Full Breakdown
Amway to Pay $225 Million in Settlement Over Deceptive Income Claims
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Settlement Details
Amway Corp and its affiliates World Wide Group LLC and Leadership Team Development Inc are scheduled to remit $225 million to the Federal Trade Commission (FTC) and the state of Washington on September 17. The payment resolves FTC allegations that the companies recruited new members with false promises that participants could earn $40,000 or more. The agency says most individuals who joined the two affiliates after 2020 spent more on training and Amway products than they earned, because they were urged to purchase items they did not want in order to qualify for compensation.
Background and FTC Context
The FTC’s action targets the multilevel marketing (MLM) model, in which distributors earn income from both product sales and recruiting new sellers. According to the FTC, the settlement is the largest ever reached by the agency against an MLM company. The regulator’s complaint focused on “deceptive income claims” that misrepresented the realistic earnings potential for new recruits.
Official Statements & Responses
The FTC stated that the settlement will largely be used to reimburse Amway members harmed by the alleged conduct and that Amway has agreed to modify its business practices to discourage members from basing their primary activity on product purchases and recruitment.
Financial Impact and Business Changes
The $225 million pool is earmarked primarily for compensation to affected Amway distributors. In addition to the monetary payment, Amway has committed to change its compensation structure so that members are less incentivized to purchase inventory solely to qualify for bonuses. The FTC highlighted that the settlement aims to curb the practice of encouraging recruits to buy unwanted products as a pathway to earnings.
Implications for the MLM Industry
The agreement signals heightened regulatory scrutiny of income-claim advertising within MLMs. By mandating compensation for members and requiring practice reforms, the FTC seeks to reduce reliance on recruitment-driven earnings. Industry observers note that the settlement could set a precedent for future actions against other MLM firms that employ similar recruitment tactics.