Consumer News: Amway agrees to $225 million settlement over sales and earnings claims

Former participants are likely to receive compensation

By Mark Huffman of ConsumerAffairs

• Amway and two affiliated training groups have agreed to pay $225 million to resolve allegations that they misled people about the money they could earn selling Amway products.

• The FTC says nearly all the money will go to participants who lost money, but it has not yet announced how payments will be made.

• Amway disputes the allegations and says the settlement allows it to move forward.

Amway and two affiliated training groups have agreed to pay $225 million to settle allegations that they used misleading earnings claims and pressured recruits to buy products they were unlikely to sell.

The Federal Trade Commission (FTC) and the state of Washington brought the case against Amway, World Wide Group and Leadership Team Development. The FTC calls the proposed payment its largest monetary recovery in a case against a multilevel marketing company. Nearly all of it is intended for Amway participants recruited by the two groups who lost money, according to the agency. A federal judge must approve the settlement before it takes effect.

Amway calls its sellers Independent Business Owners, or IBOs. In their complaint, regulators allege that recruits were told they could earn substantial income, replace a full-time job, or retire early. Yet most IBOs who joined the two training groups after 2020 spent more on Amway products and training than they received from Amway, the complaint says.

Regulators also allege that the groups urged IBOs to buy products every month whether they could resell them or wanted them for personal use. The complaint says participants were instructed to report sales they had not made, creating a misleading picture of customer demand. These are allegations resolved by the proposed settlement, not findings by a court.

Terms of the settlement

Under the proposed order, IBOs would have to sell at least 70% of the products they buy from Amway each month to other people. Recruiters would receive substantially less compensation when people they recruit buy products without reselling them. Amway would have to send receipts to customers, submit its sales records to regular independent audits, and terminate IBOs who fake sales or teach others to do so. The training groups and other approved providers could not charge new IBOs for training or services during their first year.

In a statement on its website, Amway said, We fundamentally disagree with the agencies characterization of our business. It also rejected the agencies assertion that its sales data is inaccurate and said settling lets it focus on customers, IBOs, and employees.

The FTC said it will provide details about its payment program later. Former participants do not yet have instructions for seeking a payment.