Many people outside North America won't be familiar with the name Quixtar! Don't worry, this is the same old AMWAY. Quixtar is just a new incarnation of Amway.
You wonder why they changed the name?
Here is the Amway's version of answer :
"We changed the name as we are going online" This is the official announcement.
So, if a company built an e-commerce site, should it be named something else? But I didn't see this phenomena with anyother companies! Did Walmart went online as jamboo.com?
NO, just as WALMART.COM
Then what's special about AMWAY?
Simple Answer is : Bad Reputation!
Here is the real Quixtar story! This is not my version. This story has been published in the MLM Survivors Club.
A Brief History Of Quixtar:
The history of Quixtar is inexorably linked to Amway. Amway was founded in 1959, when Rich deVos, Jay Van Andel, and some of their top distributors in the Nutrilite Company, got together to form their own multi-level marketing company. The name of their association was The American Way, which was shortened to Amway when they named the company. Their first product was a cleaning product called Frisk, which was the precursor to L.O.C. (liquid organic concentrate.) For many years the company grew slowly, and it became known as a direct sales company, where people sold to their neighbors and lugged their products door to door in wagons. Some time in the 1960s or early 1970s, Dexter Yager, a high level distributor, formalized his "training" and motivational system into an organized business, in which he started recording and selling tapes of seminars he held to teach and inspire the downline distributors. It soon became apparent that this business was making more money for the upline distributors than the actual Amway business. Only in the past four years has this information become widely available through the internet and through Ruth Carter's book, Amway Motivational Organizations: Behind the Smoke and Mirrors.
In the latter half of the 1970s, the FTC investigated the legality of the Amway business. Amway was investigated as a possible pyramid scheme. The final court order handed down in 1979 criticized Amway because of price fixing, but allowed the company to exist because of two features in the rules: 1) The buy-back rule and 2) The rules regarding retail sales. The buy-back rule allowed distributors to return product for a full refund. This was purportedly to prevent inventory loading and protect the distributor from being sold a bunch of product they couldn't turn around and sell. The rules which refer to retail sales are extremely important. The two rules are 1) the 70% rule, which states that a distributor must sell at least 70% of the total amount of products purchased during a given month in order to receive the Performance Bonus and 2) the retail sales rule, which states that the distributor must make not less than one sale to each of 10 different retail customers or have at least 50 PV of sales to any number of retail customers and produce proof of such sales.1 It was these rules that prevented Amway from being declared an illegal pyramid scheme. However, in its original decision, the FTC did not address the enforcement of the rules. In later FTC rulings against other multi-level marketing companies, such as Equinox, the lack of enforcement of these very same rules led to the FTC shutting down those companies. Unfortunately, the FTC has not re-investigated Amway/Quixtar.
Amway/Quixtar IBOs (the Quixtar name for distributors) would have you believe that the FTC "approved" the Amway Sales and Marketing Plan. In meetings, they often state that the Plan is the only one that has the FTC's stamp of approval. Actually, Amway barely got out of being shut down by the FTC.2 There was a huge dip in the Amway business in the early 1980s, directly as a result of this investigation, and also another legal entanglement the Amway Corporation faced. In 1979, the Canadian government slapped the corporation with a $25 million dollar fine for tax fraud. It is one of the largest fines ever imposed by the Canadian government, and it is a wonder the founders didn't face prison time. Amway actually kept two sets of invoices for its Canadian business, real ones and fake ones. The corporation did this to prevent payment of tariffs. In the court documents, it is clear that Jay Van Andel was heavily involved in this tax evasion scheme.3
In 1986, the Amway Corporation made a leap forward in the MLM business world by developing contractual agreements to have the IBOs distribute products and services that were not manufactured by Amway. The first of these was MCI long distance service. Amway Corp. began marketing all sorts of products, from clothing to food items to appliances, and services such as its own automobile club, voicemail, and real estate rebates (a rebate on the sale of your home if you use an Amway recommended agent.)
