Discussion re Advocare

Hey, everyone.

Thanks for joining the program here. This is very informal, and as I mentioned to Troy Dooley and Richard Brook, if they need to hop off, if they're busy, they can go ahead and hop off. Jonathan Gillum, founder of Momentum Factor, also founder of Fieldwatch, will be joining us in about five to 10 minutes. He might be quick. And this is just to sort of give our immediate impressions of the FTC's announcement regarding AdvoCare. These are very imprecise impressions. I've read the complaint, but I haven't slept on it, haven't put a whole lot of thought into it, but I do have some ideas and then just kick it around. I respect Richard Brooks experience and his judgment and the way he communicates and absolutely respect Troy Dooley and some of his thinking on the subject. And you guys need to meet my associate, Thomas Ritter. He's been working with me for about three years and brings a wealth of experience. He's the brains behind the operation.

Jonathan is here. Kevin.

Got it. He's what? Yep, there he is. Okay, promote to panelist. There he is. John Johnathan. You're muted. You can mute yourself. Okay, cool. Hey, welcome to the program. Jonathan. How's it going?

Thanks, guys.

Hey, guys. Yeah. Hey, Jonathan.

I was telling these guys, if you need to hop off real fast, you hop off, no problem.

Well, I'll take my time since Richard looks like he's got some skiing to do or something.

So I'm gonna take two minutes, maybe three, and kind of give my immediate thoughts for the community that's watching this live. Pretty sure it's on. There we go. Okay, two minutes. Okay. So I read the complaint, which is where the FTC sort of makes its case that AdvoCare is, according to the FTC, a pyramid scheme. As Thomas pointed out to me earlier, the FTC has not really used the p word. In its most recent actions against network marketing companies, they focused on false, misleading income claims and sort of a. A culture of misrepresentation. In their actions against Mobe, for example, Digital Altitude, for example Herbalife, they never used the pyramid scheme argument. Here. It's back reading the lawsuit. What concerns me is that the FTC can really do this to whoever they want to take down. In other words, nobody's perfect. I'm not trying to alarm the industry and they're going to shut it all down, but they went as far back and got material back in 2011 regarding inappropriate income claims. 2011, just in page. What page was 23 of the lawsuit? It's just income claim after income claim and most of it's from 2012. And so I'm not sure if that's a fair standard. And I'm pretty confident that most companies, if you dig back into what their distributors were saying back in 2020 12, they're not going to be able to pass muster. But it boils down to opportunity driven demand and false misleading and a culture of false misleading income claims. All right, 30 more seconds. Pyramid scheme is when you pay rewards unrelated to product sales. What's a product sale? Well, something that has value generally is what that is interpreted to be. And you measure that through customer sales. You measure it by looking at compliance measures where the company emphasizes retail over recruiting. You look at it, you look at the pay plan design. Does the pay plan require people to buy product to qualify? You look at all these things here. In the FTC's complaint, they focused on culture. They really focused on what is being said from stage. In 2012, this leader said, if you're serious, you're going to spend $1,000 in 2014 this leader said, we focus on recruiting recruiters. In 2016, this leader said it was statements from Advocare Corporate, it was statements from their diamond about the emphasis, which as a profession we have to do better and we have to be aware of this and we need to do a good job at shaping culture. That's a very brief summary. But Troy, I'm going to get you in here because you're Mr. Culture. How can a company, number one, undo the sins of the past and sort of shape a more healthy, more professional culture going forward?

I think we need to, I want to shift just back a little bit. I think it's more than just one company. So I think if you look at 2012 to 2016, we need to see what was happening in our industry as a whole. If I remember back that far, I can remember many companies at the time had big, big checks across the stage. They were promoting all of this kind of stuff to where if a company that over the years has been pretty clean like Advocare is, and if during that time period they had people that were rating their company, they had people that were saying, I'm leaving because I can't do xyz, I can't do this, I can't do that, we don't allow that, then company leaders inside of corporate saying, okay, well, if the whole industry is doing this, if they're allowing big checks from stage, if they're showing off all their cars, if they're having all these parties we get that crowd mentality because we have a fear of loss. We don't want to lose our big leaders. So first we need to look at an industry and I can't do that this week, but I'm going to dig into that and go back and see, hey, where were all the companies in 2012, 2015, that time period? But today, if we move it forward, that's a time in the past. You know, the series that's on Showtime kind of shows what the 80s was like. We're not in the 80s anymore. We're not in the 90s anymore. We're going into the third decade of the 21st century and we're in a post trust era. People want the truth. We need to be doing the truth. We need to be focusing on the facts. Richard does this really good with the book Four year career. This isn't a get rich quick, it may take you 15 years. But you've got to build a culture where people, the bottom to the top, are just earning money, selling the products and building a culture that people can believe in, not a bunch of hype and smoke and mirrors like we're seeing right now.

