The alluring life offered by the world's largest 'multi-marketing' business closely resembles a sham.
By Paula Felps
JULY 13, 1998: Financial independence, personal power and a life of luxury - they're all alluring parts of the American Dream that is craved by many but attained by few. It's the kind of lifestyle that Amway Corp. promises its distributors but, as those who have been involved in the company all too often discover, that promise doesn't come with a money-back guarantee. Since the 1950s, Amway has built its business selling a line of household cleaning products, vitamins and cosmetics. Based in Ada, Mich., the private, family-owned company is the world's largest multi-level marketing business, claiming 2.5 million distributors worldwide and generating some $7 billion in sales last year. Amway has risen amidst a storm of protest, much of it based on the company's multilevel structure, and litigation.
"They love people who are broke because they're weak," says Fort Worth resident Lori Mauldin, who had a brief but memorable experience with Amway during the past year. "They really prey on the desire of materialism. They constantly show the material gain and say, 'You can have this, too.' When you're recruiting people, they tell you to ask people what their dreams are. They love to find the people who want the Mercedes, the boats, the big houses. That's exactly what they're looking for."
Despite its success, Amway's track record is one with a high dropout rate, low average incomes and lawsuits from competitors, regulators and its own distributors. It is often referred to as a cult, is considered a pyramid scheme (despite a 1979 ruling by the Federal Trade Commission to the contrary) and its detractors are many. Still, it remains a fascinating mystery of the business realm, a curious success story that continues swimming through a sea of controversy.
Late last year, Mauldin made an ideal Amway candidate. She was substitute teaching and had very little money. When she was contacted by a former boss who had moved to Austin, she didn't realize she was being set up for a sales pitch. Eventually, though, the conversation moved from personal chit-chat into more professional areas.
"You go through a three-contact process before you know what it is. The first thing they do is contact you by phone. There's a script that they use, with phrases like, 'I'm expanding my business, but it may not be for you." They talk a lot about posturing, setting the other person up." Her recruiter then mentioned that he "and some professionals" had put together some materials that he wanted to send to her. Mauldin received what Amway calls an ad pack, a kit crammed with a motivational tape and brochures that are filled with projections of where the future is headed, touting home satellites, the Internet and cable television. Amway's name is absent from all materials.
As the final step in that three-step process, Mauldin's ex-boss drove from Austin to Fort Worth, where he talked with her about the "new business" he was expanding. After discussing what this company could do and where it was headed, he had Mauldin impressed. Then, he went for the kill. "They build this all up for you. Then they say, 'The company that has built this up is Amway. Ever heard of 'em?' I couldn't believe it." Still, she agreed to think about it. "They want to get you to your first meeting as soon as possible, before you have time to change your mind," she says. Her meeting came almost immediately when "Tim," her former boss, invited her to attend a seminar with him. She found a room filled with gracious, professional and courteous people. They were well-dressed and the speaker was "a funny, funny guy."
"That's what opened my mind just a crack," Mauldin acknowledges. "Plus, nobody tried to attack me and make me join Amway." The seeds were planted and beginning to take root. Tim assuaged Mauldin's fears and played upon the fact that her stepfather had expressed an interest in signing up. She knew that her 62-year-old stepfather worked too hard, and she thought Amway might provide him with additional income that could lead to financial freedom. She also was having difficulty saying "no" to a former employer she considered to be a friend.
"He told me to sign up my stepdad, and he would be in my 'downline.' That was a big motivator for me. I thought, I'll just get a distribution number and I won't have to work so hard. I would make money off whatever my stepdad sold, and I could just sell whenever I wanted to," Mauldin, 34, says. "But even as my mouth was saying OK, my gut was saying hell, no."
Amway's auspicious beginnings came more than four decades ago when long-time friends Jay Van Andel and Richard DeVos became independent distributors of Nutrilite vitamins. Deciding the one-on-one marketing scheme could be improved, they created the Amway Sales and Marketing Plan, the blueprint upon which they built their empire. With just one product, the L.O.C. Multi-Purpose Cleaner, they were able to grow quickly, and the company's history claims Amway's first full year of business generated more than $500,000 in sales.
