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Explained: Why ED attached Amway assets worth over Rs 750 crore?

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Explained: Why ED attached Amway assets worth over Rs 750 crore?

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Amway’s main focus is on propagating how people can become rich by becoming members, and the company only uses the products as a cover for its fraudulent pyramid scheme, according to ED, which seized assets worth Rs 757.77 crore.

Explained: Why ED attached Amway assets worth over Rs 750 crore?

The Enforcement Directorate (ED) has attached assets worth over Rs 757.77 crore of direct-selling consumer goods company Amway India in connection with a marketing scam.

The investigation agency has attached bank balances worth Rs 345.94 crore from 36 different accounts and immovable and movable properties worth Rs 411.83 crore.  The assets were seized under the Prevention of Money Laundering Act (PMLA). The attached properties include land and factory building at Dindigul district in Tamil Nadu, The Times of India reported.

What are the charges?

According to the Enforcement Directorate, a money laundering investigation revealed that Amway was running a pyramid fraud while showcasing as a direct selling multi-level marketing (MLM) network.

Most of the products offered by the company are priced higher than the alternative popular products of other manufacturers available in the market, the agency said.

According to the ED, gullible people joined the company as members and purchased the products at exorbitant prices. The products are not used by the members, but are bought with the hope of earning by becoming members, as showcased by the upline members.

“Reality is that the commissions received by the upline members contribute enormously in hike of prices of the products,” the ED said.

There is no focus on the products, the ED said, adding that the company only focuses on propagating how people can become rich by becoming members. The company only uses the products to masquerade the MLM pyramid fraud, it said.

The ED also named Britt Worldwide India Private Limited and Network Twenty One Private Limited for promoting Amway’s pyramid scheme by holding seminars for enrolling members. The promoters held conventions and social media to lure gullible investors, the agency said.

Timeline of events

In 1996-97, Amway brought Rs 21.39 crore as share capital in India. By financial year 2020-21, Amway had remitted Rs 2,859.10 crore as royalty, dividend and other payments to its parent entities and investors, Indian Express reported.

Between 2002-03 to 2021-22, the company collected Rs 27,562 crore from its business operations, from which it paid a commission of Rs 7,588 crore to its distributors and members in the US and India.

What does Amway have to say?

According to Amway, the ED has taken steps with regard to an investigation dating back to 2011. Since then, the company has been cooperating with the department and has shared all the information sought by them. Further, it said the direct selling under the Consumer Protection Act (Direct Selling) rules, 2021, has given the industry legal and regulatory clarity.

The company advised everyone to be cautious as a misleading impression about the business could impact the livelihood of over 5.5 lakh direct sellers in the country.

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