Okay, thanks, Troy. I'll take over for Kevin.

Yeah, there you go.

Sorry, sorry.

I was muted. I was muted.

Sorry.

All right, guys, I want to kick this to Jonathan, all right? Because a lot of this complaint and Jonathan, I recommend that you read it just because of the profession that you're in. Just for the uninitiated, Jonathan Gillum, I've known him for several years and he owns Field Watch, which is a tool companies can use to catch bad claims and take action. So my question, Jonathan, when you hear about this lawsuit being about what's being said in the field, what are some measures companies can do to stop it, right? It's one thing to monitor the field, which your helps companies do, but what should they do from there? Because apparently whatever Advocare was doing, it wasn't enough, right?

Well, I'm familiar with what Advocare was doing and they were doing plenty, I can say. The thing is about this business is if you have hundreds of thousands of people out there in the field who have really just clicked on with you with an agreement, probably not read it. Most of the people who start out new with companies really don't understand what they can and can't do. So really it starts with training and making sure that people come into the business, understand what they can say online and what they can't. Most people just share their experience, which seems perfectly logical. And if it's true for them, they figure, why not share it? That's what gets most companies in trouble, because not everyone has the same experience. And the guidelines for either product or income claims are just very standard and very strict and that your experience does not equal the experience of others. So the training is a big part of what needs to happen. Obviously, universal monitoring like we do and other companies do is super important because companies are on the hook for what their distributors say. And so the gal who just joined last week and goes on Instagram starts posting weight loss photos and how effective it was for her, that could get the company in trouble. But we've got to know everything that everyone's saying across the Internet, specifically indirect selling. This is kind of a unique business in that way. Not many other industries have to monitor post by post, everything said about their product or brand in every disease claim and every income claim that could possibly make, make. So it's just there is a lot of work to do. The tools are there. Obviously we've been working on that for many years, but there are, there are ways to do it and it has to be done. And this case really kind of brings that to light even more.

Yeah, I think it's an unfair standard. So I live in what I think to be is a pretty safe community in Franklin, Tennessee. We're south of Nashville, and there are criminals. If you look in the corners of Franklin, there are people. Breaking the law. Doesn't mean it's a bad community. It's just human nature, human behavior. You're never going to have a perfect utopia. And in network marketing, you have an army, in most cases of amateurs, they're going to make mistakes. And so the question that I have, the FTC made these allegations and they have some specifics, right? 2014 they said this. 2016, they said this. But what was completely absent from the FTC's lawsuit, understandably so, was what was Advocare doing to counter it? I mean, was Advocare taking meaningful measures to counter that sort of behavior? And why was the majority of bad infractions pre2016? Could they not find anything in 2018? So it seems very outcome determinative. What's your statement then? I'm gonna kick it to Richard.

Yeah, I would just say that advocare is a great company and they have been a great company. They really do care about their field. They have cared about their field in the past. They were the standard. I mean, everyone in the industry looked at AdvoCare as a great. One of the great companies in this business. And I think I can't really opine on really much of anything with regard to the settlement. I'll leave that to the attorneys. But they took extensive measures to monitor, at least on the monitoring side, in finding red flags and finding people who are saying things they shouldn't say and training them. They have always done that. But they have a lot of people in the field. And you can always find someone, as you know from Tina and others, Kevin, you know, you can always go online and find someone who's doing, saying something you shouldn't say. The standard shouldn't be 100% perfection. The standard should be is this company doing all it can to make sure that people are not deceived. And I believe in Advocare's case they were. Now, that doesn't address the inventory loading claims and really the FTC's angle on this, which is to declare war in the model, is what I think it's. So I'd love to hear your opinion about where you think that's going to go, because it seems pretty onerous to me.

Yeah. Richard, what are your thoughts as an owner and also as a former distributor and a current distributor?