In the early 1990s, the company was growing at the rate of $1 billion worth of sales per year. Of course, since this was a privately owned company, the sales were reported as "retail sales" when in fact less than 20% of sales were to retail customers.4 Then, with the advent of the internet, real people began putting together real websites, and the truth became much more widely available. And the truth was not a pretty picture at all. Far from it.
Much of the growth in Amway during that time was due to the opening of markets overseas, in Europe, Asia, and Latin America. Back home, the plan wasn't working very well at all. In 1982, Wisconsin's Assistant State Attorney General, Bruce Craig, conducted a survey of Direct Distributors (now known as Platinum IBOs) and found that their average annual net income was a loss of $918.5 There was no evidence in the 1990s that this state of affairs had changed for the distributors. Also, Amway was being linked with the words "pyramid scheme" and "cult." It had acquired an image of distributors taking advantage of their friends and relatives for commercial purposes. Big distributors were filling stadiums with rah-rah rallies and raking in all kinds of money from their downline distributors, who were losing thousands of dollars per year. Why were they losing money? Because the products were too highly priced and because people do not tolerate the commercialization of the relationships with friends and relatives. And, especially, they were discouraged from retailing.
So, with all this negative press, the top distributors and Amway got together and decided to launch a new company, called Quixtar, in 1999. The name was different so that people wouldn't immediately recognize its link to Amway. Quixtar was an online business, and it had some additional loosely-linked companies, known as Partner Stores. Amway founders formed an umbrella corporation called Alticor. The establishment of Alticor allowed them to break up the Amway corporation into different subsidiaries. When Quixtar launched, Amway distributors could sign up IBOs as Amway IBOs or Quixtar IBOS. They could mix and match. New recruits had to do business as Quixtar IBOs, though. The Amway sales and marketing plan and the Quixtar sales and marketing plan are one and the same. The Quixtar business was developed as a deception. It was developed to get rid of the name Amway, which had developed such a bad reputation. On January 1, 2003, Amway North America ceased to exist.
All along, people who got in the business were being told that they didn't have to sell anything, in direct violation of FTC regulations.! They were being told that all they needed to do was buy from their own business and teach others to do the same. The retail sales rules were not only being ignored, they were being openly sneered at. Also, the expense of doing business was ignored and is still ignored by those showing the marketing plan. Lastly, the marketing plan is a piece of fiction. It simply does not exist in the real world.
It needs to be pointed out that any business should be viewed as a closed system. Money comes from somewhere and goes somewhere. Products come from somewhere and go somewhere. Without retail customers, it should be obvious that, in Quixtar, the money comes from the lowest level distributors. Therefore, the lowest level IBOs must have expenses which far exceed their revenues. The business relies on the influx of new distributors or it quickly falls apart from the bottom. So what is holding it together?
The tapes, the books, the functions, the relationships. If an outsider listens to a few tapes or attends a seminar, he quickly understands that all the tapes do is encourage people to listen to more tapes and never, ever miss a seminar. But the IBOs are told from the beginning that the only way to succeed, that the roadmap to success, is through the tapes, the books, and the functions. In those tapes and functions, what is really being taught is the following: People who miss seminars are regarded as not being serious about the business, and those who drop out are quickly labeled losers. Those who don't understand the business from the insider's point of view are regarded as negative, and are to be dismissed or ignored. Frequently, the very act of participating in "the system" is equated with doing business in the IBO's brainwashed mind.
But not only is "the system" (tapes, books, functions) holding it all together, it is also the main source of Amway/Quixtar-related income of the top Diamond distributors. From here forward in this paper, "the system" will be referred to as the tools "business." There is documented evidence that well over 90% of the income of the top-level Diamond IBOs comes from the tools "business." 6 7 In other words, the Amway/Quixtar business is a front for a hidden tools "business" that is raking in the cash. The Diamonds show off a lifestyle of outrageous wealth, but that wealth does not come from the Amway/Quixtar business, it comes directly from the tools "business." It comes directly from the pockets of low-level IBOs, representing thousands of dollars lost by people who think they are in business making money. In reality, they are customers of the tools "business." Is this deceptive? Absolutely.
