FTC Fines AdvoCare $150 Million For Running A Pyramid Scheme
DALLAS (CBSDFW.COM) - On the front page of its website, Dallas Cowboy Jason Witten is quoted saying AdvoCare is "perfect for athletes."
New Orlean Saints Quarterback Drew Brees is listed as the "National Spokesperson."
Both Witten and Brees are among the many athletes endorsing the Plano-based nutritional supplement company.
But, at a national news conference in Dallas on Wednesday, the Federal Trade Commission announced that many of AdvoCare's distributors are not endorsing the company's business practices.
"To earn the most lucrative rewards, distributers had to make large product purchases and require others to do the same," said Andrew Smith, FTC Director of the Bureau of Consumer Affairs.
The FTC said AdvoCare was operating an illegal pyramid scheme focused on recruiting people to buy and sell products rather than focused on retail sells. The FTC said distributors complained that they were told they could "...earn unlimited income, attain financial freedom and quit their regular job(s)."
Smith says hundreds of thousands of Texas distributors earned no money or lost money. "The business model itself, the recruiting recruiters who recruit recruiters, is one that is particularly susceptible to consumer loss," said Smith
On Wednesday, business appeared as usual outside the headquarters in Plano. AdvoCare agreed to stop multi-level marketing but will continue selling products. It will also pay $150 million to consumers who lost money.
After making several attempts, the I-Team was unable to reach Jason Witten for comment.
A spokesperson for FC Dallas, which is a longtime partner of AdvoCare, told the I-Team it "has nothing to say at this time."
AdvoCare released a statement on their website that said:
AdvoCare wishes to correct statements made by the FTC in their News Conference in Dallas, Texas on October 2, 2019:
- The FTC incorrectly stated in a press conference that AdvoCare had admitted to operating as a pyramid. This is categorically false. AdvoCare forcefully rebutted this charge in its discussions with the FTC. To this day, AdvoCare denies it operated as a pyramid.
- Additionally, the FTC incorrectly stated that AdvoCare is considering additional sales channels such as GNC, Walmart or others. This is absolutely not true as we are not considering retail channels and remain committed to our distributors and customers.