FTC Takes Historic Action Against Multilevel Marketing Operator Amway for Unfair and Deceptive Business Practices

Amway Corp., one of the largest multilevel marketing companies in the U.S., and two of its affiliates—World Wide Group, L.L.C. (WWG) and Leadership Team Development Inc. (LTD)—will pay $225 million to resolve allegations from the Federal Trade Commission and the state of Washington that the companies use unfair and deceptive tactics to recruit members to its direct selling and multilevel marketing opportunity. 

The monetary relief to be paid by Amway and its affiliates under the proposed order marks the largest monetary recovery obtained in an FTC action against a multilevel marketing company, nearly all of which will be used as redress to consumers harmed by Amway and its affiliates’ allegedly deceptive tactics.

Amway offers a moneymaking opportunity that it claims gives individuals, referred to as Independent Business Owners (IBOs), the chance to own and operate their own business selling a variety of consumer products, ranging from nutritional supplements to energy drinks to health and beauty products. In their complaint, the FTC and Washington allege that Amway and two of its affiliates, WWG and LTD, use a variety of deceptive and unfair tactics, including misrepresentations about likely earnings, to incentivize and pressure IBOs to buy Amway products they don’t want and that end up being difficult to sell. 

The complaint also alleges that Amway and its affiliates deceptively instruct IBOs to falsely report selling products that they, in fact, did not sell, to create the appearance that the Amway opportunity revolves around selling products rather than attempting to recruit new IBOs to purchase Amway products. 

“Amway and its affiliates misled prospective workers with false earnings claims and then pressured them to buy Amway products they were unlikely to be able to sell,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection. “Today’s action makes clear that the FTC will not tolerate any company deceiving workers—whether through deceptive earnings claims or by promoting reports of false sales to make direct selling or multilevel marketing opportunities look appealing to consumers.”

WWG and LTD are two of Amway’s largest “approved provider” groups that recruit individuals to join Amway as IBOs. Both WWG and LTD sell training materials and services to IBOs that are allegedly marketed as being essential to becoming a successful Amway IBO. However, in these trainings, these groups instruct IBOs to buy a set amount of products each month regardless of whether the IBOs can resell them or want them for themselves and to focus their time on trying to recruit others to duplicate that behavior, according to the FTC and Washington’s joint complaint. As a result, according to the complaint, Amway, together with WWG and LTD, set up an unfair and unlawful system to pressure IBOs to purchase Amway products for reasons other than genuine demand for them. 

The complaint also alleges that Amway, WWG and LTD deceive consumers in ways that make it difficult for IBOs to make informed decisions, including:

• Falsely telling IBOs that they are likely to earn substantial income, exceeding $40,000 a year, or that they are likely to earn income that will replace their full-time job or allow them to retire early, when most IBOs who joined WWG or LTD after 2020 spent more money on Amway products and training than they received from Amway
• Falsely telling IBOs that they are likely to recruit multiple IBOs into the business to help them succeed, when in fact most consumers who joined Amway and WWG or LTD did not recruit multiple participants
• Falsely telling IBOs that they are joining an exclusive opportunity in which they will get access to mentoring from highly successful leaders, when in fact the Amway opportunity is open to any prospective IBO who follows the instructions of their recruiter, and the “mentors” IBOs work with are typically not highly successful

The proposed order settling the FTC and Washington’s allegations imposes a $225 million judgment, nearly all of which will go to IBOs recruited by WWG and LTD who lost money. 

In addition, the proposed order requires Amway, WWG and LTD to change their practices, including as follows: 

• IBOs will be required to sell to others at least 70% of the products they purchase from Amway each month.
• Recruiters will receive substantially reduced compensation if the IBOs they recruit buy products but do not resell them.
• IBOs will need to report all of their customer sales promptly, including the actual sales price, and Amway will send receipts to all of an IBO’s customers.
• Amway must terminate IBOs who fake sales or teach others to do so.
• Amway’s sales records will be audited regularly by an independent outside auditor.
• IBOs will be required to receive training on these rules and others prior to being allowed to recruit.
• Amway must require approved providers, including WWG and LTD, to not charge new IBOs for any training or services during their first year.

Information on the FTC’s redress program for this case will be provided at a later date. The Commission vote authorizing staff to file the complaint and stipulated final order was 2-0. The FTC and the state of Washington filed the complaint and proposed final order in the U.S. District Court for the Western District of Washington. 

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.