Section 12 – Breach of Contract: Sanctions
Amway IBOs have a responsibility to protect and present the Amway business in a manner which complies with these Rules. This section says that where an IBO commits a serious breach of these Rules Amway may, in the interest of the business as a whole, terminate or desponsor the IB. These Rules further note the consequences to, and rights of, both parties in the event of that extreme action.
12.1 Fundamental Rules: The following Rules are fundamental to the contact between Amway and the IBO. Any breach to the Rules of Conduct, including but not limited to those listed, will give Amway complete discretion to take any action Amway deems necessary in the circumstances: 3.2, 3.15, 3.17, 3.18, 4.5, 4.6, 4.13, 4.16, 4.18, 4.27, 4.33, 5.1.1, 5.1.10, 5.1.13, 5.5, 8.1, 8.2.
12.2 Cause for Sanction: Amway may, at its election and by notice in writing to an IBO, apply a sanction as per Section 12 including termination or desponsoring of the IBO, upon the breach of one or more of the following:
12.2.1 The IBO breaches a fundamental rule of the Rules of Conduct as listed in Rule 12.1;
12.2.2 In Amway’s opinion, the IBO has provided false information in his/her IBO Application or in any Application for Renewal;
12.2.3 The IBO breaches any other of these Rules of Conduct and (if the breach is capable of rectification) fails to rectify such breach within fourteen (14) days of being required to do so in writing by Amway;
12.2.4 The IBO commits repeated breaches of any of these Rules of Conduct;
12.2.5 Any inspection carried out by Amway, pursuant to Rule 4.32 or any audit carried out pursuant to Rule 3.33, reveals, or if Amway otherwise becomes aware that the IBO’s records are inaccurate or in error to the extent of 5% or more of his/her Bonus/Rebate calculations, PV/BV transfer or any other figure considered relevant by Amway;
12.2.6 An IBO or director of a corporate IB is convicted of an offence punishable by a gaol term;
12.2.7 If the IBO or a director of a corporate IBO is suspended or disbarred from practicing his/her usual trade or profession by any trade or professional association, institute or society;
12.2.8 An order is made or an effective resolution is passed for the winding-up of the IBO (being a company);
12.2.9 A Receiver or official Manager of the property or assets of the IBO or of a director of a corporate IBO or any part thereof, is appointed, or an official Manager is appointed;
12.2.10 Without the prior written consent of Amway, the IBO or a director of a corporate IBO makes an assignment for arrangement or composition with his/her creditors or any of them;
12.2.11 If there shall be any act, matter or thing whatsoever done or performed, the effect of which is to transfer, directly or indirectly, the effective ownership or management or control of the IBO (being a company) to any person or company other than the two principal shareholders/directors identified and specified by Amway pursuant to Rule 3.7;
12.2.12 The IBO assigns or sells or purports to assign or sell the IB or any part thereof or interest therein other than in accordance with Section 6 of these Rules;
12.2.13 If the IB is not sold or assigned or a partner’s share in an IB is not sold or assigned in either case as required by Amway pursuant to Rule 6.15;
12.2.14 The IBO dies and the IB is not assigned or otherwise dealt with pursuant to Rules 10.1.2 or 10.2 within 30 days after the grant of probate or letters of administration of the deceased IBO or if probate or letters of administration are not granted within 6 months after the date of death;
12.2.15 The IBO becomes a protected person within the meaning of that term in the relevant legislation as per Rule 10.3 or a person in respect of whom an order or direction is in force that his/her estate be subject to management under similar Country, State or Territory legislation which makes provision with respect to the management of the property and affairs of persons who are incapable of managing their own affairs by reason of mental or other condition, and the IB is not assigned or otherwise dealt with pursuant to Rule 10.3, within 30 days after the order or direction in question;
12.2.16 If the IBO being a sponsor is absent from the conduct of his/her business for a continuous period (in respect of which there is no Management Agreement or Non Resident IBO Agreement) exceeding 3 months during any Amway fiscal year; and
12.2.17 On three or more occasions within a 12 month period, a cheque or other payment drawn in favour of Amway by an IBO is not met on presentation and/ or if there are insufficient funds for a complete electronic funds transfer arranged by an IBO from his/her account to Amway.
