Authorities in India have launched a pyramid fraud investigation into Amway.
The preliminary stage of the investigation has seen ₹ 757 crore in assets frozen ($99.1 million USD).
The latest Indian investigation into Amway has been initiated by the Enforcement Directorate. Money laundering is also part of the case.
The Enforcement Directorate accused the company of running a multi-level marketing “scam” where prices of most of the products offered by the company were “exorbitant as compared to the alternative popular products of reputed manufacturers available in the open market”.
“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,” the agency said.
The ED describes Amway’s business model as your classic product-based pyramid scheme.
“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 new members are not buying the products to use them, but to become rich by becoming members as showcased by the upline members.
Reality is that the commissions received by the upline members contribute enormously in hike of prices of the products,” it added.
“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 agency said.
This is the strongest condemnation of a larger MLM company I’ve seen in India yet.
Back in 2013 then Amway India CEO William Scott Pinckney (right), was arrested on charges of “financial irregularities”.
The Economic Offenses Wing charged Pinckney and several Amway executives over pyramid fraud, leading to “illegal money circulation”.
Pinckney was released on bail but arrested again in 2014 on similar charges. He was again released on bail a few months later.
Amway operates in India as Amway India Enterprises Private Limited. The current CEO of the company is Anshu Budhraja.
Pinckney’s arrests are tied to a investigation into Amway that began in 2011. In responding to the latest asset seizure, Amway confirms the 2011 investigation is linked and ongoing.
Amway India said, “The action of the authorities is with regards to the investigation dating back to 2011 and since then we have been co-operating with the department and have shared all the information as sought for from time to time since 2011.
We will continue to cooperate with the relevant government authorities and the law officials towards a fair, legal, and logical conclusion of the outstanding issues.”
That Indian authorities have been investigating Amway for thirteen years straight is remarkable.
NDTV points out that pyramid fraud laws were strengthened in India last December;
The government had banned direct selling companies from promoting pyramid schemes in December.
The Consumer Protection (Direct Selling) Rules, 2021 were aimed at protecting consumers’ rights and restricting companies which are involved in direct selling like Tupperware, Amway and Oriflame from encouraging money circulation schemes.
It’s possible the Amway investigation had been put on ice, while authorities waited for the law to catch up.
For the most part, India’s Prize Chits and Money Circulation Schemes (Banning) Act, enacted in 1978, was woefully inadequate for regulating pyramid schemes with.
Let’s see if the new strengthened laws fare any better. So far, a $99 million seizure is leaps and bounds above anything we saw under the old laws.