Here are some that I have found so far. If there are more to add or if you wish to debate any of these issues (with supporting evidence), please let me know.
The first statement, that "Amway does not use middlemen to move their products," is untrue since (until recently) distributors ordered products through their sponsor to their sponsor to their sponsor to their Direct, who orders from the RDC. Products are then delivered from the RDC to the Direct to the distributor to that distributor on down the line to the last distributor. Payment of product is also made in this way: you pay your sponsor who pays his sponsor, etc. Granted, there is no cost-markup along the line, but is this really the elimination of middlemen?
In a majority of groups, however; distributors have enrolled in a service called ARP. Using this service, distributors can both order products and receive their bonus checks directly from Amway. This service, then, can be seen to eliminate the middlemen, but keep in mind that not all groups have authorized their distributors to order this way. There are still a number of groups who have not transferred to this service.
Also, the distribution of tools has not changed- they are still 100% distributed by middlemen. If you need to purchase a particular audio tape, you must order it from your sponsor who orders it from his sponsor, etc. Payment is made the same way. Of course, no one below the level of Profit-Sharing Direct is making any money in this chain, but there is still time and labor involved. But, from the level of Diamond to Profit-Sharing Direct, each distributor adds his own mark-up to the audio tapes. This raises the price of each tape from the manufacturing cost of less than $1.00 to a final, selling cost of $6.00 or $7.00.
What would happen if each distributor below the Profit-Sharing Direct did the same thing? Would the person at the very end of the line have to pay $10.00 for a single tape? Remember, unlike the Amway products, tapes have no value outside of the business. The last distributor in the line can not resell the tapes to a retail customer. So, then, when is this considered an illegal pyramid business? Of course, distributors don't count the tools system as having "middlemen" since tools are not produced by Amway, but produced by the AMO's.
The second statement told by distributors that "Amway does not advertise on the TV or radio" is now 100% FALSE. According to the December, 1997 Amagram:
"Amway and distributors in Sacramento, California, and Raleigh/ Durham, North Carolina, teamed up for a new phase in image advertising last year, and the success of those inaugural regional campaigns means more blitz ads are scheduled for 1998. The objective of the first two campaigns was to determine whether sales and sponsoring could be improved with a focused advertising effort. The answer was yes on both counts after the TV, radio, billboard, and print messages about the Amway business opportunity appeared." (emphasis mine)
Where does Amway get the money to pay for this advertising? Does this mean there will be less money available for distributors' bonus checks? Or will it mean less of an increase in the bonus checks in the coming years? Will their campaign start to spread to other markets besides Sacramento and Raleigh/ Durham? The tough question is this: why does the world's largest MLM business, with its "explosive growth," feel the need to advertise their business opportunity on the TV and radio? If MLM is indeed the "wave of the future," why advertise like non-MLM companies? I though Amway always prided itself on only using "word of mouth advertising." And since the article states that both sales and sponsoring were improved by the advertising, why even have the distributors go through the trouble of contacting people? Just place more advertising on the TV and radio and save the distributors a LOT of hard work.
To be fair, though, Amway has been advertising its Double X and Nutrilite products on TV during basketball games. They have also been advertising in magazine print ads (such as Time, Newsweek, Money, etc.) asking people to learn more about the products and corporation. But they have never advertised the Amway business opportunity on TV or radio before.
Over and over, distributors claim that Amway "deals with 2,000 companies, most of which are "Fortune 500" companies"- a statement which is only partially true. Why do distributors exaggerate this number? To make the Amway business look more reputable or more diverse in its product offering?
First, a basic fact: home cleaners, personal care items, etc. are only available in the Amway-brand label, without competition from any other manufacturers. You will NOT see Tide-brand laundry cleaner or Prell-brand shampoo or Ivory-brand soap or Crest-brand toothpaste. (As a side note, you'll never see Tide or Crest ever offered in an Amway catalog- those products are manufactured by their biggest competitor: Procter & Gamble.) Does Amway do this because their products are so much better than everyone else's or does Amway enjoy its monopoly over its distributors?
Yes, Amway does do business with over 2,000 major manufactures like Panasonic, Coca-Cola, Braun, and others. But, these companies have merely let Amway sell their products through the various catalogs. This is the sum total of the relationship between the companies. A number of these companies have written letters stating their corporate policy: "Amway is only a reseller of our products and no joint venture or partnership of any kind should be implied." (quote paraphrased) Of course, it makes perfect business sense: if you had access to Amway's (claimed) 3 million distributors, who would buy and sell your products instead of your competitor's, would your company be interested? But why do distributors (especially speakers at Open meeting) continue to claim that Amway has "joint-ventured" with these companies?
