Tuesday, August 28, 2007

TEAM: Timeline of Events

Original Source

Timeline of Events

  • August 28

    • Group of ex-Quixtar distributors announce that, contrary to statements issued by Quixtar on 8/24/07, the judge today ruled in favor of the distributors allowing continued participation in Team meetings

      • Quixtar forced to retract its premature claim of “complete defeat” for the distributors in the case

    • To date, the number of TROs granted heavily favors the distributors over Quixtar, 11-3

  • August 24

    • Quixtar granted one temporary restraining order in the company’s backyard of Grand Rapids, Michigan

      • Quixtar claims victory in second temporary restraining order hearing in Grand Rapids, which supposedly prohibited approximately 75,000 Quixtar IBOs from attending Team meetings

      • Plaintiffs reassert confidence in the strength of their initial lawsuit by citing the 10 TROs that have been granted to date against Quixtar

  • August 23

    • The hearing at the Kent County Courthouse from 8/22/07 resumed at 8:30 a.m.

  • August 22

    • The continuation of the hearing that took place on 8/22/07 at the Kent County Courthouse occurred

      • Judge Paul Sullivan listened to arguments for more than three hours

      • Outside the courthouse, a predominantly male crowd of hundreds of distributors dressed in dark suits and red ties protested in support of the plaintiffs, wearing stickers proclaiming, “Burned by QUIXTAR!”

      • Arguments will resume at 8:30 a.m. on 8/23/07

  • August 20

    • About 200 Quixtar IBOs from around the state of Michigan assembled outside the Kent County Courthouse while eight Michigan plaintiffs named in the lawsuit requested a temporary restraining order against Quixtar

      • The judge made no ruling on the requested restraining order

      • Another hearing with all parties is scheduled for 8/22/07

      • Quixtar agreed not to take any action against the IBOs pending the outcome of the hearing on 8/22/07

  • August 16

    • The law firm representing the plaintiffs, Shughart, Thomson and Kilroy, says Harteis’ withdrawal from lawsuit came as a “surprise”

  • August 15

    • Press release sent out correcting inaccurate statements made by Quixtar on 8/10/07 about termination of distributors

  • August 13

    • IBOAI files complaint for temporary restraining order and preliminary injunction relief against plaintiffs for a breach of fiduciary duty, breach of contraction and violation of MUTSA

      • IBOAI alleges that plaintiffs violated the provisions of the Confidentiality Agreement by disclosing confidential information from their membership and activities on the IBOAI Board in the public domain

  • August 10

    • Initial press release sent out

    • Injunction filed later in the day to stop Quixtar from enforcing the non-competition and non-solicitation rules that entrap distributors and prevent them from exiting the pyramid scheme

      • Preliminary injunction hearing expected to be held in the next two weeks in Los Angeles, CA

    • Quixtar releases statement falsely claiming the company terminated Orrin Woodward, Chris Brady and 13 other distributors before lawsuit was filed

    • After complaint was filed, the attorney of one of the plaintiffs announced that his client Fred. Harteis will no long participate in the lawsuit despite being involved in several conversations in the previous weeks concerning the state of the current Quixtar business 

  • August 9

    • Complaint filed by group including eight of the largest distributors of Quixtar filed in federal district court, central district of California, western division

      • Class-action lawsuit against Quixtar seeking a declaration that all distributor contracts with Quixtar, and the non-competition and non-solicitation provisions in particular, are unenforceable due to illegality and/or frustration of purpose

  • June

    • IBOAI requests results of “Learning Lab” once again

      • Quixtar’s response is, “what Learning Lab?”

      • Program has not succeeded in its stated goal of creating a successful selling model as of yet

  • March

    • Quixtar informs IBOAI that there are still no results of “Learning Lab” program

  • February

    • Quixtar informs IBOAI that there are no results of “Learning Lab” program

      • Quixtar promises to reveal results the next month

    • February 27

      • Member of IBOAI sends lengthy email to Chairman of the IBOAI Board, stating that the founding families were unapologetically profiting from failed efforts of the IBOs

        • The founding families hear and ignore the complaints

      • To confirm that the founding families, and top tiers of the pyramid, fully understood the problems with Quixtar’s product pricing, Orrin Woodward, an IBOAI Board member, sends follow-up letter to Doug DeVos explaining that even the wholesale prices are too high and not competitive

  • Early

    • Legal and Ethics Committee meeting, including Rob Davidson and Sharon Grider, General Counsel for Quixtar

      • Begin discussion of product pricing

      • Discussion becomes heated when Rob Davidson explodes, “I got it, I got it, the prices are too expensive! So what are you going to do about it?”

