Class Action Suit by Quixtar Diamonds and IBOA
Board Members Accuse Quixtar of
Being an Illegal Pyramid Scheme

Quixtar now has its hands in a bloody civil war and it has come out slinging mud on the Alticor Media Blog.   Interesting to note is that the links to the Quixtar Media blog have been removed from the Alticor website.  Maybe in light of the pending civil war, which will tell the realities of the Amway/Quixtar pyramid scheme, Amway has decided to accelerate the dropping of the Quixtar name from use and go back to the Amway name sooner than expected.    

In a unprecedented parting of ways, a group of Quixtar Diamonds and IBOA Board members have filed a class action pdf_icon.gif (914 bytes) law suit against Quixtar claiming that Quixtar operates an illegal pyramid scheme.    Quixtar either started the war or retaliated against the several diamonds by terminating their distributorships. It seems things came to a head and both sides came out punching.   Quixtar/Alticor claims the distributors have been long time offenders of various rules, which for unknown reasons, the corporation just now decided to start to enforce.  The distributors now claim that the Quixtar is an illegal pyramid scheme, which they unknowingly helped promote.  

It is my opinion that Quixtar terminated them once they knew their loyalty was no longer to the Amway/Quixtar corporation, and that the corporation's future profits from these groups were no longer worth holding on to.   It is my opinion that the corporation has always turned a blind eye to any distributors who break the rules as long as those distributors are helping to keep excessive profits flowing to the billionaire founding families by their group's self consumption of the overpriced Amway products. 

It is amazing that the gist of the suit summarizes what sites like this and others have been saying for years.  Basically that the corporation and the lines of sponsorships were symbiotic business relationships that needed each other to push their own individual pyramid schemes on their unsuspecting downlines.   The IBOA kingpins reaped millions in profits from the tools business and Quixtar reaped millions in above normal profits as brain washed IBOs mindlessly purchased the overpriced Quixtar products so that they could make their 100 or 150 PV "sales" goal.  Distributors stocked their shelves with XS energy drinks, nutrition bars, coffee and any other product that minimized the dollar expenditure to collect their 100 points.

I put up my website over 9 years ago with the title "The Amway Distributors Little White Lies".  The site at that time focused on the "Save 30% lie" I heard in the Florence downline. Billy Florence, amazing enough, is one of the Diamonds behind the Class Action Lawsuit.. The Class Action complaint now claims that the corporation is extorting tremendous profits from the sale of overprice Amway products to its distributors for their self consumption.   The complaint claims that only 3.6% Quixtar's products is only sold to people outside of those participating in Quixtar's pyramided compensation scheme. 

The suit claims the the business cannot be a legitimate retail organization since the Amway prices are so high, few people but distributors will buy the products.  The suit makes the same conclusion that I have made, and that is the corporation is in a position to be a monopolistic price setter to their self consuming distributor organization.   The corporation probably has no incentive to lower prices and increase volume, since their own profits would probably fall. 

The suit inadvertently confirms the symbiotic relationship of the tools systems and Quixtar.  I cannot state it any better than what the suit says:

"The Quixtar critics began with a simple truth:   the products are overpriced.  Then they deduced that the systems are used to manipulate people into buying products they wold not normally buy..."

"Since Greg has stated our products are overpriced, we have a moral responsibility to this, or else we have given the moral authority to our critics.....let's start with the product pricing since this is where our critics started and where Quixtar, Board leaders and all IBOs are in agreement."

It is interesting to observe that the corporation has long hinted that the moral authority to criticize the business was given to the critics about the support system tools scam, and how the corporation was out to clean up that portion of the business.    Now the tools systems people say the business should be cleaned up first from the overprices products side.   In really both sides needed to clean up their own businesses.  The common guy in the business was just feeding both of the scams.    It is interesting how they point the finger at each other when in fact they can not exist without each other.   They could not have not gotten as successful as they were without each other.    Without the mind controlling system materials of tapes, CD's and motivational seminars, Quixtar distributors will have no incentive to buy the expensive Amway products.  On the other hand, distributors have no need for the motivational systems if there is not some sort of quasi legitimate business behind it.  

Now that Quixtar's own top leaders and IBOA board members realize that they were promoting an illegal pyramid scheme all this time, when will the Quixtar and Alticor employees realize they too have also promoting a pyramid scheme?   The excess profits, from the overpriced products, were made on he backs of hundreds of thousands of distributors who lost money trying make money in what told to them to be a legitimate business, but was really a covert product pyramid scheme.  Are Quixtar's bonuses to the top managers and public relations people so large that they too have set their morals at the door and let Alticor's greed get the best of them?   The whole situation reminds me of the movie "The Firm" where outwardly nice and caring people really checked their morals, ethics and compassion at the door in favor of monetary benefits.  

