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I told myself when I started blogging about Advocare I would refrain from trying to explain the difference between a pyramid scheme, and Multi Level Marketing (MLM). The recent move by the Federal Trade Commission (FTC) to shutdown the MLM Company Vemma has left me with questions that need to be answered. For those of you not familiar with Vemma you might want to take a few minutes to visit their website. They are similar, if not identical to Advocare. Unfortunately I can not go straight into comparing the two companies without making sure everyone has an idea of what is going on. According to the FTC press release, Vemma was temporarily shutdown until a court of law decides they are in fact guilty of the illegal acts they have been accused of. What are they being accused of?
It appears that the FTC has reason to believe Vemma is in violation of multiple statutes. One of the main accusations is that Vemma is running a pyramid scheme. Here it is, the point where I try to explain what exactly a pyramid scheme is. Well, better yet, let me give you a quote from the declaration of Stacie Bosley, Ph.D. which is being used by the FTC against Vemma. If you go to this link, and scroll down to number 17 you will find the following definition:
"From a general economic perspective, a pyramid scheme exists when a compensation plan is structured to create a perpetual recruitment chain that dooms the vast majority of its participants to financial loss. It requires ongoing recruitment as new entrants must recruit others in order to cover their own personal investment. When a new participant recruits others, all individuals who join become part of the "downline," while those above a participant are considered the "upline." Downline activity (recruitment and associated payments/purchases) is needed in order to cover participation costs. While the compensation plan details of each pyramid may vary, the essence of the system is that earnings are dependent on the ongoing ability of a participant to recruit others into the same system. By design, this creates a system where the vast majority of participants cannot recoup their personal investment. As long as recruitment continues, membership grows at an exponential rate. At any moment in time, the most recent entrants make up the vast majority of membership. This majority is the very group that is in a position of financial loss, as they have not acquired the downline recruits necessary to offset personal investments By nature of the structure itself, a pyramid scheme is a money‐transfer scheme that siphons money from later entrants to compensate earlier entrants, delivering easily foreseen losses (from a structural perspective) to the vast majority of participants".
If you go to the U.S Securities and Exchange Commission website I just provided, maybe you will have a better understanding. See, pyramid schemes started out with just money transfers, and when the government shut those scams down they evolved into providing a cover-up product. To address the problem of getting too big, companies started using craftier control mechanisms to ensure the pyramid does not collapse. Yes, that was an intuitive conjecture, but a viable one that I will address later. Vemma is also accused of using false and misleading statements directed towards college students. Apparently they used false promises of wealth to lure in students via company website, social media, and marketing materials. So let me sum this up quickly before I get to comparing Advocare with Vemma.
The FTC shutdown Vemma (maybe temporary) because they believe they are pushing the recruiting more than the product, and are using deceptive business practices to lure in college students and young adults. Basically the FTC wants Vemma to use a disclaimer informing everyone, the fact, most people that participate will not make money. Oh, did anyone seem to notice that the FTC seemed to repeat itself in that press release. Well, if you go and read the actual injunction filed against Vemma (here) you will notice the FTC website seemed to be complicating the claims. The injunction clearly stated that Vemma is being accused of:
a) Running a pyramid scheme.
b) False claims of substantial earnings without showing proof of such earnings.
c) Claiming that individuals have earned substantial income participating in the Vemma program, and failing to disclose or disclose adequately the fact that most participants will not make money. (Really?)
d) Providing deceptive promotional material to affiliates to be used in recruiting.
Now, if you go to this website you might get a better idea of what the preliminary injunction is about. The information is coming straight from the attorney that has been hired to represent Vemma. I have to thank Advo-Truth Facebook for the valuable information. Let me remind everyone, we really do not know what evidence was used by the FTC to support the injunction. With that, the injunction can lead to changes in the business model versus a complete shutdown. Unfortunately we are going to have to wait until September to find out. But until then I can have a little fun comparing and contrasting the two companies Advocare and Vemma. I have to remind everyone that I can only review what I can see using the two companies websites, and maybe some external sources if applicable. If you take a look at the Vemma website you will notice the FTC has temporarily suspended all business, but you can still read all the material. So let’s start with the business model.
Vemma uses language that encourages people to join. If you click here you will notice Vemma identifies their product as a way of improving your health and a solid business opportunity. With that they also indicate their business opportunity can help anyone obtain products for free, create a side income, get out of dept, or trade in your 9-5 hours. At the bottom of just about every page you will find a bunch of disclaimers similar to what you see on Advocare website. If you click here you will see that Advocares business opportunity statement really is not all that different. They encourage people to join using the following statement:
"AdvoCare offers a business opportunity that empowers individuals to explore their ultimate potential. Many families across America are discovering freedom by starting their own AdvoCare business. People from all walks of life are having success with AdvoCare, enjoying time and financial freedom, and making a difference along the way."
