Amway

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Amway
Type	Private
Founded	1959
Headquarters	Ada, Michigan
Key people	Steve Van Andel Doug DeVos Lynn Lyall
Industry	Multi-level marketing
Website	www.amway.com

Amway is a multi-level marketing (MLM, also known as network marketing) company founded in 1959 by Jay Van Andel and Rich DeVos. The company's name is an abbreviation of "American Way."^[1] Based in Ada, Michigan, the company and family of companies under Alticor reported sales of $6.4 billion for the performance year ending August 31, 2005, marking the company’s sixth straight year of growth. Its product lines include personal care products, jewelry, Nutrilite dietary supplements, water purifiers, air purifiers and cosmetics as well as other products from top brands. Amway conducts business through a number of affiliated companies in more than ninety countries and territories around the world.^[2] In the United States and Canada it now operates as Quixtar.

The original intent of Amway's founders was to create a business using a novel means of product distribution that facilitates entrepreneurialism, understanding of economic management, and economic independence among its associates (i.e. distributors; the term currently in use is Independent Business Owners, or IBOs). Rich DeVos also wrote a book called Compassionate Capitalism while Jay Van Andel wrote a book entitled An Enterprising Life.

Some controversies have developed around their business models.

Contents 1 History 1.1 Founding and expansion 1.2 FTC investigation 1.3 Other legal cases 1.4 Corporate restructuring 1.5 Orlando Arena naming rights 2 Overview 2.1 Products 2.2 Corporate information 2.3 Independent Business Owners 3 Training and BSMs 4 Politics and culture 5 Controversy 6 References 7 Books 8 External links 8.1 Profiles 8.2 Media articles 8.3 Government documents

[edit] History

[edit] Founding and expansion

Ja-Ri Corporation was the original multi-level marketing distributorship for Nutrilite nutritional products, founded by Jay Van Andel,Richard DeVos and Michael Pacetti in 1949.^[3] Ja-Ri's name comes from the founders' first names, Jay and Richard. Friends since childhood, Van Andel and DeVos became business partners in endeavors such as a hamburger stand, air charter service, and a sailing business.

Ja-Ri was incorporated in 1959, and changed its name to "Amway" in 1963.^[4] All Amway and Quixtar distributors are "downline" to the founders. Their first product was the laundry detergent L.O.C. In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation, merged to form a single company.^[5]

Amway bought the Mutual Broadcasting System radio network in 1977 and sold it in 1985.

Amway expanded overseas to Australia in 1971, to Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to China in 1995, to Africa in 1997, and to Russia in 2005.^[6] Amway India was established in 1995 and commenced commercial operations in 1998 ^[7].

The product line grew, with a new detergent SA8 added in 1960, and later the hair care range Satinique (1965) and Artistry(1968). Amway bought control of Nutrilite in 1972 and full ownership in 1994.

[edit] FTC investigation

Main article: In re. Amway Corp.

In the 1979 In re. Amway Corp. (93 F.T.C. 618) ruling,^[8] the Federal Trade Commission found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product and money is paid only for business volume, personal and group. It did, however, order Amway to change several business practices and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. Amway was ordered to accompany any such statements with the actual averages per distributor, pointing out that more than half of the distributors do not make any money, with the average distributor making less than $100 per month. The order was violated with a 1986 ad campaign, resulting in a $100,000 fine.^[9]

Amway (and its American online incarnation, Quixtar) have been controversial due to allegations that these companies are pyramid schemes or cults, despite the 1979 FTC ruling (93 F.T.C. 618 (1979))^[10] that legitimized the Amway business. The case revealed that, as of 1979, most of the products sold by Amway were to the Independent Business Owners (IBOs) themselves for personal consumption rather than to retail consumers who weren't enrolled as IBOs. Buying products or directing clients to buy from Amway or Quixtar gives IBOs points and they are paid back on the number of points that they generate from personal consumption or from client volume. An existing IBO can sponsor others to get an IBO number so that they can help others divert their buying habit from other stores to Amway or Quixtar. Thus, the business grows as a greater number of people join the group. The share of profit is based on the volume that an IBO is responsible for each month, therefore an IBO may actually make more money per month than the IBO who sponsored them into the Business.

