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Amway Forever: The Amazing Story of a Global Business Phenomenon by Kathryn A. Jones

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The Decision

Amway received its own revitalization of sorts on May 8, 1979, when the FTC handed down its decision and final order. It first ordered Amway, the Amway Distributors Association, and Rich and Jay to stop allocating customers among their distributors, fixing wholesale and retail prices for their products, taking retaliatory action against “recalcitrants,” and spreading price-listing data that did not advise that sticking to the price was not obligatory. They also were prohibited from misrepresenting potential earnings and other relevant information to prospective distributors. But it was the first sentence in the government’s final conclusion that became the single most important statement to Amway’s future and that ignited the explosion of a new industry: “The Amway Sales and Marketing Plan is not a pyramid plan,” the FTC said in its decision. It went on to say:

In less than 20 years, the respondents have built a substantial manufacturing company and an efficient distribution system, which has brought new products into the market, notably into the highly oligopolistic soap and detergents market. Consumers are benefited by this new source of supply, and have responded by remarkable brand loyalty to Amway products. The . . . vertical restraints by which Amway has achieved this entry—avoiding conventional retailing through grocery stores by direct selling—are reasonable. Respondents’ restrains on price competition, however, must be prohibited.23

Amway would become a landmark ...

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