In re Amway Corp. (93 F.T.C. 618; full name In the Matter of Amway Corporation, Inc., et al.) is a 1979 ruling by the United States Federal Trade Commission concerning the business practices of Amway, a multi-level marketing (MLM) company. The FTC ruled that Amway was not an illegal pyramid scheme, but ordered Amway to cease price fixing and cease misrepresenting the apparent success achieved by the average distributor.
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The FTC filed a complaint on March 25, 1975, alleging five counts of violating Section 5 of the Federal Trade Commission Act:[1]
Oral arguments were heard on June 6, 1978.[2]
The FTC stated Amway was not an illegal pyramid scheme since the Amway system is based on retail sales to consumers. Amway has avoided the abuses of pyramid schemes by:
The administrative law judge also found that "Amway is not in business to sell distributorships and is not a pyramid distribution scheme."[5]
In the opinion section of the ruling, Commissioner Robert 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 ALJ found that the buyback rule, the 70-percent rule, and the ten-customer rule are enforced, and that they serve to prevent inventory loading and encourage retailing.—— 93 F.T.C. 618: Opinion, page 716
The administrative law judge found, and the FTC opinion agreed, that Amway engaged in:
In the Final Order, issued on May 8, 1979, Amway and its representatives were ordered to:
In 1986, Amway agreed to pay a $100,000 penalty in a consent decree for violating the 1979 ruling, after Amway placed ads that represented higher-than-average distributor earnings without stating the actual average results or percentage of distributors who actually met the represented claims.[10]