Saturday, December 10, 2005


There's a Quixtar/Amway apologist, who goes by "INSIDER", whose main job seems to be, to visit all the Critical Websites, and furiously ;-) post comments trying to prove (and ;-)) failing miserably) that the FTC's Retail Sales Rule is a myth. It seems to me that he has posted on almost every single critical website, where the Retail Sales Rule is discussed.

I have a THEORY about why he is doing this.

But, first a little background on this Retail Sales Rule. Chain-Letters, Pyramid-Schemes, and other Ponzi-Schemes are ILLEGAL and UNETHICAL, right? Well, some genius ;-) thought he figured out a way to circumvent this by introducing a PRODUCT into the mix. Thereby give it a veneer of legality. It is precisely to combat this disguising of a Chain-Letter-Scheme as a product-based pyramid, that the FTC established the Retail Sales Rule. and the Courts repeatedly agreed with the FTC in the prosecutions of different MLM schemes. i.e. THAT THE PRODUCTS OF A LEGAL MULTI-LEVEL-MARKETING COMPANY MUST BE PRIMARILY SOLD TO END-CONSUMERS WHO ARE NOT PARTICIPANTS IN THE MLM SCHEME.

Now, back to my theory. Lots of MLM companies that were shut down by the FTC, were prosecuted on the basis of this Retail Sales Rule. Amazingly, one company has gotten away with flagrant violations of this Rule. AND, they have been doing it for over 25 years. AMWAY, now known as QUIXTAR. With the proliferation of the internet during the mid-90s, the critics got a new medium (which was not only cheap, but also provided a vast world-wide audience) to broadcast their criticisms. This resulted in the creation of many websites critical of Amway. The first one, I believe, being the AUS website, by Sidney Schwartz. Then there was Ashley Wilkes, whose website was gutted by legal bills, fighting the Amway Corp.'s Legal Might. John Hoagland, Jeff Probandt, Russell Glasser, Ruth Carter...... the critics just kept coming. Finally, I believe, it was Scott Larsen's website, that broke the dam. Amway/Quixtar, inspite of its best efforts could not silence its critics anymore. And I think, even the Amway/Quixtar Corp. owners have realized that their investment in political-payoffs can NOT buy them regulatory protection anymore, that the tide is finally turning. It used to be, they wrapped themselves in the 'Flag' and 'Christianity', and they brushed off critics as 'Liberals', and 'Communists'. And most Evangelical/Conservative Christians broadly held the view that it was a legitimate business, and that Amway/Quixtar Distributors are generally honest 'Christian' people. Now that so much information is available, even Conservative, Christians like Tim, Xandaustc, and Me are criticizing Amway/Quixtar. And the Retail Sales Rule has been thoroughly explained by a Lawyer also, who is a critic.

When the lay-person outside of the Quixtar Business, starts referring to the Retail Sales Rule, it puts the Amway/Quixtar Corpn. in a very uncomfortable position. It is this very Retail Sales Rule, that Amway had in its 'Business Conduct & Rules' requirements, that saved its skin when Amway was prosecuted by the FTC in 1979. So, it seems the Amway/Quixtar Coprn., decided to change the rules, so that its Distributors/IBOs wouldn't be in violation of its own rules.

Strange coincidence, but at the same time, "INSIDER" is going around furiously trying to prove that the Retail Sales Rule is a myth. Anybody care to hazard a guess, what this guy's relationship with ;-)) Quixtar is??

Here's one ;-)) of the many comments regarding the Retail Sales Rule that this guy has posted. It was on Eric Jansen's QUIXTAR BLOG, under the No More Pretending Post. I have posted his comments in Red, and my rebuttal in Blue.

  • sigh ... why does this myth still perpetuate??? The rule is a 70% sales rule, NOT a 70% retail sales rule. If you have NO retail sales, but still have more than 70% of your volume downline, then you are in compliance with the 70% rule. The myth started because it was just one of a whole facet of things the FTC looked at back in 74-79 and they said that this rule encourages retail sales. This is completely true. If you are a new IBO, then you do not qualify for a bonus unless you have downline or retail sales. Doing retails sales is the easiest way to qualify for a bonus when you start. It encourages retail sales. Note however this is NOT a definition the FTC uses to define pyramids.
  • Posted by: insider at November 28, 2005 12:55 PM

Boy, this 'INSIDER' guy just doesn't get it, does he? He seems to be single-handedly ;-)) trying to change, TENS of COURT DECISIONS, STATUTES and ESTABLISHED CASE LAW. And he seems to decide for HIMSELF what were the conditions, the FTC established to identify an illegal pyramid scheme!

Let me try to explain the the fundamental logic behind the courts & the FTC insisting on MLM companies having "RETAIL SALES TO AN END CONSUMER OUTSIDE THE BUSINESS" as a condition for legality.

Take a chain-letter scheme. EVERYONE would agree that it is inherently exploitative, unethical, and illegal, right? Now SUBSTITUTE an OVERPRICED PRODUCT as a SHILL in the scheme. For e.g., if it is a $100 chain-letter scheme, instead of the participants paying $100 to participate in the chain-letter scheme, they are told to buy $100.75 Snickers Bars. The Snickers Bars cost only $0.75, but they are being sold to the participants for $100.75 instead. This $100 OVERPRICING, or PRICE DIFFERENTIAL basically enables the chain-letter scheme to operate as a PRODUCT-BASED PYRAMID SCHEME, with a thin veneer of SUPPOSED legality! Think about it, a $100 Snickers Bar has NO ECONOMIC VALUE in the REAL WORLD. Nobody would buy it! The participants in the scheme WOULD NOT BE ABLE TO RETAIL IT! The participants in this chain-letter sheme buy it, ONLY BECAUSE THEY HOPE TO PROFIT OFF OF OTHER PEOPLE GETTING INTO THE PYRAMID BELOW THEM! But, a LOT OF PEOPLE WILL BE LEFT HOLDING THE BAG AT THE BOTTOM OF THE PYRAMID BECAUSE THE POPULATION OF THE EARTH IS FINITE, AND BECAUSE A LOT OF PEOPLE WILL RECOGNIZE IT AS A SCAM AT SOME POINT IN THE PYRAMID'S GROWTH AND THUS IT WILL COLLAPSE! Just like any Chain-Letter/Ponzi Scheme would.

