AdvoCare to dump MLM opportunity after FTC talks
AdvoCare has announced that it is dumping it’s MLM opportunity.
The decision was made following “confidential talks” with the FTC.
As of yet no details about an FTC investigation into AdvoCare have been made public.
According to AdvoCare, talks with the FTC focused on “how (the company) compensates its distributors”.
As a result of those talks, AdvoCare claims ditching its MLM business model “is the only viable option”.
AdvoCare’s announcement states that over 100,000 distributors will be affected – but only those who were earning commissions on their recruited downline.
The retail and preferred customer programs will remain intact.
Those who currently sell only to customers will not be impacted and there will be no impact on preferred customers or retail customers’ ability to purchase products.
Reading between the lines, an FTC investigation into AdvoCare suggests the company primarily generated revenue from affiliates – as opposed to retail customers.
This is precisely what a class-action lawsuit filed against Advocare in 2017 claimed;
The suit, filed in federal court, alleges that a vast majority of distributors for the company, which earned $719 million in net revenues in 2015, are doomed to lose money rather than achieve large incomes touted by top-level affiliates.
The lawsuit alleges that at least 95 percent of AdvoCare distributors pay AdvoCare more money than AdvoCare pays them.
As at the time of publication, that lawsuit is still playing out. It is unclear whether there is any overlap with the FTC investigation.
BehindMLM reviewed AdvoCare back in 2015.
At the time I noted ‘AdvoCare has one of the strongest retail focuses I’ve seen in MLM yet‘.
I also noted however that
theoretically an affiliate could rig the retail requirement, but the hassle of setting up five bogus customers just to qualify for commissions seems hardly worth it.
It appears that, to their own financial detriment, Advocare distributors were indeed rigging the system – such that internal volume dwarfed that of legitimate retail sales activity.
Understandably, AdvoCare’s more successful distributors haven’t taken kindly to the news.
Writes one “top fan” AdvoCare distributor to the company’s official Facebook page;
I have built a successful business with you! 15 years and you’re telling me I’m going to lose all of my downline.
I am a business builder and I rely on my residual income!
Another distributor suggested AdvoCare management had pulled an exit-scam;
I’m not convinced there was a real threat by the FTC. I think this is the owners not wanting to use their profit to litigate on our behalf.
This seems like cut and run by the owners under the guise of ‘blame the government’.
Advocare was a great company… the current leadership has some explaining to do.
AdvoCare distributors have been advised compensation changes come into effect on July 17th.
This means that from July 17th, they’ll only be paid on personal retail customer sales. Any income derived from downline volume will vanish.
I anticipate between now July the FTC will publish details of the reached settlement. Stay tuned…
My heart goes out to all AdvoCare distributors with this difficult news today.
We understand first hand the importance of having leadership who will fight for you as individuals, as well as corporately. Our thoughts are with you!
This is horrible. I feel so sorry for all the AdvoCare distributors. I hope there is something you can do. Just not right.
Hahaha. I’ve had “friends” discontinue our “friendship” because we stopped buying their products.
Feel bad for the ones that were in it with good intentions, but I couldn’t be happier to see karma at work for the others.
When an MLM is civilly challenged by the FTC there is never litigation always a settlement. Only one company litigated the FTC and it won in 1960’s FTC vs. Amway Inc.
The FTC uses a cookie cutter approach..months of gathering data (8 to 12) use a federal judge for an exparte’ hearing (a one sided hearing the company is unaware of) for the FTC to convince the judge people are being harmed financially requesting to freeze bank accounts and put a reciever in place to review practices and financials (it’s books) Then the company is charged raid style with many Sherriffs immediately after bank accounts are frozen.
The recievers role is to anylize financials for a maximum settlement, and change rep. and company policies to increase precident for the next MLM company victim. Settlement takes place in 5 or more months.
Greg so you are sayong AdvoCare lied to avoid settlement costs they simply shut it down.
An MLM company can be subpoenaed by the FTC for information, thus becoming aware of an active investigation.
At that point they can negotiate and submit a settlement proposal, which in this case part of which is getting rid of their MLM opportunity.
If that’s what’s happened I very much doubt AdvoCare shutting down its MLM opportunity is the full settlement. There will likely be some sort of additional penalties.
But we can’t know for sure unless details of the FTC settlement are made public.
This hinges on AdvoCare not telling porky pies, which given what information is currently available I can’t make a call on.
Given the distributor backlash, if there haven’t been talks with the FTC then there’s probably going to be in the near future. An MLM company lying about dialogue with regulators won’t end well.
Great product! But what these P.O.S’s are doing is absolute garbage.
I love the product and refuse to give these people anymore money. They will not explain what is really going on and also the email sent to all distributors was basically stating we’re screwing you but if you put in an order we’ll give you free shipping.
These people should rot!
Why? Surely the distributors have built a retail customer base. And now instead of recruiting all their potential new customers, they can just retail the product to them and keep the markup.
Of course, the preferred customer option would be a problem since that cuts the profit percentage for them.