Over the past several years, there have been many lawsuits filed regarding the tools "business." The lawsuits are not suits filed by disgruntled IBOs who didn't succeed, as Crown Ambassador Dexter Yager would have you believe. Many, if not most, of the suits are between Emeralds and Diamonds and their own upline Diamonds, and are disputes over the tools "business" income. One such recent lawsuit spells out many of the deceptions carried out by the high-level Diamonds and the corporation's complicity in these deceptions. It is well worth taking the time to read this court document thoroughly.7
In 2001, one group of Diamonds, called Team in Focus (TIF) realized that it was unfair to hide the tools income from the downline IBOs, and tried to develop a tools business in which everyone got a piece of the pie. TIF tried to structure the tools business after their Quixtar business. But they were so brainwashed by their own tools, they forgot that by failing to sell Quixtar products to customers outside the business, they were operating their Quixtar business as an illegal pyramid scheme. And they wanted to do the same thing with the tools. For a while, the Quixtar lawyers went along. But eventually, someone at the corporation woke up and realized that the only way the tools "business" could operate without being a pyramid scheme was to keep it secret, so that the low-level IBOs function as customers!8 9 The outcome of this debacle is that 18 Diamonds and Emeralds were forced to leave Quixtar in 2002. Some were kicked out; the others resigned.
In a nutshell, the following are the major problems with the Quixtar business:
1. The Quixtar business is being operated as a pyramid scheme, since the rules are being ignored, even scoffed at. Quixtar estimates that only 18% of its product is sold to retail customers.4
2. The Quixtar business is a front for the far more lucrative tools "business." This is a deceptive business practice.
3. The lifestyle that is portrayed by the Diamonds is a result of the tools income, not the Quixtar business. Furthermore, many Diamonds live beyond their means, often using credit card debt, to exhibit a lifestyle they cannot afford. This is a deceptive business practice, and a misrepresentation of the income potential of Quixtar. In fact, more than 99% of IBOs never make any money, and some lose a great deal of money.10
4. The low level IBOs cannot participate in the tools income, or the tools "business" would very obviously be an illegal pyramid scheme.
5. High-level IBOs have a financial incentive to prevent many IBOs from succeeding because they would be obliged to split the tools income.
6. The tools contain very sophisticated brainwashing techniques to keep the IBOs blind to the truth about Quixtar and the deceptive business practices.
7. The corporation has known about the problem of the tools scheme for almost 40 years and has not taken any steps to correct the problem.7
8. The corporation has assisted a small group of Diamond IBOs in preventing others, even other Diamonds, from correcting the deceptive business practices associated with the tools scheme.7
Is this fraud? You can decide for yourself. Ultimately, it will take a court action to render a legally binding opinion on the matter.
Many thanks to Ruth Carter and Scott Larsen. Their websites contain a great wealth of information, including letters, mp3's, and transcripts of court documents.
1 Quixtar Business Compendium, 2000 4.18 and 4.22
2 FTC vs. Amway Corporation
3 The Canadian Fraud case
4 Carter, Ruth. Amway Motivational Organizations: Behind the Smoke and Mirrors, p. 22.
5 State of Wisconsin vs. Amway Corporation p.6 (p. 7 of the pdf file)
6 Carter, Ruth. Amway Motivational Organizations: Behind the Smoke and Mirrors, pp. 77-84.
7 Lawsuit: Nitro Corporation vs. Alticor http://www.amquix.info/shs_v_alticor-complaint.html
8 Letter from Quixtar to Team in Focus IBOs http://www.amquix.info/quixtar_tif.html
9 Amway lawyers want to hide the tool business. http://www.amquix.info/quixtar_tools.html
10 From Scott Larsen's website, real information from real Amway documents. Remember, the Wisconsin State Attorney General found that the average direct distributor (aka Platinum IBO) income was a loss of $918 annually. http://www.amquix.info/amway_statistics.html
Published anonymously by one of the members of the MLM Survivors Club