FTC vs Amway

 FTC_vs_Amway

Two Michigan corporations engaged in door­to­door marketing of various household products, as well as two corporate officers, are required to cease allocating customers among their distributors, fixing wholesale and retail prices for their products, retaliating against recalcitrants, and disseminating price­listing data that does not indicate that price adherence is required. 

Respondents are also barred from making false or misleading statements to prospective distributors about their earnings and other pertinent information.

Appearances

• Commissioners Joseph S. Brownman, D. Stuart Cameron, Mary Lou Steptoe, B. Milele Archibald, and Michael Goldenberg were appointed by the President.
• Respondents' attorneys: Lee Loevinger, Philip C. Larson, Robert J. Kenney, Jr., and Robert J. Kenney, Jr. of Hogan & Hartson in Washington, D.C.; John E. Stephen of Ada, Mich.

COMPLAINT

The Federal Trade Commission, acting pursuant to the provisions of the Federal Trade Commission Act (15 United States Code 41 et seq.) and in exercise of the authority vested in it by said Act, having reason to believe that the parties listed in the caption hereof, and more particularly described and referred to hereinafter as respondents, have violated the provisions of Section 5 of the Federal Trade Commission Act, a complaint has been filed with the Federal Trade Commission.

• THE FIRST PARAGRAPH CONTAINS THE RESPONDENT Incorporated on or about September 6, 1949, under the name Ja­Ri Corporation, Inc., Amway Corporation, Inc. 
• is a for-profit corporation based in the United States.
•  In November 1963, the company's name was officially changed to Amway Corporation.
•  It is believed that Amway Corporation, Inc.
•  was formed on or around January 1, 1964, when the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation, all of which were Michigan corporations, united to form Amway Corporation, Inc.
•  Its headquarters and major place of business are located at 7575 East Fulton Road in Ada, Michigan, according to the respondent corporation. [2]
• Respondent (paragraph two) ADM (Amway Distributors Association of the United States) is an association of Amway distributors and dealers based in Ada, Michigan, with its headquarters and major place of business at 7575 East Fulton Road.
•  In addition to making recommendations to respondent corporation regarding the standing, termination, or suspension of individual distributors or dealers, the Amway distributors Association is also responsible for recommending changes or other action on various restrictions imposed on distributors or dealers by respondent corporation.
• Respondent (paragraph three) In addition to being a founding member of the respondent corporation, Jay Van Andel serves as its Chairman of the Board of Directors.
•  With others, respondent Van Andel established the Amway marketing plan and distribution policies.
•  Respondent Van Andel has been and continues to be responsible for establishing, supervising, directing, and controlling the business activities and practises of corporate respondent for more than three decades.
•  The address of Mr. Van Andel's office is the same as the address of the respondent corporation.
• Respondent (paragraph 4) Richard M. DeVos serves as President of the responding corporation and was a founding member of the organisation.
•  Respondent DeVos, in collaboration with others, established the Amway marketing plan and distribution policies.
•  She has been and continues to be responsible for establishing, supervising, directing, and controlling the business activities and practises of the corporate respondent, which includes establishing, supervising, directing, and controlling the Amway marketing plan and distribution policies. The address of Mr.
•  DeVos' office is the same as the address of the respondent corporation.

Part 5:

 Respondent corporation is engaged in the manufacture, distribution, offering for sale, and selling of more than 150 different types of homecare, automotive, and personal care items (as well as vitamins and food supplements) to distributors and dealers throughout the United States.

 Aside from that, the respondent firm offers more than 300 products that are manufactured by and labelled with the names and labels of other companies.

 Clothing, home appliances, furniture, tools, luggage, watches, cameras, and other items are among the many different types of products available on the market. Retail sales of the respondent corporation's products total more than $150 million, and more than 200,000 people are actively engaged in the resale of Amway products throughout the United States, according to the complaint. [3]

In the course and conduct of its business of manufacturing and distributing its products, respondent corporation ships or causes the shipment of such products from the state in which they are manufactured and warehoused to distributors or dealers located in various other states throughout the United States, as evidenced by the following paragraph:

 These distributors, in turn, resell to other distributors, dealers, or members of the general public, depending on the product.

 As defined by the Federal Trade Commission Act, there is currently and has been for several years past a steady, considerable, and increasing flow of such products into or influencing 'commerce.'

The respondent corporation's distributors and dealers are engaged in substantial actual competition or potential competition in the course and conduct of their business of distributing, offering for sale, and selling their products in commerce, except to the extent that such competition has been lessened, hampered, restricted, and restrained as a result of the practises hereinafter alleged by the respondent corporation.

A distribution system has been developed by respondents and has been published in a variety of manuals, bulletins, booklets, and other literature and materials. For the purpose of putting these policies into effect and carrying them out, corporate respondent has entered into contracts, agreements, combinations, or common understandings with its distributors and dealers;

 and has adopted, implemented, enforced, and carried out, by various methods and means, said distribution system, which hinders, frustrates, restrains, suppresses, and eliminates competition.

