(From the industry’s perspective, were the penalties draconian? Absolutely. It could wring its hands or treat this as a teachable moment for its future. As they say, a new reality, and “it is what it is.” “Our first priority is not to prepare for a FTC confrontation, but rather to use our best efforts to stay off their radar in the first place.” Serious? To paraphrase a general counsel of one of the industry’s largest MLM companies: Therefore, the new quasi legal standards were set by FTC leverage, without firing a litigation shot, rather than by actual case law. For better or worse, the FTC accomplished its objectives in all three cases without taking the matter to formal adjudication. For AdvoCare, industry speculation about the unstated jeopardy of owners and board members, as well as existential threat to the business. For Herbalife, the overriding need to address its position as a publicly traded company. And the FTC accomplished its goals, without litigation, but rather the sheer leverage it had over the companies and individuals based on their unique factual situation. This was the third major DSA member company hit by the FTC in less than 5 years.
DSA Legal and Regulatory Conference.Ī pyrrhic victory for AdvoCare, whose marketing program and opportunity for thousands of distributors was totally gutted. no such admission had been given (although it had stipulated to the veracity of the factual allegations in the Complaint), prompting the Director of the FTC Bureau of Consumer Protection to later apologize at the Washington, D.C. To this day, AdvoCare denies it operated as a pyramid.”Īctually, AdvoCare was technically right. AdvoCare forcefully rebutted this charge in its discussions with the FTC. “The FTC incorrectly stated in a press conference that AdvoCare had admitted to operating as a pyramid. “Foul!,” called AdvoCare in an immediate responsive press release: Sending an underlined message across the bow of the direct selling industry, the FTC online blog labeled the case as “the landmark settlement.” “It is significant that we have a large and well known multilevel marketing company that is admitting that it operated as a pyramid… “ The settlement came with a $150m fine, life time MLM bans for AdvoCare’s CEO and top distributors, and the FTC spiked the ball in the end zone, noting at its press conference, The FTC announced a stipulated judgment in which AdvoCare was proclaimed online and in newspapers across the country as a pernicious pyramid scheme that had swindled hundreds of thousands. ( World of Direct Selling).Īnd then, in October 2019, a cacophony, as the other shoe dropped. Elliot said, “the world will end in a whimper, not a bang.” For a detailed article on the May withdrawal and ramifications, see AdvoCare Abandons MLM: Uncertainty Returns to Direct Selling. And the industry asked: What is this all about? It may be true, as T.S. It indicated that it was doing so, and “had no choice,” after confidential talks with the FTC. In May, 2019, 26 year old leading direct selling company, AdvoCare, announced that it would exit MLM in favor of a one level direct sales model. It was like the calm of quiet uncertainty before the storm. (First Published in World of Direct Selling) AdvoCare: A Teachable Moment for Direct Selling
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