The Federal Trade Commission announced a $225 million settlement with Amway Corp. over allegations that the multilevel marketing giant engaged in unfair and deceptive business practices on Sept. 17.
Amway and two affiliated organizations — World Wide Group and Leadership Team Development Inc. — agreed to the payment to resolve FTC allegations centered on how the company recruited and compensated its distributors, the agency said.
The settlement is the largest FTC enforcement action ever targeting a multilevel marketing operator and signals a new level of federal scrutiny over an industry that has long operated in a regulatory gray zone between legitimate direct sales and pyramid schemes.
Amway, based in Ada, Michigan, is one of the most recognizable names in direct-sales marketing, with operations in more than 100 countries and a network of millions of distributors. The company reported billions in annual revenue.
The FTC alleged that Amway and its affiliated training organizations misrepresented the income distributors could realistically expect to earn, the agency said in its announcement. The affiliated companies named in the settlement operate motivational and training programs that recruited participants into the Amway distribution network.
For the millions of Americans who participate in or have been recruited into MLM businesses, the settlement could reshape how such companies disclose earnings potential and structure compensation. The FTC’s willingness to pursue Amway sets a precedent that smaller MLM operators will watch closely.
The Direct Selling Association, the industry’s trade group, did not immediately comment on the settlement’s implications for its members.
Consumer protection attorneys said the case could open the door to additional FTC actions against companies that use similar recruitment and compensation structures.
The $225 million is expected to be used for consumer redress, though the FTC did not immediately detail the distribution mechanism.