It sounds to me like Advocare is implying that their product is a money maker, without adding the little disclaimer icon at the end of that statement. Have no fear, I noticed Vemma did not provide one either. But, you will notice that Advocare added a little extra to that particular page. At the bottom we are offered testimonials and total earnings from the time those particular distributors joined to the current date. If you are not blind or vision impaired you would notice the disclaimer symbol at the end of each earning amount. Correct me if I am wrong, but Vemma is being prosecuted for failing to disclose or disclose "adequately" the "fact" most participants will not make money. This is part of the Advocare disclaimer:
" Earnings depend on a number of factors, including your individual effort and the area in which you live. The results described above are substantially in excess of the average results achieved by all Distributors during the same time period. †" "
Where in that disclaimer does it tell the reader, the fact, over eighty-five percent of the people that join will earn $1000 dollars or less a year. That amount provided does not include the reduction of monthly personal purchases or samples given away for free. As a matter of fact 113 distributors made $250,000 in 2014 according to their income statement. Probably have a better chance of winning the lottery. Yes that was another one of my intuitive conjectures. Where is the Advocare income disclosure statement? You can find it here. If you read that statement really good you will notice that Advocare is in my opinion being deceptive. You will notice that the income statement indicates that Advocare had 517,666 distributors in 2014. The average payment chart at the bottom of the page shows the income of 154,819 of those distributors. Does that mean that the remaining 362,847 distributors made nothing? That is exactly what it means. If you read the fine print, there are only 154,819 active distributors. If you go back to the Advocare website you will notice they brag about having over 500,000 distributors (here). Should that statement not read they have grown to 154,819 active distributors? Most of which earn anywhere from $1 to $1000, not including deductions for personal cost. Let me give you an idea of what that means. If you buy just the meal replacement shake as a distributor you will pay around $36 and you get 12 packs. It will cost you around $72 for just 24 days. If you have a partner it is going to cost you $144 a month. Now let’s revisit their income statement (here). Advocare is not saying that the 362,847 distributors are not buying the product, or that they are not making money. They are telling us they did not receive a check from Advocare. The income chart provided clearly indicates that money earned from retail sales is not included in the chart provided. So what exactly does that mean? How are those distributors earning the money from Advocare if not from sales? Is it from a combination of recruiting and your personal purchases? Is it from the recruitment process? If you are only making money from recruiting people, and buying the product, would that not fall within the scope of the Federal Trade Commissions definition of a pyramid scheme? I will address the earning capabilities in a little bit.
Vemma provides an income statement on their website and you can find it here. From what I can tell they took the statement format right from the Advocare playbook with similar form and wording. Vemma does not tell us how many affiliates are active like Advocare, or the number of affiliates that have earned $1-$1000. I personally do not see that as relevant. I did notice that Vemma's income statement includes educational information that informs affiliates about the acceptable ways to advertise income claims. If you take your time and read their disclaimer you will notice the following statement:
" A participant for the purpose of this estimate, includes all participants who make a sale of Vemma products within the one year period. "
Correct me if I am wrong, but Vemma's chart seems to be indicating that the sale of the product is just as important as recruiting, and Advocare seems to be more concerned with the recruiting and purchasing of the product. I am having trouble seeing why the FTC did not throw an injunction at Advocare.
So far I am not seeing a big difference between the two companies besides the aforementioned discrepancy found on the earning statements. Well, I should note that Advocare seems to be utilizing success testimonials from income earners in the .21-.03 percent income range on their website. If you did not notice, that means that less than one half percent of the distributors can earn that kind of money. Is that not deceptive behavior? Using testimonies from people in the one percent bracket, knowing that over ninety percent of the distributors will not even come close to that, is deceptive. What about the products and the science that backs them.
Anyone that has read my previous article titled "Advocare Review" knows that the company does not offer any viable studies to read on their website. Why not? Many people question the location of these studies and Advocare has not provided them on their website to date. Vemma has their human studies located on their website, you can find them here. Advocare claims to use recent science, but does not provide the resources to back that claim. Is that not a violation of FTC? Before anyone gets upset, I am aware that neither Vemma nor Advocare is required to provide any research. But, if the company is referring to the studies to validate the efficacy of the product, they should provide them on their website so we do not have to search for them. But I am not going to go any further down that road. Is it about the sale of the product, or the recruiting of new distributors or affiliates that is relevant? Well, let’s see if we can find some information pertaining to procedures and regulations shall we.
If you want to read Vemma's affiliates terms and conditions agreement you can find it on their website here. If you want to read the Advocare policy you can find it here. After reading both of the policies it is apparent to me that both companies require all new members to sign on with a distributor or affiliate. Vemma does allow you to sign up through the company, but I am certain you would still be listed under an affiliate. Advocare seems to be the only one that requires a person to purchase a package to become a distributor, but if you want to make money with Vemma they too encourage you to purchase one of their affiliate packages (here). Now, the link I provided does not provide the packages themselves, it just supports my claim. So it is apparent that each company requires the purchase of products if you want to enter the business. But the real question is how important is the sale of the product, and what is the difference between the two companies from a business standpoint. Remember, Vemma is accused of being a pyramid scheme. Meaning they are basing their compensation plan payments primarily on the recruiting of new affiliates and not on the sale of the product.
From a business standpoint, both companies provide a website and promotional tools, rules governing product sales, and procedures that have to be followed if a distributor or affiliate wants to continue to be in the business. One could probably question the process, used by both, to govern such rules and regulations. But we will leave that for another day. So, let’s take a look at the Advocare process.
According to Advocare there are four ways to get involved. You can just purchase the product from a distributor, become a wholesale distributor at 20% discount, increase discount up to 40% by sharing with friends and family (probably by getting them to become a distributor), and by becoming an advisor. What exactly does that mean? Without trying to get too fancy, I am going to try and explain this process although you can go and read it for yourself here and here. One of those links will take you to the Advocare website and the other will take you to their policies and procedures. So, if you just want to purchase the product you will have to locate a distributor. But, if you plan on making money you will have to buy into the business and start selling the product.
But hold on a second. Most of Advocares procedures do not put emphasis on the selling of the product when you first join, although they do not discourage it either. But, if you plan on getting paid from Advocare you will have to earn a commission. How do you earn commission? By recruiting other people and have them do the same thing you are doing. Now, some people might intuitively think that you would earn whole sale commission from the sale of your downline distributors’ personal sales. I personally do not see how that would be possible. Advocare would not know about personal sales until a distributor reaches the point she/he is close to being eligible for overrides and bonuses. This might be a little difficult but let me try to explain. When a distributor is close to earning overrides or bonuses, it is at that point where the distributor has to provide at least five customers and their contact information. The information may or may not be utilized by Advocare, and to me is almost irrelevant. Other than that, Advocare really would have no clue how much money each distributor is making from direct sales, or how much of the product is actually being sold as they do not maintain those records. Advocare has instilled rules and regulations that ensure the necessity of recruitment to earn money from Advocare itself. I would like to use the legal”but for" argument here. But for the enrollment of a distributor, earning commission from Advocare would not happen.
