Enforcement Directorate attached assets of Amway India worth over Rs 757.77 crore Monday. ED alleges firm’s focus is on signing people up for get-rich schemes, not selling products.
Amway India, which markets a range of products as well as “business opportunities” to customers, has been accused by the Enforcement Directorate (ED) of being a “multi-level marketing scam” whose main purpose is not to sell its “exorbitantly priced products” but to induce the public to sign up as members of its get-rich schemes.
The ED Monday attached assets of Amway India Enterprises Private Limited worth over Rs 757.77 crore, following a money laundering probe under the Prevention of Money Laundering Act (PMLA).
its list of allegations against the company, the ED said that Amway is “running a pyramid fraud” in the guise of direct-selling multi-level marketing (MLM) networks.
Amway’s focus, the ED said, is not on its products but on “propagating how members can become rich” by signing up with the company. The products are merely used to “masquerade this MLM pyramid fraud as a direct selling company,” the central agency alleged.
Following these developments, Amway in a statement claimed that the ED’s investigation dates back to 2011, and that the company has been cooperating and sharing the required information ever since.
ThePrint looks into how Amway operates in India and why the ED has accused it of being a “scam”.
‘Pyramid fraud’
The Amway properties attached by the ED include land and factory buildings in Tamil Nadu’s Dindigul district, machinery, vehicles, bank accounts, and fixed deposits, the agency said Monday.
The Rs 757.77 crore assets attached consists of Rs 411.83 crores’ worth of immovable and movable properties, and Rs 345.94 crore kept in 36 different bank accounts.
In its statement, Amway mentioned that it has “5.5 lakh direct sellers” in India and said that a “misleading impression” of the business model would affect their livelihood.
The ED, however, has said that members have already lost their “hard-earned money” by buying the company’s highly-priced products.
“It is observed that the prices of most of the products offered by the company are exorbitant as compared to the alternative popular products of reputed manufacturers available in the open market,” the ED said in its statement.
It further noted that new members were “not buying the products to use them, but to become rich” by becoming an “upline”— an MLM term used to describe someone who recruits other members.
In its website, Amway explains that it “rewards” members not just for selling products to customers but also for “helping others you sponsor to do the same”. This, in essence, means that existing distributors or “direct sellers” are given inducements, like commissions, to recruit new members.
The Enforcement Directorate, notably, stated that the commissions received by the upline members in Amway contributed to the high prices of the company’s goods.
