- The Enforcement Directorate (ED) has provisionally attached its assets worth 757.77 crores.
- It is alleged that The entire focus of the company is about propagating how members can become rich by becoming members. There is no focus on the products. Products are used to masquerade this MLM pyramid fraud as a direct-selling company.
- Amway said that the action is regarding an investigation dating back to 2011 and that they’re fully cooperating with the authorities for a “fair, legal and logical conclusion of the outstanding issues.
Amway India is accused of running a pyramid fraud in disguise of a multi-level marketing (MLM) network. The Enforcement Directorate (ED) has provisionally attached its assets worth 757.77 crores.
The attached properties include land and factory building of Amway at Dindigul District, Tamil Nadu, Plant & Machineries, vehicles, bank accounts and fixed deposits. ₹ 411.83 Crores was attached from immovable & movable properties and the remaining 345.94 Crores relates to 36 different accounts belonging to Amway.
The company is a direct selling company whose parent is based in the USA and it sells beauty and wellness products in over 100 countries.
It has bought Rs. 21.39 Crores as share capital in India in 1996-97 and till F.Y 2020-21. However, It has remitted a huge amount of ₹2859 Crores in the name of dividend, royalty and other payments to its investors and parent entities.
“The entire focus of the company is about propagating how members can become rich by becoming members. There is no focus on the products. Products are used to masquerade this MLM pyramid fraud as a direct-selling company,” the Enforcement Directorate alleged.
It said that the prices of most of the products that were sold by Amway are exorbitant as compared to the prices charged by other reputed manufacturers in the open market. It revealed that Amway collected ₹ 7,562 crores from its business operation in the last two decades.
Britt Worldwide India Pvt Ltd and Network Twenty One Pvt Ltd have come under the lens of the ED. These companies provide training services and the products of Amway.
The ED said that these companies played a major role in promoting the pyramid scheme of Amway by conducting seminars for joining members under the guise of the sale of goods by the enrolment of members in the chain system. It added that its promoters are conducting mega conventions by flaunting their lavish lifestyle and using social media to lure gullible investors. These members receive commissions for the products that they sell and this contributes to a hike in the price of its products.
What is the Pyramid Scheme about?
Amway’s products are usually not found in neighbourhood stores. But they are sold directly by a network of 4 million “members” of the company who are present in more than 100 countries.
In a pyramid scheme, companies lure people to become its members. They set up meetings with interested individuals in an upscale restaurant and explain to them how they can become their own boss by investing a small amount. Later, they give them examples of people who minted money using their strategy and became millionaires. If the individual signs up, he/she becomes a member.
In other words, a direct selling agent or an insignificant node in a large pyramid-like scheme. The small investment is then recovered by these members when they onboard a few more members that could sell more products.
Allegedly, Amway is running a similar scheme that benefits only a few people at the top.
What happened in India?
The company was under the lens of the Andhra Pradesh Government as well as the Kerala Government. In 2008, the Andhra Pradesh Government accused it of running a pyramid scheme and banned it from all advertising. Similarly, in 2013, the Kerala Police arrested Amway India’s CEO for financial fraud. Since then there have been many complaints about its business model. As a result, the government revised rules to make direct selling companies more accountable in the year 2021.
“Direct selling entities and a direct seller shall not induce consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases,” as per India’s Consumer Protection (Direct) Selling Rules 2021.
Amway said that the action is regarding an investigation dating back to 2011 and that they’re fully cooperating with the authorities. They said that they shall continue to cooperate with officials for a “fair, legal and logical conclusion of the outstanding issues.”
Ayush Sharma, Advocate on Record Supreme Court of India said “MLM/ Pyramid schemes were prohibited under the Consumer Protection (Direct Selling) guidelines Rules, 2016 (“Rules”) which were in the form of advisory to State Governments. In view of the advisory, only states like Tamil Nadu, Karnataka, Maharashtra & West Bengal enacted state guidelines to prohibit Direct Selling Guidelines, which resulted in a lack of uniformity and regulation across the country. Rules were recently codified by the ConsumerProtection (Direct Selling) Rules, 2021, notified on December 28, 2021, wherein any direct selling entity/sellers are prohibited from promoting a Pyramid Scheme or enrolling any person to such scheme in any manner whatsoever in the garb of doing direct selling business.”
