In 2007 a class-action lawsuit was filed against Amway/Quixtar by former distributors in California. Quixtar was the name Amway used in the US at the time. The suit alleged that Amway/Quixtar and some of its top distributors were operating an illegal pyramid scheme. The plaintiffs said they were misled about how much money it would cost to be part of the business, among other things.

The settlement was $56,000,000. $34 million was cash, and the company will provide $22 million in products. Up to $20 million of the cash will go to the plaintiffs’ attorneys.

The settlement does not constitute an admission of guilt on Amway’s part. In a press release, Chairman Steve Van Andel and President Doug DeVoss said, “The suit contains strong and disagreeable allegations and language that we categorically reject. They are sensationalist claims that remain unproven and that we expect will be dismissed by the court. Nevertheless, the company and its IBO leaders take responsibility for all past issues, and we take responsibility for fixing them. We regret that the experiences of some IBOs fell short of the high standards that have allowed us to help many people, from all walks of life, start successful businesses for more than 50 years.”

In the letter, Van Andel and deVoss addressed concerns raised by the plaintiffs that the business was too heavily weighted toward the sale of tools and business support materials such as motivational tapes, books, and seminars. The company has taken several steps to rectify the situation, including more consumer advertising, improved websites, expanded money-back guarantees, and better IBO (Independent Business Owner) training.

An amended complaint was part of the final settlement. The amended complaint will have no reference to an “illegal pyramid scheme”.  The amended complaint will also prevent the plaintiffs from accusing the company of running an illegal scheme or racketeering.

This was a monster settlement. Most MLM companies could not take that kind of hit. This whole thing was about the sale of motivational tapes, books, and seminars and an issue about earnings potential and the cost to be an Amway IBO. It wasn’t about the company being an illegal pyramid.

The lesson here is this: MLM done right is legal and moral. Those considering MLM need to ask questions when talking to someone about joining one. Finding the right product and MLM company is important, but finding the right person to learn from is more important.

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