9. Distributors and dealers employed by the respondent corporation are independent contractors who sell or attempt to sell at retail to members of the general public and at wholesale to other distributors and dealers who have been recruited and/or sponsored into their respective sales organisations by the respondent corporation.

•  In most cases, with the exception of 'Direct Distributors,
• ' distributors or dealers obtain their product requirements straight from their sponsors. [4]
  

There are roughly fifteen hundred (1500) Direct Distributors around the United States who purchase directly from the respondent firm, and they are characterised by the term "Direct Distributors." Other distributors or dealers may purchase directly from Amway Corporation if they satisfy specific criteria and meet the requirements of the company.

respondents, working in concert and collaboration with their extensive network of distributors and dealers, police, enforce, and implement a wide range of rules, regulations, and policies, including those alleged to be unfair methods of competition and unfair or deceptive acts or practises in the following sections.

COUNT I Paragraphs One through Nine are included by reference into this document as if they were fully set forth verbatim in their entirety.

10th paragraph:

 The acts, practises, and methods of competition engaged in, followed, pursued, or adopted by respondents, and the combination, conspiracy, agreement, or common understanding entered into or reached between and among them, as well as between and among respondents, respondent corporation's distributors and dealers, and others who are not parties to this action, have the tendency and do tend to fix, maintain, control, or tamper with the prices at which resale goods are offered for sale.

As an example,

 distributors and dealers have entered into agreements, combinations or understandings with respondents, or they have been and continue to be required and coerced by respondents to sell to other distributors or dealers who are at other wholesale levels of distribution at the same prices that they purchased their products from other distributors or dealers or from respondent Amwa. For wholesale profits, distributors or dealers must therefore rely on the implementation and adherence to the respondents' buy volume refund plan, which must be followed exactly.

Purchase volume refunds are paid by respondent Amway Corporation to its direct-buying 'Direct Distributors' on a monthly basis at a rate of 25% of the monthly dollar volume of purchases computed at the retail price, according to the terms of this plan. All wholesale levels of distribution are covered by the rebates paid by these sponsoring distributors to their wholesale customers, which range from zero to twenty-five percent in value based on their own monthly dollar volume of purchases, and so on. [5]

In addition, distributors and dealers have committed to sell to religious, service, civic or charitable selling organisations at specified prices and to request that these organisations stick to the same retail prices when selling to the final consumer. Following that, the distributor or dealer will pay the selling organisation a quantity of money, which will be credited to the selling organization's gross income from the aforementioned sales.

According to the intent and meaning of Section 5 of the Federal Trade Commission Act, as amended, the foregoing acts, practises, and methods of competition, as well as the adverse competitive effects that result from them, constitute unreasonable restraints of trade and unfair methods of competition in commerce, as defined by the FTC.

COUNT NO. II

• The first through ninth paragraphs of this document are incorporated by reference as though they were fully set forth verbatim.

PARAGRAPH 13. 

The acts, practises, and methods of competition engaged in, followed, pursued, or adopted by respondents, as well as the combination, conspiracy, agreements, or common understandings entered into or reached between and among the respondents, respondent corporation's distributors or dealers, or others not parties hereto, tend to, and do, restrict the customers to whom respondent corporation's distributors or dealers sell their products, as well as the combination, conspiracy, agreements, or common understandings entered into or reached between and among

The respondents have entered into agreements, mergers, or other forms of collaboration with distributors and dealers, and they have been and continue to be required and coerced to adhere to practises whereby, absent prior approval to the contrary, purchases of product needs must be made either directly from the respondent corporation or from the distributor or dealer who recruited and/or hired the respondent corporation.

 Distributors and dealers are not permitted to resell their products at wholesale to anyone other than other distributors or dealers who they have recruited and/or sponsored and who have been identified as such by respondents as such. In the event that distributors or dealers withdraw from the programme, they are replaced in the distribution chain by other distributors or dealers to whom the former had previously sold their products.

Paragraph 15:

 Distributors and dealers have also entered into contracts, agreements, combinations, or understandings with respondents, or have been and continue to be required and coerced by respondents to refrain from selling from or through any business office, retail store, military store, ship's store, service station, barber shop, beauty salon, show booth, fair, or the like, and to refrain from selling to or through any other person or entity other than respondents.

Moreover, distributors and dealers have entered into contracts, agreements, combinations, or understandings with respondents, or have been required and coerced by respondents to refrain from soliciting the business of retail customers and commercial accounts from other distributors or dealers (paragraph 16).

According to the intent and meaning of Section 5 of the Federal Trade Commission Act, as amended, the foregoing acts, practises, and methods of competition, as well as the adverse competitive effects that result from them, constitute unreasonable restraints of trade and unfair methods of competition in commerce, as defined by the FTC.

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