Business Opportunity or Pyramid Scheme?

The Facts

Some people confuse the Amway business opportunity with disreputable pyramid schemes. However, there are major differences, which have been officially recognized by the US Federal Trade Commission.

Multilevel or "network" marketing is a lawful and legitimate business method that uses a network of independent business owners to sell consumer products supplied by an established company. Business owners merchandise products to consumers, not in fixed retail stores, but through person-to-person relationships between business owner and customer. Business owners can also build and manage their own sales-force by recruiting, motivating, supplying and training others to sell those products. Compensation then includes a percentage of the sales of the business owner's entire sales group as well as earnings from their own sales to retail customers.

Pyramid schemes are illegal scams in which participants invest a large amount of money in exchange for the promise of receiving profits by recruiting additional participants to make a similar investment. Pyramid promoters sometimes try to make their schemes resemble multilevel marketing methods by introducing a product line. However, little or no effort is made to actually market the products to consumers. Instead, compensation is paid for recruiting.

The Amway Sales and Marketing Plan is based on retail sales to consumers, not empty "get rich quick" promises demanding that you hand over large sums of money. In fact, only a small fee is required to become an Amway business owner and that cost is refundable should you decide to leave the business for any reason. In 1979, the US Federal Trade Commission ruled that Amway is a legitimate business opportunity.

Amway does not require its Business Owners to buy inventories of stock, and does not impose a minimum order value. While business owners can earn bonuses from sales made by people they recruit into the business, Amway does not pay bonuses for the mere act of sponsoring another person.

The Amway Plan has been recognized and cited by federal and state courts as the example that multilevel marketing plans should follow.