Why we’re appalled that an MP and Government Minister promoted MLMs like Amway in Parliament
We’re used to seeing desperate MLM reps promote their companies across social media, but we never expected an MP and Government Minister to plead the case of companies like Amway in Parliament. Sadly, as you’ll discover, this is exactly what has happened.
Thanks to increasing media attention and investigation, including the film Betting on Zero, the podcast The Dream, TV shows like Tonight with John Oliver, and this video by the BBC, people are gradually becoming more aware of the scam (in our opinion) that is MLM.
So why are MLMs still legal? Why hasn’t the government, or official bodies like Trading Standards, cracked down on an industry in which 99.6% of participants, on average, lose money? Could, perhaps, money or even political influence be the reason?
The founders of companies like Amway have friends in VERY high places
We know that the founders of some of these companies have friends in very high places. Earlier this year, George W Bush, former President of the USA attended the funeral of Amway co-founder Richard DeVos.
During the service, Bush called DeVos “an extraordinary American and a friend” and said his life was “a testament to the promise of America and the blessings of freedom.” (Read on to find out why the only people Anyway appear to be blessing are the people running the business.)
DeVos was also a long-time close friend of former President Gerald Ford, and was even an honorary pallbearer at his state funeral.
Amway’s ties with senior government figures in the US continue today; Betsy DeVos, wife of former Amway CEO Dick DeVos, is the current US Secretary of Education. You can read more about her “strange ascent” in politics here.
In the UK, our own Prime Minister, Theresa May, even opened the Juice Plus+ HQ when she was Home Secretary.
We believe that it is links like these (The Dream podcast suggests that Amway’s friendship with then-President Gerald Ford possibly helped them win the FTC’s case against them) that enable MLMs to not just exist – when there is no evidence they are a viable business model for the majority of participants – but to give the illusion of respectability.
So it was with surprise and considerable frustration that we read the Hansard transcript of a debate that took place in UK Parliament’s Westminster Hall on Tuesday 13 January 2015.
You can watch a video here of the particular part of the debate we’re interested in. You can also read the full transcript below, but following is a summary of what was said – and why we are so appalled by it.
‘Everyone can succeed in an MLM if they put their mind to it’
Chris Heaton-Harris is the Conservative MP for Daventry, and in this debate he decided to speak up in favour of direct selling (MLMs) as an industry. (A number of MLMs, including Avon, Herbalife, Cambridge Weight Plan and Amway are his neighbours.)
So what does he say? He may as well have been handed a script by the MLM companies or the Direct Selling Association (DSA) themselves (and we suspect probably was). Here’s just one familiar MLM gem he trots out:
“It does not matter what age or gender people are or what culture they are from; pretty much everyone can succeed in the industry if they put their mind to it.”
Really? A minimal amount of research by the MP would have shown this was grossly incorrect (we share our own research into Amway’s success rate below). Indeed, we know that 89% of UK Herbalife reps earned ZERO commission from the company in 2017. Did they all fail to “put their mind to it”?
‘MLMs have helped the UK’s economic recovery’
Heaton-Harris then goes on to quote some meaningless statistics from the DSA (so clearly he’d spoken to them before making this impassioned plea on the industry’s behalf), such as “38% of direct sellers are over 50 years old” and “the number of those under 25 entering the market has increased by 29%”.
He continues with the bold claim that the MLM industry has been helping women get back into work, and therefore playing an important role in the UK’s economic recovery:
“Given that 79% of direct sellers are women, the continued growth of the industry has been invaluable in aiding women back on to the employment ladder, thus helping our economic recovery.”
All of which, in Heaton-Harris’ eyes, makes MLM a “phenomenal industry that, in my opinion, does not get the credit it deserves from Government or in our national press”.
Credit for what? Ensuring that the large majority of people who invest in it lose money?
Hear the “wonderful story” of the ultimate Amway family
Then he reveals what appears to be the real reason for bringing up this subject: promoting Amway.