12.3 Sanctions: In the event that Amway, at its sole discretion, determines that there has been a breach of the Rules of Conduct or the Amway Business Policies by an IBO, Amway may take one or more of the following actions:
12.3.1 Termination: Terminate the IB by providing the IBO with a written notice of termination at his/her specified address or by some other suitable or electronic means or as allowed by law;
12.3.2 Probation: Require the IBO to complete corrective actions as Amway considers appropriate. This to be in conjunction with Retraining as outlined in Rule 12.6 below;
12.3.3 Retraining: Require the IBO to attend training as outlined in Rule 12.6 below;
12.3.4 Suspension: Suspend specific authorisations under the IB, such as by way of example and without limitation, the IBO opportunity to sponsor, to purchase or sell Amway products and services, or to conduct similar activities associated with the Amway Business;
12.3.5 Desponsorship: The removal or setting aside of an IBO from his/her position as a Sponsor in a Line of Sponsorship, with such of the following consequences as Amway in its absolute discretion considers appropriate:
a) The desponsored IBO’s Sponsor or another IBO, determined and specified by Amway in its absolute discretion, shall be deemed to be the Sponsor of the desponsored IBO’s Personal group;
b) The scope of the IBO’s authority shall be limited to soliciting orders for the retail sale of Amway products and Amway-distributed products or services and the IBO shall be prohibited from soliciting applications for appointment as Amway IBOs;
12.3.6 Repayment of Bonus/Rebate: Require refund of Amway bonus/rebate;
12.3.7 Revoke Qualification: Remove any qualification and require return of any objects evidencing such qualification (by way of example and not limitation, such as pins, certificates, etc.);
12.3.8 Written acknowledgement; Require from the IBO written acknowledgement of the breach(es) and an undertaking not to breach the IBO Contract in the future; and/or
12.3.9 Any other action: Take any action short of termination of the IB as may be permissible under applicable law and appropriate in Amway’s sole discretion to address the specific breach(es).
12.4 No Waiver: The failure of Amway to take any action upon learning of a breach or potential breach shall not constitute a waiver of Amway’s rights to assert such a breach in the future. The failure of an IBO to take any action upon learning of a breach shall not constitute a waiver of any other rights or remedies that may be available under applicable law.
12.5 Suspension: Amway reserves the right to determine the specific terms of each suspension as per 12.3.4 on a case by case basis. In the event of any breach of contract by an IBO, Amway may take action to suspend some or all of the IBO’s privileges under the IB, including but not limited to:
12.5.1 Withholding bonus/rebate for payment of higher award monies pending final resolution of the matter;
12.5.2 Suspending authorisation to conduct sponsoring activity (sponsoring, recruiting meetings, training sessions, home presentations, etc.);
12.5.3 Suspend invitations to company-sponsored seminars, trips and events;
12.5.4 Conduct reorientation and retraining meetings; and/or
12.5.5 Require that IBO provide Amway with recordings of their Amway Sales and Marketing Plan presentations.
12.6 Probation and Retraining: If Amway is of the opinion that one or more of the IBOs in a Platinum IBO’s Personal group have misrepresented Amway or the Amway business or have committed some other serious breach of these Rules of Conduct, then Amway may place the whole or such part as Amway may determine of the Platinum IBO’s Personal group on probation.
12.6.1 Probation by Amway shall consist of all or such of the following corrective actions, or other actions that Amway may consider appropriate:
a) A notice or notices will be prepared and sent by Amway to all IBOs in the Platinum IBO’s Personal group or in that part of the Personal group that is placed on probation, or to any IBO that Amway sees fit; and/or
b) A thorough program of retraining seminars or sessions, organised and conducted by Amway or a nominee designation by Amway, designed to teach the IBOs on probation the proper conduct in line with the Rules of Conduct.
12.6.2 Re-training: All attendees attending retraining as referred to in Rule 188.8.131.52 will be required to have their attendance confirmed and to sign an attendance sheet. Amway shall be entitled to record each retraining session in its entirety.
12.6.3 Consequences of probation: The imposition of probation will have such of the following consequences as Amway may in its absolute discretion determine:
a) Suspension of the IBOs authorisation as an Amway IBO;
b) In the case of a qualified IBO, removal of their qualification status;
c) Suspension of payment of any or all Bonuses/Rebates including but not limited to performance Bonus/Rebate, leadership bonus/rebate, annual bonuses/rebates and any special bonus/rebate payable. This is at Amway’s absolute discretion. Any such amounts shall be computed, but held in escrow by Amway during the probation period;
d) Amway may determine whether, and to what extent the monthly business volume of the IBOs on probation is to be counted towards qualification for higher awards, one-time cash awards, invitational events or any special bonus/rebate to be paid by Amway at the end of the fiscal year;
e) Amway may, in its absolute discretion, withhold or refuse recognition of any of the IBOs on probation for any awards under the Amway Sales and Marketing Plan;
f) IBOs on probation will not be invited to attend any invitational or recognition event held during the probation period, including but not limited to New Platinum Forum, Leadership meetings, Achievers or Diamond events. Amway may cancel any invitations to such events issued prior to the imposition of probation.
