As you probably know, Amway , Britt WorldWide , and Network 21 are currently involved in a dispute with the Department of Trade and Industry in the United Kingdom (see other posts on the situation here)
In order to gain more understanding of the issues, I’ve been studying the United Kingdom law about what they give the unfortunate name of “pyramid selling”. The relevant legislation is Statutory Instrument 1997 No. 3. Now, like most legislation, it’s not written in such a way as to make it easy for untrained folk to understand, however a “plain english” warning that is included in the legislation is quite straightforward. You’ll find this warning on the Amway Europe and Amway UK & Ireland websites as well as Amway literature and the literature and websites of virtually every MLM company with operations in the UK. It says –
This warning, and legislation, is obviously designed to target pyramid schemes where you earn money by recruiting others, rather than through the sale of products. However, the legislation, as encompassed in the warning above, is unfortunately far, far broader.
Now, I’m not a lawyer, let alone a UK lawyer, so I may be completely off base here, but it would appear to me that it would be incredibly easy for a network marketer to fall foul of this law. Think about how you show the standard Amway plan. Do you ever indicate that there is some benefit for getting others to join Amway. Of course you do. If you get others to join and they buy stuff then you’ll benefit from increased volume rebates. If you get others to join and they qualify as Platinums, then you’ll receive a leadership bonus. In most legislation I’ve looked at around the world, this wouldn’t be a problem, as you’re not benefiting from the recruiting per se, what you are benefiting from is increased product sales.
The UK law doesn’t however appear to make that distinction – you’re breaking the law just by “promising benefits”. Lets for example look at what the Amway Europe and Amway UK & Ireland websites say about how IBOs may earn income –
Performance Bonus from Group Volume: IBOs may also be rewarded with additional bonuses based on the volume of sales made by others they have introduced, or sponsored, to Amway. These people are referred to as their ‘group’ or ‘downline’. Payment of these additional bonuses does not affect bonuses paid to groups or downlines.
Does this in anyone say that if you persuade other people to join, which requires payment, you’ll receive any benefit? Sure – you may be rewarded with additional bonuses based on their sales. Certainly a benefit! I doubt this is what the framers of the law had in mind, but it certainly seems to say that this is illegal. I would have thought the problem was with a direct benefit, such as being paid for recruiting someone, as happens in classic pyramid scams.
Sources are telling me that the DTI actually “ordered” that Amway , Britt WorldWide (BWW) , and Network TwentyOne (N21) cease operations. Obviously they appealed and the case is going to court. The DTI requested Amway make certain changes to their operations pending the court case, however they apparently explicitly said that N21 and BWW did not need to make any changes. And what’s the #1 biggest change to operations that Amway UK & Ireland have made? They’ve put a hold on all plan showing and sponsoring. In other words, anything where you might “promise benefits from getting others to join”.
I’ve also heard that Amway UK & Ireland is considering implementing free membership as part of the changes. In other words, even with sponsoring you’d no longer be “persuading anyone to make a payment”.
Banning all BSM is also consistent with this interpretation of the problem. That way Amway reduces the risk of there being Amway approved materials out in the marketplace that might breach this legislation – and I’m almost certain some of it could easily do so.
If this is indeed the root cause of the current Amway UK & Ireland problems, then in my opinion the problem isn’t with Amway – it’s with a very poorly written law.
The question then arises as to why the DTI is now taking action, and why against Amway? Well, it seems that folk like well-known Amway/Quixtar critic Scott Larsen of “Amquix” and anti-mlm zealot Robert FitzPatrick of “Pyramid Scheme Alert” have been encouraging people for several years to register complaints with the DTI (here and here).
I’m sure that if they successfully encouraged enough to complain, then the DTI would have little choice but to take action, and given the wording of this law, that could be the cause of the current grief.
Still, this is all just speculation.
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