Amway Under ED Scanner: The multi-marketing giant and a household name in India Amway has been named as multi-level marketing scam and Enforcement Directorate has attached assets worth Rs 757 crore, which includes its factory in Dindigul, Tamil Nadu as well as bank balances of Rs 346 crore. The most successful and popular brand, Amway has finally seen its fairy tale going bust. But why did this happen? Was the model itself prone to scams?
Pyramid schemes or frauds are so named because they resemble a pyramid structure, starting with a single point on top that becomes progressively wider toward the bottom.Such a scheme funnels earnings from those on lower levels (in pyramid on top) of an organization to the top.A money-laundering investigation by the ED revealed that Amway is running a pyramid fraud in the guise of direct selling multi-level marketing (MLM) network.
Businesses that involve selling products to family and friends and recruiting other people to do the same are called multi-level marketing (MLM) or direct marketing businesses. Some MLMs are illegal pyramid schemes.
In the pyramid fraud by Amway, the entire focus of the company is about propagating how members can become rich by becoming members. Products are used to masquerade this MLM Pyramid fraud as a direct selling company.It was 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 new members are not buying the products to use them, but to become rich by becoming members as showcased by the up line members. The reality is that the commissions received by the up line members contribute enormously in hike of prices of the products.