Distributor Rules and Regulations

I have read in many email of distributor conduct that is against the rules and guidelines printed in the Amway Business Compendium. So on this page I have listed the rules of conduct a distributor must follow in building an Amway business. This manual is over 80 pages in length and I believe you should obtain a copy of this manual from your prospective sponsor and READ it prior to purchasing a kit and signing the application.

Remember folks, this is a business. You should KNOW the rules and regulations you are agreeing to abide by. Be sure to discuss these rules and regulations with your prospective sponsor. A reply like "Oh that rule or regulation doesn't apply to us" should be met with great concern. In my opinion, this would justify contacting the Amway Corporation and ask THEM if the rule or regulation is applicable because WHY would it be in manual if it doesn't apply to everyone?

I also feel that at this point the distributor's credibility has to be suspect. If they are not aware of the validity of many of the rules and regulations contained in this manual, how can they teach you to build an honest and ethical Multi-Level Marketing business?

I am not going to reproduce the entire manual here. I am just going to list those rules that deal with sponsoring activities and some things on qualifications. There are many rules that have rather lengthy details about the rule. If you have any question about the details, please contact your sponsor or the person showing you the business.

In most cases, a distributor is not aware of these rules. It was my experience that most people do not take the time to read through the Amway Business Compendium manual. In fact, reading this manual is considered "detailitis" by many distributors. Most distributors just count on their upline telling them what they should do. In many cases, the upline relies on what they learned from their upline, etc.

Therefore, if you take the time to inform the distributor that he/she is violating Amway's rules, you will be helping this distributor in his/her effort to build an honest and ethical business.

And if you would like to inform Amway about the distributor's activities, then by all means visit Amway's web site and send them an email!

Business Regulation 3:

Use of Dun & Bradstreet Reports is Prohibited

This rule prohibits a distributor from using Amway's Dun & Bradsheet rating when the plan is shown to you.

Business Regulation 4:

Mention of Better Business Bureau Membership

A distributor may not use the BBB's seal or imply to the public in any way that the BBB endorses the Amway business or any of it's products. They can't even ASK you to call the BBB as this is an implied endorsement. You are of course free to contact the BBB if you wish to do so.

Business Regulation 9:

Pyramid and Direct Selling Regulations

Amway identifies three common elements of a pyramid scheme in it's manual:

(1) a large, required initial investment or purchase of inventory;
(2) direct payment for the recruitment of additional persons in the scheme;
(3) heavy emphasis on the recruitment of additional persons with little or no emphasis on the sale of products.

Amway also states that "Amway distributors who improperly require large initial investments in sales kits or inventory and do not properly emphasize retail sales of AMWAY products may invite scrutiny under various state pyramid laws."

So...if a distributor tells you that all they do is buy from themselves and find other people who buy from themselves, they are inviting you to participate in an illegal pyramid or chain distribution scheme by Amway's own definition!

For those that are interested, you can visit the MLM Law Library and read the FTC Ruling on Amway in 1979. Actually, this FTC ruling is a tremendous resource for investigating Amway's early history. You will find documention on many of the techniques and practices that distributors used 25 years ago. Are you suprised they haven't changed all that much?

Paragraphs 72 - 74 document the reasons why Amway is not a pyramid:

(a) Amway's Buy back rule
(b) The 70% rule which requires distributors to sell 70% of their purchases to customers and/or downline.
(c) The 10 customer rule (now the retail sales rule) which require a certain amount of retail sales to non-distributors.

The FTC found that Amway and Direct Distributors were enforcing this rule back in 1979....are they doing it now?

Amway is Not a Tax Shelter

In this section, Amway lists many of the inaccurate tax advantage claims that some distributors have used. If you hear any claims about the deductibility of anything related to the Amway business or personal purchases that sounds a little too good to be true, I would encourage you to consult a qualified tax accountant to verify the accuracy of the claim!

The Rules of Conduct of Amway Distributors

Rule 101: Becoming a Distributor

This rule lists the requirements of a person who wishes to become a distributor and also provides some rules that a distributor CANNOT use when inviting a prospect, such as:

Rule 102: Remaining a Distributor

This section covers a lot of details about selling products.

Rule 103: Becoming a Sponsor

This section covers all the guidelines a distributor must follow to sponsor people and also lists several prohibited sponsoring practices such as:

The only requirements which a sponsoring distributor can impose on a prospect whom he is willing to sponsor is that the new distributor shall possess an official Amway Business Kit (without substitution or alteration in the contents) and sign an SA-88 Distributor Application Form and mail it to Amway.

Rule 104: Earning Performance Bonuses

If the person showing you the Amway business say all they do is buy from themselves and find people who do the same you really need to read this rule. This rule contains the documention on two rules that many distributors ignore. They are:

(a) 70% Rule: A distributor must sell at wholesale and/or retail 70% of the total amount of products he bought during a given month in order to receive the Performance Bonus or recognition due on all the products bought; if he fails to sell at least 70%, then the sponsor may pay that percentage of Performance Bonus measured by the amount of products actually sold, rather than the amount of products purchased and recognize him accordingly.

(b) Ten-Customer Rule: In order to obtain the right to earn Performance bonuses on the volume of products sold by him or her to his or her sponsored distributors during a given month, a sponsoring distributor must make not less than one sale TO EACH OF 10 DIFFERENT RETAIL CUSTOMERS that month and produce proof of such sales to his or her sponsor and Direct Distributor.

In producing proof of such sales to a sponsor and Direct Distributor, the sponsoring distributor should not disclose the prices at which he or she made the 10 retail sales.

If such sponsor fails in any month to make said retail sales and/or to produce proof of making such sales, then he or she shall be denied his or her Performance Bonus that month and may subsequently lose all sponsorship rights if he or she continues to fail to meet this requirement. This rule shall apply to a sponsoring distributor until he attains the status of Direct Distributor.

The January 97 Amagram explained a change in the 10 Customer Rule, which is now called the Retail Sales Rule. The Amagram says: "Rule 104(b) and 105(d), the Ten Customer Rule, has been modified to recognize the fact that substantial retailing of products can occur by having sales to less than 10 customers. The new rule requires either retail sales to at least 10 different customers, or at least 50 pv of retail sales to any number of retail customers. To further emphasize the purpose and importance of retail selling in the Amway Sales and Marketing Plan, this rule has been renamed the "Retail Sales Rule"."

If someone tells you that they requirement to make retail sales have been eliminated, they are WRONG!. It is not -- it's just been modified.

Rule 105: Remaining a Sponsor

This rule lists the conditions a distributor must maintain to remain a sponsor. It covers keeping a supply of products and sales supplies, training the people you sponsor, observing the Retail Sales Rule, the Buy-Back rule (must buy back any marketable literature or sales aids), and how to change your line of sponsorship.

Rule 106: Becoming a Direct Distributor

This rule lists the minimum qualifications for becoming a Direct distributor, which are:

Rule 107: Remaining a Direct Distributor

This rule lists the annual requalifications for a DD, which are:

As with many procedural type manuals, the Amway Business Compendium can be rather difficult and boring to read. But it is my opinion that each distributor should take the time to know the rules and regulations they agreed to abide by when they signed the Distributor Application Form.

Main Page