FTC and Washington Propose $225 Million Settlement With Amway Over Alleged MLM Deception

The Federal Trade Commission and the state of Washington on Thursday filed a proposed settlement that would require Amway and two major affiliated recruiting and training groups to pay $225 million and make sweeping changes to how Amway’s U.S. business operates, in what the FTC called its largest monetary recovery ever in a multilevel marketing case.

The complaint and stipulated proposed final order, filed Sept. 17 in the U.S. District Court for the Western District of Washington, name Amway Corp., World Wide Group, L.L.C., or WWG, and Leadership Team Development, Inc., or LTD. Nearly all of the money is expected to go toward consumer redress, according to the FTC. The order is not yet in effect and would become enforceable only if approved and signed by a judge.

The FTC, which enforces federal consumer protection laws, describes Amway as one of the largest multilevel marketing companies in the United States. It sells products including nutritional supplements, energy drinks, and health and beauty items through Independent Business Owners, or IBOs.

According to the FTC and Washington, Amway, WWG and LTD used unfair and deceptive tactics to recruit those sellers. The complaint alleges the companies made false or misleading earnings claims, including suggesting people were likely to earn more than $40,000 a year, replace a full-time job or retire early.

Regulators also allege recruits were pressured to buy Amway products they did not want and were unlikely to resell. The complaint further says participants were instructed to falsely report sales to make the business appear to be driven by genuine retail demand rather than recruitment, and that prospective recruits were misled into believing they were joining an exclusive opportunity with access to highly successful mentors.

“Amway and its affiliates misled prospective workers with false earnings claims and then pressured them to buy Amway products they were unlikely to be able to sell,” Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in the agency’s announcement.

WWG and LTD are described in the complaint as two of Amway’s largest approved provider groups, meaning Amway-linked organizations that recruit people into the business and sell training materials and services. Regulators allege those materials and services were marketed as essential to success.

The complaint includes stark figures about what participants allegedly earned. In 2023, median total bonuses before expenses were $139, the FTC said. In 2022, they were $145. The agency also alleges that most IBOs who joined WWG or LTD after 2020 spent more on Amway products and training than they received from Amway.

The proposed financial relief includes $154.7 million against Amway; $39.78 million against WWG and Amway, jointly and severally; $26.52 million against LTD and Amway, jointly and severally; and $4 million to Washington state. The total exceeds the FTC’s 2016 Herbalife settlement, which included a $200 million judgment.

The proposed order would also impose significant operating changes. IBOs would have to sell at least 70% of the products they buy each month to other people. Recruiters’ compensation would be reduced if recruits buy products but do not resell them. IBOs would have to promptly report customer sales, including the actual sales price, and Amway would be required to send receipts to customers.

Amway also would have to terminate IBOs who fake sales or teach others to do so. Its sales records would be audited by an independent outside auditor for 10 years. IBOs would have to complete training on the new rules before they can recruit others. And approved providers, including WWG and LTD, would be barred from charging new IBOs for training or services during their first year.

“Today’s action makes clear that the FTC will not tolerate any company deceiving workers — whether through deceptive earnings claims or by promoting reports of false sales to make direct selling or multilevel marketing opportunities look appealing to consumers,” Mufarrige said.

Under the stipulated order, the defendants neither admit nor deny the allegations except as to jurisdiction. The FTC said details of the consumer redress program will be announced later.