In the 1960s, Van Andel and DeVos took their show on the road, traveling in their custom Showcase Bus and presenting the opportunities of Amway to hungry would-be entrepreneuers around the country. That marketing technique proved successful, with more than 100,000 distributors signing on by the end of the decade.
By then, their product line had expanded to more than 200. As their catalog of products grew, so did the multilevel marketing industry. Following in Amway's footsteps, Shaklee, Herbalife, Mary Kay Cosmetics and, more recently, the cyber shopping network SPREE Independent Program, with the nutritional product distributor Streamline International, promised financial independence through multilevel marketing. Closely resembling illegal pyramid schemes but differing from them by virtue of how prospects can buy their way in, multilevel marketing operates on the promise of fewer people at the top making more money than the greater number of people below. The idea is to recruit more people to boost income potential. The first step in the Amway indoctrination process is to compile a list of about 50 friends and family members, their phone numbers and addresses. Then, Mauldin says, your 'upline' or sponsor begins setting up meetings in your home to help push the products. Recruits are told to hand out about 20 ad packs a week.
In order to sell the Amway Dream, you have to live the lifestyle. Mauldin immediately began the process of setting up her home on the Product Replenishing System, which entails taking inventory on an Amway checklist, indicating how often each product is used and when it needs to be replenished. The company sales line is, "If you're going to buy these products, you might as well buy from yourself."
Mauldin received her big box of products, but says she became suspicious when it didn't include an invoice or any prices on the products, just a list of what had been ordered. She called the company to track down the prices and ended up returning most of the box's contents.
Although Amway touts its products as being both of better quality and lower cost than those of its competitors, a number of studies fail to back up those claims. Sidney Schwartz, an Australian Amway survivor who spends much of his time building awareness of Amway's trials and tribulations, conducted a price comparison of Am-way products with those available in grocery, drug and discount stores. He points out that while Amway brags on the fact that its products cost less than those found in mail-order catalogs, the comparisons are with higher-end mail-order retailers such as Land's End. There is nothing to keep him from finding the same products at a local store for a much lower price.
Many Amway products must be purchased in bulk and, even with that alleged cost-saving practice, many of the goods still cost more than those at the corner store. Schwartz found that Amway's generic toasted-oat cereal cost $.204 per ounce, for example, while General Mills' Cheerios average $.157 per ounce - making the Amway breakfast cereal about 160 percent higher in price. Similar statistics exist for everything from motor oil (144 percent higher when purchased through Amway) to aluminum foil (189 percent) to higher-end items such as vacuum cleaners and water-filtration systems. He posts a complete list of his comparisons, as well as investigations made by two other ex-Amway distributors, on his website, "Amway: The Untold Story."
Consumer Reports also disputes Amway's claims that its products are superior to those lower-priced products found at grocery and drug stores. Its tests aren't likely to be reprinted in Amway brochures any time soon; CP ranked its Dish Drops as No. 14 on its list of products tested, and singled it out as being the most expensive of all the dishwashing products it tested. Crystal Bright, a powder dishwashing detergent, also got the nod for being most expensive in its category, four times more costly than top-rated Palmolive. (To its credit, though, Consumer Reports did say it was the least likely to cause etching in soft water.) Laundry detergent didn't fare much better, with Amway's SA8 Concentrate found to be costlier than Gain and 40 percent more expensive than Arm & Hammer. CP found that Amway's Zoom spray is more expensive - and no more effective - than its competitive counterpart, Formula 409.
Those who aren't satisfied with their Amway products, however, may find it difficult to act on Amway's money-back guarantee. "They make it almost impossible to return products," Mauldin says. "They say there's a 100 percent money-back guarantee, but you have to fill out this form to return it. They say the form is included in the box, but it never is. It took so much energy just to return products."
Further complicating the process is that each person must go through their upline to return purchases, rather than dealing directly with the company, which allows the upline to pressure the distributor into keeping the products. Even when the products are successfully returned, the "money-back guarantee" isn't exactly as it sounds. Instead of getting her money returned, Mauldin received vouchers redeemable for other Amway products.
"Amway is a cult. There's no getting away from that," says Brock Akers, a Houston attorney representing 29 distributors in a $200 million suit against the company. "My clients, who are very high up in the Amway system, just now are realizing some of these things. They're getting deprogrammed. And they can't believe some of the things they have done."
