In our ongoing, open discussion of Amway / Quixtar and other Multilevel marketing (MLM, Direct sales) businesses, FranchisePick.com commenter Sister Sam offers this warning:
Something that has been overlooked in most of the criticisms of Amway/Quixtar is the Registration Contract itself. Unless you are an attorney, you have no idea just how restrictive, one-sided, and dangerous it is to sign an Amway Independent Distributor Registration Agreement.
First, if you never achieve any success with Amway, you don’t risk much by signing the contract. But if you reach a level that the corporation considers successful and then try to leave, watch out!!
On the back of this form, Item 6 describes Amway Global’s Proprietary Information and Trade Secrets. This paragraph states that any information in the Line of Sponsorship is the proprietary, trade secret information owned exclusively by Amway. This means that even though you will spend time, gas money, and money for other sales materials; you convince a friend or family member to join Amway; you collect their personal information; and you enter that information into Amway’s system—now that information is owned exclusively by Amway and you cannot use it without their express permission and ONLY to build your Amway business. Why does this matter? See Item 8.
Item 8 is the Non-Solicitation Agreement. Any normal person would define “solicitation” as the act of urging, persuading, petitioning, or requesting. For example, you resign from Amway, and twelve months later join another network marketing company. You and I would define solicitation as actively calling other associates in Amway and encouraging them to quit and join you in your new venture. You are I are wrong!!
Here is an example:
You resign from Amway. You wait out the “non-compete” and six months later you join a different network marketing company. You and I would think that we cannot call or otherwise contact another Amway IBO to ask him to join your new business for two years, according to the non-solicitation clause. You and I are wrong!
A former associate from your Line of Sponsorship in Amway calls you seven months after you left Amway, asks if you are involved in another business, and asks you to give him some information about that new business. The Amway Global attorney says that unless you say “no,” you are guilty of solicitation and have violated this clause!
On the front of the Registration Agreement is the Agreement to Mediate and Arbitrate any disputes. Seems harmless enough, until you realize the truth. If Amway decides you have violated any of it’s Rules, it can haul you in to arbitration. The arbitrator is selected from a company that relies on large corporations like Amway for business, so they are automatically biased. (In other words, if they rule against Amway, Amway won’t bring them any more business!) Arbitration is binding—you have no recourse when you are ruled against. And Arbitration is secret, so you and I have no way of knowing how many other existing and former IBOs have been sued in Arbritration and lost.
Further, you must pay one-half of all the Arbitration costs, currently running about $6,000 per day. And any arbitration judgement will be upheld in court, so once the ruling is made, you are stuck.
Don’t believe me? I achieved the Emerald level in Quixtar. The most I ever made was $75,000 one year from Quixtar. In 2007 there was a big upheaval and Quixtar issued a statement saying “Just Go, Team.” As a result, most of the IBOs in my group quit. Many more did not renew in 2008. So I quit also—what’s the point of building a business if the company will not protect it? Mind you, I resigned AFTER most of the people in my group had already quit.
Seven months later I joined another network marketing company. A few of the people who were formerly in my Quixtar group contacted me and asked to join my new business. I made sure they had completed their six-month non-compete in Quixtar’s rules, and then registered them with my new business.
Quixtar has sued me in Arbitration saying that I violated the Non-Solicitation clause. They are asking for millions of dollars in damages because of the lost business I caused them. (Remember, these are people who had already quit Quixtar before I quit!!!) I have to take this seriously because I will be held to any judgement the arbitrator decides on. And the last guy that I know of who was sued by Quixtar in arbitration was ordered to pay Quixtar $12 million.
Don’t believe me? Buyer, beware.
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