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During the years in issue, petitioners operated an Amway
distributorship under the name of “KT Enterprises”. Petitioners
began their Amway activity in May or June 1991, when they were
recruited as “downline” distributors by an “upline” distributor.
At the time of trial, petitioners were continuing to pursue their
Amway activity.
Amway is a supplier of household and personal use products
that are sold by individuals (distributors) through direct
marketing. An Amway distributor purchases Amway products for
resale to both customers and “downline” distributors, as well as
for personal use.
At least in theory, Amway distributors generate receipts by
selling Amway products directly to customers and by recruiting
new distributors. The new recruits become “downline"
distributors of the sponsoring distributor and a part of his or
her organization. (The sponsoring distributor is referred to as
the “upline” distributor.) In turn, each “downline” distributor
is encouraged to sponsor additional new distributors, all of whom
become a part of the initial distributor’s organization. (The
process of recruiting new distributors is often referred to as
“building the legs” of a distributor's network.) Amway does not
assign exclusive geographical territories to any distributor, nor
does Amway impose a minimum sales quota on any distributor.
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Last modified: May 25, 2011