Yeah, my wife's a distributor. I'm not much of a distributor. But I think what's missing this in a way feels to me like the political divide in our country. So, you know, the FTC, in my experience and watching them over the last 30 years, watching them in Bema, this is an interesting look at them here with Advocare. My experience with them is they, whoever they are in the moment in the FTC and it's cultural in the ftc, they do not, number one, understand how our model works appropriately. They do not understand the mechanics, the methodology, the logic. They don't understand the model and they don't like it. So if you could put this and map this on to like a political landscape, you know, a liberal doesn't really understand where a conservative is coming from, not really, because they don't come from that same place and they don't like where a conservative is coming from and vice versa. And therefore there's no common ground, there's no meeting in the middle, because nobody's seeking to understand before they're understood. The big thing we ought to be doing as a profession is, is working to a summit. Maybe it's not possible, maybe it's not practical, but my vision is to work to a summit with the FTC where we get in Switzerland and we listen to them and we listen to what it is that they hate about our model. What kind of complaints do they get? And then create an opportunity where perhaps we can make a case for, look, this is how we do it, right? This is how it can be done, right? And that's our promise and that's our commitment moving forward. What would help us is to understand what exactly the rules are. Because in listening to the FTC this morning, you know, they're basically saying, well, we went after advocare because they focused on recruiting. You know, that's one of the things they said, well, the challenge I have with that is, hey, recruiting is what defines the network marketing model.

It's the model that is the model.

That's what we do.

That's why they're recruiting the business builder.

Recruiting business builder with the words they used in that press conference. And I'm like, who doesn't do that when they have a multi tiered compensation like that?

So that's actually how it works. Because if it doesn't work that way, then all we really have is the founder selling product. The founder decided, hey, I don't want to sell all the product, I want help selling the product. So the founder recruits some people, right? And so what defines the model is the people the founder recruits also get to recruit. Now what the FTC is very clear about is multilevel marketing is not illegal, Recruiting is not illegal. So what is illegal besides fraud? Right. I guess fraud is illegal. But is recruiting a recruiter illegal? It's not. And so I would really like for our profession not to knee jerk react to this. I don't know what advocare did wrong or right. I mean, my gosh. Brian Connolly is a DSA hall of Fame member, former CEO of Avon. I mean, he's one of the most pristine direct selling executives in the history of the profession. But I don't know, I don't know what they did or didn't do. But I do know that the way network marketing works is the way we sell a billion dollars worth of product is to get a million people selling it. Not by getting a hundred people to sell $100,000 a month worth of product.

Richard, I think. Sorry to cut you off.

No, go ahead. I'll talk forever if you don't.

All right. I don't know if this thought is any good. I've been baking on this thought and idea for about a month. Troy will tell you, I think it's. I don't know if, if a summit with the FTC is going to help because it boils down to almost an ideological view of how much protection do consumers need? And some people, and I won't name any names, this person in the industry thinks, you know what, Ponzi schemes should be legal. Consumers, buyer beware. Okay, I don't particularly believe in that, but that's how far you leave consumers alone. Because you can't protect everybody. And if they're going to blow their money here and you save the day, they're going to blow it somewhere else. That's that outlook. Again, not saying I agree with it. And then you have people in government, they want to earn their pay and they want to do a good job. They also want relevance. They want to protect people. Protect the little guy. And they do have a very convenient narrative with the data in network marketing that the majority of people fail. And in these lawsuits, they parade that out there and they use it. The vast majority of people only earn 200 bucks. Now, in the Vemma case, that wasn't a fair process because they counted even people that never recruited an affiliate, even people that never retailed a product, they were counted as failures in that Excel spreadsheet. AdvoCare, they had a preferred customer program. In 2017, 20% of the revenue came from that preferred customer program. What would have happened if you'd given that more time? There's a lot of concepts here that I'm baking with. I don't think we'll ever get on the same page with them. Because until we do a better job of sort of enlarging the success column for people that participate in network marketing, the problem is this has always been the case. It is so easy to join a program. It is so easy to quit. The benefit is you're not risking a whole lot of capital. So my wife started a spinning franchise. It's expensive, okay, 300,000 plus to get it off the ground. And it wasn't profitable for a very long time. And what if it wasn't? It would have been a complete waste of money. But nobody cares, right? Because presumably franchisees sort of assume the risk. I think people, when they join a network marketing program, they know the risk too, right? They know that success isn't easy or guaranteed. But yet the ftc, they take this position. You have to beat them over the face with an income disclosure statement. And I think it's an unfair standard. Troy, you haven't chimed in yet. What do you think about all that?