Without going any further into their money making procedures it is apparent that commissions are based on recruiting and sales by the distributor is really not necessary to continue making money. The more people you recruit, the more commission you can make. I do want to add that Advocare does not allow the stock piling of products or excessive recruitment of distributors. You can find that in section II 1.1 of the compensation plan. Advocare counts everything purchased as personal volume or group volume. Personal volume is the total of your purchases, retail customers, and your downline distributors’ purchases. Everything that your distributors purchase will result in a commission for you, even if your distributors chose not to sell the product. If you want to become an advisor you have to have a personal group volume (p/gv) of $3,000 in one to three consecutive pay periods. Of that $3,000, $500 must be from your personal volume which can include your downline personal volume. I think you get the point. Let me just sum it up a little bit, even though I really did not cover the whole compensation plan.
You can become a distributor just to buy the products for yourself, or to sell. But, to get paid from Advocare and be considered on their income statement you have to recruit, period. These are the only means to make money from Advocare:
•
Retail Commissions
•
Wholesale Commissions
•
Overrides
•
Leadership Bonuses
You will notice they do not take into consideration the sale of the product. It is about buying into the business, and getting others to do the same thing. Listen, I get it. Many people want to argue that this is a legitimate means to make money. I argue that if you want to sell the product that is your choice, but it is seriously overpriced which makes it really hard to sell. With that, if you chose to just sell, Advocare has seriously restricted your methods to do so, and has set the price at a rate that would allow distributors and advisors to make money from your sale. That is how it works, it’s a pyramid, and everything you do affects someone else. If you just sell, you will still help your distributor, but you will never make money from Advocare if you do not recruit a distributor of your own. Even then, you still may not make all that much money. Advocare has restricted where and how you can sell the product to make it difficult for you to survive just on selling. That is not to say that some of you can not realize a decent extra income from just selling, but I would bet it will be difficult. I would also like to say that Advocare also promotes automatic shipments and if you want to learn how, go to the following link (here). If you go back to the video link I provided pertaining to Vemma's attorney. You will hear him talk about autoship, and how the FTC is using that as one of the means to identify Vemma as a pyramid scheme. If you click here you will learn how Advocare teaches people that facts do not sell, stories do. If you want more proof that this company is all about promoting the importance of getting to advisor "fast", and not selling, just watch the videos found here. I could probably keep going but I will leave it there. Let me add this little fact in here while I am at it. All distributors are required to pay a renewal fee of $50 every year. Advocare stands to earn 7,740,950 a year just from renewing distributorships. I did the math using just the active distributors recognized by Advocare. If I do the math using the 517,666 distributors the company could earn 25,883,300. That is a lot of money. So let’s take at look at how we can make some money with Vemma shall we.
I know this is getting a little bit lengthy so I will do my best to shorten this up a little bit, and get to the point. To get started with Vemma you first become an affiliate and then they provide you with a website. You can learn everything you need to know about making money with Vemma here. They have a slightly different but similar structure as Advocare. To make money from Vemma you have to create a left team and a right team, which consist of two personally enrolled customers. In order to get paid you have to have 360 points on one team, 180 points on the other team. But I am not going to go get crazy and bore you with all the other details. It is obvious that both of these companies focus primarily on the recruiting of other people and repeating to make money. Not so concerned with the selling of the product.
Remember in the beginning I said that pyramid schemes have evolved to ensure that they will survive, and new techniques have been instilled to help prevent from getting too big and collapsing. Well let me explain what I was thinking. Both companies have a product, because without one, they would definitely be taken down. The product is aimed towards the new health trend. With that, they have instilled rules and regulations that allow them to dictate and control the product, and the person selling it. They can be as big or small as they chose to be. The procedures and policies have guidelines for each participant to follow, and if you do not play by the rules, you could find yourself out of business. They can pick and chose when to enforce rules and regulations. If the business is getting too big, they can control the number of distributors or affiliates. Advocare put a warning in their procedures to ensure members do not concentrate on stockpiling new distributors. Or is it for another reason? So let’s look at the FTC charges against Vemma again and see if they parallel Advocare. Because Vemma is already under the gun, I only need to compare Advocare to the same charges.
1. Pyramid Scheme
Click here to see what the New York Government thinks about pyramid schemes.
This is the problem for me. Both companies focus their attention on recruiting and investment. To be considered a pyramid scheme, even with a good product; recruiting and investment are the primary focus. To be part of Advocare or Vemma business you are required to invest in a starter package, I like to call that an investment. No big deal right? That is what I would do if I wanted to open a store. Both companies require you to recruit someone before you can earn money. The income statements support that fact because sales are not included in the calculations of Advocare. That means that the people recruited will be subjected to an initial investment too. Well, except for Vemma's income disclosure. They seem to be indicating that their income statement includes everyone that has made a sale of Vemma products. But I am uncertain as to how they monitor such sales unless they require personal information of all sales, or they are not telling the truth.
This is the bottom line, distributors and affiliates earn more money if they can get others to join and invest. All the money or earnings people receive from Advocare and Vemma seem to be from recruiting and initial investments, and not from sales of the product. Both companies, especially Advocare, promote recruiting first, and barely ever talk about selling products in their teaching videos. Just go back to the link and watch them again. I know, many of you are thinking, I do not do that. Well, unfortunately there are many people that do. Advocare really pushes people to buy into the advisor package with a discount. The distributor can buy their own way into advisor level for around $2100 bucks. The videos are right here if you skipped over them. That leads me to the next FTC charge.
