Amway UK & ROI has however passed a major milestone. On Monday, July 21, limited sponsoring of new Amway Business Owners began. This followed the UK High Court refusing BERR’s petition to close down Amway. BERR has appealed that decision, however Judge Norris refused their application to force Amway to maintain a moratorium on sponsoring new ABOs. Given the milestone, this is as good as time as any to review BERR vs Amway UK, it’s result, it’s effect, and the basis of the appeal. Continue reading Amway UK moves forward – Part I
The UK’s TimesOnline, High Court dismisses claims against Amway, has provided some further insights into today’s dismissal of the BERR’s case against Amway UK. Here’s a few interesting quotes –
Amway (UK) was cleared at the High Court of “dream selling”, of operating an unlawful lottery and of being an unlawful trading scheme.
This sets an excellent precedence for similar businesses in the UK, and those who recognize the British legal system. Similar charges have been filed against Amway India by police in the Indian district of Andra Pradesh, and this UK case may prove to be helpful.
However, the company had to give several legal undertakings including not to recruit further sales agents until it had publishing details of their average earnings and to scrap its annual charge to register as a distributor. Continue reading Amway UK case – further information and some comments
The Times Online has outlined the case that BERR has brought against Amway in court in the UK today. In summary –
- Just 10% of agents make any profit
- Less than 10% sell a single product
- Amway’s main activity is encouraging people to join so that they pay the registration fee and buy marketing materials
- Amway attracts people by “offering “substantial financial rewards or easy money””
- Only 6 per cent of agents bought Amway products to sell on
- the vast majority of products offered by Amway were overpriced even before retail markup was added
- 71 per cent of agents made no income from Amway in the year 2005-6
- 90 per cent had made a loss after paying the £18 fee to renew their registration
- One marketing presentation authorised by Amway offered the opportunity for a “small secondary income or an income which would rank in the top 2 per cent of money earners.”
- Such money “is being achieved in the same time it takes to study for a degree”.
- Amway’s own records showed that only Trevor and Jackie Lowe, and Jerry and Mandy Scriven among its agents earned more than the £78,000 required to place them in the top 2 per cent of earners, the court was told.
- Amway’s records showed that of the 2005, agents operating at that time, just 37 made more than £25,000 a year.
- 39,000 agents “working” for Amway
- 27,000 (71%) had no income
- 11,410 (30%) earned something
- 7,492 (of the 11,410) received average of £13.53 per year
- 11 agents received 75 per cent of bonuses
- £116K paid to top earner Trevor Lowe
- 26 number of years Mr Lowe was an agent
“The reality of being an IBO is that a substantial majority make minimal financial returns,” Mr Cunningham said. “Our case is founded on the selling of the dream on one hand and the loss or minimal financial return on the other.”
At first glance it would appear that Mr Cunningham and BERR have been sucked in by the bogus analyses of anti-mlm zealots like Robert FitzPatrick, Dean Van Druff and bloggers such as JoeCool, Larsen et all. They all seem to some how think that just the act of registering as an Amway “agent” means you are actually putting in an effort to make money.
Anyone with any experience with the Amway business knows that –
(a) many folk join just to buy the products at “agent” price and
(b) many folk register with a plan to work, then decide quickly it is not for them, ie they don’t make an effort to earn an income and don’t expect to earn an income.
As such, the figures they give above are incredibly misleading.
Mr Cunningham, your own data says that only 6% of agents bought stuff for the purpose of on-selling it – ie, actually working the business! – yet 10% make a profit!
So the problem is what exactly?
Point 3 is absurd, since Amway doesn’t profit from marketing materials. I’m wondering if perhaps that’s a misunderstanding on the part of the journalist rather than BERR. I find it hard to believe they’d understand the model that poorly.
If anybody has been claiming Amway is “easy money”, as stated in point 4, well, they should be drawn and quartered. I certainly don’t represent the business that way, and I know Amway doesn’t.
