From Robert FitzPatrick of Pyramid Scheme Alert:
In a crucial development that could rock the entire multi-level marketing business, a class action lawsuit has been filed this month against Quixtar (Amway) charging that the company is running an illegal pyramid scheme. (filed in US District court in the northern district of California on January 10, 2007, case number 3:07-cv-00201-EMC.)
The charges against Amway/Quixtar go to the very heart of the company’s business practices and most other multi-level marketing (MLM) schemes’, that there is no retail “direct selling” opportunity, only an endless chain recruitment program.
The charges are being brought by one of America’s most prestigious law firms, Boies, Schiller and Flexner. David Boies of this firm represented Vice-President Al Gore in front of the US Supreme Court in the world famous case, Gore vs. Bush that contested the vote counting in Florida after the 2000 election. The other firm partnering with Boies, Schiller & Flexner in the suit is Gary, Williams, Parenti, Finney, Lewis, McManus, Watson, & Sperando, P.L.. in Stuart, Florida. This firm has a powerful track record of successful class action suits against large companies.
The suit is based on the very same charges that the Federal Trade Commission has brought against Equinox, SkyBiz and other MLMs that regulators shut down. The suit charges that the Quixtar program . based upon selling products to recruits “for personal use”, then authorizing them to recruit others to do the same while requiring or incentivizing them to maintain quota levels of monthly purchases, and then rewarding them in a multi-level compensation system . is a fraud. The suit also attacks Quixtar’s infamous “tools” business as a second pyramid scheme perpetrated on new recruits. The “tools” scheme was exposed in a 2004 special report on NBC Dateline.
Using Quixtar’s own payout data a report published by Pyramid Scheme Alert has shown that 99% of all Quixtar recruits never earn any profit. In the report, “The Myth of MLM Income Opportunity,” the 99% loss rate was shown to be caused by the pyramid recruitment model and the lack of retail sales, not the “failure” of the recruits.
This has already been tried and they failed and the FTC ruling is that Quixtar is fine because they DO have a retail business. In fact, most of my income if from retail sales and not from people becoming IBOs in my business.
Why can’t people just leave this alone and go about their own business. If someone failed at this and is unhappy, then just get over it and go on with your life. There are a lot of people making a lot of money and helping a lot of other people in this business. It has been going for 30 years and has a very good reputation. If it was a pyramid scheme, it would not still be in business.
A pyramid scheme does not allow someone below you to make more money than the guy above you and you have to keep brinigng in more people to make it work. That is not the case either. Many people pass their upline and make more money. And when they are ready to quit and just live off the income they have coming in, they can, and the income does not stop.
These people obviously do not have their facts straight.
Unfortunately, the definition of “pyramid scheme” that you are using is inaccurate. That is not how it is defined.
Quixtar Amway really does NOT have a good reputation, and the plan may be technically legal at this time, but hopefully the litigationwill change that.
I’ve read the suit and frankly the lawyers involved should be ashamed of themselves. There’s numerous errors of fact and they show a complete lack of understanding of the business model.
I’d suggest perhaps because they may have got their information from Robert FitzPatrick, who has his own definition of “illegal pyramid” which is completely different to that used by the courts and FTC. Quite simply, in a pyramid you need to paid for recruiting. That doesn’t happen in Quixtar.
One of the most amazing lines in the suit is where the plaintiffs say “Few Quixtar products are sold to consumers; instead, most are purchased by Quixtar distributors for their own use.” Uhuh. I’d be interesting in hearing how “use” is not “consume”!
Right since the original FTC v Amway case in the 70s the courts have been away that a large percentage of volume is from “distributors”, and they’ve had little concern with that. Why should they? It makes perfect sense if you like the products to register for wholesale pricing. The issue is whether there are legitimate products with legitimate consumers. There are.
Of course you get paid for recruiting. They just disguise it a little cleverly so it doesn’t seem that way.
Newsflash – Buying stuff for yourself from Amway isn’t a BUSINESS.
My wife has been in this since before they changed to Quixstar. At first her and her recuiter worked very hard to build an up line but it never happened. Now she is still a member but just buys stuff we need.
What is a real oxymoron to me is how come a company with such a bad reputation have such good products? It baffles me!!
