Tag Archives: Quixtar

Pokorny and Blenn vs Quixtar et.al update – Arbitration denied

In a California case two former IBOs, Jeff Porkony and Larry Blenn, are attempting a class action lawsuit against Quixtar, Britt WorldWide, World Wide DreamBuilders and associated parties, alleging Quixtar is an illegal pyramid scheme in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).

As per most previous litigation, Quixtar’s first step was to claim the whole thing should be sent through Quixtar’s arbitration and dispute resolution procedures. To summarize the courts view –

“The Quixtar arbitration agreement is simply too tainted to be saved through minor adjustments. Therefore, though mindful of the strong state and federal policies favoring arbitration, the Court holds that the entire Quixtar ADR scheme is unconscionable and unenforceable.”

In essence, the court found the whole arbitration procedure unfair for IBOs. It highlighted the fact that IBOs below platinum did not even have the opportunity to vote for representation on the IBOAI board which “negotiated” the agreement, and then Quixtar itself can ignore it if it choses. Interestingly, in this case the court was reviewing the new “updated” dispute resolution procedure, which had been modified following concerns raised in earlier cases. Furthermore, the court also struck down the BSMAA provisions, which should have governed the part of this dispute between IBOs.

I’ve said this before, but I’ll say it again anyway – I agree with the court, Quixtar’s arbitration provisions are unfair. The only proviso I’d add to that is that I’m not sure whether a “rank and file” IBO going up against a multi-national, multi-billion dollar corporate would have a particularly “fair” chance in the normal legal system either. If anyone has some suggestions for a better system, I’m open to hearing it. Having read the original Porkony & Blenn complaint, I suspect they’d be saved much embarassment behind closed doors, it really is a poorly formulated case.

There is one interesting aside in the court documents, and that is that the court struck out the declarations of two “purported experts” on behalf of the plaintiffs. The phrasing implies the court found these “experts”, Stephen Hayford and Robert FitzPatrick, were anything but. Stephen Hayford appears to be a JAMs arbitrator, and I’m guessing his testimony related to the arbitration procedure.

Robert FitzPatrick is a well known anti-mlm zealot who has unilaterally decided all MLMs are illegal pyramids, and then rants against the evils of MLMs, when in fact he’s ranting against the evils of illegal pyramids. Just recently I listened to him in an interview where he attacks Amway and brings up this case as well as the recent TEAM class action case in California claiming Quixtar is an illegal pyramid. To give you an idea of his level of “independence” as an expert – he completely fails to mention the TEAM case had been thrown out!

Update: Many of the court documents are now available at Amway Wiki – Pokorny & Blenn vs Quixtar, Inc. et.al.

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Quixtar transformation to Amway begins

Quixtar’s public transformation into part of the Amway Global family has now begun, with the Amway Global logo now being displayed alongside a Quixtar North America logo the Quixtar home page.

Back in November, 2006 I wrote a blog post titled A Message to Quixtar, Inc from Amway Australia, in which I included the following video which had recently been published by Amway Australia –

I followed with –

This is a lesson I think Quixtar needs to listen to. Why? Well, first, Amway home page and scroll to the bottom – you will find a link titled Amway Sister Company : Quixtar Inc which links to the Quixtar-inc home page. Now, go to the home page of Quixtar – you’ll find a link Quixtar Sister Company. No mention of Amway. Visit Quixtar Facts – same thing. Quixtar News Room, Quixtar Easter Seals, Quixtar History, This Biz Now – same, same, same, same. Why is this, Quixtar? Are you ashamed to be associated with the most successful multi-level marketing company in the world ?

A few days later, Quixtar Director of Communications Beth Dornan, responded with a post Not ashamed of Amway, outlining the relationship between Quixtar and Amway and admitting to some nostalgia for Amway amongst longer-term employees. I asked in a comment in that blog if there were plans to resurrect the Amway name in the US. Beth deftly responded without answering.

Now, I’ve no idea if it was planned then or not, but in May 2007 I hinted about the news that become publicly confirmed in June – Quixtar was to become Amway.