Don't the people at the Alticor and their Blog get it?   The corporation was in bed with these very same distributors for years and it was a nice and cozy relationship as long as everybody made money on the back of those poor distributors looking for a way to realize the promoted false dream of unlimited income and financial independence.  The Kingpins tools profits have been reduced over the years by the critics exposing the scam, and now they realize the income from Quixtar and the illegal "buy from yourself" business model is not financially viable.   Quixtar looked the other way for years at the supposed rule abuses as those same groups pushed hundreds of millions of dollars of overpriced products on their downline. 

What is amazing is that Quixtar now comes out and criticizes the "stacking method" employed by the terminated distributors, yet the corporation embraced this method by sanctioning a  "custom SA-4400"  pdf_icon.gif (914 bytes) specifically outlining this method for the Florence organization (Team DCI)!  This document pdf_icon.gif (914 bytes) also shows another Quixtar non sanctioned stacking model in  SA-4400 form.   I always knew the managers of the corporation were hypocritical and this helps to prove it.  Quixtar even confirmed its endorsement of the stacking in the "custom SA-4400" with this letter on the IBOAI website pdf_icon.gif (914 bytes).  If the IBOAI decides to pull the letter because it shows the corporations hypocrisy you can always find a copy on my site pdf_icon.gif (914 bytes).  

The company sent the following letter out to Quixtar IBOs announcing the termination of the high level IBOs.:

"...... on issues related to the teaching by the organization on positioning of the business as the team opportunity, the practice of “stacking,” or inappropriate depth-building, ...."

So on one hand while the corporation was benefiting from the stacking method and actually approving it with their "custom SA-4400" they then about face and say it is a rules violation so they can sack a bunch of high level distributors who were fed up with Quixtar's stubborn stand on high prices.

The corporation's actions are louder than words.  They have long known about the rules violations of the distributors but only decide to terminate the distributors when the corporation can no longer profit from them.  How come the distributors were not terminated years ago when it was really obvious what they were doing?  Simple, the corporation was making too much money off them to care. The people doing the stacking were the corporation's golden boys.   They were featured as the best and brightest in the business since they were bringing in the new growth.    The managers and employees at Quixtar are fighting a two edged sword.   If the corporation is like any red-blooded American corporation, then the managers and public relation's peoples bonuses are based upon the operating results of the business.  If the corporation's managers oust the people bringing the majority of new sales growth, then their bonuses at the end of the year will be lower.  It is simple greed and lack of character.    The Alticor employees are also in on the scam.   The managers have nice perks, great salaries and probably super bonuses and they get to keep them as long as the business keeps churning out the profits for the billionaire DeVos and VanAndel families.   So they all know deep down the business is actually an inefficient and uneconomic distribution method, where the majority of distributors are losing money, but as long as they make money on it in the name of giving people "free enterprise" it is ok to do it.  Yup, that is truly "compassionate capitalism", Rich, Doug, and Dick. 

Wouldn't it be great if the managers of the Alticor/Amway/Quixtar business got their bonuses based upon how much net profit the distributors made?  Of course the corporations desire to maximize their profits, conflicts with the distributor's goal to maximize their net profit.  I suggest that all the managers and employees of Alticor watch the movies "The Firm", "Boiler Room", and "Believe".    Then they might realize what they are actually a part of. 

Well, back to the complaint.   There are lots of great quotes about Quixtar prices.

"While an analysis of Quixtar products by market analyst Topco confirms that Quixtar products are of a high quality, these same products are also priced very high.  W. Steven Rubow, a respected expert in the field of market research, observed the Quixtar business model and confirmed that the products are priced well above the competition:

"While an analysis of Quixtar products by market analyst Topco confirms that Quixtar products are of a high quality, these same products are also priced very high.  W. Steven Rubow, a respected expert in the field of market research, observed the Quixtar business model and confirmed that the products are priced well above the competition:

Mr. Rubow concludes that exorbitant prices will collapse the Quixtar business model at the expense of the IBOs:

If success is to measured by such typical measures as sales growth, same-distributor sales growth, repeat sales, sales beyond the initial IBO, and IBO turnover, then it is my opinion that the current Amway/IBOAI business model is not likely to succeed very much longer

I also contend if the support systems disappear then the business will also collapse.

My own price studies from Amway times revealed I would spend about 40% more on the products from Amway. 

"Quixtar only exists on the backs of its distributors.    Quixtar's prices have increased so much in relation to ordinary retail prices that its products cannot be sold to outside consumers.   In fact, a 2006 report prepared by Quixtar states that only 3.4% of its total volume comes from those who do not participate in Quixtar's compensation plan. 

