Death of the Amway Salesman"
||A site visitor informed me he had heard the Quixtar 70% rule was being changed
so I checked out the "what's new" section on the Quixtar website to see what
they could have possibly changed.
As I pointed out in 2003, Quixtar's practice of selling directly to IBOs instead of purchasing directly from their upline, put Quixtar at odds with its own 70% rule. In the old Amway times of buying product from your upline, IBOs relied on at least 70% of their volume being resold downline. With Quixtar's direct fulfillment method, the ability to meet the rule by moving product downline was removed and it required to that IBOs sell at least 70% of their product purchases to others.
|This rule change is not unexpected since this site started pointing out the wording of the rule
and how the only way IBOs could now reasonably expect to fulfill the rule was now to get
out and sell some product. As expected people questioned the rule and it
appears Quixtar is responding to make sure people who actually read the rules don't get
the false impression that you actually have to sell products to earn money in the Quixtar
Well Quixtar finally realized they were vulnerable and have made it so anybody can fulfill the rule now! The new wording for rule 4.18 after 11/4/2005 is:
The 9/9/2005 revision of the rule read:
So, what are the differences? The first thing that jumps out is one has to "sell at commercially reasonable price". I guess maybe this is supposed to stop people from dumping product on E-bay for below distributor cost! Anyway this point is inconsequential.
The second, and most important change now is that personal consumption purchases, and goods given away now count as part of the 70% rule.
My question then is, why even have a 70% rule? Anybody can now qualify. They might as well eliminate it altogether. Since Quixtar has a buyback policy, the 70% rule cannot be because they want to prevent inventory loading. I think they want to keep the rule, for purposes of the FTC, but water it down to meaninglessness so it cannot be used anymore somehow to enforce a minimum amount of sales so that participants will continue to get paid in the product pyramid scheme.
Let's look at the history of the rule and how it has been used by the legal system to set precedent in the past.
Here is the FTC's 1979 description of the retail sales rules that staved off a finding that Amway was an illegal pyramid scheme. Note that the basis for the FTC's decision is that these rules were meaningfully enforced to encourage retail sales.
72. Amway, the Direct Distributor or the
sponsoring distributor will buy back any unused marketable products from a distributor
whose inventory is not moving or who wishes to leave the business. The buyback rule has
been in existence since Amway started. Amway enforces the buyback rule.
Distinguishing the Koscot pyramiding case, which was tried before Amway, the ALJ explained:
"But, by several rules, Amway requires that
commissions are not paid unless the products are sold to consumers. Distributors must each
sell to ten retail customers every month; the distributors must certify that 70% of the
products purchased by them during the month have been resold; and inventory loading is
further deterred by a rule requiring distributors to buy back the inventory of any of
their sponsored distributors leaving the business."
'Prohibited marketing scheme' means a pyramid
sales scheme, Ponzi scheme, chain marketing scheme, or other marketing plan or program in
which a person participates under a condition that he or she make a payment, directly or
indirectly, to receive the right, license or opportunity to derive income as a participant
primarily from: (1) the recruitment of additional recruits by the participant, program
promoter or others; or (2) non-retail sales made to or by such recruits.
Take notice here. From Five Star Auto, the FTC opinion clearly does not accept Quixtar's. An IBO cannot satisfy the FTC retail sales rules by counting sales to his downline IBOs or for his own consumption as "retail sales."
Let's see if the FTC takes notice of Quixtar's systematic dismantling
of retail sales as a condition to earn a bonus from Quixtar.