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When Amway was permitted by the FTC judge in 1979 to continue its operation, certain Amway sales policies were presented to the Federal Trade Commission as proof that Amway would not operate as a pyramid scheme. One of these rules was the so-called "Rule of 10," that is, an Amway rep had to prove that he/she has made at least 10 retail sales each month. 'Retail' means a sale to someone who is not also an Amway distributor. Amway has since modified this rule, but the net effect is still the same - to ensure that distributors resell Amway goods to the public.
Some Amway representatives have asserted that this rule or any semblance to it is now routinely ignored in their downline organizations and that nearly all emphasis and activity are focused on recruiting new distributors, not selling products to 'customers'. If this is true on a large-scale, Amway would likely be in violation of the anti-pyramid scheme policies that were presented to the FTC in order to operate legally. Widespread or isolated, wherever the rule might not be followed by Amway distributors, the activity violates the basis of FTC judge's ruling that established Amway's continued legality.
According to a report in the Baton Rouge Advocate newspaper, April 26, 1998, "some of the Amway rules the FTC cited as a basis for its 1979 decision are not monitored, enforced or followed."
One high ranking Amway distributor named and quoted in that story stated, "I've never in my six-and-a-half years (in the Amway business) asked a distributor, 'Let me see your 10 customers. I've never heard of that actually happening. That's really just there to appease the Federal Trade Commission."
As part of its compliance, Amway officially states the "Rule of 10" as one of its rules for sponsorship. It requires that all Amway reps:
"Make not less than one sale to each of 10 different retail customers each month and produce proof of such sales to his or her sponsor and Direct Distributor...
If such sponsor fails in any month to make said retail 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 or she attains the status of Direct Distributor."
The requirement to prove that sales are made on a retail basis, rather than all distributors simply recruiting more distributors who in turn are recruiting still more, etc. is a key measure to identify a pyramid scheme. It is mathematically impossible for each distributor to recruit multiple distributors who in turn do the same. If five people each recruit five more and they in turn each recruit five who do the same and this process is continued just 11 more times, the population of the earth is exceeded! Try it out on your calculator. Multiply five-times-five thirteen times consecutively.
To pursue such a plan requires that most new recruits will inevitably fail. If everyone is a distributor, who is going to buy the products from them? To continue operating in this illegal manner, a company would have to continually replace the failures with new recruits who do not realize the odds. So the program would not only operate illegally as a pyramid but also deceptively in its recruitment program. Deceptive recruitment is illegal also.