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Amway

Type	Private
Founded	1959
Headquarters	Ada, Michigan
Key people	Steve Van Andel, Doug DeVos Russell Evans
Industry	Direct selling
Website	www.amway.com

Amway is a direct selling company that uses multi-level marketing or network marketing to promote its products.^[1][2][3]

Amway was founded in 1959 by Jay Van Andel and Richard DeVos. Based in Ada, Michigan, the company and family of companies under Alticor reported sales growth of 15%, reaching US$8.4 billion for the year ending December 31, 2008.^[4] Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. In 2004, Health & Beauty products accounted for nearly 60% of worldwide sales.^[5] Amway conducts business through a number of affiliated companies in more than ninety countries and territories around the world.^[6] It is ranked by Forbes as one of the largest private companies in the United States^[7] and by Deloitte as one of the largest retailers in the world.^[8]

Contents 1 History 1.1 Founding 1.2 International expansion 1.2.1 Amway China 1.3 Corporate restructuring 2 Products 2.1 Household cleaners 2.2 Health & beauty 2.2.1 Artistry 2.2.2 Nutrilite 2.2.3 eSpring 2.2.4 Atmosphere 3 Other Interests 3.1 Radio 3.2 Orlando Arena naming rights 3.3 San Jose Earthquakes 4 Politics and culture 5 Controversy 5.1 FTC investigation 5.2 Canadian Tax case 5.3 RIAA lawsuit 5.4 Dateline NBC Report 5.5 Procter & Gamble 5.6 Amway Andhra Pradesh 5.7 UK BERR v. Amway UK 5.8 Other issues 6 See also 7 References 8 Books 9 Documentaries 10 External links 10.1 Government documents 10.2 Profiles

[edit] History

[edit] Founding

Jay Van Andel and Richard DeVos, friends since school days, had been business partners in various endeavors including a hamburger stand, air charter service, and a sailing business. In 1949 they were introduced by Neil Maaskant (Van Andel's second cousin) to the Nutrilite Products Corporation. Nutrilite was a California-based direct sales company founded by Dr. Carl Rhenborg, developer of the first multivitamin marketed in the United States. In August 1949, after a night-long talk, DeVos and Van Andel signed up to become distributors for Nutrilite food supplements.^{[9][page number needed]} They sold their first box the next day for $19.50, but lost interest for the next two weeks. Shortly thereafter, at the urging of Maaskant, who had become their sponsor, they traveled to Chicago to attend a Nutrilite seminar. The meeting was at a downtown hotel, with over a hundred people in attendance. After seeing promotional videos and listening to talks by company representatives and successful distributors, they decided to pursue the Nutrilite business opportunity with enthusiasm. They sold their second box of supplements on their return trip to Michigan, and rapidly proceeded to develop their new business further.^{[9][page number needed]}

In 1949, DeVos and Van Andel had formed Ja-Ri Corporation (abbreviated from their respective first names) for importing wooden goods from South American countries; after their trip to the Nutrilite seminar, they dropped^{[clarification needed]} this business and Ja-Ri became their Nutrilite distributorship.^[10]. In addition to profits on each product sold, Nutrilite also offered commission on the sales of products by new distributors introduced to the company by existing distributors—a system today known as multi-level marketing or network marketing. By 1958, DeVos and Van Andel had built an organization of over 5,000 distributors. However, following concerns about the stability of Nutrilite, in April 1959 they and some of their top distributors formed The American Way Association to represent the distributors and look for additional products to market.^[11]

Their first product was called Frisk, a concentrated organic cleaner developed by a scientist in Ohio. DeVos and Van Andel bought the rights to manufacture and distribute Frisk, and later changed the name to LOC (Liquid Organic Concentrate).^[12] They subsequently formed Amway Sales Corporation to procure and inventory products and to handle the sales and marketing plan, and Amway Services Corporation to handle insurance and other benefits for distributors (Amway being an abbreviation of American Way ^[13]). In 1960 they purchased a 50% share in Atco Manufacturing Company in Detroit, the original manufacturers of LOC, and changed its name to Amway Manufacturing Corporation.^[14]> In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form a single entity, Amway Corporation^[15] Amway bought control of Nutrilite in 1972 and full ownership in 1994.^{[citation needed]}

[edit] International expansion

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, to India and Scandinvia in 1998, to Russia in 2005, and to Vietnam in 2008. In 2008 two thirds of Amway's 58 markets reported sales increases, including strong growth in the China, Russia and India markets. ^[16]. Amway India sales grew 40% to 1128 crore (US$230million)^[17].

