The 10 Biggest Amway Lawsuits in Company History
Amway is a multilevel marketing business that depends on agents they call independent business owners. They sell Amway products to neighbors, friends, and families through a model compared to a pyramid scheme. Most salespersons receive compensation that falls below minimum wage. They also recruit others to sell below them in the multi-tiered platform with meager compensation. Recruits get charged a fee to acquire the products sold. Some states hold Amway accountable for the controversial business model, suing Amway for millions and settling with the company for millions for its questionable treatment of IBOs. Here are the 10 biggest Amway lawsuits in the organization’s history to give you an idea of the scope of the problem.
10. Procter & Gamble wins Lawsuit filed by Amway
Settlement amount: $19.25 million
Insurance Journal reported that Procter & Gamble filed a lawsuit against four of Amway’s former distributors for libel. The defendants were accused of making false claims that P&G engaged in support of the Church of Satan to “advance their own business.” P&G denounced the rumors as false and took them to court. Rumors emerged in 1981. P&G filed the Lawsuit in the US District Court in Salt Lake City, Utah, in 1995. In March of 2007, a judge reviewed the case and determined that The Amway Corporation’s distributors, who spread the rumors with an enthusiasm that same year, used a voice mail platform to spread the rumors of P&G’s donations to “satanic cults.”
The judge ruled in favor of Procter & Gamble and awarded them $19.25 million in damages over violations in the Lanham Act that protects companies from such forms of false advertising and unfair competition. The case was drawn out before the final decision with dismissal when the federal courts ruled that the satanic statements weren’t defamatory. The Lawsuit was initially dismissed, but an appeal yielded the winning response from the district court.
9. Amway Settles Lawsuit over antitrust and racketeering claims
Settlement amount: $Undisclosed
Tampa Bay Times reported in 1996 that five former Amway salespeople filed a lawsuit against the company that alleged they were misled by two regional distributors recruiting them for the company. They allegedly told the sellers that the profitability of Amway product sales was exaggerated and that the distributors received encouragement to “buy motivational materials.” In 2005, Amway settled the claims by an agreement to provide the distributors with coupons that gave them discounts of 35% on multiple Amway products. An additional requirement for Amway was to publish notices that reminded distributors of their rights while also honoring refund policies regarding materials. Additionally, Amway was aware of the deceptions yet did nothing to address the false claims, making them liable for the charges of antitrust and racketeering activities.
8. Amway settles class action lawsuit for illegal gift card expirations
Settlement amount: $20 million
Quixtar, Inc and Alticor, sister companies of Amway, sold gift cards targeting redemption of their value for Amway merchandise. Top Class Actions confirm that the company issued the cards with expiration dates, resulting in numerous defaults, rendering the cards useless. The class action lawsuit filed against Amway and its subsidiaries, called Adell v. Quixtar, Inc. et al., contended that the notation instruction holders to “redeem before” a specified date were sold, with many not redeeming them because they had expired.
Multiple states, including California and others, have made it illegal for companies to sell gift cards with expiration dates. Courts ruled that Amway was responsible for providing compensation to protect consumers from loss from gift card expirations. Any “redeem before” clauses violate consumer protection laws. The independent business owners sold the cards en masse, with estimated sales of more than $20 million. Part of the settlement agreement calls on Amway to provide redemption credits for the expired gift cards or new cards in the original amount without expiration dates.
Further, Amway’s gift cards may not impose expiration dates. Even consumers who discarded their expired gift cards were granted the right to receive new cards with proof of purchase. Amway sent out notices on or before April 10, 2011, giving consumers affected by the debacle until June 20, 2011, to receive compensation. The company also agreed to donate $200,000 in products to organizations defined as charitable.
7. Amway was forced to sign a statement acknowledging fraud
Fine: $20 million
Scoop Top Scoops reports that the Canadian government forced Amway to sign a statement, admitting they committed illegal acts against the Canadian government. They pleaded guilty to fraud charges and received a fine of $20 million. Canada set them as an example of what happens when you fail to pay taxes and lie to government officials. Some companies successfully negotiate their way out of sticky situations, pay a fine and get away with a slap on the wrist. In this case, Canada ensured that the public knew that Amway participated in dishonest practices as a matter of public record. The accompanying $20 million fine was a slap on the wrist compared to the admission of guilt that serves as a warning to those who may consider joining the team at Amway Canada.
6. Amway sued in class action suit over pyramid scheme allegations
Settlement amount: $20 million
M Live confirms that Amway allegedly operated a pyramid scheme in 2007. The case was filed in a California Court by Quixtar’s former distributors, working for Amway’s United States-based affiliate companies. The plaintiffs alleged that Quixtar misled distributors about how much money they could make to convince them to invest their funds into the business. Amway representatives recruiting the distributors used illegal and unfair business practices to lure them into the positions. Amway agreed to settle the claims for $20 million but made no admission of guilt in the case.