Amazingly, even since the transformation became public, announced on Quixtar and on Quixtar Blogs, I’ve still seen  IBOs around the internet deny a connection between Quixtar and Amway. Now, in the past it has been correct to say Quixtar is not Amway, but it has never been correct to deny any connection and say they’re completely different – they’re not. In 2008 however Quixtar is becoming Amway, so to try to limit, minimize, or even deny a connection is specious to say the least. A moment’s internet research by a prospect will lead to them discovering they’ve been lied to. A great way to build a business relationships – “join with me in building a great business! By the way, as you’ve just learned, I can’t be trusted!”


Wth Stage 1 in place, the Amway name is clearly at the top of the Quixtar website. In 5 months, stage 2 will occur and Amway will become the more prominent name. In a year, Quixtar will be consigned to the history bin

One day I hope we can consign deceitful IBOs to the same place.

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Amway Myth: If the products are so good, why do so few new IBOs renew?

One of the superficially reasonable questions that some Amway/Quixtar critics have espoused is “If the products are so good, then why is it that so few new IBOs renew their businesses?”

On the face of it this seems a reasonable question. According to statistics revealed in the recent disputes between Quixtar and TEAM, only 30.8% of new IBOs renew their Quixtar businesses at the end of their first year.

You would think that even if they decided that the business wasn’t for them, that they would at least renew and continue to purchase the products at IBO price and enjoy other benefits of being an IBO. Yet a very large percentage don’t.

A reasonable conclusion would be that these new IBOs have decided that the products aren’t worth buying, even at IBO price, so they don’t renew.

The facts tell another story.

Another statistic was revealed in the Quixtar/TEAM dispute – only 50% of IBOs place any order after joining! This figure is quite stunning – only half of people who register with Quixtar ever even test the website and order products!

Now, granted many of those IBOs would have received some products when they registered, but Quixtar (and Amway elsewhere) has literally thousands of products available. What this figure tells us is that IBOs are doing a very poor job of helping new IBOs they sponsor try out the various products and the website.

It also tells us something else. 50% of IBOs place an order. 30.8% of IBOs renew. I think it’s safe to assume that IBOs renewing who never placed an order a few and far between, so the renewing IBOs are those that actually tried out Quixtar and the products.

Indeed, nearly 2 out of 3 IBOs who place orders after registering renew their business.

The message from this is clear – contrary to critics claims, the majority of people who actually try what we have to offer like what they find!

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Continue reading Amway Myth: If the products are so good, why do so few new IBOs renew?

Profiles of the American Dream: Amway

A decade ago a documentary was produced entitled Profiles of the American dream: Rich DeVos, Jay Van Andel and the remarkable beginnings of Amway. You can occasionally pick up a copy of it on video on ebay, but these days it’s generally hard to come by. Well, by the wonders of the internet, it showed up recently on Google Video. From the description – Continue reading Profiles of the American Dream: Amway

Amway/Quixtar MYTH: No growth in IBOs in 30 years

This myth seems to have been started in 2004 by the infamous lawdawg on his MLMlaw blog, with a post Zero Population Growth (update: the site has since been removed). Lawdawg takes a quote from a press release stating that Quixtar has a sales force of about 340,000 IBOs –

Though it’s young, Quixtar already has a sizable sales force: about 340,000 distributors — Independent Business Owners, or IBOs, as Quixtar calls them

He then takes some figures from the FTC v Amway case in 1979-

1. The number of active distributors since 1972 has remained relatively constant, fluctuating around 300,000, climbing in 1977 to about 360,000.

And “confirms” his 2003 figure by quoting a 2003 Tax court case Guadagno v. Commissioner, where it states –

Amway has about 360, 000 independent distributors.

On the face of it, this lookings pretty damning doesn’t it? Nearly 30 years and no growth in IBO numbers! A little common sense though makes one think. It certainly made me think when I read lawdawg’s page, and here is what I found ….