The misrepresentation can easily be spotted in the second half of the above statement. If you assume the words "most of which" to mean 'a majority of the total,' this would translate into 51% or more of the total number. In turn, this becomes 51% of 2,000 companies which would equal over 1,000 total. By definition, there are only 500 "Fortune 500" companies. Therefore, there is no way that "most of" the 2,000 companies Amway deals with are "Fortune 500" companies.
Along the same argument, many distributors have claimed that Amway does business with 90% of the "Fortune 500" companies. This translates into 450 out 500 companies (90% of 500). If you were to look at the actual listing of the "Fortune 500" companies published yearly, there are quite a number that would not be able to even do business with Amway. These include: software manufacturers, oil companies, and other non-consumer-product companies. Then, how many "Fortune 500" companies does Amway have the ability to deal with? I don't know the actual number, but a number of critics have placed the estimate around 20-25%. The percentage is smaller when talking about the actual number of companies whose products are in the Amway catalogs. This is very different than the 90% claimed by distributors.
As a side note, I have made a list of every company found in the following: the sales & marketing plan, the 1998 "Spring & Summer" catalog, and the 1997-1998 "Personal Shopper" catalog (Amway's main catalog). Click here to go to that page. If you count how many companies I have listed, the total comes to just over 450. Now, keep in mind that I have not counted the companies in any of the other catalogs such as: the "Steak" catalog, the "Major Appliance" catalog, the "Christmas" catalog or the "Office Supply" catalog. Also keep in mind that most of the companies' products found in the "RDC/ Service Center" catalog can also be found in the "Personal Shopper" catalog. And, also keep in mind that the products found in the "Coreline/ Products & Services" catalog are ONLY Amway-brand. The conclusion is this: if I have found only 450 companies in the main catalogs, can there be another 1,550 companies in the secondary catalogs I have missed? Or is the claim, "Amway deals with 2,000 companies," just another deception by distributors?
Almost every distributor claims that "by becoming an Amway distributor, you can save 30% off retail price" by purchasing items in the Amway catalogs instead of the local store. In reality, there is evidence that distributors actually pay about 40% MORE for products. And don't forget the postage costs to have the items "conveniently" shipped to your house. Rather than debate this issue, I am going to refer you to entire web page dedicated to this one lie. Click here to go to The Amway distributors little white lie page.
I will start this section by saying that Amway does not condone nor allow the use of the Profiles of Success as an aid in sponsoring. Second, the incomes in the Profiles of Success are grossly misrepresented. As a number of lawsuits contend, Diamonds make a vast amount of their "Amway income" from the sale of tools. Therefore, for distributors to claim that the lifestyle shown in the Profiles of Success is typical, is nothing more than a lie. By using the Profiles of Success, distributors can lead prospects to believe that they too can have the wealthy lifestyle of the Diamonds. And if prospects need a "moving" version, the Diamond will probably have a "lifestyle" video produced at the same time his Profiles of Success information is created.
According to sources who have worked with some Diamonds, many items shown in the pictures are completely fraudulent. A number of the cars were leased or even borrowed- instead of owned. In one case, the big home behind the Diamond was actually the house he had just sold, but the picture implied that the house was his. Boats and motor homes may be rented for the photo shoots as well. Why go to these lengths for a few pictures or a video? The fabulous lifestyle shown in the pictures will lend more credibility to the Amway business- "If all these people are making money, then it must be a good business."
Chances are good that most distributors are not aware of these facts. Chances are good that many Directs are not aware of these facts. Since they have not been taught otherwise, these distributors strongly believe that the material items surrounding the Diamonds have been purchased with only Amway bonus checks. Ask yourself this question: can a Diamond making around $115,000 afford the numerous cars, the large house, or other material goods. Chances are, he can MORE than afford them if he makes over $115,00 + $916,000 a year. (These figures are from the See how much money upline distributors really make page.)
Contrary to what most distributors believe (and teach others), Diamonds do not have lots of free time. According to one critic, Diamonds "have the LEAST amount of free time." Instead of "retiring," a Diamond's time is spent motivating and working his group, speaking at meetings and functions, and traveling to company seminars and upline meetings. My own Diamond would tell stories about how his upline would call him to tell him to change his plans- they were going on a trip. And if he declined the "invitation," would the tools bonus stop? How can you plan your life if you worry your upline could change those plans at the last minute? Is this the "great life of freedom" distributors always talk about? Another critic had personally witnessed his Diamonds leaving their children to speak at yet another function. Those Diamonds even missed Christmas with their children in pursuit of the speaking fees. It makes a person wonder what Diamonds feel is more important: spending time with their children or continually pursuing the money? And these are the same people who tell distributors to keep building the Amway business so they will have more time to spend with their own children.