2. Providing deceptive promotional material to affiliates to be used in recruiting.
I guess we could start off with Advocares video I just provided for you or this new distributor checklist that does not seem to have any of those disclaimer icons notifying distributors of the typical income one should expect. If you click on the link I just provided for you and scroll down to the Get to Advisor section. Under the heading you will see eight reasons why a new distributor would want to go straight to advisor and this is what number six reads:
"Customers want products immediately; it will help you get started faster if you have the products on hand. People don't open retail store fronts without products to sell."
That statement is deceptive and misleading as it would be a clear violation according to section 8.8-4 under unauthorized sales. Advocare does not want you making money that way and it is a violation to knowingly sell to a person you know, or should have known, will sell the product in a retail store. If that is not deceptive enough then read the Advocare prerequisites to their success system. One of the prerequisites is to introduce the future prospect to an Advocare product via free product. Even the mixer party suggests sparking people up prior to beginning the party. They do not provide income disclaimers within that particular marketing tool warning of almost certain failure.
Let’s think about it for a minute. If you could pay an enrollment fee to become a wholesaler or distributor ($79 plus tax and shipping) to get a 20- 40% discount on your purchases, I think a reasonable person would go that route instead of paying full price for the product. But that was an intuitive conjecture. Is it not deceitful to throw around the word success without providing some type of disclaimer as to what success means to Advocare. I have a really good idea from their website what success means to them from the success stories found here. There are no success stories about losing weight using the product, or making a couple hundred dollars. Oh, by the way, even wholesalers have to pay the $50 dollar yearly renewal (here). Are these wholesale "customers" actually counted as distributors, although the intent is for personal use? They order their own products and are still referred to as customers. I am almost certain the person that enrolled him/her will benefit from each purchase. Go to the link I just provided and you will see that a wholesale customer has the same options as a distributor. So why use deceptive language? Just call her/him a wholesale distributor all the time.
What about all the unrealistic financial success stories used by Advocare on their website? Disclaimer or no disclaimer, it is misleading and deceptive when they know, or should know, 99% of the people that join will not even come close to that income. Where is the income statement found on that page?
That brings me to the other two charges: Making false claims of substantial earnings without showing proof of such earnings, and making such claims without the financial disclaimer discussed many times in this article.
Where on this page can I find the proof that those people made that much money? We see the disclaimer, barely. But not one bit of proof that either one of them really made that much money or how they made it. The Huckabee family claims to have made over $200,000. Is that after deducting personal purchases, and other business expenses such as giving away products to lure someone in? Or is that amount just the commission earned? See, I do not know anything about how they reached this personal goal. According to the FTC they are supposed to provide that information, right?
I could keep going, showing you all the deceitful language used by Advocare and Vemma to lure people into their product. But I believe I have reached the point of redundancy. So allow me these final words.
The important question is the one pertaining to a pyramid scheme. That is the charge that will bring them completely down and close their doors for good. Do I believe they are a pyramid scheme? Well, answer these questions, and you will realize that answer for yourself. Does Advocare or Vemma pay you money if you only sell? Do you have to invest in the company to make money? Do you only get paid by Vemma or Advocare if you recruit someone? If you answered yes to most of them, there is a high possibility that someone is pulling the wool over your eyes.
Advocare uses just as much deception if not more than Vemma, and both companies are almost identical when it comes right down to it. Yes, they both have a product that could sell very well in a store front or on Amazon.com. Both companies could still do very well just opening a bunch of little stores all over the world. But that is not what they want. They want to earn millions from first time distributors, and renewing distributors. I am not even sure if Vemma requires a renewal fee. Could you imagine if all of the 517,666 distributors decided to buy into the advisor package? The company could earn up to 1,087,098,600. Over a billion dollars just by getting you to bite on that one deal. Alright, that does not deduct any expenses, but you get the idea.
There are many deceptive ways a distributor from Advocare and Vemma can bypass the need to sell. You can purchase some of the product for your own use, and then deflect the rest of your $500 personal volume required to meet Advocares commission standards to your downline, and pretend you sold some to a friend with the intent to recruit. You know, give it to them, but use their name as the customer without requiring them to actually give you money.
Alright, I have rambled enough. So, here is the big question. Did I find any serious differences between Advocare and Vemma? NO!
Absolutely not is my answer. If I am wrong, please guide me to the area that I missed. I know there was a lot to cover, and I am human. But, both companies require an investment, and recruitment prior to realizing any income. All money paid is from commissions not selling. Yes, they both do very little encouraging to sell the product, and someone could make a decent extra income if you just sell. But you would run out of people to sell to because at some point the pyramid gets big. That is why they control that aspect of your business. Not to mention you will run out of people to sell it to at the higher price suggested by Advocare. Yes I used the word pyramid, because that is what you are involved in. I could have used multi level marketing, but the business you are building, will look more like a pyramid when you’re done. The people at the top, those are the ones that will be holding the money. Please do not misunderstand what I am saying. I know many of you truly believe in the Advocare and Vemma products, and I am sure some of them do taste good. But the products really are not being questioned here, and that should concern many of you multi level marketers. The people joining these companies are not to blame, and are not ignorant or stupid by any means. The people that are running these companies are very intelligent and know how to word things to make their business plan work, and lure people in. If the Vemma Company does end up closing their doors, I am almost certain that Advocare will be close behind.
As usual, please feel free to give me your thoughts, but please be respectful. Thank you everyone that spent the time reading this long and probably redundant article. Again, I would like to thank Advo-Truth for all the valuable information.
