Corporate Law- Amway

​Litigation is the settling of disputes in a court of law!

​Hey!

You are the top-most corporate lawyer in the country. All companies come to you when they mess up.

​Amway, a US-based health and nutrition company, has approached you to defend it against the charges filed by the government.

So let's study the case before the trial begins!​

​Charge 1:

Running a pyramid fraud in the guise of a direct selling network.

Let's understand the pyramid fraud through this video here:​

Multiple Choice

How will you disprove this charge of running a pyramid fraud for Amway?

• Members are earning huge commissions

• Our members become rich by selling products

• Members are paid commissions only for sales and not for recruiting other members

• A lot of other companies are using in direct selling model

​Members are paid commissions only for sales and not for recruiting other members.

​As we saw in the video, a true direct selling network is one where the members are paid commissions only for selling the products and not for recruiting more members.

​Charge 2:

The prices of most of the products offered by the company are extremely high.

Your team surveyed to compare the prices of different products and came up with these details:​

Multiple Choice

How will you fight this claim of Amway being overpriced?

• Amway sells premium high- quality products. Hence, our prices are higher

• Buyers have no problem

• Other brands are also doing the same

• We are not overpriced

Amway sells premium high-quality products. Hence, our prices are higher.

​You can refute this claim by saying that the company only sells good quality, premium products that are not the same as the ones locally available.

​Charge 3 :

Pays fewer commissions to its sellers.

Here is the data shared by Amway for their profits and expenses for the period 2002-2022​:

​

Multiple Choice

How will you challenge this charge of underpaying the members?

• Amway will increase the percentage

• Amway spends significant money on imports

• Amway spends significant money on marketing

• Amway has paid 27% commission, which is the same as industry standards

Amway has pays 27% commission, which is same as industry standards.

As the data suggests, Amway has paid around 27% of its total profit as commissions​, which is quite a significant amount.

Amway's other expenses have nothing to do with whether the commissions are high or low​

​

​Charge 4:

The higher management is conducting mega conventions and flaunting their extravagant lifestyles to lure new members.

Multiple Choice

How will you disprove this charge for Amway?

• Our distribution mechanism is through friends and referrals. So it's important to host such events

• We do this to make new members

• Doing events like these is not a crime

• All of these

All of these.

Hosting events like these cannot be a charge. Many other companies promote their products in the market in the same manner.​

​Charge 5 :

Amway's top management was involved in financial fraud.

In 2014, Amway's India CEO William S. Pinckney was arrested on charges of cheating and other financial fraud and jailed in Kurnool, Andhra Pradesh.

​

Multiple Choice

How would you refute this charge?

• This charge is irrelevant as Amway had already changed the CEO and has nothing to do with the pervious case

• There has been only one fraud since Amway started operating in India

• The case is already closed so let's not go in the past

• Such things have happened with other companies as well

This charge is irrelevant as Amway had already changed the CEO and has nothing to do with the pervious case.

Amway has already changed its India CEO​ and we have no proof of Amway's involvement in the previous case. Thus, historical cases shouldn't impact Amway's current case.

​Congratulations!

You have successfully ​won all the arguments till now. Now is the time for the final charge of the case.

​Charge 6 :

The majority of Amway's revenue has come from the people that they have recruited as sellers, who purchased the products to become members.

​

Multiple Choice

The data for the company's last month's sales suggests that 70% of the products were purchased by its members. How would you challenge this charge in court?

• Amway doesn't force its members to purchase the products, they do so in their own will

• Amway's customers are fond of its products and often end up becoming members

• Amway doesn't charge any membership fee for new joiners

• All of these

All of these.

You can use all of these arguments to challenge this charge as Amway has neither charged any membership fee to become a member nor forced its members to purchase the products.

Oh no!

The court doesn't agree with any of your arguments against this charge and has gone ahead seizing all of Amway’s assets in India for INR 757 Cr.

​

Poll

The Court has asked Amway to stop all its current practices of recruiting new members and pay back the money charged to any members who have joined in the last 2 years.

What would you recommend to your client, considering that the majority of the revenue was indeed coming from the members and not the sale of products to consumers?

• Shut operations in India and leave your seized assets

• Stop the recruiting practices and change the business model to selling directly through retail stores

• Launch a website and let people order online directly

• File a case against the government in the supreme court

Wow! you handled the case quite well. Winning or losing is not always in your hands. ​

Poll

Would you like to become a Corporate Lawyer in the future?

• Yes

• No

• Maybe

Poll

On a scale of 1-5 (1 being the lowest and 5 highest), how much would you rate this challenge on fun and learning?

• 1

• 2

• 3

• 4

• 5

Open Ended

What changes would you suggest for this challenge?