There have even been allegations that Diamonds have to continually "kiss up" to their upline to insure the tools money doesn't stop. Yes, "kissing up" to your boss may take place in the corporate world, but if you don't like your boss, you can get a new job. What can Diamonds do for a living if they quit the Amway business- assuming, of course, that they can quit? First of all, it is almost unheard of for a Diamond to leave the Amway business. By the time people have reached that level, they have grown accustomed to the constant edification and worship from their downline. If they were to leave the Amway business, they would become just another employee. What would happen to their ego then? Also, most Diamonds have given up control of their business to their support staff- either by choice or because that's what "expected" of a Diamond. Therefore, a lot of Diamonds may have lost any business skills they once had. What would happen if they applied for a "real job" then? This could be the reason Diamonds tell distributors it is so terrible to leave the business- they couldn't survive themselves!
Whenever a person is approached to build an Amway business, distributors represent that, by building an Amway business, a person can achieve a "debt-free" lifestyle. By building the business, the person will have more than enough money to pay off ALL their bills: mortgage payments, car payments, credit card bills, and any loan payments. When the bills are paid, the person will be completely debt-free.
It is my contention that a person can never truly have a 100%; quot;debt-free" lifestyle. There will ALWAYS be monthly bills that create debt, even temporarily, such as the telephone bill, the utility bill, or the cable bill. Yes, these bills are completely paid within a month, but for that time, there is still debt.
A more accurate statement would be to say that a person could make enough money to have an almost debt-free lifestyle. Instead, though, distributors lead people to believe that all their debt will disappear if they work long enough at building the business. (Never mind the fact that some critics contend that building an Amway business creates more debt than it cures.)
I know that this point may be "nit-picking," but it is "one more thing" that adds to the overall picture of the Amway distributors. They make so many claims that it becomes hard to tell which are true, which are "bending the truth," and which are just lies.
Ever since Amway was created, its distributors prided themselves on the fact that they were "unique" or "different"-- they didn't need retail stores to sell Amway's products. Going door-to-door or recruiting neighbors or contacting strangers was always enough. Until July, 1998, that is.
Due to pressures against the MLM industry, Amway agreed to the Chinese government's decision that all MLM business were to switch to retail-selling or leave China. Following behind such other MLM companies as Avon and Mary Kay, Amway converted its distribution centers into retail stores. Customers are now free to purchase products without using a distributor.
According to an article in the July 22, 1998 issue of the Orlando Sentinel:
"Amway Corp. will be allowed to sell dish soap, window cleaner and other products in China. But the sales won't solely be through its door-to-door suppliers. Under a new system, Chinese customers will be able to shop at Amway retail stores, which are currently used as distribution centers. They will also be able to buy products from their distributors. In April, the Chinese government banned Amway Asia Pacific Ltd. and other direct marketers from door-to-door sales. Authorities were concerned such sales would promote illegal activity, including smuggling, the state-run news agency said. Under the deal, customers who pay a fee will be eligible for bonuses on the products they purchase, the same way Amway salespeople in other parts of the world receive bonuses. Customers who pay the fee can also join the sales force."
And from the July 22, 1998 issue of the South China Morning Post:
Amway said its operations had resumed in 14 provinces and four cities, employing about 1,300 employees, about 100 less than when it closed on April 22, when Beijing announced a blanket direct-selling ban.
It plans to combine retail outlets with a team of sales representatives, expected to be the group who previously conducted direct marketing.
For a fee, clients can become privileged customers, enabling them to buy products at a discount.
"The company is only allowed to sell to the product's end user, meaning it retains legal right to the product and it cannot be sold to the sales person," [spokesman Mr. Herbert] Ho said.
"No direct marketing is permitted at all, so we have to be very clear about the new rules," Mr Ho said.
However, at one Beijing retail outlet, sales people appeared to be in some confusion over the regulations.
Mr Ho said the activity this former sales representative described was improper, as sales people were not allowed to buy products before selling them.
However, he said that problems or confusion about the new company rules that might arise would be resolved easily, as the new rules of operation had been clearly announced and all prices were fixed and prominently displayed.
