As regular readers would know, a few years back some disgruntled former Quixtar IBOs, Pokorny & Blenn, launched a class action lawsuit in California against Quixtar (now Amway) and Britt World Wide. In my view the case was clearly bogus, but Amway decided to avoid the cost of a long court case, and also take the opportunity to clear the decks of any issues from the past. What they did was to not only offer a settlement, but to bring all the other major Amway business support groups in to the case as well, so that any IBOs who felt they’d been exploited could get some restitution and agree not to launch any future legal actions. Everyone could just move on.
Well, today I received an email from the “Class Counsel” handling the settlement that began like this -
Records show that you are a current or former Amway/Quixtar distributor (“IBO”). Former IBOs can get benefits from a Settlement providing $34 million in cash and $21 million (retail value) in free products from Quixtar. Initially, eligible claimants had until August 17, 2012 to file a claim to receive cash or free products. However, after accounting for the claims that have already been filed, there is excess cash and products in the Settlement Funds.
Critics of multilevel marketing claim there are literally hundreds of millions of “victims” of MLM companies that have lost thousands, even tens and hundreds of thousands of dollars. When asked where all these “victims” are, and why they haven’t requested refunds, or complained to authorities or groups like the Better Business Bureau (there are very, very few complaints against legitimate MLM companies), critics claim that these “victims” are too ashamed to complain.
Right now, hedge fund short seller Bill Ackman has been making similar claims against Herbalife, another large MLM company. He has made various accusations against them, including that it is an illegal pyramid scheme, and is betting it will be closed down, in which case he will make hundreds of millions of dollars from shorting the stock. (In reality he stands to make a lot of money just by driving the stock price down, which he successfully did just by making the accusations). Another investor, Daniel Loeb, made the following comment about Ackman’s accusations -
“The short thesis rests on the notion that the FTC has been asleep at the switch, missed a massive fraud for over three decades, and will shortly awaken (at the behest of hedge fund short seller) to shut down the company,” Mr. Loeb wrote. “We find this thesis to be preposterous.”
We find this thesis to be preposterous. Loeb has stated well the reality of many of the claims of critics of the multilevel marketing industry. We find this thesis to be preposterous.
Well, following Amway’s settlement in the Pokorny Class Action, the administrators endeavoured to contact every single Amway/Quixtar IBO over the last decade in the United States. They contacted them and offered them money.
The result? To clear the settlement money they’ve had to extend the time to submit a claim by seven months and expand the benefit dramatically. The value of the product packs available has doubled, and if you spent money on BSM, you can just write a letter and claim you spent money, and how much, and get some of the cash.
So c’mon, don’t be ashamed! Get your free wag now at www.quixtarclass.com
MLM has too many middlemen?
One of the claims of critics of the multi-level marketing model is that due to having paying the independent distributors, there’s too many “middlemen” to be able to distribute products efficiently, thus it forces the prices of MLM products to be too high. Well, if you’ve been paying attention to European news in the past week, there’s been a great example showing how MLM critics aren’t just ignorant of the MLM model – they’re ignorant of business models in general.
What’s happened is that it was discovered that some pre-packaged food products, such as lasagne, being sold in supermarkets around Europe contained horse meat instead of the advertised beef. Following the trail of blame shows just how many middlemen there are involved in “traditional” supply and distribution -
Findus (brand) who blames their supplier
Comigel (manufacturer) who blames their supplier
Spanghero (meat processer) who blames their
agent in Cyprus who blames their
agent in the Netherlands who blames
abattoirs in Romania who bought
the horse meat off local farmers
So to get the product (meat) to the customers, there are at least 8 different middlemen, including at least 3 in the distribution chain. Indeed there’s almost certainly more, such as transport companies, local wharehouses. advertising companies, legal and accounting firms and more. All of these get paid out the final price of the product as paid by the consumer.
How does it work in Amway? Well, back in the 1970s when the FTC investigated (and cleared) Amway, they found -
43. Currently about half of all Amway distributors were sponsored by a Direct Distributor or by a distributor sponsored by a Direct Distributor. More than 70% were within three positions of a Direct Distributor and 99% were within seven positions. (RX 423)
So for half of all distributors, it went -
So just 3 levels of “middlemen” for half of all transactions in the distribution chain, and only two when you consider the distributor as customer, which is a common scenario. That compares to 3+ levels in the distribution channel for the Findus product – and then you have 5 levels in the supply chain. How long is the supply chain for Nutrilite, Amway’s largest brand? Amway is the supplier, they own their own farms which supply their core ingredients. Yes there’ll be some suppliers for other ingredients, but it’s nowhere near the total of 8 levels in the supply and distribution chain for the lasagne.
MLM critics – not just ignorant about Amway and the MLM model.