Point 6 is a similar issue to what TEAM has raised, and myself and others have made similar points about some Amway products. I have however received price comparisons by Amway UK IBOs showing the coreline products are generally competitive for products of similar quality. IMO there does however need to be adjustment on some lines to allow easier retailing for new IBOs. I’ve been suggesting the HomeCare range, and Amway has in fact dropped prices on that range in the UK since this case was launched.
Now, points 9 and 10 seem to be of legitimate concern. The article says this was material “authorised by Amway” not “distributed” or “made” so I’m guessing it was material produced by one of the “systems” and approved by Amway, yet it clearly isn’t true for the UK market.
I’m not sure what kind of income representations are made by Amway UK agents, so I can’t really judge the claims on that. I do know that I spent 2 years with no luck trying to get “average income” statistics out of Amway Europe.
It appears to me that the core of the problem, again, is whether someone is making a legitimate effort to actually earn an income is being ignored. Back in August I wrote a post – How to Improve Amway & Quixtar – Part I where I outlined my concerns about this very problem. Amway’s own system of categorizing folk provides unrealistic and misleading data about the business, with folk who are little more than wholesale shoppers being lumped in as “business owners” with folk who are seriously working to develop an income. I’d suggest this very problem is contributing substantially to BERRs position in this case. Amway UK’s new requirements to be considered a business owner in the UK are a major step towards improving this situation, and I would suggest similar action should be taken elsewhere.
Finally however, it must be said that point 12, and indeed the corresponding general lack of growth of the UK market is a concern. It’s my belief that Amway’s core products are, in general, of premium quality, and priced competitively for that market. However – it’s extremely difficult for a new IBO to market such products. I again encourage Amway to globally address the problem of having products that are easily retailable by a new IBO. I would suggest that even the new Simply Nutrilite range launched in the US still doesn’t quite fit that category. You still need to be educated about the health benefits of the products and market to a group that (a) are interested in health (b) are willing to pay a little more for it.
Amway’s HomeCare range such as SA8, LOC, and Dish Drops in particular are very well regarded in the consumer marketplace – yet they simply are not as price competitive as they used to be, at least not outside the new UK pricing! IMO they are easy to market and easy to sell when well priced. Products like XS can be too – however the corp. has to respond more quickly to market changes. XS was very price competitive when launched, but as the energy drink category grew and inspired more competitors, others dropped their prices. Amway can be notoriously slow to respond to market forces and changes in pricing and needs to address this problem.
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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.
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)
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?
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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.
Continue reading Amway’s letter to IBOs in the UK and Ireland
On numerous places on the internet, including the forums on this website, the following letter from Amway UK and Ireland to Amway IBOs has been published –
Letter: from Ben Woodward Branch Manager Amway UK UK/ROI IBO Communication
May 4, 2007
To: UK/ROI IBO Leader
From: Ben Woodward, Branch Manager, Amway UK
RE: Significant change to Amway’s mode of operations in UK/Republic of Ireland.
This letter is to inform you of significant changes to the way Amway will conduct its business in the UK and Republic of Ireland. These changes are effective immediately. While these changes may cause short-term challenges for some of our IBOs, we strongly believe the changes will make our long-term business in the UK/RoI stronger.
Effective Immediately: 4 May 2007.
Amway will prohibit the production, sale or promotion of BSM that are not authorized and distributed by Amway; this includes websites. This includes any BSM (books, tapes, meetings, CD’s, websites) that have been already been approved by Amway UK/RoI. They are now considered unauthorized for use.
All meetings for which an entry fee is charged are suspended until Amway has approved, in writing, the meeting and its content; Amway has imposed a moratorium on sponsoring new IBOs for at least 60 days and until current IBOs are re-trained and re-qualified; We are evaluating all costs associated with joining Amway;
We are also sanctioning a number of IBOs based on contract violations that have come to our attention.
