Howard,I’ve been researching and writing about multilevel marketing companies like Amway for over a decade, and unfortunately your article is full of inaccuracies. This isn’t surprising considering you quote Robert FitzPatrick, who has spent a better part of his life spreading myths about multilevel marketing.(1) You say “the most basic requirement is that participants sell a reasonable percentage of the products to outsiders”. This is false, and the FTC has explicitly stated as much in response to allegations by the likes of FitzPatrick. What’s important is that people are purchasing products out of legitimate demand and not out of some belief doing so will some how make them rich. It makes no difference if they are registered as distributors or are full retail paying customers. It’s this same falsehood that Bill Ackman is promoting in his failing attempt to short Herbalife. Having said all of that, Amway requires all it’s active distributors in the United States to have a minimum level of sales to retail customers.

(2) You’ve mixed up two different lawsuits. One involved a large group of distributors that Amway terminated from the company because of alleged unethical practices. Amway fought and won that lawsuit, including a version in California that alleged it was an illegal pyramid. The other involved a separate couple of California distributors. Amway elected to settle that lawsuit, and an analysis of the settlement shows why – the settlement is costing them significantly less money than going to court would have. Interestingly, despite having contacted 97% of all Amway distributors and former distributors in the US over the past decade, the class settlement administrators have been unable to get rid of the money! There’s apparently simply not enough people who feel “scammed”. Indeed only 0.7% of distributors submitted a claim for reimbursement of losses. An independent consultant for that case found that at most only 18% of all distributors had even $100 of expenses over the entire lifespan of their time as a distributor. On the other hand, government mandated statistics published by Amway show that “active” distributors (46% of those registered) earn on average nearly $2500/yr in monthly commissions alone, not counting retail profit margin and not counting yearly bonuses which can be as high as several million dollars. Despite this hard data critics claims 99% lose money, which is virtually a mathematical impossibility.

(3) You quote FitzPatrick as saying regarding MLM companies – “Not one would have passed the [Federal Trade Commission legal] test. Obviously not Amway. It did not pass that test.” This contradicts the fact that the FTC investigated Amway more than 30 years ago and cleared the company of allegations it was an illegal pyramid.

(4) You cite the decision of a Belgian court regarding allegations Herbalife is an illegal pyramid, and state it is “a company operating using Amway’s business model”. How can you make that claim when the Belgian court explicitly stated one of the reasons behind their decision was that Herbalife *did not* follow the Amway model? (As an aside, the Belgian court decision seems contrary to EU law on this type of model, so I’d be surprised if it’s not overturned on appeal).

Amway has an excellent reputation in much of the world, even winning “most admired company” awards in several countries. Unfortunately in the US it’s reputation was tarnished by a number of distributor groups operating in less than ethical ways. Those kind of issues were cleaned up by Amway some years ago, and it’s been primarily the likes of anti-MLM zealots such as Robert FitzPatrick who have actively been misleading people that has maintained the myths about the company and industry.

Please don’t support their efforts by repeating these myths uncritically.