He’s already mentioned that Andy Smith, the general manager of Amway UK and Ireland (and current Director General of the DSA), is a constituent of his. And he continues with a sales pitch for the business that Andy would be proud of, involving the heartwarming story of Brenda Wills, her daughter Sally Brinner, and Sally’s daughter Victoria – the ultimate Anyway family.
Worryingly, Heaton-Harris goes on to mention that the DSA has “a close relationship” with the university of Northampton and that “DSA representatives regularly visit the university to give talks to students about the direct selling industry”. He also describes direct selling as “the first and easiest of all steps on the ladder to becoming an entrepreneur”.
Again, we need to reiterate the statistic (published by the Federal Trade Commission) that, on average, 99.6% of participants in an MLM will lose money. Not really the first introduction to entrepreneurship that most young people would want.
Heaton-Harris doesn’t seem to be aware of this figure or, if he is, to care, because he goes on to celebrate that fact that “there are around 75,000 direct sellers under the age of 25, 75% of whom are women” and describe this as “an amazing statistic”.
He concludes his sales pitch for pyramid schemes (as we believe MLMs to be) by stating that he wanted to “ensure that the direct selling industry is not forgotten by the Minister or his Department when they are deciding policies in future”.
Heaton-Harris also hopes that the Minister would “recognise and understand the importance of that industry, and will continue to work with it in future to ensure that it continues to play such a positive part in our country’s economic development”.
‘MLM reps should give talks in schools’
Worryingly, he appears to have found a kindred spirit in Nick Boles, then Minister for Skills and Equalities and current MP for Grantham and Stamford. Nick Boles begins his reply by, incredibly, likening MLM hawkers to politicians: “we often have to use many of the same skills and methods as those who succeed in the direct selling industry”.
He goes on to acknowledge the “wonderful story of Brenda, Sally and Victoria” from Amway and describe direct selling as “an area of business and entrepreneurial activity that is perhaps particularly attractive to young women, especially those trying to combine work and enterprise with bringing up children”.
Again, showing a complete ignorance of the real statistics that reveal the debt that mothers are getting into debt pursuing their MLM dreams. (You can read less heartwarming statistics about Anyway below.)
But what is most worrying (aside from the fact that a Government Minister has clearly taken the direct selling industry’s sales pitch at face value) is his suggestion that:
“senior executives in the direct selling businesses, and… individuals running direct selling businesses… make contact with their old school, go back as alumni and talk to young people about what direct selling and setting up their own business from home has done for their lives. They could say how it has enabled them to fulfil their dreams and establish financial independence for their families.”
He concludes by saying “That would be as powerful a message as any” and that this subject is (again, very worryingly) “certainly one that the Department for Business, Innovation and Skills is focused on”.
How much can you earn with MLM Amway?
So, Chris Heaton-Harris and Nick Boles believe that direct selling should be promoted by the Government as a “phenomenal industry” in the UK – especially for mothers at home with children. Let’s look more closely at what kind of income mothers can expect from these companies.
We know from our investigations into Herbalife that 89% of distributors in the UK earned nothing from the company in 2017. And we estimate that a significant number, if not all of, of these people will actually have lost money working for Herbalife.
But what about Amway? Remember the “wonderful story of Brenda, Sally and Victoria” and their Amway success? We decided to investigate how common their experience really was, and whether other women could realistically replicate it.
We found a copy of Amway’s 2017 income disclosure statement for UK and the Republic of Ireland. This covers the period from September 2016 to the end of August 2017. And the numbers in it are familiarly disappointing.
66.9% of MLM Amway reps made nothing in 2016-17
As of 31 August 2017, Amway had 17,205 registered Retail Consultants. However, only 4,735 of these consultants actually received a rebate from Amway, which means that 12,470 people earned nothing. And, of the 4,735 consultants who earned anything, the average monthly payment was just £41.82.
So that’s an annual income of just £501.84 before expenses are deducted.
Amway had 19,669 Certified Retail Consultants. Of these just 7,413 earned a rebate (12,256 earned nothing), and this averaged at just £100.43 a month (£1,205.16 a year – again before business expenses are deducted).
At the top of Amway’s pyramid-shaped earnings table are Business Consultants. They had just 66 of these, and the average income for them was just £2,281 a month, or £27,372 a year.
