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issue. In September 1999, petitioners ceased their Amway
activity and became involved in Quixtar, Inc., an Amway
affiliate.
Amway is widely known as a marketer and supplier of various
personal and household products. Amway relies on distributors to
purchase such products for personal consumption and for resale
primarily to “downline”1 distributors and customers.2 In
general, a distributor’s gross income is based on profit from
retail sales, plus a “performance bonus” that is controlled by
Amway and is influenced by the type and quantity of products the
distributor purchases from Amway.
Profit from retail sales is determined by the difference
between the wholesale price, which is set by Amway, and the
retail price, which is set by the distributor. On average,
Amway’s suggested retail price for its products is approximately
25-30 percent above wholesale, but distributors are entitled to
sell a product at whatever price they choose, even if a sale at
that price produces a loss.
1 The term “downline” simply refers to one’s relative
position in a particular distribution chain of Amway products.
One becomes an “upline” distributor after successfully recruiting
one or more downline distributors.
2 A customer purchases Amway products for personal
consumption, but a distributor purchases Amway products intending
to resell them to customers or other distributors.
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Last modified: May 25, 2011