[edit] Other legal cases

In 1983, Amway pleaded guilty to criminal tax evasion and customs fraud in Canada, resulting in a fine of $25 million CAD, the largest fine ever imposed in that country. The company was fined another $45 million CAD in 1989 to settle a suit brought by Canada's trade office.^[11][12][13] In an 1994 interview, Amway co-founder Rich DeVos stated that this incident had been his greatest "moral or spiritual challenge", first in "soul searching as to whether they had done anything wrong" and then for pleading guilty for technical reasons, despite believing they were innocent of the charges. DeVos stated he believed that the case had been motivated by "political reasons".^[14]

The Recording Industry Association of America (RIAA), as part of its anti-piracy efforts, sued Amway and several distributors in 1995. The RIAA alleged that copyrighted music was used on "highly profitable" training videotapes.^[15] Amway settled the case out of court for $9 million.^[16] In a related lawsuit initiated by the distributors involved, the Court established that Mahaleel Lee Luster, who had been contracted to make the videotapes, had violated copyright without the knowledge of three of the five of those distributors.^[17]

Amway grew quickly in China starting from 1995. In 1998, after abuses of illegal pyramid schemes led to riots, the Chinese Government enacted a ban on all direct selling companies, including Amway.^[18] After negotiations, some companies like Amway, Avon, and Mary Kay continued to operate through a network of retail stores promoted by an independent sales force. Although multi-level payments were still banned, it is alleged that Amway didn't significantly alter its pay scheme, and justified them as payments for services. ^[19] In 2006 Amway was one of the first companies to receive a license to resume direct sales. At the time they had a reported 180,000 sales representatives, 140 stores, and $2 billion in annual sales.^[20] Multi-level marketing (commissions on sales of new sales persons recruited) is still forbidden.

[edit] Corporate restructuring

In 1999 the founders of the Amway corporation launched a sister (and separate) Internet-based company named Quixtar. The Alticor corporation owns both Amway and Quixtar, plus several other concerns. Quixtar replaced the North American business of Amway in 2001, with Amway operating in the rest of the world. Amway's internet sales in Europe are conducted via their Amivo website. The Access Business Group was split off to handle manufacturing.

Later additions to the core product range included water filters and cookware.^[21] The eSpring water filter, introduced in 2000 and developed by Alticor, includes eCoupled wireless power induction technology. Alticor subsidiary Fulton Innovation introduced the technology in other consumer electronic products at the 2007 International Consumer Electronics Show. Companies licensing the technology include General Motors, Motorola and Visteon.^[22][23]

[edit] Orlando Arena naming rights

In December 2006, Alticor secured the naming rights for the 17,000-seat basketball arena in Orlando, Florida - home of the Orlando Magic which are owned by the family of Rich DeVos. The arena, formerly known as the TD Waterhouse Centre, is now called Amway Arena.

[edit] Overview

[edit] Products

[edit] Corporate information

[edit] Independent Business Owners

[edit] Training and BSMs

A significant part of the Amway culture is the promotion and sale of training materials, as well as the attendance at meetings and rallies locally, regionally, and nationally. Training includes education about the topic of generalized, non-Amway specific entrepreneurship. The purpose of this is to create interest and enthusiasm. They are intended to maintain and increase membership, and to inspire IBOs to be more successful in their businesses. To a casual observer, they have some resemblance to a religious gathering, due to the fact that meetings and rallies within some distributor organisations in the United States begin with the Pledge of Allegiance and a prayer. (As noted above, exit counseling groups have expressed concern in regards to this.) By involving people in a regular schedule of meetings, people are encouraged to maintain their focus, and to not be distracted by critics and other nay-sayers. Their training organisations', AMOs, perception of the role of women, though, always includes successful women in awards, recognition and speaking engagements. One rarely, if ever, sees a male, married distributor speak on stage without his wife getting equal billing, and explaining her active role in the business.

Typically, IBOs spend money on tapes, books, and seminars which are promoted to IBOs as the preferred way to learn the "business skills of the IBOs" and to maintain their desire to build their business. These "Business Support Materials", or "BSMs", are not provided by Amway itself but organizations often described as Amway Motivational Organizations (AMO) in general run by people in the higher ranks of the organization. One example of an AMO is Crown Ambassador Dexter Yager's organization, the International Dreambuilders' Association/Digital Alliance (usually simply referred to by the abbreviation IDA), one of the largest and most widely-known AMOs. Claims regarding the support material (also known as "tools" in AMO parlance) range from "can be of help to an IBO" to some organizations claiming they "are absolutely required" to "build a big business". Investigations like one done by Dateline NBC^[24] in April 2003 (this episode aired in 2004) suggested that most of the money being earned by these successful individuals was coming from the hidden "tools" business rather than through selling the company products.

Other AMOs include Britt World Wide, Network TwentyOne, TEAM, INA, ILD, WWDB, efinity, Marker Man Productions, Biznet or Harteis International, ProAlliance and Interbiz.

[edit] Politics and culture

Commentators have often identified Amway as supporting the U.S. Republican Party,^[25] and it contributed $4,000,000 to a conservative 527 in the 2004 election cycle.^[26] Amway states that its business opportunity is open to people regardless of their religious and political beliefs [1].