So, of the 36,940 people who were signed up to Amway in that year, only 66 people earned over £110 a month on average.
Let’s look at this in terms of percentages. Of the 39,940 people who were signed up to Amway in 2016-17:
- 66.9% earned nothing.
- 12.8% earned £41.82 a month.
- 20% earned £100.43 a month.
- 0.17% earned £2,281 a month.
According to tax returns even top Amway sellers make a loss
Even for the top 0.17% of Amway consultants who earned over £100.43 a month, the picture isn’t quite as rosy as the income disclosure statement shows.
Why? Because consultants still need to deduct their business expenses before calculating actual profit. And when they do this, many will get a shock.
Research published by the FTC in the US reveals that:
“The average net income (after subtracting expenses) for the 200 top Amway distributors in Wisconsin was approximately minus $900.”
Yes that says that Amway’s top sellers earned minus $900. And this information is not guesswork. It comes from state tax returns obtained and used by the Office of Attorney General for the State of Wisconsin in a 1980 suit against Amway.
99.9% of people who participate in Amway lose money
In conclusion, the research published by the FTC estimates that 99.9% of people who participate in Amway will lose money. In fact, it calculates that you’re 286 times more likely to win from one spin of the roulette table in Las Vegas than you are to make money with Amway.
Even the DSA’s own figures show that, on average, UK MLM reps earn less than minimum wage.
And yet, Chris Heaton-Harris and Nick Boles believe that this is such a “phenomenal industry” and a business opportunity with such “amazing statistics”, particularly for mothers, that they want the government to consider it, and for MLM sellers to promote the scheme in schools.
Why are MPs promoting schemes in which 99.9% of people lose money?
There are only two explanations for this extraordinary promotion of the MLM industry in Parliament:
- The MP and former Minister are ignorant of the true statistics behind MLMs and are happy to put their names behind businesses like Amway and Herbalife without conducting any research.
- The MP and former Minister are fully aware of the true statistics behind MLMs, and don’t care.
We don’t know about you, but we’re not happy to have people who fit either of these two categories speak for us, let alone influence or shape policies that impact our lives, and the country we live in.
We believe that MPs and Government Ministers have a duty to research the businesses they promote, and ensure companies (or indeed entire industries) who offer such appalling ‘opportunities’ to their recruits are investigated, not championed in Parliament.
If you’d like to know why we campaign so passionately against the MLM industry, we recommend you read our MLM articles here.
The information this article is based on was passed to us by David Brear, MLM expert and author of the blog ‘MLM’ The American Dream Made Nightmare.
Read the full transcript
Here is the full transcript, taken from Hansard.
Chris Heaton-Harris (Daventry) (Con): It is a pleasure to serve under your chairmanship, Mr Crausby. As you know, my constituency takes the name of Daventry, but it also has a couple of nicknames. Some call it logistics central because of the number of jobs in the logistics sector there; others call it direct selling central, which is extremely relevant to the debate.
My constituency is a hub for the direct selling industry. On my southern doorstep is Avon. Its former boss, Paul Southworth OBE, is one of the most active people in Northamptonshire business politics I have ever met, and until recently he was chairman of the Northamptonshire enterprise partnership. Andy Smith, a constituent of mine, also happens to be the general manager of Amway UK and Ireland, and there a number of big direct selling businesses just down the road in Corby. For example, Cambridge Weight Plan has more than 100 jobs and exports to more than 25 other countries, and Herbalife UK is based in Middlesex, along with dozens of other companies.
I therefore try to keep a watchful eye on what is happening in the direct selling industry. I wanted to take this opportunity to remind the Minister how important the direct selling industry is to the British economy. The industry has an association—the appropriately named Direct Selling Association—and its member companies contribute about £1.6 billion a year to UK GDP. Some 400,000 people work in the industry, making it one of the largest providers of part-time working opportunities nationwide.
