Amway to Pay $225 Million to Settle FTC Charges of Deceptive Income Claims

Amway Corp. and two affiliated companies will pay $225 million to settle charges from the U.S. Federal Trade Commission (FTC) and the state of Washington that they used deceptive income claims to recruit new members into their multi-level marketing business. The settlement, announced by the FTC on Thursday, also requires the company to overhaul key business practices.

Details of the Allegations

According to the FTC, Amway and its affiliates, World Wide Group LLC and Leadership Team Development Inc., allegedly lured prospective recruits with promises of substantial income, with some claims suggesting earnings of $40,000 or more.

The agency's investigation found that these claims were misleading. The FTC stated that most individuals who joined the two affiliate organizations after 2020 ultimately spent more on training materials and Amway products than they earned in compensation. The commission also asserted that recruits were encouraged to purchase products they did not want in order to qualify for payments from Amway, a practice that prioritizes recruitment over genuine retail sales.

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Settlement Terms and Business Overhaul

The majority of the $225 million payment will be used to provide compensation to Amway members affected by the alleged conduct, according to the FTC's announcement.

Beyond the monetary penalty, the settlement mandates significant changes to Amway's business operations. The company has agreed to modify its practices to discourage members from attempting to earn money primarily through their own product purchases and the recruitment of others. Instead, the focus must shift to compensation based on actual product sales to external customers.