Amway has been in business for over 50 years. And just like many other companies that have been around for that long, they have had their fair share of legal issues. Of those legal battles they have had, most of them are about product liability or distributor disputes. However, not one of those legal battles has affected the tremendous growth that has occurred within Amway.
As an example, in 1997, Amway sued a polish film maker for libel. The film, Welcome to Life, purportedly defamed Amway, showing a misleading and libelous version of what muli-level marketing was all about. Amway Poland was able to obtain an injunction, preventing the film’s release, and subsequently Amway won the lawsuit.
Other relatively minor legal battles have involved some Amway distributors using copyrighted music on promotional tapes – these usually do not affect the company as a whole and most have been settled out of court. But another type of legal battle gets at the heart of what MLM is…
Is MLM, and Amway specifically, a pyramid scheme? In other words, is the business model illegal from the start? This is when the big time legal battles started. Losing a challenge on this subject would mean, not just fines, but a complete shutdown of operations – maybe even jail time.
Well, in 1977, Amway was subjected to just such a challenge. The US Federal Trade Commission (FTC) started investigating Amway for deceptive business practices and the charge was essentially one of operating a pyramid, or Ponzi, scheme.
The crux of the issue was this, was Amway trying to make money just from recruiting distributors or was the main business model to sell products. This is a serious charge in a serious venue – the FTC had the power to completely shut Amway down.
After over two years of investigating, the FTC ruled that the Amway business model was legit. They did criticize some of the business practices, and Amway changed some of its sales materials as a result. But the ruling was clear – there was nothing illegal about MLM and network marketing.
This one single decision by the FTC save the network marketing industry as a whole. With the validation of the FTC, network marketers could finally claim what they had always known – MLM isn’t a scam, or a deceptive business practice. Instead, it is a legitimate way to sell products and grow individual businesses.
Proctor and Gamble, Amway’s main competitor, brought suit in 1995, claiming that Amway had allowed its telephone messaging service (AmVox) to be knowingly used to harm P&G. The claim was that rumors that P&G was a Satanist organization had been spread over this service and that the company’s reputation had suffered damage because of this.
After almost a decade in the courts, and lawsuits in multiple States, the case was dismissed in 2003. P&G did win money against four individual Amway distributors in Utah in 2005, but the Amway Corporation remained untouched by the slander.
**Foreign legal battles**
While the legitimacy of the MLM model was proven in the US, occasionally, the same issue has been raised in other countries. Because Amway Global is actually global in scope, these are of interest.
2006 – India started action against Amway under their version of Ponzi scheme laws. While the case isn’t entirely settled, Amway still does business in India and has won against some of the injunctions placed upon it. The original case is still pending, but in the past four years, no grounds have been found to move forward.
2007 – British authorities brought an action against Amway for what were called, “objectionable practices.” The Department of Trade and Industry (the UK version of the FTC) has the power to shut down operations and this was a serious matter. In 2008, the investigation was complete and Amway was found to have violated no laws in Britain.
**A settled issue**
With the results in, the question of whether Amway is a pyramid scheme or not is settled. Challenges to the MLM business model have been mounted, not only in the US, but several other countries. In every major legal battle, Amway had won.
Network marketing remains a viable and completely legal way to do business. In the new millennium, with the rise of the Internet, it may in fact be one of the best ways to do business. Amway has proven their model over and over again – both in the courts and on the ground. If you wish to partner with Amway, rest assured there is no pyramid scheme, no Ponzi operation – just an exciting opportunity.