He said that former sales representatives would have to get used to the new rules.
Beijing banned direct marketing following the discovery of widespread abuses, fraud and illegal schemes - such as pyramid selling - and declared the market was not yet ready for it.
To compound matters, Amway President Dick DeVos flat-out lied to the press:
From the HONG KONG, July 20, 1998 /PRNewswire/:
We are honored to be the first company so approved for business resumption by the national government and are gratified by the trust and confidence which the Chinese government has in Amway's ability to train, develop and manage a responsible and effective sales team." (emphasis mine)
Compare this with an earlier June, 1998 South China Morning Post:
"Avon Receives Approval to Resume Operations in China [on] Friday, June 5, 1998 10:01 AM"
From the NEW YORK, June 5, 1998 /PRNewswire/:
"Avon Products, Inc. (NYSE: AVP) announced that it has received today Chinese governmental approval to resume operations in China as a wholesale and retail business, and anticipates being operational by June 15 ."
How can Amway be "the first company so approved for business resumption" when Avon was approved by the Chinese government almost 3 weeks earlier, and then started operations 1 full week before Amway? Are DeVos' statements merely "spin-doctoring" (to explain a potentially disastrous situation) or outright lying? And if the president of a corporation lies about its operations, does that really inspire the public's trust? For Amway, DeVos should do whatever he can to improve Amway's tarnished public-image.
To clarify the situation, Dexter Yager made these statements in a public-relations announcement:
"Amway China is viewed as a normal retail sales company with "Sales Representatives" and "Sales Managers" working for the company in approved areas of China. Amway is not viewed as a "special business opportunity" with "independent business distributors" building a personal business." (emphasis mine)
"The China and Hong Kong markets are now two separate, individual markets with no [line-of-sponsorship] links."
"Amway will conduct retail sales to anyone that enters an Amway shop and asks to purchase product."
"Amway no longer uses distributors. Amway now has employees and customers..."
"It will no longer be necessary to purchase an Amway Starter Kit- 700 RMB ($85.00 USD) to join the Amway business in China."
What happens if Amway's sales increase due to this shift to retail selling? Would Amway decide that they could further increase its profits by doing the same in the United States? Could this be the end of Amway's distributor force- are distributors really needed if retail stores can sell more products? Or could this mean that Amway will take control of the products, leaving distributors free to concentrate on selling tools to build their own "motivational" businesses? Then again, this whole point could be moot when Amway's Internet-based, "sister company," Quixtar, starts to fully operate.
Almost every distributor has heard the rumors, but not many know the entire truth behind the Amway/ Canada tax case. Distributors learn the "Amway-accepted" version of the story- a version that tells how Amway was a victim of complex tax and tariff regulations and how, in a show of "ethics," founders Rich DeVos and Jay VanAndel "generously" returned to Canada to face the charges against them.
"From Promises to Keep, by Charles Paul Conn
The twenty-five million-dollar fine to which you refer was a result of a customs dispute between Amway and Revenue Canada, the branch of the Canadian government which collects tariffs. The dispute was a complicated one which began in the 1970's, when Amway first began shipping products from its manufacturing plant in Michigan across the international boundary to its distributors in Canada.
By the time all this legal maneuvering was over, tens of millions of dollars were at stake, and the fine, when it was levied, was a very large one. Even in Canadian dollars, twenty-five million is plenty."
Yes, the dispute was "complicated," since the government would later find out that the Amway Corporation had created "dummy" companies to circumvent the import laws. The government also discovered that Amway had created these companies willfully, for a number of reasons. Conn's "Amway-approved" version is an extreme watered-down version of what actually happened. In fact, DeVos and VanAdel were almost extradited by the Canadian government if they failed to face the criminal charges against Amway.
"From Amway And Canada- The Judges Report, Gaylen J. Baker, The Reformed Journal, September 1994.
On November 10, 1983, before Chief Justice Evans of the Supreme Court of Ontario, the Amway Corporation and Amway of Canada Ltd. pleaded guilty to charges of criminal fraud and paid a C$25,000,000 fine, the largest ever imposed in Canada. The crime was tax evasion. The Canadian court upheld the government's claim that by means of fake and fictitious invoices and price lists and the creation of a dummy corporation, the Amway companies had defrauded Canada out of amounts in excess of $28,000,000."
Make no mistake about the court's conclusion: Amway was found guilty of willfully, fraudulently, and criminally cheating the Canadian government out of millions of dollars.
