Amway Corp. To Pay $100,000 Civil Penalty, Settling FTC Charges
It Failed to Make Required Earnings Disclosures in Newspaper Ad
FTC News Release
May 19, 1986
Amway Corp. will pay a $100,000 civil penalty to settle Federal Trade Commission charges it violated a 1979 Commission order by making earnings claims for its distributors without disclosing actual average gross income figures, under a proposed consent decree filed in federal court today.
The consent decree and a complaint were filed at the request of the FTC by the Department of Justice. The consent decree is subject to court approval.
Amway is a manufacturer and marketer of household and consumer products, which are sold door-to-door, including home and personal-care products, vitamins and food supplements. Under its Amway Sales and Marketing Plan, the Michigan-based company sells its products to distributors, who in turn resell to other distributors or directly to consumers.
A 1979 Commission decision resolved FTC charges that Amway's claims about the amount of money distributors are likely to earn had the capacity to deceive potential distributors. The order accompanying that decision prohibits Amway from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. The order also requires that whenever Amway makes above-average earnings or sales claims, it must also dis close clearly and conspicuously either the average earnings of all distributors or the percent of distributors who actually earn the amount claimed.
According to a complaint filed with the proposed consent decree, Amway violated the 1979 order by placing an advertisement in newspapers across the country that represented the earnings of distributors without the required disclosures. The complaint charged that the 1983 ad, which offered Amway distributorships, contained earnings and sales claims that were higher than the average income actually earned in any recent year.
In addition, the complaint charged, Amway violated the 1979 order by failing to include in its ad clear and conspicuous dis closures of the average earnings or sales of all distributors in any recent year or the percent of distributors who actually achieved the results claimed.
Under the consent decree, Amway is prohibited from making claims about above-average distributor earnings or sales unless it makes the required disclosures about actual earnings or sales.
The proposed consent decree was filed in the US District Court for the District of Columbia.
FTC Chairman Daniel Oliver and Commissioner Andrew J. Strenio Jr. did not participate in the vote.
- Civil Action No. 86-1360 (District of Columbia). FTC Docket No. D-9023.
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