In the Matter of Amway Corp. , 93 FTC 618 (1979)

Is Amway an illegal pyramid scheme and does its marketing program illegally restrict competition and fix prices?

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The FTC affirmed the Administrative Law Judge's opinion that Amway was not a illegal Pyramid, but found that Amway did restrict prices and make misrepresentations about the earnings potential of new distributors. Amway was not an illegal pyramid scheme because it did not offer a headhunting fee, made product sales a precondition to receiving recruitment performance bonuses, bought back excessive inventory, and required products to be sold to consumers. The Commission specifically found that Amway's rules requiring 70% of a distributor's orders be sold to ultimate consumers and that each distributor sell to 10 different consumers in a given period tended to show that it was not a pyramid. The Commission did find that Amway unlawfully restricted the prices at which independent distributors could sell products and misrepresented the potential earnings of distributors. The Commission ordered Amway to cease requiring minimum prices and associated practices and to cease representing earnings potentials to prospective distributors.

The full case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/IntheMatterofAmwayCorp.php

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Published In: Administrative Agency Updates, MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

Reference Info:Federal, Federal Circuit | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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