Amway distributors face $19 million judgment in suit

A case of rumor mongering that over the years took on the stuff of urban legend has cost four Amway distributors dearly.

After some 12 years working its way through the courts, a federal jury in Salt Lake City on Monday levied a $19.25 million judgment against the distributors for spreading the rumor that the company Procter & Gamble, and their old corporate logo, were linked with Satanic worship.

"This is about protecting our reputation," said P&G's chief legal officer Jim Johnson, in a statement released Monday. "We will take appropriate legal measures when competitors unfairly undermine the reputation of our brands or our company."

In 1995, P&G sued four Amway distributors — Randy Haugen, Steven Brady, Stephen Bybee and Ted Walker — on multiple claims, including defamation and false advertising. In the company's complaint, P&G claimed the group, some of whom lived in Utah, perpetuated the rumor that the company was linked to Satanism in order to gain a market advantage in selling its competing products. Amway has traditionally been sold outside of retail outlets primarily through representatives and word of mouth.

"It was disseminated among Amway distributors via a phone-mail system called Amvox," said attorney Tracy Fowler with Snell & Wilmer's Salt Lake office, who represented P&G. Through the Amvox system, Fowler said Haugen, Brady, Bybee and Walker forwarded the rumors to potentially thousands of other Amway distributors in Utah, Nevada, Texas, Florida and other states.

The distributors managed to win several legal victories, whittling P&G's claim down to just one claim of violating the Lanham Act, which prohibits unfair competition and false advertising.

During the trial, which ran over two weeks, Fowler said P&G brought forward an economist who testified that the Satanism rumor had a real economic impact on 40 P&G products, including detergents, feminine-care products and oral-care items. The economist told the jury that P&G's brands actually fell in market sales nationwide against competing brands during the time the rumors were being spread.

P&G sells a wide variety of household products in more than 80 countries.

Fowler said P&G didn't claim that the four distributors created the rumor. "It has been around for a while," Fowler said, going back to the 1980s, but added the distributors "re-ignited" the rumor for their financial gain.

The distributors' attorney, Joseph Joyce in South Jordan, said he was disappointed by the jury's verdict. He believed that P&G did not show any evidence linking his client to the spreading of the rumor. Joyce said he and his clients are considering appealing the verdict.

"We feel there was an obvious missing link between Procter & Gamble's claim and the actions of my clients," he said.

Joyce said that within a day to a week of leaving the phone-mail messages, his clients submitted retractions to Procter & Gamble.

Fowler said although they have yet to research it, Monday's verdict could be one of the highest jury awards for false advertising ever seen.

"At the end of the day, I think P&G was concerned about protecting its reputation," Fowler said.

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