Quixtar disputes TV report

The Grand Rapids Press/May 8, 2004
By Rob Kirkbride

Quixtar rejected Dateline NBC's assertion that it runs a "scam" where few get rich and many lose money buying high-priced business support materials such as motivational cassettes and videos.

The direct-selling branch of Alticor Inc. said in a prepared statement that "we may not be perfect, but we do a lot of things right, including our commitment to consumer protection."

"Dateline got it wrong," said Quixtar Managing Director Ken McDonald. "After a year of investigative reporting, Dateline's story on Quixtar boiled down to the complaints of three independent business owners and ignored the hundreds of thousands of IBOs powered by Quixtar who are achieving their goals."

McDonald said Quixtar rules prohibit statements misrepresenting the possible income. And he added all support materials are "voluntary, optional and covered by satisfaction guarantees."

He said most people get involved to make a little extra income, not attain great wealth.

"Quixtar offers an opportunity, not a guarantee," McDonald said.

Friday night's Dateline segment showed hidden camera video of boisterous seminars and recruitment meetings.

The show also noted a federal lawsuit between Alticor and a group of former independent business owners -- Quixtar's name for its network of distributors.

The former dealers claim Quixtar allowed a handful of its distributor network to develop a separate business selling "tools" and "functions" -- motivational material such as tapes, books and seminars designed to boost individual businesses.

This business support materials trade became so big that high-level distributors, described in the lawsuit as "kingpins," developed BSM businesses that brought in millions of dollars more than their Quixtar business.

The lawsuit alleges that Quixtar helped these distributors monopolize the BSM business, cutting others out of potential profits. It also said Amway and its distributors misrepresent the true earnings potential of being an IBO because top earners are reliant on BSM income, which most IBOs are not eligible to collect.

The "kingpins," with Quixtar's help, also required their "downline" network to buy their materials and attend their functions or risk being blackballed from the "pyramid," the lawsuit alleges.

By backing and helping to propagate such a system, the plaintiffs allege Amway/Alticor/Quixtar violated anti-trust rules, and conspired to misrepresent the Amway business opportunity, according to the lawsuit.

The plaintiffs also allege Amway illegally conspired to boycott groups that don't fall in line with the "kingpins" and illegally created arrangements where BSMs became required products for low-level distributors who wished to maintain good standing.

Bo Short, who appeared on the news program, is a former Quixtar dealer who set up a rival direct marketing company.

The report said the Federal Bureau of Investigation and Internal Revenue Service were "looking into two top (Quixtar) distributors."