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Amway is a multi-level marketing company founded in 1959 by Jay Van Andel and Rich DeVos. The company's name is a portmanteau of "American Way." 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, dietary supplements, and cosmetics. Today, Amway conducts business through a number of affiliated companies in more than ninety countries and territories around the world [http://www.amway.com/en/History/global-growth-10106.aspx.

The original intent of Amway's founders was to create a business using a somewhat novel means of product distribution, which would facilitate 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).

While Amway has been successful in implementing this ideal to a large degree, some controversial elements have also developed around the business.

Quixtar

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. Amivo acts as an Amway subsidiary in Europe.

The Corporation

An Amway Independent Business Owner (or IBO, formerly known as a Distributor) purchases products from Amway at rates published as wholesale prices. Each product/service has an associated Points Value (PV), which is the same for that product all around the world. It operates like an international currency, which represents the amount of profit inherent in the product. The sum of the group's PV determines the commission level (3%, 6%, ... 25%) payable. The Business Volume (BV) turns the PV into the local currency, after removing items such as value added tax (which obviously cannot be part of the profit). The commission level is applied to the BV in determining the monthly payments to be received as commission.

As in most MLM businesses, a person wishing to join Amway is "sponsored" by an existing IBO. This involves the new IBO purchasing an Amway Opportunity Kit or Business Pack. The kit also contains literature and some starter product. IBOs must pay a yearly fee to remain in Amway, although they are not required to buy a minimum amount of products.

Amway claims to have 4 million distributors worldwide who have renewed at least once, including 500,000 in the U.S. Japan represents a very fast-growing market with 1 million distributors. Recently, Amway received permission to establish a network in China and have done sales of over 2 billion U.S. dollars in 2004 and 2005. Amway cannot conduct Chinese operations as it does elsewhere due to a ban on direct sales.

Training organizations exist to offer a variety of business services to IBOs as well as their prospective business partners. This includes training seminars, CDs and literature. Often, public meetings are made available as a way of helping present the concept to prospects.

Amway's distributors are organized hierarchically, and the corporation employs a system of pin levels to reward successful distributors (so-called because attainees are awarded a stick pin to indicate their level.) Higher-level distributors act as mentors to newer distributors, organize regular meetings of their group and (controversially) may derive most of their profit from the sale of motivational tools to them. "Crosslining," or associating with people from a different "leg" or distributor chain, is generally discouraged.

Pin Levels

Pin levels reflect the level an IBO has reached in the Amway business. As such they are an indication of both the size of an IBO's group and their income, and by extension the IBO's knowledge and expertise in the field. Top pin level IBOs may have groups numbering hundreds or thousands of people, and are in high demand. They also command respect and adulation from their group. High pin levels are named after precious metals or gems to convey a sense of the wealth that they are supposed to represent.

The lowest pin levels reflect successively higher volumes of PV sold through the IBO's group, and are named after the percentage bonus that each level pays.

The first significant pin level is that of Platinum (formerly known as a Direct.) The term Direct came from distributors beginning to get products sent to them directly from the corporation after attaining this level, as opposed to previously having bought them via their "sponsoring" distributor. (These days the "Direct" concept is defunct, as all IBOs order their product direct from Amway.) This level requires the IBO's group to be moving 7,500 PV (or 10,000 PV in some countries) of product per month, and the Amway recruitment plan customarily shows that such a group will have a total of 70-100 people; although in practice that number is often larger. The income at the Platinum level, generally speaking, is approximately the same as the average full-time wage in the IBO's country of origin, although this will depend on a number of factors including business structure, volume of retail sales versus group sales, and the total PV turnover. Variations typically range from half to over double the average full-time wage.

A significant pin level is that of Diamond. This level requires that six people the IBO has sponsored have themselves reached the Platinum level (or higher). The remuneration at Diamond is (generally) a "six-figure" passive annual income, and advertised to represent financial freedom for the IBO. Almost all IBOs aspire to this pin level because of this "freedom" aspect.

