AdvoCare's $150M FTC settlement — a pyramid scheme that paid out almost nothing

AdvoCare was a Texas-based multi-level marketer selling health and wellness products, most visibly its Spark energy drink, through a network of hundreds of thousands of distributors. The company pitched its business opportunity at conferences, webinars, conference calls, podcasts, social media posts, videos and print materials, promising ordinary people a 'life-changing financial solution' that would let them 'earn unlimited income, attain financial freedom, and quit their regular job.'

The FTC said the income claims were the engine of an illegal pyramid scheme. A distributor paid $59 to join and spent $1,200 to $2,400 on product to reach 'advisor' status, and compensation was then earned by recruiting more advisors who bought more product — not by selling to customers. The real earnings told the story: in 2016, 72.3% of AdvoCare distributors earned no compensation at all, another 18% earned between one cent and $250, and the annual distribution was nearly identical from 2012 through 2015. CBS reported that more than 90% of US distributors earned under $250 a year.

In October 2019 AdvoCare settled with the FTC for $150 million and agreed to be permanently banned from multi-level marketing, as were former CEO Brian Connolly and two top promoters, Carlton and Lisa Hardman, who also faced a $4 million judgment. The company denied the pyramid-scheme charge and said it shelved the MLM model. The settlement echoed the FTC's 2016 $200 million deal with Herbalife, which the agency had declined to call a pyramid scheme outright — this time it did.