Anyway, if it’s such a great product priced right at retail, one shouldn’t have a problem retailing it, right? Lots of flea markets and doors to knock on out there. Imagine the possibilities and lace up those boots.
Product sales isn’t easy, but the positive people can do it. That is, after all, what they signed up for.
To respond to the comment above me, to CHAR. just throwing this out there.
I am a 40% discount level distributor, or well was lol, but i was told when my change takes place to a preferred customer, I would keep my 40% discount, renewal would still be $19.95 instead of $50. and then nothing after that.. But I would keep my 40% discount.
I like the arginine extreme, its a great product.
My gut told me long ago that this would never work out in the long run. for me anyway. I did not have that much faith in it, and saw many promises but not fruits. Only convincing people of a dream and a way of life, that still required them to change their physical days and eating habits.
Products yes are only an assistance, but the proof is in the pudding, and all the people who worked their butts off exercising and losing weight, I salute you. But it was your hard work, and eating right. Not the products.
Some products can help assist you in lasting longer but the cost is a little too high.
It will be years before my 40% discount makes me back the $3k investment i fronted back a few years ago, but I’ll buy 2 products until this company desolves in the future, if it does. Clear mood, and Arginine Extreme.
Thank you for your time if you read this.
This appears to be the inherent pyramid scheme. Recruiting what should be retail customers and getting them to spend thousands chasing an income opportunity.
If Clear Mood and Arginine Express were available from a supermarket, would you walk in and drop $3000 on a single-purchase? Of course not.
Not having a go at you in particular, but that’s where the marketed income opportunity comes into play.
I have a few friends that made great money off their downline worked their tails off to make this living for themselves, now July 17 they won’t beable to pay their bills, the majority of their income gone.
This is a company making “make it rich” promises to build their company name then pulling the carpet out from under 100,000 families, this is sick.
I’m calling tomorrow canceling my membership I can buy products like this anywhere, I hope they lose their greedy company.
This company has been around for along time. The people who were leaders in this company lost everything also. I built my team up in 5!years of hard work and now it’s gone.
The company did not do this because they wanted to it’s a choice they were forced to do.
If you know anything about MLM then there is always a risk that you will not make money if you don’t work your tail off to earn it. Anyone who put in real effort saw results period. Too bad for the people who are hurting and I pray for their families.
This was something that I believe goes deeper than them just throwing in the towel. This company had too many loving and caring people from the top to bottom to do what just happened because they had other choices.
Anyone truly involved knows I’m right. A lot of people are hurting right now because they know the integrity was always first in Advocare.
This company was a great mlm, my family, 2 daughters,both worked hard and was making a great living with the company.
The plan was a very solid one, with great products.
The griping Ive read is the fact,you didn’t work the plan, I know because I did for a little myself,but didn’t have the personality for it, but thousands did.
Just like any other mlm company, it was belief in the products, and the drive.
I have nothing bad to say about these products or their marketing plan, IT WORKED.
In 13 months my daughters were doing great. Living a life I only dreamed about.
It’s people that suck at it that will always screw up a great mlm plan. You have to work at it PERIOD.
This “working your tail off” you speak of, was it a large non-affiliated retail customer base with you making a retail markup on products, or a large recruited downline?
What makes the MLM opportunity of any other company different from AdvoCare?
Define “work the plan”. Might that be “buy from yourself and teach others to do the same”? Because according to the Advocare lawsuit, “AdvoCare’s own training materials explain that the key to succeeding in AdvoCare is recruiting.”
Nothing except other companies haven’t been busted and audited for genuine retail customers yet.
And if they were audited, due to the inherent flaw in MLMing, very few non-affiliated retail customers would be found. MLMing is MLMing, and the practical definition of the method doesn’t change.
Not going to compare Advocare to others, but I think in this day and age the push is definitely moving more towards a DTC (direct to consumer) model that primarily compensates the first level.
I think the companies that will survive/thrive in this are ones that primarily compensate your first level, intentionally create a space for retail / affiliate sales (with a large focus on those customers), and a much smaller focus on team compensation.
Times are changing. The mlm model has been great to many people, providing opportunities and lower barriers to entry than alot of physical businesses, but companies need to adapt.
1) Find a product that fits a niche and the price point is relevant and supported compared to the retail industry / amazon style sales (without selling via amazon)
2) Compensate the front line primarily for the work, with the secondary / team compensation being small / minor so as not to “stack the top”.
If you can show 70-80-90% of your sales are primarily retail / retail-like your company will be fine and not under the gun with the FTC.
I have been a distributor at Advocare since early 2000, however I didn’t receive the email everyone is talking about making distributors aware of the changes…. I READ IT ON THE INTERNET?!?
That speaks volumes about their loyalty when the going gets tough!!!
I hope all the other legal pyramid schemes get caught up in this too. They sell people a dream with the only way to get to the top is to recruit others with the same bullcrap lie they fell for before.
