This week Amy Dunlap filed an amended answer in the lawsuit Mary Kay Inc. has filed against her for alleged violations of her national sales director agreement. The most notable part of the answer and counterclaims is the portion in which Dunlap alleges that Mary Kay violates the Texas Business and Commerce Code by promoting a pyramid scheme.
“Pyramid promotional scheme” means a plan or operation by which a person gives consideration for the opportunity to receive compensation that is derived primarily from a person’s introduction of other persons to participate in the plan or operation rather than from the sale of a product by a person introduced into the plan or operation.
And the filing gets even better. Amy says she spent over $125,000 to purchase products from Mary Kay, and that “… Mary Kay intentionally and grossly deceived [Amy] as to the extent of an actual retail market for the resale of the goods purchased from it at wholesale by [Amy] and the other members of its sales force…”
Amy again alleges that Mary Kay lies to recruits when telling them that they will “own their own business”:
By agreeing to acquire her beauty consulting business as an independent contractor, entrepreneur and the owner of her own business as a result of her contracts with Mary Kay, Defendant/Counterclaimant was a consumer of the Plaintiff/Counterdefendant goods and services as that term is defined under §17.45 of the Texas Business and Commerce Code, having relied on the written and oral representations of Plaintiff/Counterdefendant that, as an “independent dealer” she was the “owner of her own business.” Throughout her relationship with Mary Kay, until the very end, she was deceived by the company’s continuous, non-stop, orchestrated campaign through speeches at the annual Seminars, business opportunity meetings, CDs, DVDs, cassette/VCR tapes, brochures, letters and emails, representing to her and the other Consultants in her National Sales Director unit (known as her “Area”), and throughout the company for that matter, that they were being provided by Mary Kay the business opportunity of “owning” their “own business.”
Remember that previously I revealed that Amy Dunlap said this exact thing to women she was recruiting, so her hands are as dirty as Mary Kay’s on this issue.
More on the lack of a retail market for Mary Kay Cosmetics:
Mary Kay intentionally and grossly deceived the Defendant/Counterclaimant as to the non-existence of a viable retail market for the resale of the goods purchased from it at wholesale by Defendant/Counterclaimant and the other members of its sales force, making the sale of “her own business” to Defendant/Counterclaimant, which consisted of the bundle of tangible services and products acquired by her, a sham transaction, of little or no value to the Defendant/Counterclaimant. Since Defendant/Counterclaimant could not retail more than a small percentage of the goods she purchased from Mary Kay at wholesale prices, she was forced to give away most of the goods to prospects, and ultimately, to charitable organizations. Contrary to Mary Kay’s misrepresentations to Defendant/Counterclaim regarding the existence of a strong and viable retail market for its goods, the only real market for its goods is the sale at wholesale prices of same by it directly to new IBCs disguised as “training,” “start-up” and “fast start” packages, wholesale sales by Mary Kay to those IBCs caught in the web spun by Mary Kay manifested by its compensation scheme…
What??? Someone who was so successful that she got to the top position in the pyramid, and she couldn’t actually sell “more than a small percentage” of the products she bought from Mary Kay?And the real market for the products is consultants, and that’s why large inventory packages are pushed?
And in case you didn’t understand the first time that Amy Dunlap is saying consultants are only able to sell a very small quantity of products:
… when in truth and in fact the vast majority of its sales volume is made up of the wholesale purchases by its own sales force who are then unable to retail what they have bought from the company.This lack of a retail market, which manifests itself in the inability by the Mary Kay sales force to make retail sales of the vast bulk of the items purchased by the sales force at wholesale, is well known to Mary Kay. Mary Kay conveniently hides behind its public position that virtually all of the wholesale sales to its sales force result in retail sales of those products but pleads ignorance to knowing the extent of the actual paucity of retail sales since it does not track retail sales made by its sales force. Mary Kay’s own corporate interests are well served by this dodge, as all the while it is racking up record sales and profits of its own merely by the sale of its items to its own sales force, many of whom are operating under and themselves perpetuating the myth perpetrated by the company that retail sales are what drives it.
If possible, it gets even better. Amy Dunlap admits to cheating to get through NIQ (national in qualification), buying more than $48,000 of products to help the units in her area meet the requirements so Amy could become a national sales director:
During the time she was a National Sales Director in Qualification (NIQ)
Defendant/Counterclaimant and her husband invested more than $48,000.00 in wholesale purchase of products from Mary Kay in order to help eighteen of her Sales Directors meet the stringent $4,000.00 per month minimum qualification for each of their sales units each month for four months, in order for Defendant/Counterclaimant become an NSD.
And Amy says that “dozens” of others got to the position of nsd in the same way. She claims this cheating is systemic:
Mary Kay supposedly had rules to prevent this kind of “garage qualification” but everybody knew how to go around the rules because they were taught by their trainers how to do it.
She reveals the problem with the DIQ (director in qualification) process, and people buying their way up the career ladder:
As a consequence of this Mary Kay scheme, the vast majority of those attempting to qualify in the DIQ and NIQ categories rack up huge purchases of unneeded product from Mary Kay accompanied by crushing, bankruptcy causing, mortgage defaulting, divorce causing debt. If a consultant gives up after putting out the $4,000.00 per month for a month or two, or simply falls short of that amount in the third month, they lose their entire investment, have a garage full of product that they will not be able to sell, and lose all of their second and third line recruits and, by Mary Kay rules of qualification, can never get them back.
Amy outs some of the women who cheated in this way:
As for other examples of Consultants who have fallen into this deceptive trade trap laid by Mary Kay: consultant Gena Gass borrowed tens of thousands of dollars, Michele Sudeth had to obtain a second mortgage on her home, and Donna Meixsell put what she lacked in NIQ on retired Senior National Sales Director Pat Fortenberry’s credit card.
Don’t forget that Amy has also revealed in this case how little money she made at the top of the pyramid.
When you roll around with pigs, you should expect to get dirty. Both Amy Dunlap and Mary Kay are pigs in this case. They use dirty, deceptive tactics to recruit women and convince them to buy inventory that they have little hope of being able to sell. Thus, Amy’s outrage at Mary Kay’s practices is ridiculous.