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I told myself when I started blogging about Advocare I would refrain from trying to explain the difference between a pyramid scheme, and Multi Level Marketing (MLM). The recent move by the Federal Trade Commission (FTC) to shutdown the MLM Company Vemma has left me with questions that need to be answered. For those of you not familiar with Vemma you might want to take a few minutes to visit their website. They are similar, if not identical to Advocare. Unfortunately I can not go straight into comparing the two companies without making sure everyone has an idea of what is going on. According to the FTC press release, Vemma was temporarily shutdown until a court of law decides they are in fact guilty of the illegal acts they have been accused of. What are they being accused of?
It appears that the FTC has reason to believe Vemma is in violation of multiple statutes. One of the main accusations is that Vemma is running a pyramid scheme. Here it is, the point where I try to explain what exactly a pyramid scheme is. Well, better yet, let me give you a quote from the declaration of Stacie Bosley, Ph.D. which is being used by the FTC against Vemma. If you go to this link, and scroll down to number 17 you will find the following definition:
"From a general economic perspective, a pyramid scheme exists when a compensation plan is structured to create a perpetual recruitment chain that dooms the vast majority of its participants to financial loss. It requires ongoing recruitment as new entrants must recruit others in order to cover their own personal investment. When a new participant recruits others, all individuals who join become part of the "downline," while those above a participant are considered the "upline." Downline activity (recruitment and associated payments/purchases) is needed in order to cover participation costs. While the compensation plan details of each pyramid may vary, the essence of the system is that earnings are dependent on the ongoing ability of a participant to recruit others into the same system. By design, this creates a system where the vast majority of participants cannot recoup their personal investment. As long as recruitment continues, membership grows at an exponential rate. At any moment in time, the most recent entrants make up the vast majority of membership. This majority is the very group that is in a position of financial loss, as they have not acquired the downline recruits necessary to offset personal investments By nature of the structure itself, a pyramid scheme is a money‐transfer scheme that siphons money from later entrants to compensate earlier entrants, delivering easily foreseen losses (from a structural perspective) to the vast majority of participants".
If you go to the U.S Securities and Exchange Commission website I just provided, maybe you will have a better understanding. See, pyramid schemes started out with just money transfers, and when the government shut those scams down they evolved into providing a cover-up product. To address the problem of getting too big, companies started using craftier control mechanisms to ensure the pyramid does not collapse. Yes, that was an intuitive conjecture, but a viable one that I will address later. Vemma is also accused of using false and misleading statements directed towards college students. Apparently they used false promises of wealth to lure in students via company website, social media, and marketing materials. So let me sum this up quickly before I get to comparing Advocare with Vemma.
The FTC shutdown Vemma (maybe temporary) because they believe they are pushing the recruiting more than the product, and are using deceptive business practices to lure in college students and young adults. Basically the FTC wants Vemma to use a disclaimer informing everyone, the fact, most people that participate will not make money. Oh, did anyone seem to notice that the FTC seemed to repeat itself in that press release. Well, if you go and read the actual injunction filed against Vemma (here) you will notice the FTC website seemed to be complicating the claims. The injunction clearly stated that Vemma is being accused of:
a) Running a pyramid scheme.
b) False claims of substantial earnings without showing proof of such earnings.
c) Claiming that individuals have earned substantial income participating in the Vemma program, and failing to disclose or disclose adequately the fact that most participants will not make money. (Really?)
d) Providing deceptive promotional material to affiliates to be used in recruiting.
Now, if you go to this website you might get a better idea of what the preliminary injunction is about. The information is coming straight from the attorney that has been hired to represent Vemma. I have to thank Advo-Truth Facebook for the valuable information. Let me remind everyone, we really do not know what evidence was used by the FTC to support the injunction. With that, the injunction can lead to changes in the business model versus a complete shutdown. Unfortunately we are going to have to wait until September to find out. But until then I can have a little fun comparing and contrasting the two companies Advocare and Vemma. I have to remind everyone that I can only review what I can see using the two companies websites, and maybe some external sources if applicable. If you take a look at the Vemma website you will notice the FTC has temporarily suspended all business, but you can still read all the material. So let’s start with the business model.
Vemma uses language that encourages people to join. If you click here you will notice Vemma identifies their product as a way of improving your health and a solid business opportunity. With that they also indicate their business opportunity can help anyone obtain products for free, create a side income, get out of dept, or trade in your 9-5 hours. At the bottom of just about every page you will find a bunch of disclaimers similar to what you see on Advocare website. If you click here you will see that Advocares business opportunity statement really is not all that different. They encourage people to join using the following statement:
"AdvoCare offers a business opportunity that empowers individuals to explore their ultimate potential. Many families across America are discovering freedom by starting their own AdvoCare business. People from all walks of life are having success with AdvoCare, enjoying time and financial freedom, and making a difference along the way."
