WASHINGTON, D.C. — Amway Corp. and two affiliated multilevel-marketing groups would pay $225 million and overhaul recruiting, compensation, and sales practices under a proposed settlement with the Federal Trade Commission and Washington state over allegations that consumers were misled about earnings and pressured to buy products they were unlikely to resell.
The proposed judgment against Amway, World Wide Group LLC and Leadership Team Development Inc. would represent the largest monetary recovery in an FTC action against a multilevel-marketing company, according to the agency. Nearly all of the money would go to consumers recruited through WWG and LTD who lost money.
The FTC and Washington allege that the companies promoted Amway’s business opportunity with misleading earnings claims while encouraging participants, known as Independent Business Owners, or IBOs, to make recurring product purchases regardless of whether those goods could be resold or were wanted for personal use.
According to the complaint, most participants who joined WWG or LTD after 2020 spent more on Amway products and training than they received from Amway. The regulators also allege that participants were told they could earn more than $40,000 a year, replace full-time employment income or retire early despite results that did not support those representations.
The complaint further alleges that Amway and its affiliates encouraged IBOs to falsely report customer sales, creating the appearance that product purchases were driven by outside demand rather than recruiting additional participants who would themselves buy products.
WWG and LTD are among Amway’s approved-provider groups and sell training and other services to participants. Regulators allege those programs instructed IBOs to purchase set quantities of products each month and focus on recruiting others to repeat the same behavior.
Under the proposed order, IBOs would be required to resell at least 70% of the products they purchase from Amway each month. Compensation to recruiters would also be substantially reduced when recruits purchase products without reselling them.
Participants would have to promptly report customer sales and actual transaction prices, while Amway would be required to send receipts directly to customers. Amway also would have to terminate participants who fabricate sales or instruct others to do so.
An independent outside auditor would regularly review Amway’s sales records. Participants would be required to receive training on the new rules before recruiting others, while approved providers including WWG and LTD could not charge newly recruited IBOs for training or services during their first year.
“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,” Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said.
The FTC voted 2-0 to authorize the complaint and stipulated final order. The FTC and Washington filed the case in U.S. District Court for the Western District of Washington, and the matter remains pending until the court approves and signs the stipulated order.
The FTC said details about how consumer redress will be distributed will be released later.
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