The industry is open to everyone. There are absolutely no barriers to entry, which is why so many mums coming back into the jobs market choose to do so by setting up their own direct selling businesses. In fact, stay-at-home mums account for 29% of direct sellers—many are attracted by the flexibility and social aspects of direct selling—and for a 20% increase in numbers between 2012-2013 and now.
If hon. Members will forgive me for being slightly political for one moment, the Opposition regularly talk down part-time job opportunities as not being proper jobs. I see things very differently. I view every part-time job provided as a massive positive. For many, the flexibility of part-time work allows them the opportunity to earn some extra money when it suits them. For some, it facilitates re-entry into the jobs market. As I said before, there are no barriers to entry in direct selling. It does not matter what age or gender people are or what culture they are from; pretty much everyone can succeed in the industry if they put their mind to it.
One need only look at the recent survey by the Direct Selling Association of its 60 member companies, which discovered that 38% of direct sellers are over 50 years old, yet the number of those under 25 entering the market has increased by 29%. It highlights the breadth of people to whom direct selling reaches out and whom it enables to work. The industry has gone from strength to strength: revenue in the sector last year increased by 7%.
That makes the direct selling industry invaluable to UK plc. Think about it: when the Opposition had some issues with how they ran the economy, jobs in some parts of the country were few and far between. Which industry was still recruiting new blood in those areas? The direct selling industry was. Female unemployment rose more than male joblessness after the recession. Given that 79% of direct sellers are women, the continued growth of the industry has been invaluable in aiding women back on to the employment ladder, thus helping our economic recovery. I am sure that the Chancellor would not forgive me if I did not add that such entrepreneurship is key to our long-term economic plan.
In my constituency, the unemployment claimant rate has fallen to just 1.1%, with just 600 people claiming. Youth unemployment has fallen more than 40% since 2010, and long-term unemployment has fallen by nearly half as well. That is all excellent local news for Daventry, but I am aware that not every part of the country is as fortunate as my constituency. However, I do know the direct selling industry is giving those who are harder to place in employment the chance to start their own business, no matter where they are based. Direct selling is like the Heineken of industries, operating in every part of the country no matter what the economic circumstances or social demographic. It is a phenomenal industry that, in my opinion, does not get the credit it deserves from Government or in our national press, which is why I thought this debate was needed.
In the time remaining, I will say a bit about the benefits of self-employment, and specifically about the opportunities in direct selling, including opportunities for female entrepreneurship. With the help and sponsorship of Amway, one of the biggest direct sellers, I have hosted a lunch and an afternoon tea in Parliament on the subject with some of the great and good of politics from the House of Lords, the House of Commons and local government, and business representatives and some amazing female entrepreneurs and their advocates.
Amway is the world’s No. 1 direct selling company, established in 1959, and Amway business owners operate in more than 100 markets around the world. There are more than 40,000 Amway business owners in the UK alone, selling products across a wide range of industries including skin care, cosmetics, hair care and so on. One good example of an Amway business owner is Brenda Wills. She and her daughter Sally Brinner have been working as distributors for Amway for more than 30 years. Sally was introduced to the business by her parents, who started their Amway business together in the mid-80s, and they have worked together in the industry ever since.
Sally’s parents were drawn to the prospect of owning a business that offered independence, flexibility and a chance to earn a living on their own terms. Some 30 years later, Brenda is still working from home and enjoying an income aged 81, and Sally and her own 27-year-old daughter Victoria, who has been an Amway business-owner since the age of 18, are now driving the business forward. That means three generations of the same family are part of this entrepreneurial industry, which sells products globally.
The Direct Selling Association has had a close relationship with my local university, the university of Northampton, for a number of years. Indeed, DSA representatives regularly visit the university to give talks to students about the direct selling industry, including on how to start up their own business. The DSA provides advice on how students can combine a direct selling business with their studies. One benefit of such a business is that it provides students with something concrete and interesting to put on their CV for life after university; it shows that they have held a position of responsibility and gained some experience in a number of areas by running their own business. Of course, it also encourages something that is almost impossible to teach—the wish, or urge, to be an entrepreneur and run a business. That is the direct selling industry’s strongest suit. Direct selling is the first and easiest of all steps on the ladder to becoming an entrepreneur.
