A major multilevel marketing company has agreed to pay hundreds of millions of dollars to settle federal claims it misled recruits about earnings and pressured them into buying products they were unlikely to sell.
The proposed settlement requires Amway Corp., World Wide Group and Leadership Team Development to pay $225 million, nearly all of it for consumer redress, according to the Federal Trade Commission (FTC) and the state of Washington.
The complaint alleges the companies falsely promised income above $40,000 a year or a path to replace a full-time job, when most independent business owners who joined after 2020 spent more on products and training than they earned.
It also claims the firms told participants
It also claims the firms told participants to falsify sales reports to hide a model built more on recruitment than real product sales.
The order adds new rules, including a requirement that independent business owners resell at least 70% of monthly purchases, lower pay for recruiters whose downline fails to move inventory, prompt sales reporting with customer receipts, independent audits, and a ban on first-year training fees from approved providers.
Says Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection,
“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. Today’s action makes clear that the FTC will not tolerate any company deceiving workers—whether through deceptive earnings claims or by promoting reports of false sales to make direct selling or multilevel marketing opportunities look appealing to consumers.”