Akers says that distributors are expected to do something called "edifying your upline." That amounts to paying them respect - sometimes bordering on worship - and consulting them for decisions, not just in terms of business but in day-to-day matters such as what kind of vehicle should be driven and what type of clothes to wear.
"For example, an upline expects someone downline to open the car door for them. Joe Morrison is a medical doctor who became so successful at Amway that he retired from his medical practice before the age of 40. He's the spokesman in our lawsuit, and he talks about how he would run up to grab a car door for his upline. That's the kind of mentality they instill." A visitor to the "Amway: The Untold Story" website offers, "Now I realize what people mean by 'Amway Brainwashing.' They leave one unable to trust themselves or their capabilities. I have experienced that and [it] has led to a great lack of self-esteem and a diminished self-image, which I have to work on now on a daily basis just to cope. I have become very depressed and have had to seek a doctor's care and treatment." The writer adds that he feels the depression and lack of self-esteem came from having to second-guess himself on a daily basis and not being able to act without prior approval from his upline.
The word "cult" is often used in regard to Amway, and the organization even has the dubious distinction of being mentioned in a number of books and articles on cults. In her book Dangerous Persuaders (Penguin Aus-tralia), Louise Samways says, "Increasingly, Amway is adopting similar tactics to many cults in order to attract recruits, then to keep them involved and committed to the cause. Extremely large gatherings are held regularly and at these, many techniques used by traditional cults are employed to reinforce values and enhance commitment."
The Cult Awareness Net-work in Chicago lists the marks of a destructive cult as mind control or the use of coercive persuasion; charismatic leadership demanding unquestioning obedience; deception such as recruiting/fundraising with hidden objectives; alienation or separation from family and friends; exploitation to spend a great deal on courses or to give excessively to special projects; and a totalitarian worldview, also known as a we/they syndrome. Mauldin says she saw that brainwashing in action. "It's a real 'we' vs. 'them' mentality," she explains. "It's the idea of, 'They're going to be poor and homeless. We are going to be rich and powerful.' They really work on your fears. People going through a mid-life crisis, or those getting older who are afraid of financial insecurity - they're perfect targets. They present it in such a way that it makes so much sense, like there is no way you can't win."
In January, less than a month after her initial agreement to buy into the Great American Scheme, Mauldin attended a "major function" in Nashville. Her upline drove Mauldin and her stepfather to the event, convincing them the road trip would be "fun." She says they listened to Amway-sanctioned motivational tapes for the entire 13-hour trip.
When they arrived, they found lines of people waiting outside the building. "It was freezing cold, but they wouldn't let anybody in. They were all waiting outside this auditorium to see Billy Florence," she says, explaining that Florence is a Diamond, the highest level of success in the Amway echelon. He was inside the heated auditorium, meeting with the Emeralds, the next highest level.
"So hundreds of people just stand out there for an hour and a half, and they don't even seem to mind." Newcomers to the company are cordoned off from the rest of the pack and taken to meet with Florence and his wife, Peggy, whom Mauldin refers to as "the cult leaders." She said Amway veterans kept telling her how fortunate she was to be able to meet with the Florences. When the couple took the stage, they were all smiles and motivation, repeating phrases like, "We are so lucky to have you here" and "We love you." In fact, the "L" word gets tossed a lot by Amway folks.
"They take such a serious word and throw it around like a ball," Mauldin says. "I had people I met only a couple of times coming up to me, hugging me and telling me they loved me." The Cult Awareness Network reports this is another common technique, called "love bombing," which discourages doubts and reinforces the individual's need to belong. Other techniques, the network reports, are isolation, thought-stopping techniques such as meditating, chanting and repetitious activities and sensory overload. Mauldin says she witnessed all of those techniques in practice.
"They tell you your true friends will either get in the business, support your being in the business and/or buy your products. There's a lot of hero worship, a lot of earning people's friendship. You get to go to people's homes and to their parties based on what you accomplish, not based on who you are," she says. "They have very charismatic speakers with a lot of energy. It's not a business, it's a community. They provide you with family, love and friendship. They feed you ideas on religion, politics and relationships. They tell you everything about how to act and how to think."
