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Consumer Health Digest #07-07
February 13, 2007
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Quixtar facing major class-action suit.
Two former Quixtar distributors have filled a class-action suit
charging that Quixtar and several of its high-level distributors with
fraud and racketeering. The allegations of the complaint include:
**Quixtar is an illegal pyramid scheme because most of its sales are
to distributors rather than to retail customers.
**The defendants recruit distributors by making false or misleading statements.
**Quixtar products would be difficult to sell to unaffiliated
consumers because they cost much more than similar products at retail
outlets.
**Quixtar's lowest level distributors are instructed not to waste
time on marketing and retailing the products, but instead to focus on
consuming the products themselves and recruiting others to be
distributors.
**Most products are purchased by Quixtar distributors for their own
use, and any profit is eliminated by the costs of buying
instructional materials.
**Quixtar has "unconscionable" arbitration policies that prevent most
distributors from recovering their losses if problems arise.
Quixtar is a multilevel marketing (MLM) company founded in 1999 as
the successor to Amway in the United States, Canada, and the
Caribbean. It is privately owned by the families of Amway founders
Rich DeVos and Jay Van Andel through the Alticor holding company,
which is also the parent of Amway. In 1979, the Federal Trade
Commission concluded that Amway was not a pyramid scheme because it
followed certain policies to ensure that its business was based
primarily on the retail sale of products rather than on the sale of
"business opportunities." The current suit alleges that although
Quixtar still has these policies, it does not enforce them. The
complaint and supporting documents are posted at
http://www.casewatch.org/civil/amway/class_action_complaint.shtml-------------------------------------------------------------------------
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