[edit] Amway China

Amway grew quickly in China from its market launch in 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. ^[19] China introduced new direct selling laws in December 2005, and in December 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]. In 2007 Amway Greater China and South-east Asia Chief Executive Eva Cheng was ranked #88 by Forbes magazine in it's list of the World's Most Powerful Women.^[21]. In 2008 Amway Greater China was Amway's largest market, reporting 28% growth and sales of ¥17 billion (US$2.5billion).^[22]

[edit] Corporate restructuring

In 1999 the founders of the Amway corporation established a new holding company, named Alticor, and launched three new companies, 1) a sister (and separate) Internet-focused company named Quixtar, 2) Access Business Group, and 3) Pyxis Innovations. Pyxis, later replaced by Fulton Innovation, pursued research and development and Access Business Group handled manufacturing and logistics, both for Amway and Quixtar and third party clients.^[23]

After virtually all Amway distributors in North America switched to Quixtar, Alticor elected to close Amway North America after 2001. Amway continued operating in the rest of the world. In June 2007 it was announced that the Quixtar brand would be phased out over an 18 to 24 month period in favor of a unified Amway brand worldwide.^{[citation needed]}

[edit] Products

Amway's product line grew from LOC, with a new detergent SA8 added in 1960, and later the hair care range Satinique (1965) and Artistry(1968). Today Amway manufactures over 450 products, with manufacturing facilities in Ada, Michigan, China, and India, as well as Nutrilite organic farms in California, Washington State, Mexico, and Brazil. In addition Amway affiliates market products from hundreds of other manufacturers offering everything from books (eg Barnes & Noble, North America) to wine (World of Wine, Europe).^{[citation needed]}

[edit] Household cleaners

Amway is best known in North America for it's original cleaning products, LOC, SA8 clothes washing products and Dish Drops dish cleaning products. In the January 2007 issue of Consumer Reports, SA8 with Bioquest was rated as the best performing laundry detergent, scoring 99 out of a possible 100. ^[24]. Consumer Reports did however criticise SA8's pricing, which was disputed by Amway.^[25] In 2008, Amway's cleaning products were named Favourite of Experts by an independent consumer survey in Ukraine.^[26]

[edit] Health & beauty

The majority of Amway's sales today come from the Health & Beauty sector and in North America the Amway Global/Quixtar website is ranked the #1 Health & Beauty website by Internet Retailer^[27]. In South Korea Amway is ranked one of the top two companies in tolietries and cosmetics.^[28] Amway's health & beauty brands include Artistry, Time Defiance, Satinique, Tolsom, Body Series, Glister, Moiskin (South America)^[29], Nutrilite, Nutriway (Scandinavia and Australia/New Zealand),eSpring, Atmosphere and iCook as well as XS Energy drinks.

[edit] Artistry

Amway's Artistry products include skin care, cosmetics, and anti-aging creams and serums. Euromonitor International, an independent researcher and publisher of market reports, business reference books and online information databases, ranks Artistry as one of the world's top 5 best selling brands in the prestige brand category, alongside Clinique, Estee Lauder, Lancome, and Chanel.^[30][31] Artistry is the only direct sales brand classifed in the "prestige" category.^[30][32].

[edit] Nutrilite

Amway's largest selling brand is the Nutrilite range of health supplements (marketed as Nutriway in some countries), and in 2008 Nutrilite sales exceeded US$3billion globally^[33]. Nutrilite products incorporate organically grown whole-plant concentrates. Euromonitor has for several years ranked Nutrilite the world's best selling nutritional brand in tablet or capsule form^[34] . In 2001, five Nutrilite products were the first dietary supplements to be certified by NSF International.^[35]. Surveys by independent group Consumerlab.com since 2002 have rated Nutrilite as having the highest customer satisfaction rating (96% in 2006)^[36][37] In 2006, 2007, and 2008 in the nutrient and health food category, Nutrilite won "Platinum" and "Gold" awards in Malaysia, China, Taiwan, Thailand, and Asia overall in the Reader's Digest "Trusted Brands of Asia" survey^[38]. In 2008 Nutrilite scientists, in partnership with Alticor subsidiary Interleukin Genetics won the 12th John M. Kinney Award for Nutrition and Metabolism for their research into the interaction between nutrition and genetics.^[39]