  • President Doug DeVos and Chairman Steve Van Andel hold private executive meeting

    • DeVos concedes that Quixtar and its distributions have known for years that Quixtar needed to take responsibility and lower product prices to be competitive

    • DeVos announces that a new committee was formed to find 15 to 20 inexpensive, saleable, marketable products to sell through Quixtar

    • DeVos announces that Quixtar would have new retail products in the health and beauty product lines that he promised would be great sellers


  • October

    • Results of “Learning Lab” due

      • Quixtar states that results are still inconclusive and promises results in February, 2007

  • Summer

    • Quixtar begins program called, “Learning Lab,” to take group of motivated leaders and given them special training about how to sell the Quixtar products to bona fide customers

      • Goal is to prove the retailability of the products and to create a successful selling model

  • April 3

    • Orrin Woodward emails Rob Davidson, Quixtar’s Vice President of Sales and Marketing and Second-in-Charge, and states that the team is “going crazy” with XS and Protein Bars due to competitive price and value

      • Email states that company needs more competitively priced products

      • Rob Davidson responds, “We will own the pricing issues of products…”

  • February 11

    • Orrin Woodward sends letter to all IBOAI Board Members stating that everyone, including Quixtar, knows Quixtar’s products are overpriced by at least 15%

  • January

    • When Florence was the outgoing President of the IBOAI, he has a conversation with Jim Payne, Quixtar’s Managing Director and First-in-Charge, to underscore the reality that the IBOs needed saleable products because Quixtar’s current product line was not selling due to pricing

      • Payne states that “this is not the business we are in” and that Quixtar was not in “the retail business”

      • Payne tells Florence that Quixtar would  never be able to compete in the retail market because the multi-level marketing system required higher margins

      • Florence responds to Payne that if this was the case, then Quixtar was operating an illegal pyramid scheme

      • Payne changes the subject


  • December

    • Achievers Q-12 event in Dallas, TX

      • Billy Florence, then-President of the IBOAI, talks for an hour to Doug DeVos, President of Alticor and member of the founding families, in the ballroom of the event

      • Florence informs DeVos that Quixtar needs to lower product prices

      • Earlier that day, Florence had accompanied Don Wilson and David Vanderveen to Wal-Mart to look at prices

      • Vanderveen states that Quixtar products had a 3 to 1 markup over manufacturing costs

      • Florence explains to DeVos that the IBOs could not retail a product already priced significantly higher than comparable retail products

      • DeVos confirms that 35% of product pricing is required to cover “field expense” (all of the IBO payments, bonuses and trips paid by Quixtar)

      • Florence offers that the IBOs could be persuaded to receive smaller bonuses, with a reduced PV per item, to help create retail saleability if the founding families would also reduce their margins

      • Devos tells Florence that he would have to look into the matter and revisit the margins required by the founding families

      • No action was ever taken, presumably because the Jay Factor is fixed

  • May

    • IBOAI recommends that Quixtar bring in a group of young IBOs (20s-30s) to discuss pricing issues

      • This demographic consistently complained about Quixtar product prices

      • Quixtar sets up presentation so IBOs could see screen of options and then press a button to register and compute their choices

      • Results show that people of this age group typically spent less in one product category than the cost of one Quixtar product in the same category

      • Quixtar acknowledges results to the IBOAI and promised, “We’re working on it.”

  • Plaintiff David Brandy enters into Quixtar uniform distributor contract

  • Quixtar’s Second-in-Charge, Randy Bancino, commissions an analysis and report from McKinsey Consultants regarding whether Quixtar products were overpriced and not sellable

    • Findings of the “McKinsey Report” presented to entire IBOAI Board and other Quixtar representatives

    • Report shows that there are very few retail customers buying Quixtar products, and that hardly anyone was selling the Quixtar products at retail


  • March

    • Claire Zevalkink, Quixtar’s head of marketing, explains Quixtar’s product pricing constraints

      • Recognizes that the complaints about product pricing have been heard

      • Quixtar acknowledges that product prices could be greatly reduced, and Quixtar’s profit margin will still be positive


  • Many IBOs choosing Quixtar over Amway

    • Company elects to shut down Amway operations in U.S.