Amway is quick to dismiss the cult accusations, offering an official company line that says "shared business philosophies should not be misinterpreted as a cult." Accusations of Amway being a cult have become so widespread that the company dedicates a couple of pages on its website to the topic. Amway explains that its meetings might appear to some people to be a cult because "Amway meetings are full of energy, enthusiasm and excitement - just like most sales motivation meetings.
"Some people aren't accustomed to that. Yet, most successful companies know that enthusiastic meetings increase morale and boost results in any sales force. This enthusiasm motivates our distributors to help and support one another, and that builds sales." If these motivational meetings do nothing but build sales, then perhaps Amway should have them more frequently. According to an article in the electronic newspaper Electric Times Union, the average Amway distributor earns $1,056 a year - before deducting expenses such as travel and telephone charges.
"At the major function, they showed videos of how Peggy and Billy Florence lived. They showed Peggy pulling glittery ballgowns out of a closet as big as this room. They show people living in these incredible mansions. It's so emotional," Mauldin says. "And they keep saying, 'This all can be yours.' They really try to make you believe it."
However, she pointed out, the people who are truly successful in Amway aren't making their money off Amway products - they're making it through sales of business tools, such as motivational tapes and materials. A Diamond-level executive such as Florence makes money off the hotel reservations, tickets for the seminar, t-shirts, books and tapes. "They attribute it all to Amway," Mauldin says, "but it's not."
The Nashville event began on Friday and concluded with a marathon church service Sunday. Mauldin concedes the speakers were charismatic, entertaining and persuasive. Patriotism runs rampant in this conservative, Republican-aligned organization, and family values are as heavily hyped as material wealth and impending prosperity.
"I actually talked to a single person who said he wouldn't consider marrying someone who wasn't in Amway," Mauldin says. "It's a Christian-based company, but there's no particular denomination. They talk about God a lot throughout the weekend."
Rather than motivating her to immerse herself in Amway, that weekend-long experience motivated Mauldin to leave the company. "I think that what is so scary is that these people don't appear to be lunatics. I met some nice, normal people, but Amway is a totally ... right-wing religious group."
Mauldin returned to Fort Worth and told her upline she wanted out of the business. She says he became angry and defensive when she informed him the major function hadn't motivated her, but had just the opposite effect. She loaded as many products, ad packs and materials as she could fit into a box and returned it to him. Some products she returned directly to the company, whose representatives, she says, were polite about the end of the business arrangement. But like many distributors who leave Amway, Mauldin said she lost money during her short tenure.
"I think the Internet may ultimately cause the demise of Amway," maintains Akers, the Houston attorney. "Anyone who is thinking about getting into Amway, who has a computer and has a clue can check it out. And they're going to find a lot of unhappy people out there." Indeed, the superhighway is strewn with tales of money, dreams and friendships lost in the treacherous waters surrounding Amway. Most are in the process of rebuilding their lives, some are attempting to mend broken marriages. All are bitter and more than a little bit angry with themselves for being duped. Schwartz's website even attracts testimony from some current Amway distributors, who remain anonymous for obvious reasons.
"When we were unable to go to our first function, our upline suddenly no longer had time to meet with us or our prospects," writes one distributor who is struggling financially. "Now ... our upline has told us if we really want to build the business we can find a way despite our dire situation. In so many words, we were told to not make payments due or not eat a meal a day to pay for it."
Apparently, such practices are not uncommon when distributors begin looking at shaky financial figures and begin losing faith in the Amway way. "I have also lost support from my upline," responds another distributor. "I have about $25,000 in debt. My debt seemed to grow, ever since I got in this business, at about $2,000 a year. If you figure it out, 'The [Amway] System' costs about $4,000 a year. My calculations are that I could have been getting out of debt [at a rate of] about $2,000 a year."
Despite the failed finances and the harsh treatment from uplines, many distributors still seem determined to hang in there and keep trying to create the dream part of their reality. "While I think the business can work and want to make it work, I want to keep paying my bills, too!" writes another financially strapped Amway distributor. "I want to make this work and know we can, but am wondering if others have this problem."