[edit] eSpring

Amway's eSpring water filter, introduced in 2000, was the first home water treatment system to incorporate a carbon block filter and Ultraviolet disinfection unit, becoming the first home system to achieve certification for ANSI/NSF Standards 42, 53 and 55^[40]. The unit was also the first commercial product to include sister company Fulton Innovations eCoupled wireless power induction technology. Fulton Innovation introduced the technology in other consumer electronic products at the 2007 International Consumer Electronics Show. Companies licensing this technology include General Motors, Motorola and Visteon.^[41][42]. In 2006 eSpring was named Product of the Year by the Poland-based non-profit World Foundation of Health, Heart and Mind.^[43]. eSpring has won numerous Gold and Platinum awards in the Reader's Digest Most Trusted Brand Asia surveys^[44].

[edit] Atmosphere

In 2008 Amway's HEPA air filtration system became the first air cleaner certified asthma & allergy friendly by the Asthma and Allergy Foundation of America.^[45]

[edit] Other Interests

[edit] Radio

Amway bought the Mutual Broadcasting System radio network in 1977 and sold it in 1985.^{[citation needed]}

[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.^{[citation needed]}

[edit] San Jose Earthquakes

As of the 2009 MLS season Amway will be the official sponser of the San Jose Earthquakes. They have currently agreed a three year contract. A major part of the partnership is focused on community initiatives in the Bay Area. Amway Global is now the official sponsor of the Kicks for Kids program that focuses on fitness and healthy lifestyles, as well as bringing underprivileged children to Earthquakes games. The partnership will also see the creation of the Amway Global Street Team in 2009. The Amway Global Street Team will appear at all home games, while also having a presence at a number of soccer and non-soccer events throughout the Bay Area. The members of the Amway Global Street Team will give away Earthquakes-branded merchandise and provide soccer skills demonstrations at each event. ^[46]

[edit] Politics and culture

Commentators have identified Amway as supporting the U.S. Republican Party,^[47] and its founders contributed $4,000,000 to a conservative 527 group in the 2004 election cycle.^[48] Amway states that its business opportunity is open to people regardless of their religious and political beliefs.^[49]

Rolling Stone's Bob Moser has contended that former Amway CEO and co-founder Richard DeVos is connected with the dominionist political movement in the United States. Moser states that DeVos was a supporter of the late D. James Kennedy, giving more than $5 million to Kennedy's ministry.^[50]

Multiple high-ranking Amway leaders,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.^[51]

One of Amway's most successful distributors, Dexter Yager, has criticized Democratic President Bill Clinton. Mother Jones reported that Yager stated in voice mail to his downline network of distributors, "If you analyze Bill Clinton's entire inaugural address, it is nothing but a New Age pagan ritual. If you go back and look at how it was arranged and how it was orchestrated, he talked about forcing the spring. So what they're trying to do is...force the emergence of deviant lifestyles, of a socialist agenda, and force that on us as American people."^[52] Yager also allowed Republican George W. Bush to send messages through that voicemail system to thousands of distributors.^[53]

Doug Wead, who was a Special Assistant to U.S. President George H. W. Bush, is a successful IBO who is a regular speaker at group rallies.^{[citation needed]} In 2000, President George W. Bush appointed Timothy Muris, a former anti-trust lawyer whose largest client was Amway to head the FTC, which has direct federal regulatory oversight over multi-level marketing plans.^{[citation needed]}

Amway co-founder, 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.^[54]

In May 2005, former Amway President Dick DeVos, one of the wealthiest men in Michigan, announced that he would run against Governor Jennifer Granholm in Michigan's 2006 gubernatorial election. DeVos, running as a Republican, won 42% of the popular vote, while Granholm won 56%.^[55]

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.^[56]

[edit] Controversy

[edit] FTC investigation

Amway and its American online incarnation, Quixtar, have had allegations that these companies are pyramid schemes or cults.

In a 1979 ruling,^[15][57] the Federal Trade Commission found that Amway does not qualify as an illegal pyramid scheme since the Amway system is based on retail sales to consumers.

