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.