Promises, promises...

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Mefiante (February 22, 2007, 18:42:18 PM):
Dr Luthon64 was 'phoned on Saturday by a friend who said that there was someone who wanted to talk about a "business opportunity." We agreed to listen to a presentation on Tuesday evening, where it turned out to be a recruiting session for Amway, the largest Multi-level Marking (MLM) shysters on the globe.

Basically, the idea is to promise newbies incalculable wealth supposedly amassed through buying and selling household products. These products are said to be "cheaper and better" than the ones you get at Pick'n'Pay or Woolies, but that just isn't so. The real money is made through the sale of seminars, CDs/tapes and promotional material. In essence, it's a thinly-veiled pyramid scheme, where those who signed up earliest score biggest.

So, if you get a call about a "fantastic business opportunity," be careful and do some research first before deciding, which is what Dr Luthon64 and I did. Thereafter, we politely but firmly hinted about a long walk and a short pier and how these might be combined. Plus, another friend likened Amway to Jehovah's Witnesses, a comparison not entirely without merit.

Most people who get suckered into this sort of thing are, I think, decent but uncritical sorts with nothing but good intentions. The MLM business model, however, tends to corrupt well-meaning individuals with its focus on recruiting more and more people into the fold. What set the alarm bells off for us were the following questions for which no adequate answers were given:
If these products are such high-quality, but nonetheless very cheap, items and Amway has been operating since the late '50s, why haven't they largely displaced all competing products?Why are "loyalty discounts" paid back later in the month in the form of a cheque, rather than being given immediately - i.e. why is the flow of money so complicated?Why is it necessary to fill in such an enormously detailed application form when supposedly we're only buying and selling household goods?Why is everyone grinning like a Moonie?
Additional materials and resources here:
Merchants of DeceptionPyramid Scheme Alert OrganizationFTC submissions #1, #2 and #3Consumer Awareness InstituteDave Touretzky's Amway infoFalse Profits
Mefiante (February 22, 2007, 18:42:44 PM):
From Jon M. Taylor's report, The 5 Red Flags, a sobering excerpt:
In a 1980 suit by the State of Wisconsin against Amway, the tax returns of the top 1% (about 200 out of 20,000) of Amway distributors were examined. Their average income was minus $900!

There may have been one or two that reported a significant net profit. As later research demonstrated, only a tiny number (at the top of a hierarchy of participants) profit in such programs. Later in this paper, recent evidence of the unprofitable nature of MLM for all except for a few at the top will be discussed.

And a class action suit against Amway was filed earlier this year in the US. It'll be interesting to see if it is upheld by the courts.

Mefiante (March 23, 2007, 14:14:39 PM):
Here's an update and discussion of the class action lawsuit filed against Amway/Quixtar etc. earlier this year. The reporter considers it likely that the "class has not [yet] been certified by the court" (meaning, presumably, that the court needs to satisfy itself that the plaintiffs indeed constitute a social class as defined in US law, rather than, say, another company). Such certification may take a while.

The author voices the opinion that the case is a "pivotal" one since it focuses on "the core of what defines a pyramid scheme and what does not." He may be right in this assessment: a successful prosecution will open the door to a flood of similar suits against Amway/Quixtar itself and other MLM companies.

Mefiante (March 26, 2007, 07:00:40 AM):
Correction: "class" in this context means a group of people who suffered loss or injury in similar ways from similar causes. US law considers the society it serves classless... :-\

EM (March 26, 2007, 12:30:18 PM):
Nice links.

A thing that tickles me pink is that none of the people who are conned by these things (Amway, harbalife etc.) are ever concerned about the fact that there is more emphasis on recruiting members rather that sales. More members will ultimately mean more competition... Although these schemes are quite clever at disguising the member recruitment as 'sales'


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