Even worse, Quixtar is having a difficult time marketing its products to its IBOs.  People sign up for the Quixtar business opportunity but never purchase anything because they cannot justify spending so much money on Quixtar's products.

In April of 2000, the IBOA conducted a "Confidential Competitive Analysis" of the Quixtar products.  The IBOAI compared the Quixtar products with three competitive market leaders in each type of product and a cost per unit measurement was established to fairly compare the products.     In almost every item, the Quixtar products were substantially overpriced in comparison to the three industry leaders.   In response, Quixtar promised to "work on it."

In May 2005, the IBOAI recommended that Quixtar bring in a group of young IBOs, in their twenties and thirties, to discuss pricing issues.     This demographic had consistently complained about the Quixtar product prices.  Quixtar itself selected a group of the best and brightest young IBOs and flew them to Michigan for a meeting.  Quixtar set up a presentation so that the young IBOs could see a screen of opinions in front of them and then press a button to register and compute their choices.   The basic question for each product-type was, "How much do you or your friends spend on e.g. shampoo per month?"  The results showed that people of this age group typically spend less in one product category than the cost of one Quixtar product in the same category.   Quixtar acknowledged the results to the IBOAI and promised: " We're working on it."

Quixtar's Second-in-Charge Randy Bancino commissioned an analysis and report from McKinsey Consultants regarding whether Quixtar products were overpriced and not sellable.   The McKinsey Report was prepared 2005, and its findings were presented to the entire IBOAI Board with various Quixtar representatives.    The McKinsey Report showed that there were very few retail customers buying Quixtar products, and that hardly anyone was selling Quixtar products at retail   

In a letter to the chairman of the IBOA board from an IBOA board member:

I was invited to the board meeting for one day in the fall of 2005 when the McKinsey report cam out.  Doug DeVos and Steve VanAndel were in the room with us and the report confirmed what we in the field already knew.  people aren't making any money.   The products are overpriced, and the negative on the web isn't going away...There seems to be an enormous profitability to the founding families yet Emeralds and Diamonds are selling stuff off and going back to work. 

It has been widely understood in Quixtar for years that IBOs buy Quixtar products mostly to earn commissions or bonuses.   On more than one occasion, Quixtar representatives have stated in the presence of Mr. DeVos and Mr. Van Andel, that the company knows IBOs purchase just enough product to qualify for the commission bracket, and then go to Wal-Mart to purchase the rest of the items they need.  

Quixtar's best efforts fail to product retailers.   In the summer of 2006, Quixtar began a program called "Learning Lab".   The function of the Learning Lab was to take a group of motivated leaders and give them special training about how to sell the Quixtar products to bona fide customers.   The goal was to prove the retailability of the products and to create a successful selling model.   This group of people was given all of the tools and support necessary to create an army of distributors who could actually sell the Quixtar products.   Results were initially due in October 2006.  However in October Quixtar stated that the results were still inconclusive and promised the results in February 2007.    At that meeting the IBOAI was again informed that there were no results, which Quixtar then promised to reveal the next month.   At the March 2007 meeting, there were still no results available.   By June 2007, the Board once again requested the results of the Learning Lab.  Quixtar's response was "what Learning lab".    Quixtar never produced the results because ever the most well-trained IBOs cannot retail Quixtar's over priced products. 

Billy Florence had a conversation with Jim Payne to underscore the reality that IBOs needed saleable products because Quixtar's current product line was not selling due to pricing.  Mr. Payne stated that "this is not the business we are in.".   Mr. Payne stated that Quixtar was not in the "the retail business."  Mr. Payne told Mr. Florence that Quixtar would never be able to complete in the retail market because the multi-level marketing system required higher margins.   Mr. Florence responded to Mr. Payne that if this was the case, then Quixtar was operating an illegal pyramid scheme.  Mr. Payne changed the subject.

Quixtar distributors are instructed to not waste their times selling the Quixtar products to retail customers because it simply cannot be done. 

President Doug DeVos himself has stated at IBOAI Board meeting that "Quixtar is an internal consumption company," not a retail sales company.

Quixtar operates an illegal pyramid scheme and has duped countless distributors into a no-win situation at great financial and personal costs. 

The complaint then goes on to list the other pyramid case precedents which I have long had on this site, and which Quixtar distributors have said were not applicable to their business.    It is amazing that a group of high level distributors who a few years previously would have debated that those some precedents were not applicable to the Quixtar business. 

I suggest you read the complain yourself   It is amazing.  All these statements are coming from the mouths of high level distributors.    One would have never hear such thing before. 

The comments in this suit are a great vindication and proof to what I have been writing for years.