It sounds to me like Advocare is implying that their product is a money maker, without adding the little disclaimer icon at the end of that statement. Have no fear, I noticed Vemma did not provide one either. But, you will notice that Advocare added a little extra to that particular page. At the bottom we are offered testimonials and total earnings from the time those particular distributors joined to the current date. If you are not blind or vision impaired you would notice the disclaimer symbol at the end of each earning amount. Correct me if I am wrong, but Vemma is being prosecuted for failing to disclose or disclose "adequately" the "fact" most participants will not make money. This is part of the Advocare disclaimer:
" Earnings depend on a number of factors, including your individual effort and the area in which you live. The results described above are substantially in excess of the average results achieved by all Distributors during the same time period. †" "
Where in that disclaimer does it tell the reader, the fact, over eighty-five percent of the people that join will earn $1000 dollars or less a year. That amount provided does not include the reduction of monthly personal purchases or samples given away for free. As a matter of fact 113 distributors made $250,000 in 2014 according to their income statement. Probably have a better chance of winning the lottery. Yes that was another one of my intuitive conjectures. Where is the Advocare income disclosure statement? You can find it here. If you read that statement really good you will notice that Advocare is in my opinion being deceptive. You will notice that the income statement indicates that Advocare had 517,666 distributors in 2014. The average payment chart at the bottom of the page shows the income of 154,819 of those distributors. Does that mean that the remaining 362,847 distributors made nothing? That is exactly what it means. If you read the fine print, there are only 154,819 active distributors. If you go back to the Advocare website you will notice they brag about having over 500,000 distributors (here). Should that statement not read they have grown to 154,819 active distributors? Most of which earn anywhere from $1 to $1000, not including deductions for personal cost. Let me give you an idea of what that means. If you buy just the meal replacement shake as a distributor you will pay around $36 and you get 12 packs. It will cost you around $72 for just 24 days. If you have a partner it is going to cost you $144 a month. Now let’s revisit their income statement (here). Advocare is not saying that the 362,847 distributors are not buying the product, or that they are not making money. They are telling us they did not receive a check from Advocare. The income chart provided clearly indicates that money earned from retail sales is not included in the chart provided. So what exactly does that mean? How are those distributors earning the money from Advocare if not from sales? Is it from a combination of recruiting and your personal purchases? Is it from the recruitment process? If you are only making money from recruiting people, and buying the product, would that not fall within the scope of the Federal Trade Commissions definition of a pyramid scheme? I will address the earning capabilities in a little bit.
Vemma provides an income statement on their website and you can find it here. From what I can tell they took the statement format right from the Advocare playbook with similar form and wording. Vemma does not tell us how many affiliates are active like Advocare, or the number of affiliates that have earned $1-$1000. I personally do not see that as relevant. I did notice that Vemma's income statement includes educational information that informs affiliates about the acceptable ways to advertise income claims. If you take your time and read their disclaimer you will notice the following statement:
" A participant for the purpose of this estimate, includes all participants who make a sale of Vemma products within the one year period. "
Correct me if I am wrong, but Vemma's chart seems to be indicating that the sale of the product is just as important as recruiting, and Advocare seems to be more concerned with the recruiting and purchasing of the product. I am having trouble seeing why the FTC did not throw an injunction at Advocare.
So far I am not seeing a big difference between the two companies besides the aforementioned discrepancy found on the earning statements. Well, I should note that Advocare seems to be utilizing success testimonials from income earners in the .21-.03 percent income range on their website. If you did not notice, that means that less than one half percent of the distributors can earn that kind of money. Is that not deceptive behavior? Using testimonies from people in the one percent bracket, knowing that over ninety percent of the distributors will not even come close to that, is deceptive. What about the products and the science that backs them.
Anyone that has read my previous article titled "Advocare Review" knows that the company does not offer any viable studies to read on their website. Why not? Many people question the location of these studies and Advocare has not provided them on their website to date. Vemma has their human studies located on their website, you can find them here. Advocare claims to use recent science, but does not provide the resources to back that claim. Is that not a violation of FTC? Before anyone gets upset, I am aware that neither Vemma nor Advocare is required to provide any research. But, if the company is referring to the studies to validate the efficacy of the product, they should provide them on their website so we do not have to search for them. But I am not going to go any further down that road. Is it about the sale of the product, or the recruiting of new distributors or affiliates that is relevant? Well, let’s see if we can find some information pertaining to procedures and regulations shall we.
If you want to read Vemma's affiliates terms and conditions agreement you can find it on their website here. If you want to read the Advocare policy you can find it here. After reading both of the policies it is apparent to me that both companies require all new members to sign on with a distributor or affiliate. Vemma does allow you to sign up through the company, but I am certain you would still be listed under an affiliate. Advocare seems to be the only one that requires a person to purchase a package to become a distributor, but if you want to make money with Vemma they too encourage you to purchase one of their affiliate packages (here). Now, the link I provided does not provide the packages themselves, it just supports my claim. So it is apparent that each company requires the purchase of products if you want to enter the business. But the real question is how important is the sale of the product, and what is the difference between the two companies from a business standpoint. Remember, Vemma is accused of being a pyramid scheme. Meaning they are basing their compensation plan payments primarily on the recruiting of new affiliates and not on the sale of the product.
From a business standpoint, both companies provide a website and promotional tools, rules governing product sales, and procedures that have to be followed if a distributor or affiliate wants to continue to be in the business. One could probably question the process, used by both, to govern such rules and regulations. But we will leave that for another day. So, let’s take a look at the Advocare process.
According to Advocare there are four ways to get involved. You can just purchase the product from a distributor, become a wholesale distributor at 20% discount, increase discount up to 40% by sharing with friends and family (probably by getting them to become a distributor), and by becoming an advisor. What exactly does that mean? Without trying to get too fancy, I am going to try and explain this process although you can go and read it for yourself here and here. One of those links will take you to the Advocare website and the other will take you to their policies and procedures. So, if you just want to purchase the product you will have to locate a distributor. But, if you plan on making money you will have to buy into the business and start selling the product.
But hold on a second. Most of Advocares procedures do not put emphasis on the selling of the product when you first join, although they do not discourage it either. But, if you plan on getting paid from Advocare you will have to earn a commission. How do you earn commission? By recruiting other people and have them do the same thing you are doing. Now, some people might intuitively think that you would earn whole sale commission from the sale of your downline distributors’ personal sales. I personally do not see how that would be possible. Advocare would not know about personal sales until a distributor reaches the point she/he is close to being eligible for overrides and bonuses. This might be a little difficult but let me try to explain. When a distributor is close to earning overrides or bonuses, it is at that point where the distributor has to provide at least five customers and their contact information. The information may or may not be utilized by Advocare, and to me is almost irrelevant. Other than that, Advocare really would have no clue how much money each distributor is making from direct sales, or how much of the product is actually being sold as they do not maintain those records. Advocare has instilled rules and regulations that ensure the necessity of recruitment to earn money from Advocare itself. I would like to use the legal”but for" argument here. But for the enrollment of a distributor, earning commission from Advocare would not happen.