5. Amway receives fine for Canadian fraud case
Settlement amount: $25 million
Christianity Today confirms that the Amway Corporation engaged in illegal business acts that went beyond their authority, as admitted by the owners of the company. The company adopted a Christian platform that helped enlist people of the Christian faith to work as international distributors. Representatives stated that each person involved with the company was accountable for their actions and would answer to someone for their actions.
The Canadian government took the words seriously and held owner Richard DeVos accountable for his actions. Police investigated claims that Amway “defrauded the government for $148 million in customs charges. Investigators discovered that the offenses occurred from 1965 through 1982. Amway knowingly lied to the Canadian government and customs officials, cheating them out of customs fees that were legitimately owed. Amway initially denied the allegations, but after investigators presented facts discovered in the case, they entered a guilty plea. They took responsibility for their illegal actions to avoid a lengthy jury trial, agreeing to pay a fine of $25 million. The settlement was approved by Canada’s Supreme Court of Ontario, Chief Justice Gregory Evans, in 1983.
4. Amway settles second Canadian Lawsuit
Settlement amount: $38.1 million
Six years after Amway paid the Canadian government a fine of $25 million for illegal business practices and evading customs fees, it was in the hot seat again. The multilevel marketing company was again accused of committing tax fraud. Allegations claim that Amway was caught for related tax evasion in Canada, associated with undervaluing merchandise on exports. They exported their products from the US to its Canadian distributors, lying to avoid customs charges, but they also undervalued the merchandise they shipped into Canada. The Revenue Agency of Canada discovered the illegal actions of Amway, which constituted fraud, according to Canadian laws.
The goods shipped from 1974 through 1980 were under the microscope of investigators, who found evidence of misstatements over the shipments’ value. Amway had no desire to enter into a long and drawn-out legal battle and agreed to pay a fine of $38 million on top of the $21 million fines. Much was at stake as the Canadian government filed criminal charges against Amway fo-founders Jan Andel, Richard DeVos, and a few other leading execs in the company. After a guilty plea was entered and the $21 million fine was paid, the Canadians dropped the criminal charges. Amway officials have a gag order and to no discuss the settlement nor details surrounding the legal actions.
3. Amway to pay back fees and fine over $148 million in debt to Canada
Settlement amount: $45 million
The situation Amway created with the Canadian government over tax evasion and avoiding customs fees was far from over with the settlements and guilty pleas for the offenses. Canada’s government imposed one more monetary penalty. The Canadians billed Amway for the full amount owed for customs, taxes, duties, and other penalties in 1989. It was off to court again, but Amway caught a break for its illegal actions this time. After examination of the evidence, the Canadian government settled the $148 million debt with a lowered fine of $45 million. Amway attempted to claim the penalties as a tax deduction, but the Canadian government ruled that the fines were not tax deductible in 1996. This particular case is a legal action over the years with additional findings against Amway and its affiliates.
2. Amway settles with Independent Business Owners in class action lawsuit
Settlement amount: $56 million
Find Law reports that Amway and Quixtar were accused of committing illegal business practices when they misled IBOss about how much the costs for joining the company would cost. They further misled them about how much money they could make working with Amway. In 2007, multiple former Amway IBOs claimed that Amway and Quixtar ran a massive pyramid scheme that caused financial harm through deceptive recruiting techniques. Many IBOs lost over $2,500 while attempting to build their businesses within the company. The business model calls on Amway affiliates to invest in the company and sellers instead of in the products.
Amway emphasized training materials versus products and actual product sales, making money from recruits in a business model that meets the definition of a pyramid scheme. Amway agreed to a settlement of $56,000,000 that included $34 million in cash compensation and $22 million in products. They admitted no wrongdoing and argued that the allegations were untrue. Amway also agreed to enhance its IBO training structure, invest more in education programs, and offer a money-back guarantee on training materials and products. The caveat to the agreement is that there are only 90 days for claims. The case settled in 2010, with Quixtar plaintiffs receiving up to $15,000 for loss compensation.
1. Amway lawsuit alleges 401k plan mismanagement
Lawsuit amount: Up to $1.2 billion (ongoing)
After several years of arguing, Amway’s parent company Alticor Inc. is facing a potential class action lawsuit. This is over excessive fees by the ERISA plan by Alticore Inc., the parent company of Amway. Policyholders’ complaints spurred investigations into their concerns, according to Bloomberg Law. Investigators discovered that Amway staff showed imprudence by offering “bad investments and overpaying on fees.” They made poor investments that performed poorly, charging excessive fees. Fiduciaries failed to manage the plans prudently, but Amway argued they made corrections and improvements. A Michigan judge heard the case and, after examining the evidence, found factual discrepancies in the plan’s investment lineup. In the latest update, he refused to accept recent changes Amway made. This is to reduce liability for its previous neglect of honoring its responsibilities to stakeholders in 2021. The case involving the mishandling of the $1.2 billion plan has yet to resolve.