(Note that it cannot merely be assumed that the income of a Diamond IBO is a simple 6x multiple of the income of a Platinum, since there are several other ranks between Platinum and Diamond, and monetary bonuses are paid as a result of having attained these as well.)

The highest level is Crown Ambassador. This level used to require at least twenty legs, each at least at the Platinum level. Amway has recently introduced a system called FAA Points, where it is possible to become a Crown Ambassador with only 9 legs - however each needs to have a Diamond within that leg. This is helping to create much more stable sustainable businesses.

Only a small number of people have attained this pin level, and they are in constant demand for recruitment, training and motivational speaking engagements. The remuneration at the Crown Ambassador level runs into the millions annually.

Other pin levels include Ruby (15,000 PV per month), Emerald (three Platinum legs), and Executive-, Double- and Triple Diamond (nine and twelve and 15 Platinum legs respectively - or with differing numbers of FAA Points.)

On top of the remuneration for PV moved through their group, an IBO may be entitled to additional monetary incentives. These bonuses are paid for meeting growth targets, extraordinary recruitment number, etc and can represent a significant portion of an IBO's income.

Alticor recently started a program that makes it possible to attain the Crown Ambassador level with only 9 legs. If all of the 9 legs are Diamonds, the IBO receives 27 FAA points as every Diamond counts for 3 FAA points. This allows for greater earnings than with the "old-fashioned way." Additionally, approximately 80 FAA-points would guarantee a 7 figure bonus (USD) per year.

"Crown Ambassador"

By way of their seniority most Crown Ambassadors* sit on various Amway boards, deciding business policy which affect all IBOs worldwide. Most also run, or contribute heavily to, their own motivational organizations. Dexter Yager, one of the biggest landowners in Charlotte, North Carolina is probably the most famous American Crown Ambassador. He created a training system of functions, books of the month, and tapes.

Berniece Hansen, the widow of early Amway partner Fred Hansen, is another Crown Ambassador who has created a successful Amway operation. She used her wealth to build the Berniece Hansen Athletic Center at Cornerstone University.

Lines of Sponsorship

A line of sponsorship (LOS or line of affiliation) is an essential organizational concept in Amway organizations - since a new member (the downline) can only link in by connecting underneath an existing member (the upline). *

Typically, it is the upline's responsibility to guide and support the new IBO, and thus there is a higher status associated with being higher up in the Line of Sponsorship. However, whereas a member's income in some network marketing organizations is purely determined by one's position in that Line of Sponsorship, under the Amway structure it is possible for an IBO to earn more than their upline, by building a greater number of independent Lines of Sponsorship below themselves.

A new IBO signs an agreement upon registration that says he/she will not switch LOS (Crossline). This protects an upline from having someone transfer out of their business, even after they have played a significant role in building that group.

Some of the more significant Amway LOS have included: TEAM (formerly Team of Destiny), InterNET, BWW, WorldWide Dream Builders (WWDB), Alliance Net Solutions (ANS), Empire, True North, eFinity, InterNet Associates (INA), International Connection, International Leadership Development (ILD), MarkerMan Productions (MMP), ProAlliance, Interbiz, IBO Alliance, and GlobalNet. *

Supporters

John C. Maxwell, a famous Christian author, supports Worldwide DreamBuilders. Paul Harvey, a radio broadcaster, known for his 'The rest of the story' tagline has been an ardent supporter of the Amway program for years. Og Mandino, author of The Greatest Salesman In The World and The Greatest Miracle In The World, has also been a supporter of the Amway program. Robert Kiyosaki, author of the all time best-selling (but controversial) business/financial books Rich Dad, Poor Dad and Cashflow Quadrant, endorses organizations that, according to him, promote financial literacy. A few of those organizations utilize Amway as a vehicle to develop a business. Kenneth Copeland and Charles Stanley, well known Christian pastors and authors, have endorsed or spoken at various functions for some of the Motivational Organizations. Former President Ronald Reagan has also spoken at such a conference. Other speakers include MTV's Jeannie Mai, renowned chef and culinary specialist Jason Roberts, heavyweight boxer Evander Holyfield, and motivational author Zig Ziglar.

