Consumer Affairs Agency orders Amway Japan to suspend operations

The Yomiuri Shimbun

18:05 JST, October 15, 2022

The Consumer Affairs Agency has ordered Amway Japan G.K. to suspend certain operations in connection with illegal solicitation, the CAA said Friday.

The agency ordered the Tokyo-based company to stop trading for six months — Oct. 14 to April 13 — for violating the Specified Commercial Transactions Law in connection with a multilevel marketing scheme, also known as “pyramid selling.”

The agency also issued an instruction to the company demanding it take measures to prevent a recurrence.

It is the first time for Amway Japan to receive an administrative punishment for violation of the law.

According to the announcement, members of a company scheme had solicited people via social media since March last year.

The firm wooed people without offering the name of the company or explaining the purpose of the venture and persistently solicited individuals who had already refused to become involved.

Staff members also committed other unlawful acts such as withholding documents after contracts were signed.

The law defines such deals as “multilevel marketing transactions.” Under such schemes, members receive referral fees if they attract new sign-ups.

Though the law does not prohibit such enterprises per se, it stipulates obligations and prohibited actions. One clause states that business operators must explain the purpose of solicitations, as such schemes have a tendency to cause trouble.

The agency has the power to punish business operators if business scheme members violate the law.

Following the CAA’s ruling, Amway Japan cannot solicit or sign contracts with new customers. However, the firm will still be allowed to operate in fields other than multilevel transactions, such as selling goods via its online shopping website.

“We regard the punishment very seriously,” an official of Amway Japan said.

The Amway group originated in the United States, and the Japanese unit was established in 1977.

Amway Japan has more than 600,000 business scheme members, and, according to a private business research company, annual sales that amounted to about ¥99 billion, as of December last year.

The Kyoto prefectural police arrested two members of Amway Japan in November last year on suspicion of violating the law, alleging that they solicited a person without informing them of the proposed scheme’s purpose and tried to persuade the person to become a member.

One suspect was given a summary order to pay a fine.

App use

The agency also gave specific examples of the firm’s law violations, citing cases in which it targeted people via social media then solicited them persistently.

In a case from March last year, a woman was invited to dinner by a man she met via a matchmaking app. During the meal, he said, “My acquaintance runs a business circle and I’d like you to join.” They then moved to a nearby building, where the woman received a face massage from another woman.

The masseuse said, “I really recommend the cosmetics I’m using now, let me tell you about them.” The woman then showed the other woman pamphlets containing Amway Japan goods.

The “victim” turned down the offer, but the man repeatedly told her: “These [goods] are absolutely necessary. You need to become a member to buy them.”

Fearing she would not to be able to return home if she did not accede to such demands, the woman reluctantly agreed to join the sales scheme.

Another woman was invited to participate in a female-only party by a person she met via social media, but after dinner, was suddenly pressured to join a scheme.

Consumer centers across the nation received 953 complaints and consultations about the company from fiscal 2019 to September this year, with 45% of advice-seekers in their 20s.

An agency official said, “If you are solicited in connection with events or business deals, please be careful.”