ED freezes Amway assets worth Rs 757 crore: What is the multi-level marketing company’s pyramid fraud?
April 19, 2022 | Corey Augenstein
The ED has said that an investigation into money-laundering allegations against the company has revealed that Amway is “running a pyramid fraud in the guise of direct selling multi-level marketing network”
The Enforcement Directorate (ED) on Monday attached assets worth over Rs 757 crore belonging to Amway India Enterprises Pvt Ltd.
The investigating agency said that the provisionally attached properties include land and factory building at Dindigul district in Tamil Nadu, plant and machinery, vehicles, bank accounts and fixed deposits.
“Immovable and movable properties worth Rs 411.83 crore and bank balances of Rs 345.94 crore from 36 different accounts belonging to Amway attached,” it added, noting that the seizures have been made under the Prevention of Money Laundering Act (PMLA).
What is the case against Amway India?
The ED has said that an investigation into money-laundering allegations against the company has revealed that Amway is “running a pyramid fraud in the guise of direct selling multi-level marketing network”.
According to ED, the prices of most of the Amway products are “exorbitant as compared to the alternative popular products of reputed manufacturers available in the open market”.
The agency claimed that the company collected an amount of Rs 27,562 crore between FY 2002-03 and FY 2020-21, out of which, the company paid a commission of Rs 7,588 crore to their affiliated members and distributors in the United States and India.
It said that the new members of the multi-level marketing company don’t buy the products to use them, but to become rich as showcased by the upline members.
“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. Reality is that the commissions received by the upline members contribute enormously in the hike of prices of the products,” ED said.
The agency claimed that Amway’s modus operandi is about propagating how the general public can get richer by becoming its member.
The products it offers are used to cover up this “MLM pyramid fraud” by showcasing the company as a direct selling brand, it said.
As per a report by the Indian Express, the company brought Rs 21.39 crore as share capital in India in 1996-97. Till FY 2020-21, the company has remitted a huge amount of Rs 2,859.10 crore in the name of dividend, royalty and other payments to their investors and parent entities.
“M/s. Britt Worldwide India Private Limited and M/s. Network Twenty One Private Limited also played a major role in promoting pyramid scheme of Amway by conducting seminars for joining members under the guise of sale of goods by enrollment of members in chain system. The promoters are conducting mega conventions and flaunted their lavish lifestyle and used social media to lure gullible investors,” the agency said.
As per the Consumer Protection (Direct Selling) Rules, 2021, the government bars direct selling companies from promoting pyramid schemes.
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.