Mega Pyramid Fraud: Rs. 750 Cr of American MLM Amway India Frozen

New Delhi (India CSR): Assets worth over Rs. 757 crore belonging to direct-selling consumer goods American multi-level marketing (MLM) company Amway India have been attached under the anti-money laundering law, the Enforcement Directorate said on Monday.

Amway company, which recently suspended operations in Russia sells health, beauty, and home care products in Indian Market through 5.5 lakh Amway Business Owners (ABOs). Amway only sells through ADS – Amway Direct Selling Partners. “Rs. 1000 crore invested in India. Rs. 600 crore towards setting up of manufacturing facility in India.”, the company said.

The D2C goods seller biz has been accused by the ED of running an MLM ponzi scam across its pan India business.

The provisionally attached properties of Amway India Enterprises Pvt Ltd. include land and factory building at Dindigul district in Tamil Nadu, plant and machinery, vehicles, bank accounts and fixed deposits, it said in a statement.

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Attaching a property means it cannot be transferred, converted or moved.

Amway India is a wholly owned subsidiary of Amway with headquarters located in Ada, Michigan, USA. Established in 1995, Amway India commenced commercial operations in May 1998 and has emerged as the largest FMCG Direct Selling Company in the country. Amway India offers Indian citizens an unparalleled opportunity to own and operate their own business by selling more than 140 distinctive quality consumer products, the company website revealed.

Amway India has close to 2500 direct and indirect employees. Amway’s first manufacturing facility in India is located at Nilakottai in the Dindigul district of Tamil Nadu. India is one of two key global manufacturing hubs for Amway, along with China, in addition to the company’s U.S.-based manufacturing operations. Amway manufacturing facility has won the prestigious LEED Gold Certification from the U.S. Green Building Council for being one of the most environment friendly and sustainable manufacturing facilities in the country.

Prevention of Money Laundering Act

Out of the total Rs. 757.77 crore of assets attached under the Prevention of Money Laundering Act (PMLA), immovable and movable properties are worth Rs. 411.83 crore while the rest are bank balances of Rs. 345.94 crore kept in 36 accounts belonging to Amway, it said.

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.

ED alleged that the company brought shares capital in India worth INR 21 crores in 1996-97. Till FY 2020-21 the company remitted INR 2,859 crore in dividends, royalty and other payments. During the period of 2002-03 till 2021-22, Amway collected a net amount of INR 27,562 crores through its business operations. ED stated that the company paid a commission of INR 7588 crore to its members and distributors in India and the US.

ED further alleged that Amway duped gullible members (something that is so common across all MLM companies globally). The agency claimed that new members were not buying products to use rather to become rich as their upline members. Of the total properties attached, movable and immovable assets are worth INR 411.83 crores. The remainder of INR 345.94 crores is deposited in 36 bank accounts belonging to the company. The attached property also includes Amway’s land and factory in Dindigul (TN).

Become rich by becoming 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. 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.

We have been co-operating: Amway India

Responding to the charges in a statement, 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.”

“As the matter is sub judice, we do not wish to comment further. We request you to exercise caution, considering a misleading impression about our business also affects the livelihood of over 5.5 lakh direct sellers in the country,” the company added.

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.

The agency alleged that the entire focus of the company is propagating how members can become rich by becoming members. Products are used as masquerades. According to the agency Britt Worldwide India Pvt Ltd and Twenty One Pvt Ltd played a vital role in promoting Amway’s chain marketing by conducting workshops, seminars and such under the guise of selling products.

Meanwhile Amway has responded internally stating that the current actions of the ED pertains to an ongoing investigation dating back to 2011, for which the company has been coordinating without fail. The company further states that it doesn’t want to comment as the matter is subjudice and it affects the livelihood of over 5.5 lakh direct sellers.

No business in Russia

“…the continuing war, along with the global legal and operational environment, makes it impossible to continue business as we have been in Russia, and so we are announcing the immediate suspension of product imports and will be pausing other operations as well.”, the company recently said.

Future Strategy

The company has not yet given any information about its future strategy. Will the company continue to work on its network for the sale of products in the future? Will this incident have any adverse effect on its production plants? The company should give quick answers to these questions from its stakeholders.

(India CSR)