This is the LOGICAL BASIS for the courts' decisions in dozens of cases where MLM schemes were prosecuted, that THE EXISTENCE/LACK OF RETAIL SALES IS THE TEST OF THE LEGALITY OF THE SCHEME.

Read these threads, look at the court decisions, make up your own mind. So, INSIDER, is this a clear enough exposition for you now, or you still don't get it?

Posted by: perceptive at December 3, 2005 06:46 PM

There's one more flaw in 'INSIDER's comments, that Imran Aziz of the QuixtarSucks Blog, pointed out. I will post his comment here in Green.

So I do 300 PV on personal volume, I shouldn't get a bonus? Posted by: Imran at November 28, 2005 04:30 PM

This 'INSIDER' guy has a comment on my blog also ;-)), under my HOW I GOT INTO THIS.... post. Like I said, desperate, desperate ;-)).....


At 7:02 PM, Blogger insider said...

oooohh.... a whole post directed at me ... *blush* :-) I'm flattered.

I'm dying to find out what all the guesses are about my relationship with Quixtar! Should be interesting :-)

In any case, surprisingly enough, you do get to the heart of the matter about pyramids and illegality, and we pretty much agree. If you believe that AQ products are just shills for the purposes of enticing people to join, then yup, that's a fair indication of a scam.

So, the question is, is there a legitimate market for the products? You apparently believe there isn't. I believe there is.

Now, a question for you. Assume someone thinks the products are good value, and they want to buy them at the best possible price - why wouldn't they register as an IBO?

At 4:54 PM, Blogger perceptive said...

INSIDER-- In any case, surprisingly enough, you do get to the heart of the matter about pyramids and illegality, and we pretty much agree.

PERCEPTIVE-- WOW!!! Quite an admission there, Insider! But it COMPLETELY contradicts your statements on so many critical sites, including mine.

Here's your EXACT statement, "Now, as you are aware from my postings on the mlmlaw blog and elsewhere, there is not and never has been a 'retail sales rule'", that you wrote as a comment on my second post, HOW I GOT INTO THIS...

INSIDER-- So, the question is, is there a legitimate market for the products? You apparently believe there isn't. I believe there is.

PERCEPTIVE-- I already addressed this on my post SOME MORE DEBUNKING.... But I will repeat myself anyways.

Here are the latest Quixtar Statistics, from the Corporation's data itself.

Quixtar Q12 Business Statistics reported in August 2004 and October 2002

1. 67.8% of IBOs who registered in 2003, did not renew in 2004.

2. The average IBO had just 0.23 members and clients registered.

3. Only 18.4% of IBOs registered even one person.

4. The average IBO had 38.5 PV/month. (100PV is shown in the plan)

5. 65.6% of IBOs never once attained 100 personal PV in the previous 11 months.

6. 21.5% of IBOs had a ditto delivery profile

7. Only 1.9% of Members and Clients had ditto delivery profiles.

8. The average PV point cost $2.70.

Look at the first statistic. Why do those 67.8% IBOs drop out? Why don't they stay on as IBOs, or even as 'Members' (it's cheaper at $20), to take advantage of all the great products and the great values ;-)) ? See the second statistic - the average IBO had only 0.23 members and clients registered. And remember, 'Members' can buy the products at the same price as IBOs. Clearly, only clients can be considered 'Retail Customers', since they are the only people off of which you are making a 'Retail Profit'. So, assuming only half of that 0.23, are clients, the average IBO had only 0.11 clients. See the fourth statistic - the average IBO had only 38.5 PV/month. And, see the fifth, and in my opinion, the most DAMNING STATISTIC - 65.6% of IBOs never ONCE attained 100 personal PV in the previous 11 months.

And, these statistics have been REMARKABLY consistent over the years. Some Critic estimated, using the Quixtar numbers, that over 5 million people must have joined and quit Amway/Quixtar, over the last 25 or so years. 5 MILLION DROPOUTS!!!! Don't you think that is a significant, BROAD rejection of the economic-value of Amway/Quixtar products in the market-place outside of the people involved in the business??

Allow me to quote the great Scott Larsen:

"What are all these statistics of low average IBO sales, and high turnover really saying? It says to me that the typical consumer can't find enough deals or superior value through Quixtar to shift their buying habits from where they currently shop.""

INSIDER-- IF you believe that AQ products are just shills for the purposes of enticing people to join, then yup, that's a fair indication of a scam.

PERCEPTIVE-- There are no IFs here. The objective data CLEARLY speaks volumes. See above. AQ products ARE A SHILL.

INSIDER-- Assume someone thinks the products are good value, and they want to buy them at the best possible price - why wouldn't they register as an IBO?

PERCEPTIVE-- Again, you are missing the point, this is NOT about assumptions. The objective data, the marketplace, has already spoken. And it has been speaking for over 25 years!! AND, you do NOT have to be an IBO to buy AQ products at the best possible price. You can be a 'Member' and still buy it at the same price as IBOs, i.e. the best possible price.


Post a Comment

Links to this post:

Create a Link

<< Home