The DSA’s experience is that many young people want to run their own business but do not know how to go about it. The direct selling industry provides a safe environment for them to take their first steps as an entrepreneur. Some stay in the industry, while others use it as a stepping stone. When I was researching material for this speech, I asked how many younger direct sellers there are in the UK and was told that there are around 75,000 direct sellers under the age of 25, 75% of whom are women. That is an amazing statistic.
As a Conservative who has set up and run businesses of my own, I hope I know how important self-employment is, but just in case the Government do not get it, let me read out part of an interview conducted last summer with the Minister for Employment, my right hon. Friend the Member for Wirral West (Esther McVey). The headline was: “‘Young people should think about starting their own business instead of university,’ says employment minister.” She said that, for many teenagers, being their own boss would be better than embarking on a career with a large firm, and she wanted to encourage people who had the “seed” of an idea to pursue it, instead of feeling pressured to follow friends or family into taking a degree. She said that the choices made by people to become apprentices or self-employed are “equal and good and worthwhile” when compared with those made by people who go to university. I wholeheartedly agree.
As I am sure my hon. Friend the Minister knows, the direct selling industry can help to deliver the opportunities for people to do exactly what our right hon. Friend the Minister for Employment was talking about. As I have already said, one of the industry’s biggest players is Amway and it regularly commissions a study on how different countries view entrepreneurship. The findings of the latest study were fascinating. Denmark is considered to be one of the top countries within the EU for having the most positive attitude towards entrepreneurship. Perhaps an explanation for that is that the Danish Government encourage the teaching of enterprise skills at school from the age of 16. Whether or not that is a good idea is a discussion for another day. However, the study also highlighted that fear of failure was one of the main reasons given by women, young people and pretty much everyone in the UK for not setting up their own businesses. The direct selling industry contains many excellent people who help people such as that—we know from the statistics I mentioned earlier that this group especially includes women—over the hurdles that help to perpetuate that fear.
In conclusion, I wanted this debate to ensure that the direct selling industry is not forgotten by the Minister or his Department when they are deciding policies in future. I also wanted to explain that the industry provides fertile training ground for entrepreneurs, from people who want to provide a little extra for their families to those who aim big and want to employ others themselves. It gives people the chance to make their lives better, to build self-confidence and business confidence, and to succeed. Thus, I would like to receive one simple assurance from the Minister today: that he and his Department recognise and understand the importance of that industry, and will continue to work with it in future to ensure that it continues to play such a positive part in our country’s economic development.
The Minister for Skills and Equalities (Nick Boles): It is a pleasure to serve under your chairmanship, Mr Crausby. I congratulate my hon. Friend the Member for Daventry (Chris Heaton-Harris) on securing this debate on an industry that is not only important to his constituency—although, as he rightly pointed out, it could easily claim to be the centre of direct selling in the UK—but to communities across the whole country.
We in our profession should have a particular affinity with anyone in the direct selling industry, because what are we politicians ourselves other than direct sellers, going—particularly in the next few months—from door to door and trying to persuade people to buy a product from us? We do not do so for profit, but we often have to use many of the same skills and methods as those who succeed in the direct selling industry. We all know that, simple though it sounds, summoning up the persuasive powers and reserves of charm necessary to persuade a sceptical person on the doorstep that they should give us a little time so that they can listen to our message and understand what we are proposing is not the easiest thing in the world.
It is a huge credit to the people engaged in direct selling that they are as successful as they are and that they are able to build sustainable incomes for their families. My hon. Friend told the wonderful story of Brenda, Sally and Victoria, three generations of one family, all of whom—including Brenda, who is now 81 but still active—are direct sellers; I believe it is for Amway, which is obviously the most famous direct selling company in the world.
Those three formidable ladies provide particular lessons for us. The first lesson is that the income is sustainable. Direct selling is not just something that people do perhaps for a year or two at the start of their careers, although it could be that. It can provide a sustainable income and be a business that provides a livelihood for a family—not just for decades, but across generations.