Other supporters in Australia include Former QLD Master Builders president Derick Pingle, former Federal Parliamentarian Peter Shack, and well known community and spiritial advocate Brian Huston.

Controversy

Amway (and its American online incarnation, Quixtar) have been controversial for years because of allegations that these companies are pyramid schemes or cults, despite the 1979 FTC ruling (93 F.T.C. 618 (1979)) that legitimized the Amway business. The case revealed that most of the products sold by Amway are to the Independent Business Owners (IBOs) themselves for personal consumption rather than to retail consumers who aren't enrolled as IBOs. Buying products from Amway or Quixtar gives IBOs points and they are paid back on the number of points that they generate from personal consumption. It is claimed to be a business opportunity and hence an existing IBO can help others to get an IBO number and 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 leverage that an IBO has.

Typically, IBOs spend money on tapes, books, and seminars (known as "tools" in AMO parlance) which are promoted to IBO's as the preferred way to learn the "business skills of the IBOs" and to maintain their desire to build their business. These 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. Claims regarding the support material range from "can be of help to an IBO " to some organizations claiming they "are absolutely required" to "build a big business". However, investigations like one done by MSNBC Dateline in April 2003 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. Critics also claim that the materials are specifically geared towards encouraging IBOs to continue working for a non-economic return, rather than improving their actual business skills. Proponents of the materials claim that the "tools" business is the best way to develop a large business, because every person in their organization can get the same information (as opposed to the results achieved by "playing telephone" as a child, where one person passes a message onto another, to another, etc). Proponents note that many IBO's with large numbers of people in their organization cannot possibly spend the required time teaching every single person without taking time away from their family or job or other responsibilities.

Crown Ambassador Dexter Yager's organization, the International Dreambuilders' Association/Digital Alliance (usually simply referred to by the abbreviation IDA) is arguably the largest and best-known of the AMOs, and is probably the one most commonly associated with Amway.

Political causes/Culture

Commentators have often identified Amway as supporting the U.S. Republican Party, and it contributed $4,000,000 to a conservative 527 in the 2004 election cycle. * However, Amway Corporation claims to support no political party.

Many of Amway's best-known distributors, including Dexter Yager, have also declared themselves Republicans. 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.

Senior distributors also promote a world view encompassing Judeo-Christian values, and a general advocacy of boomer/50s values. The Amway Motivational Organization's (AMO's) 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. This is a reflection of the AMOs' strong advocacy of the 1950s style nuclear family model.

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 most meetings and rallies begin with the Pledge of Allegiance and a prayer. 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.

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 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 of 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.

Legal rulings

In the 1979 In re. Amway Corp. (93 F.T.C. 618) ruling 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. 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 (due to the fact that wealth in the Amway business isn't often created by just one person's efforts, or a "used car salesman" type selling technique). The order was violated with a 1986 ad campaign, resulting in a $100,000 fine. [http://www.ftc.gov/opa/predawn/F86/amway.htm In 1983, Amway, headed by Richard DeVos, pled guilty to tax evasion and customs fraud in Canada, resulting in a fine of $25 million CAD, the largest fine ever imposed in that country.

Other violations

In 2005, Amway/Quixtar orchestrated an attempt to drown out sites reporting deceptive practices and negative opinions. The "Web Initiative" was flagged as Google bombing, a violation of Google's Quality Guidelines.

External links and references

Amway detractors accuse the company of spreading right-wing beliefs among its distributors:

Resources

Amway | 1959 establishments

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This article is licensed under the GNU Free Documentation License. It uses material from the "Amway".

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