Lindy
Quixtar Products may be really good and high quality, But its Costler than others. May be they can be of more quality than others but buying capacity is also equally important. Most ppl have a base line and they cannot go over 10-20% above the base line. But the quixtar price is 40% and more abve the base line except a few products. I’m not against quixtar but the real fact is ppl do not want to spend money just for quality.
The tools business is an illegal pyramid (IMO). Quixtar can skate by because “legally”, they supposedly have a retail sales rule, although they do not enforce it. Plus add in the philosophy of “buy from yourself” and you can see that what is taugth by uplines is not in line with what the spirit of the quixtar retail sales rules are.
The tools are illegal – they have no customers. Only the participants in the scheme buy the tools and the lest IBO cannot sell the tools to anyone.
According to the FTC provisos (“retail rules”) dating from 1979, the Amway/Quixtar sales model can be considered a pyramid scheme if any one or more of the following rules is violated:
(1) 70 per cent or more of a distributor’s sales revenue must derive from non-distributors;
(2) Distributors must be able to prove sales to ten or more customers each month, and
(3) Reasonable buy-back provisions are available to customers.
Rules (1) and (2) are the ones that flag Amway/Quixtar as a product-based pyramid scheme in virtually all cases.
Regarding the supposed quality and/or low cost of Amway products, one should consider this: Amway’s been around since 1959 – that’s more than 45 years, or roughly two generations. Moreover, the estimated current size of Amway’s active sales force is about 2,000,000. If Amway/Quixtar products are really so great, and they’ve been around so long and there’s so many people selling, why have not these products largely displaced all their competitors in the marketplace?
The absence of extensive advertising and marketing campaigns does not adequately explain the lack of significant commercial success of these products. Surely the Amway/Quixtar kingpins are smart enough to have altered their business strategy accordingly if they thought that extensive advertising and marketing campaigns really would increase turnover and profit. And altruists they’re clearly not.
What we have here is an illegal business that have bought protection from Republican Kingpins who happen to oversee the FTC. Times they are a changing though. Seems that Amway has taken setbacks of late in Great Britain, India and China and the stench of the tool and function scandal will not drift away easily. These pyramid scheme businesses seem to succeed as long as recruitment continues to expand, but the industry has been contracting in a downward spiral. Now there is a titanic struggle going on at the top of the Quixtar pyramid over control of the tool and function business which Alticor wants to retain by firing former IBO Kingpins who have operated their own pyramid inside the pyramid for years. To be fair, the fired IBOs have raised the issue of Quitar prices being so high that retail sales become impossible. This so called “IBO rebelion” has put a big crack in humpty dumpty’s shell. In a stare down contest, Alticor has blinked, is now scraping the Quixtar name and is probably going to retool the Amway North American Business Model entirely.
For all those brain washed people still involved in this scandal ridden business, I have a few questions: How are you (in good conscience) going recruit new prospects(marks) into this business by saying “that this isn’t Amway” knowing full well that it is and soon will be Amway? Are you going to tell them that the future legality of their business is being challenged as a pyramid scheme in the federal courts? Are you going to tell them that changes to the business model by Alticor may actually require them to sell Amway products to real world customers, and will you still encourage them to be the real consumer of their own wares?
Independent Business Owners have been their own best customers and, therefore, is it any surprise that over 99% of these sham businesses loose money every year. As a tax write off, the IRS has determined that many of these businesses are run in such a way that they will never show a profit and therefore are being denied the traditional business expense write offs allowed legit business.
The lost opportunity people in the MLM business incur is incredible. Consider the social stress on family, friends and community these “dream merchants” cause! It shouldn’t be difficult to feel, the sooner these pyramid schemes collapse, the better! Amway, Quixtar, Amway: Three Card Monte–Ponzi!!!
As a former Quixtar member, and one who used to run a system, I can say that the line that Quixtar feeds you is totally bogus. They’re masters of making their scam seem legit–just look at how much money they’ve spent recently in order to dominate the top page of the search engines. They’re using money in order to try and sweep allegations against them under the rug. I know what they do because I used to be a successful part of it, but the more I learned about the disparity between what they tell new recruits and what really happened, I realized that they were scam artists, each and every one. The trouble is that some people have sold out to the cultish mentality of the MLM system so entirely, they can’t take a step back and realize how much they’ve been sucked in.
