Story
Amway to Pay Record $225 Million to Settle FTC Deception Claims
Summary
Amway Corp. and two affiliates will pay a record $225 million to settle allegations from the FTC and Washington state that they misled recruits with deceptive income claims. The funds are intended for restitution to affected members.
Amway Corp. and two of its affiliates have agreed to pay $225 million to settle allegations from the U.S. Federal Trade Commission and Washington state that they used deceptive income claims to attract new recruits. The proposed order, announced by the FTC on Thursday, addresses practices the agency said led to most participants losing money.
Details of the Settlement
The settlement resolves allegations against the multi-level marketing (MLM) company and its affiliates, World Wide Group LLC and Leadership Team Development Inc. According to the FTC, the vast majority of the $225 million payment is designated for restitution to Amway members financially harmed by the alleged conduct.
In addition to the monetary penalty, Amway has agreed to reform its business practices. The changes are designed to disincentivize a compensation model based on members purchasing products themselves and recruiting others, rather than focusing on retail sales to the public.
FTC Alleges Misleading Income Claims
The federal agency's complaint centered on claims that potential recruits were told they could earn $40,000 or more through the Amway business opportunity. However, the FTC's investigation found that most individuals who joined the two affiliate groups after 2020 ultimately spent more on training materials and Amway products than they generated in income.
AdRegulators asserted that the company's structure encouraged members to buy products they did not necessarily want simply to qualify for compensation from Amway. This created a system where revenue was driven more by recruitment and internal consumption than by genuine market demand.
Record-Setting Action
The FTC noted that this settlement represents the largest monetary judgment it has ever secured in an action against a multi-level marketing company. This landmark case underscores increasing regulatory scrutiny of the MLM industry's compensation and recruitment practices.
Amway did not immediately respond to a request for comment on the settlement, according to reports from Reuters.
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