Failure to comply with the above mentioned points 1 to 3 will lead to a suspension and/or termination of the respective IBO contract. Please also note that Amway is in no way limited to these sanctions, but can impose further corrective or punitive measures.
In addition, the company is announcing a thorough review of its business practices globally with the goal of ensuring a consistent, rigorously enforced set of rules and regulations governs its relationships with IBOs and consumers.
That global audit has begun, and we expect it to be completed in June, and will share the results with you later this summer.
These are important steps, but in some ways, they are not surprising ones. Many of you know that for the past 1 years, Amway has been moving to exert more control over the way we do business globally.
In newer markets that has meant, for example, outright bans or tight restrictions on the sale of non-company BSMs and the requirement of a more consistent, approved messaging and branding by IBOs about the Amway business opportunity.
While most changes in other markets have been carried out gradually around the world according to our timetable, we need to move more quickly here. This is in response to serious concerns raised about Amway by the Department of Trade and Industry (DTI) following the receipt of complaints about BSMs and misrepresentation of the business to prospective IBOs.
At this time, we can not specify when sponsoring will be allowed to resume. We will continue to communicate with key international and local IBO leadership to update them on developments of a new operational mode in UK and Republic of Ireland.
For example, if any IBO has a planned meeting for which tickets have been sold (that is required to be cancelled and ticket purchases refunded), or they have unsold inventory of BSM, or have unsold Starter kits, or have completed applications not yet submitted to Amway, they may contact the dedicated enquiry telephone number – 198-62940 (press option 4).
In the following weeks, we will seek to meet with you personally to discuss the implications of this policy change and respond to any questions you may have. Meanwhile, please feel free to call me at 198-62944.
Amway has been in the UK/RoI for more than 30 years, and today is a strong, growing £13 million business with more than 100 staff and 30,000 IBOs. We are entering into a challenging period of time.
But we believe in this business, we believe in our values and we believe in our IBOs. We are committed to making the changes we need to make in order to ensure the continued growth and success of Amway in the UK/RoI.
I have refrained from commenting on the email until I had confirmation it was authentic, I now have that confirmation and a little more information. The situation with the Department of Trade and Industry is a real issue, and leaders have been aware of it for some months. As has been the case in other markets, some IBOs, and indeed some “systems” have not operated in what I would consider a professional manner. I’ve had reports in the past, for example, of Amway UK and Ireland IBOs being taught by their group to invite friends around for dinner, then at the end of the dinner, bring out the whiteboard! Such deceptive techniques are explicitly against Amway rules and highly unprofessional.
Additionally, Amway Europe has had in place for some time rules limiting the amount of BSM IBOs may purchase in the first 3 months in the business. It’s my understanding these rules have been ignored by some groups.
An IBO with business in the UK I have been in contact with has clarified the following –
- Sponsoring is postponed
- BSM sale is stopped until it is (re)-approved.
- Meetings with an entry-fee need written approval.
- The business has not stopped, the sale of products have not been banned!
- The income opportunity is not closed
- Meetings are not banned
He goes on to point out –
This is not unique to the UK. It works fine in many countries (including China and Russia) where similar regulations have been in place from the opening of the business due to local government regulations. Those markets are not sleeping… 🙂 The IBO organisations I know of are not planning to sue Amway, they are cooperating with Amway to get the DTI issues cleared properly.
I’ll have more information as it comes to hand, but as it is a public holiday in the UK today, this may take a little while. It appears that what has happened is that the Quixtar Accreditation approach has been made compulsory and implemented immediately by Amway UK and Ireland in response to concerns expressed by the UK Deparment of Trade and Industry. Such “shock therapy” is what many critics have been calling for, whereas Amway and Quixtar has tended to take a more “softly, softly” approach to implementing change. The UK market is a potential sleeping giant for Amway, with very little market penetration, which hasn’t been helped by the deceptive practices and over-selling of some IBOs. It will be interesting to see the effect of these changes.
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