Honestly, the real profit from the higher-ups comes from selling tapes and CDs, not from products. And that’s why they promoted the need for listening to QUIXTAR tapes and QUIXTAR-approved books so strongly. They even went so far as to say that unless you were investing thousands of dollars each month on these ‘tools’ to distribute, you wouldn’t have a successful business.
All the tools do is brainwash people (repeat a big lie many times–just like the Nazis) and line the pockets of the people who are high enough to record/distribute them. The truth is that people like Bill Britt, Larry Winters, and other high level business owners distribute their own tools in a manner they don’t have to continue kicking money up to other people so they can get richer themselves. And they go on stage, talking to thousands upon thousands of new people every year, teaching that unless they buy the tools, they’ll never succeed.
They should be ashamed of themselves and there will be judgment against them when the good Lord calls us all home. I, for one, couldn’t stomach being part of that system once I saw through all the BS they spout and looked at the system exactly as it was–an pyramid scheme that preys on the hopes and dreams of young people. Did you know that the average age of a new Quixtar member is below 24 and continually getting younger? They’re urging people to recruit on the college campuses in order to get them before they grow wise, just like the abusive credit card practices that snare people in debt for their lives.
Don’t listen to the hype about making money in MLM. It’s not true what they say. They’ve had over 45 years to perfect their sales pitch and new recruits have a much shorter time to see through it. Sorry for all the hurt I did to people during my time in Quixtar. I just hope people will forgive me because I only did what the people I trusted told me to do. I refuse to have anything to do with MLM again.
I am an MLM distributor and seeking MLM attorney in Texas. can someone help? thx
Steve Manily…
I understand your passion and agree generally with your assessment of Quixtar/Amway. The tool pyramid scandal, although lucrative for the top kingpin sellers is small potatoes to the “product pyramid” run by the AmQuix Dons. Incredibly overpriced products reap incredible profits for the company. Considering all total revenues from Amway’s worldwide business, the product profits make the tool kingpins profits look like chicken scratch.
The Devos and Van Andel crime family dons operate this more lucrative “hidden product pyramid”. They get the benefit of people believing that their side of the business is legit, while to tool scandal aspect is questionable. These crooks operate the public relations aspect of the business while the tool kingpins manage the “internal” cult-like motivational propaganda aspect.
Amway/Alticor has attempted to “manage” this tool scandal by announcing a name change back to Amway last year. They have also made a public showing of shaking a few rats out of the IBOAI nest, and are placing a renewed (mostly sham) emphasis on requiring distributors to make retail sales. The lack of retail sales is the Achiles heel of the Biz.
Quixtar has not enforced its own retail sales rules and I truly doubt that recent Alticor public relation strategies are anything more than a sham effort to avoid regulatory scrutiny. If their teat has gone into the wringer, they want to reverse the rollers and get it back out.
The Devos and Van Andel families have paid for the best protection from regulatory scrutiny their money can buy. They have forced disgruntled distributors into a silence of the lambs arbitration clause that U.S. Courts are now finding “unconscionable”. The little lambs hopefully will get their day in court.
Tracy is correct when she comments that a distributor that consumes their own product is not a business. This does describe a badly confused consumer.
IBO, do you know who is really fleecing you? It is you, for believing all the cult like rhetoric from the tool kingpins and allowing the Alticor Public Relations Department to foster the belief in you that they are “Good Fellas” having your best interests at heart. Wake up!
The Amway/Quixtar legal department has torn many a “Diamond-Jim” distributor to shreds. It is the supposedly successful distributors that suffer at the hands of this “Lawyers Gone Wild” mentality that exists there in Ada, Michigan. Bah Bah Black Sheep: Have you any wool? The kingpins take a little off the hind section while the company Dons remove the lions share for the surface of your hide. IBO, Think about this the next time you self consume your 150 pv or 300 pv from month to month? The best thing that could happen for you is that, through a “miracle” of regulatory scrutiny or legal jurisprudence, this “double pyramid” scam business will be rolled up and save you for other more lucrative pursuits instead of spinning your wheels and enriching folk that do not deserve your time of day, let alone thousands of dollars of your hard earned “JOB” cash!