Amway’s ‘Pyramid Fraud’: Here’s How Multi-Level Marketing Forced People Into Its Network For Decades

The Enforcement Directorate (ED) has attached assets worth Rs 757 crores from one of India’s most well-known multi-level marketing companies, Amway India. The probe for the money laundering allegations against the company revealed that the company was running a ‘pyramid fraud’ in the name of multi-level marketing. The investigating agency said that the initial investigation led to provisionally attaching assets, including the land, factory, vehicles and fixed deposits in Tamil Nadu’s Dindigul district. The investigating agency has also mentioned that Amway charged exorbitant prices for its products compared with products from reputed brands in the market.

People Associate With The Company To Make Money

The agency claimed that the company collected an amount of Rs 27,562 crore between FY 2002-03 and FY 2020-21, out of which the company paid a commission of Rs 7,588 crore to their affiliated members and distributors in the United States and India, FirstPost reported. Moreover, it is believed that the new members who get associated with the company join it more to achieve the wealth of the upline members rather than using their products. The company functioned by influencing people on how they could become wealthier by becoming members of the company.

The Logical Indian asked its readers for views about Amway and if they felt bullied into the loop of buying their products. Pathankot-based Anshu Thakur said, “People associated with Amway would force their relatives and friends into buying their products”. Another reader, Manvi Bhatia, mentioned, “My parents were Amway members when we were children; they got out in time. The company used to sell expensive products to my parents forcibly”.

The multi-level marketing scheme makes the general public the distributors for the company. The company pushes the new distributors to buy its products and then gets people to join their network as the second tier of distributors, and the cycle continues. Therefore, eventually, the company ends up with many distributors who hold onto the company’s products but are not able to sell them. At the same time, the company keeps encouraging people to buy more products saying that the ‘demand would come soon’.

In multi-level marketing, the company forces its distributors to sell its products directly to the people through person-to-person sales, which could have amongst friends, and families, from home, a customer’s office or online. Companies influence people by making them believe that they can earn money in two ways: by directly selling their products to retail customers or by recruiting new distributors under them. Since one distributor tries to bring others into the company, it becomes a pyramid structure. However, if multi-level marketing does not become a pyramid structure, it earns money directly through its sale to the customers.

What Does The Law Mention?

As per the Consumer Protection (Direct Selling) Rules, 2021, the government bars direct selling companies from promoting pyramid schemes. Megha Virk told The Logical Indian, “I’ve seen Amway enter India when I was in class 6! Everyone wanted a Platinum Status. Because they were getting benefits such as foreign trips, super discounts, and Additional money in their accounts. My Uncle is a Neurosurgeon in the US. He told me they send low-grade stuff, especially to ‘third world countries’, so yes, it was a cheat”.

Amway India has over 5,50,000 direct sellers, or distributors in its network, out of which 60 per cent are women. The company aimed to provide self-employment opportunities to the middle-class, thus alluring them into the network with potential better financial conditions.