It did, however, order Amway to stop retail price fixing and allocating customers among distributors and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve with the business. 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.^[58]

Amway has avoided the abuses of pyramid schemes by (1) not having a 'headhunting' fee; (2) making product sales a precondition to receiving the performance bonus; (3) buying back excessive inventory (4) requiring that products be sold to consumers. Amway's buy­back, 70% and ten customer rules deter unlawful inventory loading. (5) Amway is not in business to sell distributorships.

In the opinion section Commissioner Pitofsky stated:

"Two other Amway rules serve to prevent inventory loading and encourage the sale of Amway products to consumers. The '70 percent rule' provides that '[every] distributor must sell at wholesale and/or retail at least 70% of the total amount of products he bought during a given month in order to receive the Performance Bonus due on all products bought . . ..' This rule prevents the accumulation of inventory at any level. The '10 customer' rule states that '[i]n order to obtain the right to earn Performance Bonuses on the volume of products sold by him to his sponsored distributors during a given month, a sponsoring distributor must make not less than one sale at retail to each of ten different customers that month and produce proof of such sales to his sponsor and Direct Distributor.' This rule makes retail selling an essential part of being a distributor.

The Administrative Law Judge (ALJ) found that when the buy­back rule, the 70 percent rule, and the ten customer rule are enforced, they serve to prevent inventory loading and encourage retailing."

In 1986 Amway Corp. agreed, under a consent decree filed in federal court, to pay a $100,000 civil penalty to settle Commission charges it violated a 1979 Commission order that prohibits Amway from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. According to a complaint filed with the consent decree, Amway violated the 1979 order by advertising earnings claims without including in it clear and conspicuous disclosures of the average earnings or sales of all distributors in any recent year or the percent of distributors who actually achieved the results claimed.^[59]

[edit] Canadian Tax case

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 Canada at the time. In 1989 the company settled the outstanding customs duties for $45 million CAD.^{[60] [61]} In a 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".^[62]

[edit] RIAA lawsuit

The Recording Industry Association of America (RIAA), as part of its anti-piracy efforts, sued Amway and several distributors in 1996, allegeding that copyrighted music was used on "highly profitable" training videotapes.^[63]. Amway denied wrong doing, blaming the case on a misunderstanding by distributors, and settled the case out of court for $9 million^[64]. 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.^[65]

[edit] Dateline NBC Report

A Dateline NBC report from 2004 picked up the criticism against some Amway groups.^[66]

Amway subsequently published a website with a response to the Dateline report.^[67]

[edit] Procter & Gamble

Some Amway distributors were involved with an urban legend that the (old) Procter & Gamble service mark was 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.)^[68] 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.^[69] The distributors had used Amway's Amvox voice messaging service to send the rumor^{[citation needed]} to their downline distributors in April 1995. After more than a decade of lawsuits in multiple states, by 2003 all allegations against Amway and Amway distributors had been dismissed. In October 2005 a Utah appeals court reversed part of the decision dismissing the case against the four Amway distributors, and remanded it to the lower court for further proceedings.^[70] On 20 March 2007, Procter & Gamble was awarded $19.25M by a U.S. District Court jury in Salt Lake City, in the lawsuit against the four former Amway distributors.^[71][72] On November 24, 2008 the case was officially settled.^[73]

[edit] Amway Andhra Pradesh

The Andhra Pradesh state high court has declared that Amway's Indian subsidiary is in violation of an act prohibiting "Money Circulation Scheme[s]". After a number of raids and seizures against Amway distributors in the state, the company filed a petition to stop the Andhra Pradesh state police's investigation. On August 14, 2007 the Supreme Court of India ordered the state police to complete the investigation against Amway in 6 months.^[74]

[edit] UK BERR v. Amway UK

In 2007, following investigations that lasted more than a year, the United Kingdom's Department of Trade and Industry (DTI) (and its successor, the Department for Business, Enterprise and Regulatory Reform (BERR) issued petitions against Amway as well as two IBO organizations Britt World Wide (BWW) and Network 21^[75], and initiated civil court proceedings. According to Amway, the DTI's objections include misrepresentation of the financial rewards expected from the Amway business, excessive promotion of BSMs (Business Support Materials like books, tapes, CDs, meetings, websites) and Amway's failure to prevent these abuses.