To read more information about this story, please go to The Canadian Tax Fraud Scandal (reprinted from Sidney Schwartz's "Amway: The Untold Story" website). This article goes into much more detail than can fit into this section.
What is "D&B?" It stands for the Dun & Bradstreet company, a financial company that rates the credit risk of corporations. This rating is used to determine whether or not a corporation should be lent money. Now, I can't say if Amway's D&B rating is good or bad because the Corporation does not release that information to the public (which includes Amway distributors). (I am assuming Amway's rating is excellent since distributors make a point of stressing how the Corporation is "debt-free." And, since Amway is "debt-free," no one should have to lend them money. Doesn't this mean their D&B rating is irrelevant?)
To further this point, I'll let Amway's Business Manual speak for itself:
Business Regulation 3: Use of Dun & Bradstreet Reports Is Prohibited
Dun & Bradstreet financial reports and ratings are not to be used in the course of sponsoring new distributors. All Dun & Bradstreet financial reports and ratings are confidential, reserved for the exclusive use of subscribers. Using such reports and ratings in sponsoring could result in Dun & Bradstreet refusing to rate Amway in the future.
While using these reports and ratings is prohibited, we encourage you to stress Amway's financial soundness in your sponsoring efforts.
I wonder what would Amway do if they found distributors were using Dun & Bradstreet ratings in Open meetings? Probably nothing. But, what would Dun & Bradstreet do to Amway if they discovered distributors were promoting Amway's rating as a way to further bolster Amway's "financial soundness?" Look at the last sentence of the first paragraph: "Using such reports... could result in Dun & Bradstreet refusing to rate Amway in the future." I suppose distributors are counting on the fact that Dun & Bradstreet will never find out.
Recently, I received a short e-mail from a distributor "laughing" at me due to the fact that he claims Amway's revenues were around $7 billion for the 1997/1998 fiscal year. On October 26, 1998, Amway announced its official figures. Please note that the word "revenue" is not mentioned at all, but is referred to as "estimated retail sales":
AMWAY ANNOUNCES ESTIMATED RETAIL SALES OF $5.7 BILLION
ADA, Mich., Oct. 26, 1998 -- Amway Corp. today announced global estimated retail sales of $5.7 billion for the fiscal year ended Aug. 31, 1998, a decline of more than 18 percent from estimated retail sales of $7 billion the previous year. [emphasis mine]
This figure represents the combined results at estimated retail for the 49 affiliate markets supported by privately owned Amway Corporation and its publicly traded sister companies - Amway Asia Pacific Ltd. and Amway Japan Limited - which announced their annual sales separately during the past 10 days.
"Fiscal 1998 was a challenging year," stated Amway Chairman Steve Van Andel. "Nearly half of our business is in Asian markets where economic upheaval resulted in weak consumer demand. Our revenues were further reduced when translated from weak Asian currencies back into strong U.S. dollars."
"We've enjoyed phenomenal growth, including double-digit increases during the early and mid 1990s," said Amway President Dick DeVos. "We remain confident in the fundamentals of the Amway business and we're finding new ways to energize our business through the products and the business opportunity we offer our distributors and customers. Because of what we've accomplished in the face of many challenges, fiscal 1998 remains one of our best years ever."
NOTE: Before I critique this announcement, a point should be made: The Amway Corporation refers to its $5.7 billion and $7 billion figures as ESTIMATED RETAIL SALES. The Corporation never refers to these figures as REVENUE. And, as so many people are quick to point out, a vast majority of Amway's products are sold at "distributor" prices, not "retail" prices. Therefore, are these figures actually inflated by the "distributor savings" of 30%?
In the announcement, DeVos calls "fiscal 1998... one of [Amway's] best years ever." This is certainly putting a "spin" on the information. If Amway did, indeed, "[enjoy] double-digit increases during the... 1990s," how can a year that produced "a decline of more than 18 percent" be considered one of their best? Or is DeVos implying that Amway was expecting to show a bigger loss?
Distributors are always quick to point out, "How many other companies increased their sales revenue $500 million in one year, like Amway did?" (Referring to Amway's estimated retail sales increase from $6.3 billion in 1996 to $6.8 billion in 1997.) Well, I should ask them, "How many other companies decreased their retail sales $1.1 billion in one year, like Amway did?" And I wonder if the speakers at Open Meetings will change their speeches to reflect this new figure- Amway's estimated retail sales are no longer "almost $7 billion," but are now "less than $6 billion." And why do I have the feeling that they will neglect to mention the 18% drop, as well?