Advocare ordered to pay $150 million to consumers for pyramid scheme
AdvoCare must give 100% refund on any unused products
SAN ANTONIO – The Federal Trade Commission announced Wednesday that Texas-based AdvoCare International will have to pay $150 million in refunds to consumers.
AdvoCare is banned from all future multi-level marketing and must put an immediate end to the company's pyramid scheme, according to the FTC.
It was determined that AdvoCare was a pyramid scheme after the FTC found it rewarded distributors for recruiting other distributors, not for selling products.
"Legitimate businesses make money selling products and services, not by recruiting. The drive to recruit, especially when coupled with deceptive and inflated income claims, is the hallmark of an illegal pyramid," said Andrew Smith, director of the Bureau of Consumer Protection.
People would pay thousands of dollars for inventory to become distributors, but the FTC alleges 72.3% of distributors earned between one cent and $250.
A federal court ruling requires AdvoCare former CEO Brian Connolly to notify all distributors of the lawsuit and the settlement.
If distributors had significant losses pursuing their AdvoCare business, they might get some of their money back from the FTC, and if a distributor decides to stop participating, AdvoCare must give a 100% refund on any unused products.
"Two of AdvoCare's top promoters also have settled with the FTC for $4 million, most of which is suspended, based upon their inability to pay. They, too, are banned from multi-level marketing. The FTC's case against two other leading AdvoCare promoters is continuing," according to the FTC.
If you're tempted by a business opportunity that requires you to sell products to people you know, check the FTC guidelines for spotting a pyramid scheme before continuing.
To file a complaint with the FTC, click here.
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