The Amway Corporation is muzzling its distributors. Any distributor who uses Business Support Materials (BSMs), or who wishes to renew his distributorship for the new fiscal year, is now required to sign an Arbitration Agreement as part of the annual renewal. The distributor agrees to binding arbitration, gives up his right to sue, and agrees in advance to being gagged.
Additionally, all renewing distributors must sign an Intent To Continue form which removes some of their legal rights. According to Amway, these agreements were put in place to "protect" the distributors. The only distributors being protected by these yellow-dog contracts are the high-pin-level heads of AMOs, people like Dexter Yager and Bill Britt. The average distributor is being thrown to the wolves.
Before discussing the text of the agreements themselves, let's take a quick look at Amway's history of enforcing its own rules, as borne out in a number of court pleadings.
Gerald and Edda Hayden filed suit against Amway Corporation, the Amway Distributors Assocation, Dexter Yager and his business entities, Colombo and Karen DiSalvatore and their business entities, Don and Nancy Wilson and their business entities, and Amway Corporation employees Ed Postma and David Kruer in July, 1997. This suit claims that :
"The defendants claimed that the Haydens would only be successful in recruiting other distributors who would recruit other distributors to purchase Amway products by attending defendants, rallies, purchasing defendants' tools, and inducing their downline recruits and prospects to attend defendants' rallies and purchase defendants, tools.
"The defendants represented that the rallies and products were essential to the Haydens' success because "the key to this business is the power of duplication." The defendants claimed that duplication could only be achieved if all of the individuals within the Yager organization received the same tools and attended all of the rallies, in short, 'you must follow the system", as they define it.
"all of the defendants, between 1993 and 1997, represented, both orally and through written materials, that purchase of "tools" and attendance and promotion of rallies organized by Yager, the Wilsons, and the DiSalvatores was "vital" to plaintiffs, success as Amway distributors or would "insure" plaintiffs' success as Amway distributors; and
"Yager, by and through the Wilsons, DiSalvatores and other Amway distributors, strictly controlled the content, distribution and price of tools within the Yager Amway network."
However, the pleadings continue, plaintiffs had at the time no means of knowing the deceptions involved in the motivational tools business.
"at least fifty percent (50%) of the defendants' income and represented lifestyles, etc. was derived from the sale of tools and rallies to the Haydens and other individuals, including the Haydens' recruits;
"consequently, the defendants counseled the Haydens to purchase defendants' products and attend defendants, rallies and recruit other individuals to purchase tools and rallies in order to obtain profit from such sale;
"defendants counseled the Haydens to focus on recruitment rather than retail customer sales for the purpose of ensuring an ever increasing market for defendants, tools and rallies without regard to the long term effects of such conduct upon plaintiffs' interest in Amway."
There follows a rather harrowing account of how the defendants discredited the Haydens to their downline distributors, and essentially dismembered the Haydens' business. Where was Amway while this was going on?
"During all times relevant herein, Amway knew that the lifestyles presented to plaintiffs by both Amway and Amway distributors reflected income earned primarily or solely through the recruitment of individuals to act as Amway distributors, purchase Amway products for personal consumption and recruit other distributors to do the same as well as the investment in, creation and development of a distributorship of tools and rallies. Amway omitted to inform plaintiffs of this fact.
"During all time relevant herein, Amway was aware that defendant Yager and other similar Amway distributors' integrity had been compromised by their motivation to sell non-amway products to distributors within the Amway system and to utilize their position and knowledge of the Amway system to promote and expand their non-Amway businesses and that Amway had taken no action to enforce its rules of conduct against Yager and Yager Enterprises.
"During all times relevant herein, Amway knew that, in practice, retail sales represented a minimal portion of Amway sales and that, instead, the "Amway opportunity" was represented and practiced as an illegal pyramid scheme in which distributors were trained and induced to personally purchase large volumes of Amway products and to recruit others to personally purchase large volumes of Amway products in order to purchase status levels within the Amway system and earn profit in the Yager Tools scheme.
"Amway further knew that defendants Yager and Yager Tools as well as other distributors within the Yager distributorship would act to prevent, injure and otherwise harm plaintiffs, Amway distributorship in the event that plaintiffs, failed or refused to participate in the Yager "system" which included coercing plaintiffs and plaintiffs' recruits to purchase large volumes of Amway products for personal consumption.
"Nevertheless, on March 18, 1996, Postma wrote a letter to the Haydens in which he stated that "Amway finds no rules violations documented for Amway's review or decision."
Is this case unique? Was Amway Corporation duped by its Diamond Direct Distributors DiSalvatore, Wilson and Yager?