    • Quixtar becomes operational version of Amway in U.S.

  • Plaintiff Kirk Birtles enters into Quixtar uniform distributor contract

  • Plaintiff Aron Radosa enters into Quixtar uniform distributor contract

  • Plaintiff Benjamin L. Dickie enters into Quixtar uniform distributor contract


  • April

    • IBOAI conducts “Confidential Competitive Analysis” of Quixtar products

      • In almost every item, Quixtar products substantially overpriced in comparison to three industry leaders

      • In response, Quixtar promised to “work on it”

 Late 1990s

  • Retail prices of Amway’s products have increased substantially in relationship to the consumer marketplace, while trends in retailing are lowering retail margins and prices for consumers

    • Concentration and uniqueness of Amway’s products lost as the market begins developing broader arrays of products to match demand

  • Amway’s products become increasingly difficult to retail

    • Quixtar distributors personally consume products or discard those they did not use (“internal consumption”)

 Mid-Late 1990s

  • Amway’s products are almost completely non-sellable


  • Amway launches sister company, Quixtar, the e-commerce company

    • Amway touts Quixtar as its chance to make a second, and this time good, first impression on the network marketing industry in the U.S.

  • Access Business Group, LLC (“Access”) created as the manufacturer of the products sold by Quixtar and Amway

  • Alticor Inc. (“Alticor”) created as the parent holding company of Quixtar, Amway and Access

  • Plaintiff Tim Marks enters into Quixtar uniform distributor contract


  • Diamond Meeting of the Company Internet Services

    • Price discussion ensues regarding price of Amway dog food

      • Amway representative says company does not look at marketplace to determine what a competitive retail price should be

        • Products are priced at the IBO cost

      • IBOs attempting to resell the dog food would have to sell it at cost, foregoing any profit, to be competitive


  • IBOs complain to Quixtar that products are not sellable


  • Ninth Circuit revisits the rules on pyramid schemes in the Omnitrition case

    • Court holds that Omnitrition operates as an illegal pyramid scheme because distributors had to purchase and convince three other recruits to purchase a certain amount of product in order to advance or receive any benefit from the system

    • Quixtar has a similar structure

      • Distributors can only earn money when they self-consume Quixtar’s products and when they recruit new IBOs to do the same


  • IBOAI begins pressuring Amway to start an e-commerce business

    • IBOAI threatens to start up an e-commerce business with or without Amway

    • Amway embraces the threat and takes over the project to create an Internet-based retail business

      • Amway wants to incorporate the e-commerce business into the Amway distributor business, but the IBOA believes that Amway’s reputation had so disintegrated that a new business necessitated a new name


  • Publication places both Richard DeVos and Jay Van Andel in the top 10 wealthiest Americans (worth $4.5 billion each)


  • Plaintiff Orrin Woodward enters into Quixtar uniform distributor contract

 Late 1980s

  • New COO of Amway, Tom Eggleston, renegotiates contract with the ADA board

    • Reunites the board with Amway, while still allowing it to be independent representative of the distributors

    • Amway ADA evolves into the Quixtar IBOAI (Independent Business Owners Association International Board)


  • Amway’s reputation begins its considerable decline

    • “60 Minutes” and “Phil Donahue” run broadcasts disparaging the Amway business model as fraudulent

      • One long-time IBO comments that he lost half of his business in the eight months following these broadcasts

  • Founding families become disenchanted with Amway Distributor Association (ADA) when they denied the right to hand-pick members of the board

    • DeVos and Van Andel abandon the board and Amway severs its ties

    • ADA becomes antagonistic toward Amway, which is forced to fund itself for the first time since inception

 Early 1980s

  • Founding Van Andel and DeVos families derived so much wealth from Amway that they were listed in Forbes’ list of the wealthiest Americans

    • Forbes.com lists Richard DeVos as the 73rd richest person in America, with a  net worth of $3.5 billion derived from Alticor


  • Federal Trade Commission (FTC) begins looking at Amway’s business model to determine whether it was operating as an illegal pyramid scheme

  • Because the company was still producing products capable of being sold in the retail market, the FTC rules that Amway was not a pyramid scheme


  • Amway’s retail sales reach $210 million

  • Plaintiff Billy Florence enters into Quixtar uniform distributor contract


  • Amway founded by Jay Van Andel and Richard DeVos


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