The second lesson is that, as my hon. Friend pointed out, this is an area of business and entrepreneurial activity that is perhaps particularly attractive to young women, especially those trying to combine work and enterprise with bringing up children. That is because it has a key, innate flexibility. A direct selling business is one that they can run from home, devoting whatever hours in whatever days of the week suit them. What matters is their results, not how they achieve them.
That is why it has been so important that the Government have been focused, and remain focused, on making it easier for people to set up and run businesses from their homes. Of course, not all businesses run from homes are direct selling businesses, but a great number of them are. Previously, there were some pettifogging bureaucratic rules that made it harder for people to set up and run businesses from home—rules on tenancy agreements, meaning that people required a specific change to them, with the agreement of their landlord, before they could set up a business to run from home. We have changed the law so that landlords can agree to home business use without in any way affecting or undermining their residential tenancy agreement.
In addition, there were rules relating to business rates and planning conditions that also militated against people setting up businesses to run from home. Consequently, we have made sure that, in the majority of circumstances, home-based businesses will not attract business rates. We have published revised business rates guidance to clarify that point. That is important, because if someone is setting up a home business they probably do not have a great deal of capital to set it up; perhaps one of the attractions of the direct selling industry is that it does not require a huge amount of start-up capital. However, if they face the prospect of being charged business rates instead of council tax, that could be very off-putting. The change that we have made will help to make the prospect of setting up a home-based business more attractive to people.
Finally, we have published a guide for anyone who wants to set up a home-based business, so that they can find in one place all the information they need to ensure that they are acting properly within the law and to understand what support they get from Government as start-up businesses, as well as what opportunities there are for start-up loans and other financial support from the British Business Bank.
We believe, as a Government, that we have a good record of supporting anybody who wants to set up a business—particularly a business from home. I am sure that that record has played a role in the substantial increase in home-based businesses. The number of home businesses has increased to 2.9 million, a 500,000 increase since 2010. That increase is enabling people who previously either did not have any work or had a job that was not satisfying to them and was incompatible with their other responsibilities to take charge of their lives and provide for their families in a way that suits them.
My hon. Friend made an important point in saying that this way of working enables people to have independence and to run their lives in a way that suits them and their families. It can also suit their broader responsibilities, providing them with an opportunity to develop a business and earn an income that is flexible and fits with the pattern of their lives. I am happy to give my hon. Friend an assurance that we will continue to take into account home-based businesses—particularly direct selling businesses—in the formulation of policy.
My hon. Friend mentioned an interesting study of attitudes towards home-based businesses and direct selling businesses in different countries. He singled out Denmark as a place where attitudes were most positive. He conjectured that that might be a result of the fact that Denmark requires every young person to be offered enterprise education from the age of 16.
I hope that my hon. Friend welcomes—I am sure that he does—the work by the noble Lord Young, who has held a central and distinguished position in a series of Conservative Governments going back over many decades and who is passionate about enterprise education. Lord Young recently produced a report for the Prime Minister called “Enterprise for all”. He proposes specifically to establish a network of enterprise advisers—current or former executives with local businesses—attached to schools, whose job it would be to co-ordinate bringing people into schools who could inspire young people with the possibilities of enterprise and of setting up their own businesses.
That policy is welcome and has now been given over to the new careers company that Christine Hodgson is setting up and leading, to which the Government are committing £20 million. We hope that within a couple of years we will have a network of enterprise advisers across the country and that every school will have somebody with real business experience, embedded and implanted in the local business community, who can bring into schools speakers, programmes and work experience offers that will enable young people who think they might be interested in setting up a business to get some experience and talk to people who have done it.
I say to my hon. Friend’s constituents who are senior executives in the direct selling businesses, and to individuals running direct selling businesses and members of the Direct Selling Association, that they could make contact with their old school, go back as alumni and talk to young people about what direct selling and setting up their own business from home has done for their lives. They could say how it has enabled them to fulfil their dreams and establish financial independence for their families. That would be as powerful a message as any.
I thank my hon. Friend for bringing this subject to the attention of the House. It is certainly one that the Department for Business, Innovation and Skills is focused on.
Photo by Luke Stackpoole