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Amway India uses the slogan, "We are listening", which implies that the company understands Indian customers and is listening to all the complaints of its customers. The same company has been booked by the Enforcement Directorate (ED) in an MLM scam.
Amway, short for "American Way", is a direct selling company that sells health, beauty, and home care products. It was established in 1959 and has its presence in 100+ countries. It is also considered as one of the most profitable direct selling companies in the world.
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The ED has attached assets worth Rs 757.77 crores, Rs 411.83 crores in movable and immovable property, and funds in 36 bank accounts belonging to Amway India. Attaching a property means that said property cannot be moved, transferred, or converted. The attached properties include factories in Tamil Nadu, plants & machinery, and vehicles.
So, what is a pyramid scheme?
It is an illegal and unsustainable business model where one person/entity sits at the top of the corporate 'pyramid' and recruits underlings with promises of payment. These new people enter the second level after paying fees upfront. Now, these people need to bring in new people to get money. They bring in people in the third level whose fees are passed up to the one on top and a commission is paid to the second level. Now the people in the third level do the same and commission is paid to both the second and the third level.
So is Amway running an illegal pyramid scheme?
Amway operates a legal pyramid scheme/ business practice called "Multi-Level Marketing" (MLM). Here, actual goods and services are sold. Amway's distributors, referred to as "Independent Business Owners" (IBO), sell goods either directly to customers or to other IBOs which they bring into the fold. These IBOs earn money through profits on goods they sell and a performance bonus based on sales by IBOs brought in by them. It doesn't sell to wholesalers like normal businesses, instead, it sells directly to IBOs, who are often customers who wish to purchase the product at discounted prices.
"A money-laundering investigation by the ED revealed that Amway is running a pyramid fraud in the guise of direct selling multi-level marketing network," a statement by ED said. "Without knowing the real facts, the common gullible public is induced to join as members of the company and purchase products at exorbitant prices and are thus, losing their hard-earned money," the statement added.
The government had banned direct selling companies from promoting pyramid schemes in December last year to protect customers. Amway has insisted on its innocence in the matter and claimed that it is assisting all relevant authorities in their investigation.
by Aman Agarwal
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