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use, uses a direct marketing approach to promote sales of its
products. It is based on an incentive system whereby a
distributor’s sales are rewarded by bonus checks. In addition to
earning commissions on their retail sales to consumers,
distributors can increase their proceeds through the sale of
products by individuals whom the distributor recruits. The
former are known as “upliners” or “sponsors”, while the latter
are known as “downliners”. Upliners sell Amway products to
downliners at the same prices at which the upliners purchased
them, and then earn bonuses based on the volume of the sales.
Thus, the wider the network of downliners a distributor creates,
the greater is the distributor’s profit potential.
Petitioners did not have written contracts with their
sponsors or any of their downliners. Prior to becoming
distributors for Amway, petitioners did not review the financial
records of any other Amway distributor regarding that
distributor’s success with Amway, nor did they have a written
business plan detailing how they intended to profit from their
distributorship. Petitioners, however, did speak with existing
Amway distributors concerning the nature of Amway operations.
Petitioners received reports from their upliner and from
2(...continued)
primarily involved in the purchase and promotion of Amway
products, we will continue to refer to their activity as an Amway
distributorship.
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Last modified: May 25, 2011