They have requirements to be able to qualify to get paid like earning recruits every month. The personal volume requirements mean those downliners at the bottom just recruited by them end up paying out of pocket monthly going deeper into the hole they were trying to get out of before. The ones at the top got sit there profiting off them.
It’s hard to sell mlm crap. Always way too expensive and if you do buy it you get the recruitment pitch cringe.
Isn’t this the case with every single mlm? So are they all going to a direct to consumer model now?
Most MLM companies don’t disclose their retail revenue ratio. Read into that how you want.
I quit a different MLM years ago. Only a handful of people were “living the dream” on the backs of people who were taking out credit cards to purchase way more product than they could ever use and actually getting in debt.
Interesting comment on BFH. Not only do you not own your own business in MLM, backdoor deals abound. MLM is a scuzzy “business” method folks. You play with fire, you get burned.
I am not a bit sad about this.
All of these direct sale companies are difficult to do yes and you have to have the heart to build your team up, but listen, you are just another notch on the leaders belts.
I have been the best and biggest and once I stop gaining money for your upper leads you become nothing to them. They leave you behind and you then lose your faith and drive.
I loved spark!! But I lost weight because I worked my ass off in the gym and I ate right.
It wasn’t the products that made me lose my weight. Or the so said support they give you, it was me.
Advocare was in time going to fizzle out, they all do. Something bigger and better always takes over.
To all you “millionaires” it’s your own fault you bought that huge house, taken all those vacations, spoiled your kids with cars, clothes, the best of everything and now they have no clue how to even live for themselves.
That has nothing to do with how Advocare paid you. You put your own selves there. Pull your pants up and get a job instead of living off your down line!
Sorry for the rant but man stop blaming direct sale companies they are only making the profits off us who keep believing they will always support you and your business.
Like all big companies there is always something. Whether the company sales to another and you lose your job or they have to down size. It happens to everyone.
You should always save for the worst and not live high on the mountain all the time.
Seems to me that the ones doing the bitchin’ here aren’t with Advocare or even in MLM at all.
If you haven’t walked the walk, shut the hell up.
These folks are hurting and they don’t need you piling on.
Bottom line to me, people will be affected by this. Whether they knew what they were getting into or not, it never makes me happy to see others invest and fail. Especially after having come to earn and believe that income would be residual.
Fervent prayers and best wishes to the distributors that took losses building it how they were told. Hats off to those that were financially literate and developed leadership skills to sustain them through this time of tragedy.
I hope other DS companies are taking hard looks at their practices and ensuring they are training and protecting their distributors/members from similar scenarios.
There are many people of good character in the industry.
My heart goes out to those hurting.
Welcome to the future of MLM. This trend is not going away. They will either be forced to shut down, or to change their business model such that they will be out of business.
Retail sales represent only a small fraction of total sales. They are pyramid schemes operating in plain site.
Why don’t you offer your expertise to the ignorant heads of the FTC, and let them know how stupid they are to not realize the “inherent flaw in MLMing”. Because for some reason, your opinion is not the legal stance.
While you’re at it, why not call your local Congress, and let them know your expertise in the law, and how your understanding of the “inherent flaw in MLMing” is much greater than theirs … that they and the FTC are so ignorant and wrong about?
Since you are one who is apparently in the know, compared to all the other ignorant people falling for network marketing …
In your great wisdom, when do you predict that Amway, Shaklee, Herbalife, Mary Kay, and Avon, and Fuller Brush are “going to fizzle out” because “they all do.”?
Has anybody thought that there is the possibility that something fishy is happening here?
What is happening is not common, there is not FTC letter anywhere, the procedure seems fishy,
Several companies have been under the FTC scrutiny in the past, Amway, NuSkin, Herbalife, Mary Kay, etc and they survived…again, I say something abnormal is happening here.
No court files, not prosecutors, no defenses, not even a comment. There is no any precedent to anything like that,
I’d agree without anything from the FTC side it does seem suspicious.
Regulators don’t comment on cases though (even if there is no case), so we’re kinda stuck.
KT recently stated he’s heard of Advocare affiliates being threatened for attempting to leave with their downlines.
Seems kinda suss on AdvoCare’s part. Surely they’d realize canning the MLM opportunity would result in the majority of their affiliates leaving.
They alone know how many of them were engaged in retail sales. All we can go on is the supposed FTC action, which would mean close to none.
Not all MLMs are a pyramid scheme. It’s should always be about the product first.
Nothing wrong with a distributor format like Avon or Mary Kay, but the product sales come first!
Interesting comment since Mary Kay does NOT track retail sales to end users. Wonder where you’re getting your information from Harvey?
D to C has the ability to lower costs if done right. Move away from the pure mlm model (ie crazy comp plan, hard to understand) and go to something that pays for personal sales, with perhaps commission 1 person past that (ie XX on personal sales, and the person who introduced you gets a small percentage as well).
Focus on the retail sales (ie, party plan / online / belly to belly) at retail pricing and you should be fine.
While also bringing the overall comp down you can bring your pricing down and work more like the affiliate model and level social media / instagram.
Seems like a no brainer to me.