Indian Kanoon - Search engine for Indian Law

5. The case of Amway is that it is engaged in the business of manufacturing, marketing and selling skin care products, health care products, nutrition and supplements and other related products. It sells these products through a system of ―Direct Selling‖. Under the concept of direct selling, Amway‟s products are sold through direct sellers under a Direct Seller‟s Contract. The said direct sellers undertake to market, distribute and sell Amway products and provide services appurtenant thereto, directly to consumers. These direct sellers are provided training periodically. The number of direct sellers of Amway are stated to be more than 5 lakhs. All the direct sellers generate income by marketing and selling Amway products to the consumers. They are also bound by a „Code of Ethics', which governs their conduct. Apart from sale through direct sellers, Amway also sells its products through its website, www.amway.in. The products of Amway are, thus, sold either by Amway directly online, or by these direct sellers, who are also known as Amway Business Owners (hereinafter, ‗ABOs').

9. Thus, according to Amway, any sale of its products except in compliance with the Guidelines would be contrary to law. The grievance of Amway in the present cases is that various e-commerce platforms, who have been arrayed as parties in the present suit, are enabling sale of Amway branded products through their platforms, without their consent. The sellers/re-sellers on the said portals are also arrayed as Defendants in the present suit.

10. That Amway, acquired knowledge of sale of Amway branded products and various e-commerce platforms and found that various Amway branded products were being advertised, offered for sale and sold on the said platforms without Amway‟s consent. This, according to Amway, was in violation of the Guidelines. Amway‟s products were being sold at much cheaper prices than the market price, which according to Amway resulted in huge financial losses to it also direct sellers. Considering the manner, in which the products were being sold at such cheap prices, Amway also apprehended that the goods may not be genuine and may in fact be counterfeit/tampered Amway products. Accordingly, Amway addressed a cease and desist letters to the said e-commerce entities bringing to their knowledge the following facts:

14. Since there was no effective redressal of its disputes Amway has filed the present suits. In addition to the reliance on the Direct Selling Guidelines, Amway, in its plaint, avers that the sale of its products, through such unauthorised channels such as e-commerce websites, is without its consent, and that it does not guarantee the authenticity and quality of such products. Further, tampering with and removal of the unique codes from the products, would also result in loss of reputation for Amway, and will affect its relationship with its Direct Seller, as also the consumers. It is stated that Amway products are being sold on Defendants‟ e-commerce platforms on a non-returnable basis, which is in stark contrast with the return policy of Amway, and this would lead to dilution of goodwill and reputation of Amway amongst its customers. Amway also alleges passing off by the Defendants as they seek to cash in on the goodwill, and reputation acquired by Amway, by either showing Amway as a ‗featured product' on its website, or showing Amway products in advertisements of the e-commerce websites. Further, sale of Amway products at a rate cheaper than the market price brings into question the genuineness of the products being sold through such e-commerce platforms. Sale of low-quality Amway products is not only life threatening, but causes immense loss of goodwill to Amway. For all of the above reasons, the brand value of Amway is being diluted and eclipsed. Sale of Amway products in such an uncontrolled manner thus, exposes Amway to the risk of losing its license to conduct its business in India as a Direct Selling Entity.

No Direct Seller shall sell or permit Amway Products or services to be sold or displayed in retail stores (this shall include non-Amway e-commerce websites), schools, fairs, ships or military stores; nor shall he or she permit any Amway product to appear in such locations even if the Amway product or services themselves are not for sale. No Amway literature shall be displayed in retail establishments. A Direct Seller who works in or owns a retail store must operate his or her Amway business separate and apart from the retail store. Such Direct Sellers must secure customers and deliver products them in the same manner as Amway Direct Sellers who have no connection with a store. Other types of retail establishments, which are not technically stores, such as barber shops, beauty shops, or professional offices, etc., likewise may not be used to display Amway Products, information about Amway services, or Amway literature. Further, Direct Sellers may not use mass communication methods such as television merchandising channels, computer networks, national or international advertising, etc., to secure Amway customers.