO HAVARDE
    OR CAMBRIDGE SCHOOL.
    CAN I CHECK THE TEACHER QUALITY BEFORE GOING ADMISSION ? NO.
    CAN I KNOW AMWAY BEFORE DOING ANYTHING ?
    THE STORY OF 5 BLIND MICE TO KNOW ELEPHANT.
    GOOD LUCK.

  5. I would like to know at what time my commission/bonus will be more than my PV. In short, at what point the money I earn will be more than the money I spent.

    I have 10,000 Rs in my bank and jobless. If I join Amway business, how can I support my monthly expenses? How much time will it take for me to start earning real money and support my daily expenses? Please explain with complete mathematics on how to maximise my own profits and how to reduce profit passed to my uplines.

    1. Hi Divya,
      It’s impossible to put a time frame on when you can reach profitability, but it’s not a matter of bonus being “more than (your) PV”. PV, personal volume, is a combination of two things – products purchased for your personal use, and products purchased for resale direct to customers. Products purchased for personal use are not a business expense. They’re a household expense like anything else you buy from any other store. Like any other household expense it’s important to ensure you don’t overspend unnecessarily and that you can afford what you’re buying.

      Personal PV purchased for resale to customers is a profit source. The more of that you are have, the quicker you can be profitable. Indeed customer profit is the fastest way to early profitability. Expenses will vary from IBO to IBO so it’s impossible to know what income you’ll need to match your expenses, but if your currently jobless I’d recommend keeping your expenses low by borrowing material from your upline and trying to develop a customer base to get some cash in fast. Speak to your sponsor and upline about the best way to do that in your market. Good luck!

  6. Rajesh all you need is 300 pv, doesn’t matter wether it’s your groups or yours….if there are minimum 300 points you will certainly get the commission.

  7. let me know that its mandatory of 50 PV per month to get commision from Amway.
    Suppose my Group PV is 300 and personal is 0 then I will get commission or not????

    1. Unfortunately the Amway India rules of conduct are on a password protected area of their website, so I can’t confirm the exact rules. Smething similar is a fairly standard rule in the Amway world. In the US it’s 50PV of personal retail sales. Note that it’s bonuses on downline sales that it applies to. You still earn commission on any personal sales, both retail markup and volume rebates.

  8. wait for few hours..Amway India will give some positive surprise news for us..as they do always..
    keep it up… we will do billion doller in india itself!!!

  9. I don’t understand why sometimes Amway doesn’t learn from the experience world over to pre-empt these kinds of problems before they occur. Decision making process is reactive.
    Take the case of Renewal fee. I don’t understand why Amway charges this year on year. It is very annoying to ABO’s who sign up very close to the renewal time. Why is renewal not performance based?
    Something like,
    If Group annual PV is more than 5000 renewal is free.
    If 2000 to 5000 say 25% of full fee.
    If 500 to 2000 say 50% of full fee.
    Between 0 to 500, first year renewal free subsequent full fee(which can be brought down as well)
    Amway can also ask or terminate ABO’s eventhough they renew saying u didn’t perform for so many years so don’t waste your time & money. Please be a client.

  10. I wonder how long the case will drag on for before a conclusion is reached. Would Amway need to grease the palms of corrupt officials before we see an end to this matter?

    1. The problem is there really is no case. If Andhra Pradesh is any guide, allegations will be made, offices, ABOs, and staff harassed …. and the case will never make it to court, leaving Amway and ABO unable to defend themselves against the allegations.

  11. It means Amway has to take parts in bribing the officials..
    If they do, i’m sure the charge will be dropped..

    1. Perhaps a more subtle approach? Like inviting some of the regional law enforcement and politicians on a tour of Amway’s manufacturing facilities and headquarters in the US (to show them it’s real products), guided by cricketing legend and Amway spokesperson Adam Gilchrist? I’m sure they’d find that trip might open their minds up 🙂

  12. I can’t believe that an investigation can be based on such ludicrous claims. The Indian Authorities need to study the Amway sales and marketing plan more thoroughly.

    1. How can people with mindsets that are pre-determined ever be in a position to study the plan with an open and honest mind. The only way this madness can stop is by bringing in all Amway India distributors under one platform where they can persuade the government of India to come out with a law governing direct marketing business.

  13. I read the initial points mentioned in the write up…. i feel the knowledge of Amway is limited or probably is selective knowledge. Half of the points i read is not true, for e.g. min 50 PV every month…

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