Ponder this

From FTC v Amway

183. Amway’s United States sales have grown from $4.3 million in 1963 to $169.1 million in 1976. Worldwide sales of Amway products in 1976 amounted to about $205 million. (RX 431, RX 448) [71]

and the same press release lawdawg quotes –

Quixtar, which sells in the United States and Canada, hit the $1 billion sales level for the first time last year, and has set monthly records since then.

Hmm ….

1976 Amway Sales – $169,100,000
2003 Quixtar Sales – $1,035,000,000

What’s more, prior to 2000, Amway reported estimated retail sales, ie sales as if IBOs had sold them at recommended retail price. Since 2000 they have reported actual sales. The FTC reported the markup in 1976 was on average 03%, so comparing actual sales (a little over a billion in 2003) we have –

1976 Amway Sales – $130,076,923
2003 Quixtar Sales – $1,035,000,000

Lawdawg would have us believe, that without any change in the number of IBOs, the sales for the corporation have increased nearly 700%!

Even adjusting for inflation, and converting to year 2003 dollars, sales in 1976 would only be equivalent to approx $425,061,704. From 1976 to 2003 there has been a more than doubling in sales volume, or inflation adjusted, growth of 143%.

1976 Amway Sales – $425,061,704 (inflation adjusted)
2003 Quixtar Sales – $1,035,000,000

Have IBOs really become so much more efficient, and profitable? What’s going on?

What’s going on is that the two numbers lawdawg compares aren’t measuring the same thing. In the FTC v Amway case, the numbers reported were “active distributors”. How was “active” defined in FTC v Amway?

At the end of the calendar year the files are cleared of the names of distributors who elected not to continue. The number of distributors at the beginning of the year therefore is close to the number of active distributors.

In other words, it’s the number of IBOs that actually renewed. How is “active” defined by Quixtar today? From thisbiznow.com

**Based on an independent survey during 21. “Active” means an IBO attempted to make a retail sale, or presented the Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2001.

Two completely different measurements of “active”. You can’t compare them.

So what’s the truth? Fortunately, with a little straightforward math, we can do a comparison of like with like.

Fun With Numbers!

So, actual sales in 1976 were $169,100,000. FTC v Amway also reports –

In 1973-­74 the average BV for each distributor was about $33 a month.

BV stands for Business Volume and at that time was equivalent to the value of the products less the retail markup – ie the actual price sold to IBOs. I’ve already accounted for the retail markup, so to obtain the total number of IBOs in 1976, it’s a simple matter of dividing the sales figure by the sales per IBO for the year –

Total IBOs in 1976 = $169,100,000/($33*12) = 427,020

Now, it’s possible that the BV per IBO changed between 1974 and 1976, however the FTC reports it increased from $20 to $33 between 69/70 and 73/74. This means any adjustment in the number of IBOs would likely be a decrease. We’ll take the higher number.

What about for Quixtar in 2003/2004? Well, Quixtar Platinums have access to something called “The Platinum Index”, which provides the very statistics we need. A copy of the 2004 index, providing statistics for 2003, is on QuixtarBlog. From this we have the following information –

Quixtar actual sales 23: $1,035,000,000
Average Monthly PV per IBO: 38.46
Average amount of PV for each $1 spent: 0.37

Now, this time the calculation is fractionally more complicated, since we have to account for “PV” and convert to BV.

Average Monthly BV per IBO = PV per IBO/PV for each $1 spent = 38.46/0.37 =14BV

Total IBOs in 2003 = $1,035,000,000/($14*12) = 829,327

In other words, a 94% increase in the number of IBOs – Reasonably consistent with the inflation adjusted 143% increase in sales and the increase in BV per IBO.

These calculations required no guesswork, no estimates. “Critics” will tell you that Amway and Quixtar has “saturated”, that it hasn’t grown in 30 years.

They’re wrong.

Sales have more than doubled, and matching this, the number of IBOs has almost doubled. No guesswork. No estimates. Just pure math.


UPDATE 060803: I found an error in my original calculations where I mistakenly used the inflation adjusted figures to calculate the number of IBOs in 1976 instead of the actual sales data. Corrected.