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November 24, 2005
No More Pretending
By QBlog in Miscellaneous
Quixtar recently modified its "70% Rule" to essentially remove the requirement for retail sales. Prior to the changes IBOs were required (though it was seldom enforced) to sell 70% of the products they purchased. However, the revised rule states that "products used for personal or family consumption or given out as samples are also considered as part of the sales volume."
Using products at home (self-consumption) is clearly not a retail sale but Quixtar now states that it is a retail sale. The lawBlawg has done a thorough analysis of the changes to rule 4.18 (IBOs only).
To sum up the changes Quixtar is basically saying that to earn money in the business you must sell products to customers — unless you don't want to sell products to customers in which case you may just use the products yourself. The "buy from yourself and teach others to do the same" philosophy is now clearly reflected in the Quixtar rules. That's refreshing because before the rule change the "buy from Me-Mart" mentality conflicted with the 70% rule. Now the message is consistent.
One downside to this rule change is that retail-minded IBOs like Fred Johnston don't have the 70% rule to back up their efforts. Now a new recruit has to carefully consider the options — do I work my tail off selling products to retail customers or do I sit in living rooms teaching others to just change their shopping habits. Which would you choose?
Comments
Does this now mean that Quixtar is in violation of the 1979 FTC ruling? Are they now officially an illegal pyramid?
Bradley
Sure looks like it.
In relation to the AMO's/QMO's, they still are adn have been illegal pyramids because theyr tools are not sold to customers, but exclusivey to participants.
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.
So I do 300 PV on personal volume, I shouldn't get a bonus?
Insider, what about the tools business?
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?
http://mlmlaw.blogspot.com/2005/11/what-happened-in-1979.html
http://mlmlaw.blogspot.com/2004/08/single-most-important-word-in-mlm.html
http://mlmlaw.blogspot.com/2005/01/lets-talk-about-seventy-percent-rule.html
http://mlmlaw.blogspot.com/2005/11/quixtar-bets-farm.html
http://amquix.info/quixtar_pyramid_rebuttal.html
Again, this comment is directed towards INSIDER and his comment regarding the Retail Sales Rule. The point I am making below is MOOT, of course, in light of the explanation I have given above regarding the Logic behind the Retail Sales Rule imposed by the FTC and the courts. But just to point out another flaw in INSIDER's logic, here goes....
INSIDER says, "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." Heck, if you recruit 4 people underneath you, THAT's good enough for you to have 70% of your volume downline. But, NOW, those 4 people have to recruit 4 people each to have 70% of their volume downline. And those 16 people have to recruit another 4 people each. And those 64 people have to recruit another 4 people each..... and so on.... until the earth's population is EXHAUSTED. So, what do the people at the bottom of the chain do? INSIDER might counter that you don't have to have a downline, you can do retail sales. But that's the main problem with most MLMs, ESPECIALLY QUIXTAR - participants are INVARIABLY told that they don't have to do any retail sales, they just have to recruit more people and teach them to change their buying habits, i.e. buy from Quixtar. BECAUSE most people would be put off by the thought of direct selling/retail selling. MOST people don't want to do that.
which one do you choose? Neither, because they're both system-induced pieces of crap that will milk recruits for their money.
Get rid of the system, Quixtar retailing could be ...closer...to an actual business opportunity (more of a fundraiser type activity, since u cant really retail the products)
Posted by: Mevi | November 24, 2005 6:25 PM