Brig and Lita Hart, Double Diamond Direct Distributors from Florida, filed a complaint last year naming Amway Corporation, Yager, his business entities, and a shocking number of high-level distributors as defendants. The Harts claim that
"This lawsuit arises out of a series of unlawful actions by Defendants Richard Setzer and William Childers, both of whom are fellow Amway distributors "up-line" to the Harts and both of whom have achieved a status in Amway at least as high as the "Diamond" level. The suit also arises because of unlawful actions by various distributors down-line" to the Harts, including Defendants Angelo D'Amico, James D. Hayes, Carlos M. Marin, Jr., and Joe Rodriquez. Acting alone and in concert, these "Distributor Defendants" are, and have been, profiting directly from the sale of business support materials to various members of the Hart Network without respecting the "lines of sponsorship" that have formed the foundation of Amway's distribution system since the company's inception. . . . Amway's own written rules -- which expressly govern the activities at the heart of this Complaint -- refer to such a course of conduct as "an unwarranted and unreasonable interference in the business of other Amway distributors." (Section B, Rule 4, Rules of Conduct of Amway Distributors).
"Amway has been named in this action solely for purposes of injunctive relief compelling Amway to enforce its rules regarding business support materials. No monetary damages are being sought against Amway in this Complaint."
The Harts demand that Amway help them.
"Plaintiffs have suffered and continue to suffer damages as a result of the Distributor Defendants' conspiracy to boycott plaintiffs in the market for Amway-related business support materials by agreeing not to adhere to or enforce Rule 4 as applied through the parties' course of dealing and business practices -- thus turning all distributors who purchase business support materials from InterNET into competitors in the business support materials market -- and by agreeing to not purchase or sell business support materials from or to the Plaintiffs; and
"Plaintiffs are entitled to injunctive relief against Amway to compel Amway to enforce its business conduct rules, which prohibit Amway distributors from unreasonably and tortiously interfering with the business of other Amway distributors for personal financial gain, and prohibit distributors from selling business support material except through the line of sponsorship. Plaintiffs are also entitled to injunctive relief against the other Defendants to force their compliance with these rules and the other obligations they accepted in becoming Amway distributors."
Amway's response has been to change its own rules! Rather than enforce its own rules about maintaining the integrity of the line of sponsorship and of fairness -- if indeed anything about the motivational tools business can be considered fair -- Amway has amended its rules to allow any distributor to sell non-Amway produced materials to another distributor as long as the selling distributor does not solicit that sale. According to Amway, "You are free to buy or obtain Business Support Materials for your own use, or for resale, from any supplier you choose. Amway's rules prohibit distributors from soliciting sales of independently produced products and services, including Business Support Materials, to Amway distributors the seller does not personally sponsor." (Emphasis is Amway's.)
On January 6, 1998, an enormous suit was filed against Amway, Yager, Wilson and others by twenty-nine high-level distributors. Twenty-eight of these distributors are at the Emerald level, and one is a Diamond. The suit claims that:
These three lawsuits, all within the past twelve months, claim abuses by high-ranking distributors, with the knowledge and collusion of Amway Corporation. Apparently distributors at all levels can be wantonly victimized, as these court cases represent Direct Distributors, Emerald Direct Distributors, a Diamond Direct Distributor, and a Double Diamond Direct Distributor. What chance does the "average" distributor, who earns only $88 per month before expenses, according to Amway's published information, have against the highest level distributors? Whatever chance he had last year, he has much less now.
Amway's Business Support Materials Arbitration Agreement (BSMAA) states in boxed, block print on the front: "It [this agreement] obligates buyers and sellers to obey Amway's Business Support Materials Rule, and it provides for mediation and compulsory binding arbitration of any disputes."
In plain and simple terms, this means if you are a distributor and you have a dispute with your upline about motivational tools (which includes functions), you no longer have a right to seek legal remedies through the courts. Your only remedy is Amway's "binding arbitration." So who are the arbitrators? The best information we have is that arbitration will be provided by members of the Amway Distributor Association Board. Who are these board members? The same people who are named as defendants in these lawsuits: Bob Zeender, Paul Miller, Stan Evans, Dennis Delisle, Ron Puryear, Ed Courtney, Scott Michael, Mark Crawford, Jerry Meadows, Don Wilson, Bill Britt, and Dexter Yager.
According to Jeff Probandt, an Emerald who has put up a website and is bringing the tool business out into the open, "The fact is, the odds are in favor of the house. But most people don’t know that. They think arbitration will be totally fair and unbiased. Well, that depends on who the people are who are deciding the arbitration. "
The cat's among the pigeons with a vengeance.
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This page was last updated on Apr-06-98