Without going any further into their money making procedures it is apparent that commissions are based on recruiting and sales by the distributor is really not necessary to continue making money. The more people you recruit, the more commission you can make. I do want to add that Advocare does not allow the stock piling of products or excessive recruitment of distributors. You can find that in section II 1.1 of the compensation plan. Advocare counts everything purchased as personal volume or group volume. Personal volume is the total of your purchases, retail customers, and your downline distributors’ purchases. Everything that your distributors purchase will result in a commission for you, even if your distributors chose not to sell the product. If you want to become an advisor you have to have a personal group volume (p/gv) of $3,000 in one to three consecutive pay periods. Of that $3,000, $500 must be from your personal volume which can include your downline personal volume. I think you get the point. Let me just sum it up a little bit, even though I really did not cover the whole compensation plan.
You can become a distributor just to buy the products for yourself, or to sell. But, to get paid from Advocare and be considered on their income statement you have to recruit, period. These are the only means to make money from Advocare:
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Retail Commissions
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Wholesale Commissions
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Overrides
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Leadership Bonuses
You will notice they do not take into consideration the sale of the product. It is about buying into the business, and getting others to do the same thing. Listen, I get it. Many people want to argue that this is a legitimate means to make money. I argue that if you want to sell the product that is your choice, but it is seriously overpriced which makes it really hard to sell. With that, if you chose to just sell, Advocare has seriously restricted your methods to do so, and has set the price at a rate that would allow distributors and advisors to make money from your sale. That is how it works, it’s a pyramid, and everything you do affects someone else. If you just sell, you will still help your distributor, but you will never make money from Advocare if you do not recruit a distributor of your own. Even then, you still may not make all that much money. Advocare has restricted where and how you can sell the product to make it difficult for you to survive just on selling. That is not to say that some of you can not realize a decent extra income from just selling, but I would bet it will be difficult. I would also like to say that Advocare also promotes automatic shipments and if you want to learn how, go to the following link (here). If you go back to the video link I provided pertaining to Vemma's attorney. You will hear him talk about autoship, and how the FTC is using that as one of the means to identify Vemma as a pyramid scheme. If you click here you will learn how Advocare teaches people that facts do not sell, stories do. If you want more proof that this company is all about promoting the importance of getting to advisor "fast", and not selling, just watch the videos found here. I could probably keep going but I will leave it there. Let me add this little fact in here while I am at it. All distributors are required to pay a renewal fee of $50 every year. Advocare stands to earn 7,740,950 a year just from renewing distributorships. I did the math using just the active distributors recognized by Advocare. If I do the math using the 517,666 distributors the company could earn 25,883,300. That is a lot of money. So let’s take at look at how we can make some money with Vemma shall we.
I know this is getting a little bit lengthy so I will do my best to shorten this up a little bit, and get to the point. To get started with Vemma you first become an affiliate and then they provide you with a website. You can learn everything you need to know about making money with Vemma here. They have a slightly different but similar structure as Advocare. To make money from Vemma you have to create a left team and a right team, which consist of two personally enrolled customers. In order to get paid you have to have 360 points on one team, 180 points on the other team. But I am not going to go get crazy and bore you with all the other details. It is obvious that both of these companies focus primarily on the recruiting of other people and repeating to make money. Not so concerned with the selling of the product.
Remember in the beginning I said that pyramid schemes have evolved to ensure that they will survive, and new techniques have been instilled to help prevent from getting too big and collapsing. Well let me explain what I was thinking. Both companies have a product, because without one, they would definitely be taken down. The product is aimed towards the new health trend. With that, they have instilled rules and regulations that allow them to dictate and control the product, and the person selling it. They can be as big or small as they chose to be. The procedures and policies have guidelines for each participant to follow, and if you do not play by the rules, you could find yourself out of business. They can pick and chose when to enforce rules and regulations. If the business is getting too big, they can control the number of distributors or affiliates. Advocare put a warning in their procedures to ensure members do not concentrate on stockpiling new distributors. Or is it for another reason? So let’s look at the FTC charges against Vemma again and see if they parallel Advocare. Because Vemma is already under the gun, I only need to compare Advocare to the same charges.
1. Pyramid Scheme
Click here to see what the New York Government thinks about pyramid schemes.
This is the problem for me. Both companies focus their attention on recruiting and investment. To be considered a pyramid scheme, even with a good product; recruiting and investment are the primary focus. To be part of Advocare or Vemma business you are required to invest in a starter package, I like to call that an investment. No big deal right? That is what I would do if I wanted to open a store. Both companies require you to recruit someone before you can earn money. The income statements support that fact because sales are not included in the calculations of Advocare. That means that the people recruited will be subjected to an initial investment too. Well, except for Vemma's income disclosure. They seem to be indicating that their income statement includes everyone that has made a sale of Vemma products. But I am uncertain as to how they monitor such sales unless they require personal information of all sales, or they are not telling the truth.
This is the bottom line, distributors and affiliates earn more money if they can get others to join and invest. All the money or earnings people receive from Advocare and Vemma seem to be from recruiting and initial investments, and not from sales of the product. Both companies, especially Advocare, promote recruiting first, and barely ever talk about selling products in their teaching videos. Just go back to the link and watch them again. I know, many of you are thinking, I do not do that. Well, unfortunately there are many people that do. Advocare really pushes people to buy into the advisor package with a discount. The distributor can buy their own way into advisor level for around $2100 bucks. The videos are right here if you skipped over them. That leads me to the next FTC charge.