Former Amway CEO Richard DeVos as well as his son (and former Alticor CEO) Dick DeVos and daughter-in-law Betsy DeVos, and other members of the DeVos family are heavily connected with the dominionist political movement in the U.S.^[27][28] The DeVos foundation is one of the single largest donors to specifically dominionist political groups in the U.S.^[29] Other members of the DeVos family known to be involved in rightwing politics include Betsy DeVos's brother Erik Prince, CEO of the controversial military contractor Blackwater USA. Richard DeVos himself is known to be a member of the secretive Council for National Policy, an invitation-only group that is a "think tank" for both dominionist and Neoconservative groups.^{[30][31][32][33][34]}

Multiple high-ranking Amway leaders, including Richard DeVos, Dexter Yager, and others are also owners and members of the board of Gospel Films, a producer of movies and books geared towards conservative Christians as well as co-owner (along with Salem Communications) of Gospel Communications.^[35]

Many of Amway's best-known distributors, including Dexter Yager, have also declared themselves Republicans. Yager has attacked Democratic President Bill Clinton^[36] and allowed Republican George W. Bush to send messages to thousands of downline distributors using Yager's voicemail system.^[37]

Doug Wead, who was a Special Assistant to former U.S. President George H. W. Bush, is a successful IBO who is a regular speaker at group rallies.

Amway cofounder, the late Jay Van Andel (in 1980), and later his son Steve Van Andel (in 2001) were elected by the board of directors of the United States Chamber of Commerce as chairman of that organization.

In May 2005, former Amway President Dick DeVos, one of the wealthiest and largest charitable givers in Michigan, announced that he would run against Governor Jennifer Granholm in Michigan's 2006 gubernatorial election. DeVos won 42% of the popular vote, while Granholm won 56%.

Amway touts the environmental benefits of many of its products, and in June 1989 the United Nations Environmental Program's Regional Office for North America recognized it for its contributions to the cause of the environment.^[38]

[edit] Controversy

Several groups including those associated with the anti-cult movement have expressed concern that tactics of AMOs may constitute cult-like activity. Steven Hassan's Freedom of Mind Center lists the practices of AMOs as potentially abusive according to his "BITE" Model of mind control.^[39] Other similar organizations that have expressed concern with the activities of AMOs in practice include FACTnet,^[40] Cult Awareness and Information Centre (Australia),^[41] and others. The Rick Ross Institute keeps a collection of related material in its website.^[42]

One controversy that Amway was involved with was an urban legend that the (old) Procter & Gamble service mark is in fact a Satanic symbol or that the CEO of P&G is himself a practicing Satanist (in some variants of the urban legend, it is also claimed that the CEO of Procter & Gamble donated "satanic tithes" to the Church of Satan^[43]). Procter & Gamble alleged that several Amway distributors were behind a resurgence of the urban legend in the 1990s and sued several independent Amway distributors and the parent company for defamation and slander. After more than a decade of lawsuits in multiple states, by 2003 all allegations against Amway and Amway distributors had been dismissed, with the trial judge declaring "Throughout this and its related protracted and duplicative litigation, P&G has tried to evade the law of the case doctrine, and has squandered scarce judicial resources".^[44][45] However, in October 2005 a Utah appeals court reversed part of the decision dismissing the case against one Amway distributor, Randy Haugen, and remanded it to the earlier court for further proceedings.^[46] On 3/20/2007 P&G was awarded $19.5M by a jury. The U.S. District Court jury in Salt Lake City found in favor of the Cincinnati-based consumer products company in a lawsuit filed by P&G in 1995. It was one of several the company brought over rumors alleging a link with the company's logo and Satanism.^[47]

[edit] References

[edit] Books

• Ain't It Great: A Look Inside Amway published September 1, 2001 by Authorhouse; ISBN 0-75962503-4
• Amway: The Cult of Free Enterprise published December 1, 1985 by South End Press; ISBN 0-96487951-4
• Amway: The True Story of the Company That Transformed the Lives of Millions published September 1, 1999 by Berkley Publishing Group; ISBN 0-42517040-3
• Behind the Smoke and Mirrors: Amway Motivational Organizations published September 1, 1999 by Backstreet; ISBN 0-96710702-4
• False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes published May 1, 1997 by Harold Press; ISBN 0-96487951-4

[edit] External links

• Amway Corporation
• Alticor Inc. (Amway & Quixtar Parent Company)
• Amway Japan Limited
• Amway India
• Amway Europe
• Amway Latin America
• Independent Business Owners Association International

[edit] Profiles

• Alticor Inc.
• Yahoo! - Amway Corporation Company Profile

[edit] Media articles

• "She Did It Amway" Mother Jones, September 1996
• "No Amway Christian" Augusta Free Press, February 4, 2005
• "With soap in their hands and hope in their hearts" Bangalore Magazine
• "Amway.com" Forbes, June 25, 2001
• "In pursuit of the almighty dollar" MSNBC Dateline, May 7, 2004
• Quixtar's response to the Dateline report
• "Amway II: The Kids Take Over", BusinessWeek, February 16, 1998

[edit] Government documents

• Prepared Statement of Debra A. Valentine, General Counsel for the U.S. FTC, on "Pyramid Schemes"
• Amway Corp. to Pay $100,000 Civil Penalty (1986), from ftc.gov