Is it dishonesty or just ignorance? If you search around the posts of critics of Amway and Quixtar on the internet, something you’ll see regularly is reference to something like “The 70% Retail Sales Rule”.
Here for example, on Pyramid Scheme Alert, the claim is made -
A 70% retail requirement level has been applied in various agreements between state Attorneys General offices and multi-level marketing companies charged with violating pyramid scheme statutes.
At least 70% of product must be sold at retail to consumers who are not also Amway distributors.
On QuixtarBlog, where a number of Amway and Quixtar critics congregate, the topic is considered so important, it’s give it’s own “sticky” in the “Quixtar Neutral” area -
On AmQuix, Scott Larsen seems to believe that when Amway moved from ordering from downline to direct fulfillment, they drastically changed the entire business -
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.
On lawBlawg, a now defunct website by an anti-Amway lawyer it was claimed -
70% of the volume has to be sold to non-distributors.
The problem is, this is all completely false. There is no 70% retail sales rule and never has been.
What there is, is a 70% Rule -
4.18. Seventy Percent Rule: An IBO must sell at least 70% of the total amount of products purchased during a given month in order to receive the Performance Bonus or recognition due on all the products purchased; if the IBO fails to sell at least 70%, then such IBO may be paid that percentage of Performance Bonus measured by the amount of products actually sold, rather than the amount of products purchased, and recognized accordingly.
If we go back the landmark FTC v Amway case, the court had the following to say about this rule -
73. To ensure that distributors do not attempt to secure the performance bonus solely on the basis of purchases, Amway requires that, to receive a performance bonus, distributors must resell at least 70% of the products they have purchased each month.
75. The buyback rule, the 70% rule, and the tencustomer rule encourage retail sales to consumers.
146. Amway’s 70% rule deters inventory loading by sponsoring distributors. Amway’s buyback, 70% and ten customer rules deter unlawful inventory loading.
Two other Amway rules serve to prevent inventory loading and encourage the sale of Amway products to consumers. The ’70 percent rule’ provides that ‘[every] distributor must sell at wholesale and/or retail at least 70% of the total amount of products he bought during a given month in order to receive the Performance Bonus due on all products bought . . ..’ This rule prevents the accumulation of inventory at any level.
So, the 70% rule serves two purposes. The main purpose, as is evident from the above, is to deter inventory loading – ie ending up with a garage full of unsold soap! The secondary purpose is to “encourage retail sales to consumers“. Now you’ll note that is to consumers - no reference is made to them being non-distributors (IBOs). A retail sale is a sale made not for the purpose of resale. An IBO purchasing for their own use is a retail sale, as is a sale to a customer. What is there apart from retail sales? Wholesale sales - sales made for the purpose of resale. Every time a frontline IBO purchases something from Quixtar or Amway, and they intend to resell it, either to a customer or one of their downline, that is effectivel a wholesale sale for the sponsoring IBO. Large Quixtar businesses are primarily wholesale businesses. A diamond for example, wholesales in excess of US$20,000 a month to each of 6 different businesses (platinums).
Amway/Quixtar and MLM critics have ignored this and decided to focus entirely on sales to non-distributors, claiming that 70% of products bought each month must be sold to non-distributors, otherwise it’s an “illegal pyramid” (see this post for more on that).
There is no 70% retail sales rule. Myth BUSTED.
UPDATE: With the changes in the business due to the use of the internet and direct fulfillment, the 70% rule has been changed somewhat. Amway corporation has explictly stated that personal use is included in the 70%. A website user has stated on the forum that he contacted Quixtar for clarification and that downline purchases direct from the corporation do not qualify under this rule. Given the purpose of the rule is to prevent inventory loading, this makes sens.
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I remember a couple of years back when I had four downline IBOs. I was encouraging them to get their orders in before the end of the month so as to allow for the various bonuses that would be sent to them by Quixtar. My own purchases were slim, not quite meeting the 3% rule. I thought that if I took the time to encourage my downline to get those last minute needs in before the end of the month that the PV would increase.
I was in shock when I received a note a few weeks later from Q telling me that my bonus was paid to my upline Emerald. When I emailed my upline to find out about this, I was told:
———— February 17, 2006 ———–
I’m answering this quickly without researching it; but I will give you some general information.
The Corporation has a relatively new rule called the “Member Client Volume Requirement”. It says that every IBO will be paid a bonus on his personal volume; however, to receive a bonus on downline volume, the member-client volume requirement must be met.
The rule is pretty simple. Each month you are required to sell to members or clients….or they can shop for themselves if they are registered. The required minimum amount of the sales is 50PV or $100 or 10 individual sales. The sales can be auto-captured by the corporation as with members/clients who are registered with Quixtar and do volume during the month; or it can be self-reported.
It is important to keep track of this yourself. When your downline volume puts you in a higher PV bracket, the requirement must be met in order for you to be paid on the downline volume.
So most of our IBOs meet requirement by doing at least 50PV personally each month and then reporting that volume as member/client volume. Reporting can be done at the time of the order or after the fact on the site, just so it’s done during the month.
When the requirement is not met and there is downline bonus earned, it passes to the first upline qualified Platinum…in your case, me. Then, if proof of meeting the requirement is provided to the upline, the bonus would be paid by the upline.
Is that as clear as mud?
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Obviously, this had a negative impact on future behavior. It also happened to all four of my downline, who later quit the business. I haven’t built it since this issue surfaced.
Yet, I continue to seek retail customers on my own, there’s more recognition with retail sales – heck, I keep all the profit from a sale. I don’t need discouraging bonus’s based on some kind of rule that discourages my downline.
Rob,
The member/client volume rule has always existed in Quixtar and is in the Compendium. It’s a separate issue to the 70% rule.
Your upline was unfortunately promoting deceit with the idea that
“most of our IBOs meet requirement by doing at least 50PV personally each month and then reporting that volume as member/client volume.”
That clearly does not fulfil the member/client volume rule, it’s promoting fraud.
“the 70% rule serves two purposes. The main purpose, as is evident from the above, is to deter inventory loading – ie ending up with a garage full of unsold soap! The secondary purpose is to “encourage retail sales to consumers“
It is also designed to keep individuals from “buying into” a certain level. If an IBO had a 4000 pv business, they couldn’t buy 3500pv personally to hit 7500pv (platinum). Their personal consumption would obviously exceed the 30% that is allowed.