A number of people have had similar problems. In a much-publicized 1982 Wisconsin case, tax returns from all distributors in the state revealed an average net loss of $918 for that state's direct distributors. In that suit, defendant and distributor Wayland Behnke was charged with using income examples that were "untrue, deceptive and misleading in an attempt to recruit newcomers to Amway. The suit further charged that Behnke and others "indicated, expressly or by direct implication, that their personal Amway incomes or the incomes of other Amway distributors were at a level significantly higher than what was in fact earned." A review of Behnke's income and expenses for 1978 and 1979 showed a loss of $3,031 the first year and a capital gain of $1,949 in 1979. Many people are attracted to Amway because of its promise of a "minimal investment of the price of a distributor kit," but, unlike Behnke, aren't able to sink $12,000 into the business before seeing a profit. "The perfect plan doesn't seem to exist, from what I have seen," writes one disillusioned former distributor. "My former sponsor is down by about $15,000, I would estimate, as he went to a few more functions than I. And my former Direct, according to my former sponsor, has had to sell his second home."
Still, the energy of an Amway function is contagious, which is why major functions are scheduled quarterly, and less dazzling monthly meetings also are strongly hyped. In addition, distributors are "strongly encouraged" to listen to one motivational tape a day, tapes that are sold, of course, by their uplines.
"It's funny, now that I look back on it, that all the time this was going on I would have told you how wonderful it was," writes a former distributor. "I was digging myself a hole doing something I really didn't want to do thinking that someday, maybe, I would get it right and become successful." That same goal drives many to continue their quest at all costs. "My husband and I are senior citizens - he is a survivor of an always fatal cancer," writes a contributor to the Perils of Amway website operated by Russell Glasser. "By the grace of God, he has survived. His medication bills are horrendous, and we were informed by our upline that you must do what it takes to attend the meetings. You must skip the house payment this month, or do without food, or sleep in your car, or yes, do without medication. The worst that could happen is that he could die, but the Amway distributors will always be there for me." Many people sustain considerable damage before finding the resolve to leave the system. Others, like Mauldin, realize fairly early that the Amway way of life isn't working for them. "It didn't take me long to figure that Amway was not for me and a little longer for my ex-wife because she didn't want to admit that she was being used," writes a former distributor. "The things that I hated most were those damn tapes and the upline attitude that if you're not with us, you're doomed to a life of failure."
Sometimes it is the very spiritual principles taught by Amway that leads its distributors out of the business. One former distributor writes of signing up despite his wife's skepticism. "Once I started to 'plug in,' I was very quickly beginning to walk, talk and act like the system wanted me to. I eventually started to check deep inside myself and would study what the bible said concerning what was happening to me, and I found scripture upon scripture that spoke to me concerning the deception I was involved in. It was a revelation to me to see the truth coming out, and when I approached my upline and shared this scriptural revelation, they were furious and would not listen to a word I said."
On their Disenchanted Dreamers website, a couple relates their downward spiral as they continued trying to clutch onto the slippery promise of success. "The days ran into one another as we spent every spare moment we had making lists, calling people, showing plans, going to ... rallies ... etc. What little bit of money we had went straight into the business buying tapes, nice dress clothes, accessories and 'positive products.' When the little bit of extra money ran out, we were told to put off paying certain bills and put that money directly into the business so as to get it off the ground quicker."
Assured that they would be able to pay off their debts in six months, the couple continued working the Amway plan, only to discover their friends no longer called them, their family avoided them and they wound up broke. Ultimately, they were evicted from their home, something that jolted them from their Amway-induced coma and brought them back into a more pragmatic way of life.
"We have resumed normal lives," they report. "Our family members are talking to us [well, sort of] and we have managed to mend a few old friendships. We did learn a valuable lesson from all of this. Being a dreamer and making those dreams come true does not mean becoming a con artist, losing your conscience, using and brainwashing people and sacrificing your morals and values."
Twenty years ago, a woman by the name of Jenne Mills wrote, "When you meet the friendliest people you have ever known, who introduce you to the most loving group of people you've ever encountered, and you find the leader to be the most inspired, caring, compassionate and understanding person you've ever met, and then you learn that that cause of the group is something you never dared hope could be accomplished, and all of this sounds too good to be true, it probably is too good to be true. Don't give up your education, your hopes and ambitions, to follow a rainbow."
She was referring to her former membership in the People's Temple and the Jonestown mass suicide.
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