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Directly Speaking

Article Index
Directly Speaking
Exhibit E
The Problems
The Solutions
Sales Division Objective in Timing
Exhibit A Memo
Exhibit A Directly Speaking
Side A
Side B

To anyone who has makes a serious study of Amway and the problems that have for so long plagued it, one thing becomes overwhelmingly obvious: if there is any one primary cause for almost all those problems, it would have to be the "Systems" developed by a small number of high-level distributors to sell large amounts of motivational "tools" to the thousands or hundreds of thousands of distributors in their downlines.

While each of these Systems claims to be different from and superior to the others, they seem to me mostly indistinguishable from each other, sharing a number of common characteristics:

  1. Recruits are lured in by exaggerated income claims and ostentatious displays of wealth.
  2. Once they are in, it is repeatedly stressed that they will not have any chance of attaining said wealth unless they strictly adhere to the System, meaning they should buy at least one tape per week, attend all meetings and rallies, and spend most or all of their free time trying to recruit others. Amway's rules state that the purchase of motivational tools is optional, but it seems clear that those who sell the tools have figured out how to pay lip service to these rules while continuing to exert pressure on their downlines to buy the tools. "The tools are optional, and so is success," goes the oft heard refrain.
  3. Retailing is downplayed or ignored completely in favor of self-consumption of Amway products.

It's not surprising that these Systems have been the subject of a series of lawsuits, as they are inherently deceptive and fraudulent. Distributors are routinely not informed that their upline may be making as much or more from the sale of motivational tools as they are from the sale of Amway products. Without this vital piece of information, distributors naturally assume that the incomes and lifestyles of their upline are attributable to their Amway businesses, and they buy the motivational tools in the hopes of achieving a similar success. It's an insidious and self-perpetuating cycle: the more motivational tools the masses of downline distributors buy, the more successful the upline distributors appear to be in their Amway businesses, which in turn inspires the downline distributors to buy more motivational tools, and round and round she goes. Lower level distributors are either bled dry and quit, or hang in long enough to make it to the level where they start to get a cut of the tools profits.

Most Amway distributors seem largely ignorant of what Phil Kerns so accurately referred to back in 1982 as a "ghost system of non-Amway produced materials." Many deny that their uplines make any profit at all from the sale of the tools; that their uplines may actually be making most of their money from the tools is inconceivable to them. They are either unaware of the compelling evidence that has been available for years, or have chosen to ignore it. (Some of this evidence is discussed in the "Tools Scam" article.)

Amway Corp.'s public reaction to these problems has been to either deny that these problems exist, or to acknowledge them but claim that the culprits are "independent distributors" and that Amway Corp. bears no responsibility for their actions. A glaring example of the former is Amway Vice President Craig Meurlin's recent comment on the proposed settlement in the Hanrahan class action lawsuit: "We’re just pleased to move on. Stacy Hanrahan and the other plaintiffs had a very abnormal experience with the company." Keep these words in mind as you read the very revealing court documents that follow.

In 1984 Cairns v. Amway was initiated by a group of Amway distributors; these documents were entered into the court records as evidence by the plaintiffs. These documents indicate that, at some point in the late '70's or early '80's, Amway Corp. became concerned at the increasing attention being focused on them by the FTC and various state attorneys general, and in response conducted one or more internal investigations. The first two documents are Amway Corp. memos concerning the causes and findings of these investigations. Clearly Amway Corp. was very concerned about what it found, and various courses of action were recommended. One of the responses to the findings of the investigations were the two "Directly Speaking" tapes made by Rich DeVos in 1983, in which he addresses a whole laundry list of problems and asks for the help of the Direct Distributors in eliminating them.

It is equally as clear that whatever action Amway undertook to control these problems was ultimately ineffective, as every one of the problems discussed by DeVos are still evident today. We know this from the more recent lawsuits as well as from the hundreds of comments received from current and former Amway distributors. At this point we can only speculate as to whether Amway Corp. was unable to control these problems, or unwilling to, or some combination of both. As Dr. Juth pointed out, by the time the Cairns case was filed, Amway Corp. and the distributor groups had become equally powerful, mutually dependent organizations:

"The entrepreneurs of the Amway Corporation, perhaps unwittingly, created an organizational structure which evolved into two powerful, symbiotic organizations. The survival of the Corporation and the distributor organizations are now dependent on and constrained by the other. The Amway Corporation is constrained in its ability to garner desired profits because of the amount of money it must allow for distributor incentives and the fact that distributors are more inclined to sponsor rather than to sell (retail). Corporate profit levels are also constrained by the legal "wars" it must wage because of the illegal and deviant behavior of some of its distributors. Corporate profits can also be constrained by legal changes, e.g., customs laws. Finally, the Corporation can be constrained in its decisions regarding distributors by actions of the Board of the Amway Distributors Associations.
"The distributor organizations are dependent upon the Amway Corporation for products and visibility (through advertising). The distributors actions are constrained by Amway's Code of Ethics and Rules of Conduct. Distributors are also under pressure by the corporation and its top distributor organizations to sell more and recruit more. Additional sales and recruits however are constrained by uncontrollable external social and market conditions.
"Structural constraints impede the efforts of both entrepreneurial organizations (the corporation and the distributors organizations) in obtaining their goals. As a consequence, each organization adroitly manipulates, often in an illegal and deviant manner, its constraints in order to ensure its success. When the goals of the corporation and the distributor organization coincide, as they do in recruitment and sponsoring efforts, then accommodation and tacit support by the corporation for successful but illegal and deviant practices of the distributor organizations may occur. When the goals of the corporation and the distributor organizations conflict, as in the sales of non-Amway goods, some attempt may be made by the corporation to control such activities but the structure of the Amway organization is such that real enforcement efforts by the corporation would threaten the survival of the total enterprise. The independent contractor status of distributors, the sheer number of distributors involved, and Amway's policies which allow distributors to produce their own materials, combine to make such questionable practices normative. Illegal and deviant behavior exists in the organization because it benefits either directly or indirectly each organization."

One thing is clear: Amway Corp. has long known of the serious abuses being perpetrated on its distributors, and has failed in its moral and ethical responsibility to either protect them, or to sufficiently inform them so they could protect themselves. (The "Directly Speaking" tapes, as the name implies, were sent only to Direct Distributors.)

These documents have been reproduced here as accurately as possible, except were the copies I have were illegible. All emphasis is as it was in the originals. The documents were obtained from District Court in Cincinnati.