Subsequently, Amway imposed a ban on sale of BSM in UK that are not authorized and distributed by Amway. It further announced significant price changes for a range of products, modifications to its compensation plan, and an indefinite moratorium on registration of new IBOs in UK. It would also initiate a thorough review of its business practices globally.^[76][77]

The case against BWW was dropped after BWW elected to close their operations in the UK market.^{[citation needed]} BERR also dropped their case against Network 21 however Network 21 remains in operation in the United Kingdom.^{[citation needed]} The case against Amway was dismissed 14 May 2008, after Amway agreed to maintain the changes to their business model implemented in 2007, and to publish statistics on the average incomes and numbers of qualifiers at different levels of the business.^[78]

BERR submitted two appeals in the case alleging procedural irregularities. Justice Norris refused an application by BERR to restrict Amway from resuming sponsorship activity whilst the appeals were pending^{[citation needed]}. Amway UK released statistics on earnings of distributors on July 21, 2008 and sponsoring resumed.^[79][80]. On January, 29, 2009 the appeals were dismissed. ^[81]

[edit] Other issues

Amway distributor groups have often been accused of using cult-like tactics to attract new distributors and to keep them involved and committed ^{[82][83][84][85]}. Allegations include resemblance to a Big Brother organization with paranoid attitude to insiders critical of the organization ^[85], seminars and rallies resembling religious revival meetings ^[85][82], and enormous involvement of distributors despite minimal incomes ^[82][84][85]. An examination of the 1979-1980 tax records in the state of Wisconsin showed that the Direct Distributors, comprising less than 1% of all distributors, reported a net loss of $918 on average ^[84][86].

Sociologist David G. Bromley calls Amway a quasi-religious corporation having sectarian characteristics ^[86][87]. Bromley and Shupe view Amway as preaching the Gospel of Prosperity^[88]. Bhattacharya and Mehta propose an alternative economic explanation to the cultism controversies, saying that the distributors' enormous involvement inspite of minimal pay is due to the social satisfaction compensating for less economic satisfaction ^[89].

Amway disputes cultism charges, and states that meetings with enthusiasm, excitement and energy are a proven way to motivate sales people ^[90].

[edit] See also

• Alticor
• Quixtar
• eCoupled
• Direct selling
• Multi-level marketing
• Artistry (cosmetics)
• Nutrilite
• SA8 (detergent)
• XS Energy Drink
• Network TwentyOne

[edit] References

[edit] Books

• American Victory: The Real Story of Today's Amway published April, 1997 by Chapel & Croft Publishing; ISBN 0-96451716-7
• 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
• An Enterpising Life published 1998 by HarperCollins; ISBN 0-88730-997-6
• An Uncommon Freedom, the Amway Experience and Why It Grows published 1982 by Revell; ASIN B000HFJE1Y
• Commitment to excellence: The remarkable Amway story published 1986 by Benjamin; ISBN 0-875021360
• Compassionate Capitalism: People Helping People Help Themselves published September, 1994 by Penguin Books; ISBN 0-452-27051-0
• Empire of Freedom: The Amway Story and What It Means to You published September 3, 1997 by Prima Lifestyles; ISBN 0761510885
• How to Be Like Rich Devos. Succeeding with Integrity in Business and Life published 2004 by Health Communications, Inc; ISBN 0-7573-0158-4
• The First Eleven - The growth of Amway in Britain through the lives of its local heroes published 1984 by AM Publishing; ISBN 0-9509593-0-8
• Promises to Keep: The Amway Phenomenon and How It Works published 1986 by Berkley Books; ISBN 0425098567
• The Direct Selling Revolution: Understanding the Growth of the Amway Corporation published 1993 by WileyBlackwell; ISBN 978-0631192299
• The Possible Dream: A Candid Look At Amway published 1977 by Revell; ISBN 0800708571

[edit] Documentaries

• Profiles of the American Dream: Rich DeVos and Jay Van Andel and the Remarkable Beginnings of Amway 1997 by Premiere Films; ASIN: B000OK0YRA

[edit] External links

• Amway Media Blog
• Amway Corporation
• Alticor Inc. (Amway & Quixtar Parent Company)
• Independent Business Owners Association International
• Quixtar Corporation
• Amway and Quixtar at the Open Directory Project
• Opposing Views at the Open Directory Project

[edit] Government documents

• Prepared Statement of Debra A. Valentine, General Counsel for the U.S. FTC, on "Pyramid Schemes"

[edit] Profiles

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