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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 to customers and downline distributors.3 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 each product is approximately
25 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. Petitioners’ practice was to sell
products to their customers and downline distributors at cost,
thereby eliminating product sales as a source of profit.
A distributor’s performance bonus is determined by his or
her “point value” and “business volume”. Point value is a
unitless number that corresponds to a particular tier in the
Amway “performance bonus schedule”. Business volume is a dollar
amount generally equivalent to 87 percent of the suggested retail
3 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