2. Providing deceptive promotional material to affiliates to be used in recruiting.
I guess we could start off with Advocares video I just provided for you or this new distributor checklist that does not seem to have any of those disclaimer icons notifying distributors of the typical income one should expect. If you click on the link I just provided for you and scroll down to the Get to Advisor section. Under the heading you will see eight reasons why a new distributor would want to go straight to advisor and this is what number six reads:
"Customers want products immediately; it will help you get started faster if you have the products on hand. People don't open retail store fronts without products to sell."
That statement is deceptive and misleading as it would be a clear violation according to section 8.8-4 under unauthorized sales. Advocare does not want you making money that way and it is a violation to knowingly sell to a person you know, or should have known, will sell the product in a retail store. If that is not deceptive enough then read the Advocare prerequisites to their success system. One of the prerequisites is to introduce the future prospect to an Advocare product via free product. Even the mixer party suggests sparking people up prior to beginning the party. They do not provide income disclaimers within that particular marketing tool warning of almost certain failure.
Let’s think about it for a minute. If you could pay an enrollment fee to become a wholesaler or distributor ($79 plus tax and shipping) to get a 20- 40% discount on your purchases, I think a reasonable person would go that route instead of paying full price for the product. But that was an intuitive conjecture. Is it not deceitful to throw around the word success without providing some type of disclaimer as to what success means to Advocare. I have a really good idea from their website what success means to them from the success stories found here. There are no success stories about losing weight using the product, or making a couple hundred dollars. Oh, by the way, even wholesalers have to pay the $50 dollar yearly renewal (here). Are these wholesale "customers" actually counted as distributors, although the intent is for personal use? They order their own products and are still referred to as customers. I am almost certain the person that enrolled him/her will benefit from each purchase. Go to the link I just provided and you will see that a wholesale customer has the same options as a distributor. So why use deceptive language? Just call her/him a wholesale distributor all the time.
What about all the unrealistic financial success stories used by Advocare on their website? Disclaimer or no disclaimer, it is misleading and deceptive when they know, or should know, 99% of the people that join will not even come close to that income. Where is the income statement found on that page?
That brings me to the other two charges: Making false claims of substantial earnings without showing proof of such earnings, and making such claims without the financial disclaimer discussed many times in this article.
Where on this page can I find the proof that those people made that much money? We see the disclaimer, barely. But not one bit of proof that either one of them really made that much money or how they made it. The Huckabee family claims to have made over $200,000. Is that after deducting personal purchases, and other business expenses such as giving away products to lure someone in? Or is that amount just the commission earned? See, I do not know anything about how they reached this personal goal. According to the FTC they are supposed to provide that information, right?
I could keep going, showing you all the deceitful language used by Advocare and Vemma to lure people into their product. But I believe I have reached the point of redundancy. So allow me these final words.
The important question is the one pertaining to a pyramid scheme. That is the charge that will bring them completely down and close their doors for good. Do I believe they are a pyramid scheme? Well, answer these questions, and you will realize that answer for yourself. Does Advocare or Vemma pay you money if you only sell? Do you have to invest in the company to make money? Do you only get paid by Vemma or Advocare if you recruit someone? If you answered yes to most of them, there is a high possibility that someone is pulling the wool over your eyes.
Advocare uses just as much deception if not more than Vemma, and both companies are almost identical when it comes right down to it. Yes, they both have a product that could sell very well in a store front or on Amazon.com. Both companies could still do very well just opening a bunch of little stores all over the world. But that is not what they want. They want to earn millions from first time distributors, and renewing distributors. I am not even sure if Vemma requires a renewal fee. Could you imagine if all of the 517,666 distributors decided to buy into the advisor package? The company could earn up to 1,087,098,600. Over a billion dollars just by getting you to bite on that one deal. Alright, that does not deduct any expenses, but you get the idea.
There are many deceptive ways a distributor from Advocare and Vemma can bypass the need to sell. You can purchase some of the product for your own use, and then deflect the rest of your $500 personal volume required to meet Advocares commission standards to your downline, and pretend you sold some to a friend with the intent to recruit. You know, give it to them, but use their name as the customer without requiring them to actually give you money.
Alright, I have rambled enough. So, here is the big question. Did I find any serious differences between Advocare and Vemma? NO!
Absolutely not is my answer. If I am wrong, please guide me to the area that I missed. I know there was a lot to cover, and I am human. But, both companies require an investment, and recruitment prior to realizing any income. All money paid is from commissions not selling. Yes, they both do very little encouraging to sell the product, and someone could make a decent extra income if you just sell. But you would run out of people to sell to because at some point the pyramid gets big. That is why they control that aspect of your business. Not to mention you will run out of people to sell it to at the higher price suggested by Advocare. Yes I used the word pyramid, because that is what you are involved in. I could have used multi level marketing, but the business you are building, will look more like a pyramid when you’re done. The people at the top, those are the ones that will be holding the money. Please do not misunderstand what I am saying. I know many of you truly believe in the Advocare and Vemma products, and I am sure some of them do taste good. But the products really are not being questioned here, and that should concern many of you multi level marketers. The people joining these companies are not to blame, and are not ignorant or stupid by any means. The people that are running these companies are very intelligent and know how to word things to make their business plan work, and lure people in. If the Vemma Company does end up closing their doors, I am almost certain that Advocare will be close behind.
As usual, please feel free to give me your thoughts, but please be respectful. Thank you everyone that spent the time reading this long and probably redundant article. Again, I would like to thank Advo-Truth for all the valuable information.
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