12.6.4 Bonus/Rebate information required: All IBOs placed on probation will, throughout the probation period, supply Amway with all such information as may be necessary or required by Amway to enable Amway to calculate the performance bonus/rebate due to them and their Personal group.
12.6.5 Lifting of probation: If Amway is satisfied that probation and retraining has been successful in making it unlikely that the IBOs or some of the IBOs under probation will in the foreseeable future misrepresent or further misrepresent the Amway business or commit further or other serious breaches of these Rules of Conduct, Amway will lift probation and, subject to Rule 12.6.8 below, restore full IBO rights and privileges to the IBOs in respect of whom Amway is so satisfied.
12.6.6 Probation leading to termination or desponsorship: If Amway is not satisfied that probation retraining has been successful in making it unlikely that the IBOs or some of the IBOs under Probation will in the foreseeable future misrepresent or further misrepresent Amway or the Amway business or commit further or other serious breaches of these Rules of Conduct, Amway may:
a) Direct that probation continue and further corrective action be taken in respect of the IBOs of whom Amway is dissatisfied; or
b) Conclude probation and terminate or desponsor the IB of each IBOs in respect of whom Amway is dissatisfied, without prejudice to Amway’s rights under Rule 12.6.8.
12.6.7 Terminated or desponsored IB after probation: In the event that an IBO’s IB is terminated or desponsored by Amway after a period of probation, the provisions of Rule 12.7, 12.8 and 12.9 below shall apply and the IBO shall forfeit to Amway any and all bonus/rebate payments held by Amway in escrow, and in the event that an IBO’s proportion of expenses referred to in Rule 12.6.8 below shall be deemed to have been deducted from the bonuses/rebates so forfeited and Rule 184.108.40.206 shall not apply to the balance of the bonuses/rebates so forfeited.
12.6.8 Expenses of probation: All expenses incurred by Amway in conducting the investigation, retraining seminars and in generally administering the probation imposed under this Rule 12.6 (“the Expenses”) will be borne by the IBOs under probation as follows:
a) the IBOs under probation shall bear the Expenses in the same proportions as each of their bonuses/rebates entitlements paid or payable in respect of the month immediately preceding the imposition of probation bears to the total bonus/rebate entitlements of the IBOs under probation paid or payable in respect of such month;
b) Amway may recover the expenses by deducting the expenses from the bonus/rebate funds held in escrow during the probation period pursuant to Rule 220.127.116.11, in the proportions referred to in Rule 18.104.22.168;
c) Any balance of bonus/rebate funds held by Amway in escrow after deduction of expenses pursuant to Rule 22.214.171.124 will be paid to the appropriate IBOs; and
d) Should the funds held by Amway in escrow during the probation period pursuant to Rule 126.96.36.199 be insufficient to meet the expenses, or should Amway elect not to suspend payment of bonuses/ rebates to the IBOs or certain IBOs during probation under Rule 188.8.131.52, then Amway will be entitled to withhold from funds due or to become due after probation to the IBOs whose proportion of the expenses Amway has not received in full, sums sufficient to meet the shortfall, and Amway will not be obliged to recommence paying bonuses/rebates to any IBO until his/her proportion of the expenses has been paid in full.
12.7 Effect of termination: Upon termination of an IB for any cause whatsoever, the IBO shall:
12.7.1 Cease to identify or hold himself/herself out as an IBO;
12.7.2 Return in good condition to Amway, all Amway products, subject to Amway refunding the IBO price paid less any handling and freight charges as specified;
12.7.3 Cease the use of any and all trademarks, trade names, insignia or other intellectual property used in or related to the Amway business; and
12.7.4 Cease any actions taken as part of an Amway Independent Business including but not limited to:
a) Soliciting IBO applications;
b) Formally or informally presenting or explaining the Amway business to IBOs or potential IBOs or any other person;
c) Selling or soliciting orders for the sale or demonstration of Amway products; and
d) Holding or participating in meetings held by Amway, IBOs or associated groups.
12.8 Effect of desponsorship: Upon desponsorship for any cause whatsoever, the IBO shall:
12.8.1 Cease to be leader of their personal group, and the group shall be allocated to another sponsoring IBO or IBOs in the Line of Sponsorship as determined by Amway in its absolute discretion; and
12.8.2 Forfeit to Amway, all and any bonuses/rebates, as determined by Amway, including but not limited to performance bonus/rebate, Leadership Bonus/Rebate, Annual Bonuses/Rebates and any special Bonuses/Rebates payable of accrued at time of desponsorship.
12.9 No Claim Following Termination: In the event that Amway terminates an IBO’s IB pursuant to these Rules, the IBO will have no claim against Amway arising out of or in respect of the termination.
12.10 Appeal: If an ABO does not agree with the actions taken by Amway, the ABO may appeal a decision in line with the dispute resolution process provided for in Section 14.