Couple things. Richard touched on something and so did you. Richard said, you need a million people selling product if you're going to sell a Billion dollars. You touched on the fact it's an ideology so you're never going to be on the same page. And I thought about that for a second. I think you're both right because the FTC doesn't see this as a selling anything. That's the problem. They see us going out there telling other reps, you have to buy the product in order to rank up, earn this money and everything else. They don't see us selling product to the general masses. And when I looked at the lawsuit and I started trying to think backwards, I have not once in the last five, six years seen a commercial on TV from advocare about recruiting. We build champions. And it's always during a sports event because they're so big into the sports. When I, when I meet people, they're talking to me about the product, specifically one product, because it just had amazing effect on them. No one has ever tried to recruit me. They tried to tell me about the product. So I think it comes down to what Richard was saying. If we could get a summit with them so that we could all get on the same page and listen. And networkers don't like to listen. Government bureaucrats don't like to listen. We just want to puke on everybody and tell our side of the story. If we could get the words down to where they understood we're not here just trying to recruit and make money and not sell product. We really want to sell great products to great people, we'd start that path. But I don't know that we can do that because Richard hit that spot. A conservative is never going to convert a liberal and a liberal is never going to convert a, a conservative. And I'm not sure that an attorney working for the FTC is ever going to be converted into thinking that the direct sales industry is a legit industry, no matter what they say in public.

Right.

My sense is that the, you know, DSA has done a lot to communicate with the FTC to get them involved in our events. You recall Marine, her last name. Kevin had given her guidance at one of the meetings. And I think there has been a lot of connection with FTC from an industry level. I'm wondering what effect the new dssrc, the new self Regulatory Agency will have. You'll recall from the live stream that they mentioned the BBB was a great partner of theirs who was also very involved with the dssrc. So my sense is maybe FTC is going to put a lot more weight on the SSRC and what they do than doing these Original investigations. Or maybe they'll take the investigations from there and occasionally have one of these kind of big industry shakeup kind of things. But I know from an everyday standpoint, they're really relying on self regulation and DSA and others from the public to feed them the cases that they want. So I'm not quite sure where that's going to go. It is a new development in the last year or two, the self regulation aspect. So curious as to what you guys think.

That's Troy's point. I'll reiterate what he said earlier, and it's that if the network marketing community. Let me start over, if there are consequences for bad behavior, then companies that are clean are not at a competitive disadvantage. In the old days, if you're a clean company and the bad guys were able to operate, make lots of money and recruit and raid and there were no consequences. There was almost a financial incentive to cheat. We still see that. I mean, the problem is the FTC sues one company approximately every two years. One meaningful company. Our digital altitude had it coming. Mobe had it coming. Nobody cares about them. But fema, Advocare, Herbalife, those are meaningful cases. Happens once every two years, maybe once every three years. And so it's not very frequent. So we need the DSRC to maybe be more involved and sort of pop some of these companies. But I don't think they can work fast enough. That's my suspicion. Dssrc, my understanding is one guy, and I like him and I like the idea of it all. I don't know if it's enough. What concerns me is that the ftc, can. They control the web and they can find crap on any company dating back to 2012. And so if they have a, you know, pay attention to where this Andrew Smith goes to. I'm sure he's a nice man. I'm sure he's a good lawyer. But he ain't gonna be at the FTC forever. He's gonna get a job in DC at a big firm and he's gonna 6x his income because he's got a scalp. So this is a staff attorney that pushed this case. I'm surprised. I wonder if there was a vote at the top levels of the FTC why they'd support this. But they did. So it's bizarre. I think back to my days, going back to my roots as a QuickStar distributor, also referred to as Amway, back in 2000. God, what was it, three even I didn't know what I was doing. I was raised by A single mom. The idea appealed to me. I don't want to get into the whole story, but the stuff that was coming out of my mouth now, I was just parroting what I was told. If you could dig back and say, Kevin Thompson said this as proof that Amway is a pyramid scheme, you could do it right? There was a link on the quickstar page where it took you to partner stores, Best Buy, Circuit City, Disney, and you got like 0.2% volume. This is an affiliate link deal. And we would say things like, well, Walt Disney wouldn't partner with Amway unless they vouched for him, unless they had two lawyers look at him. I didn't know if it was true or not. I was repeating what I was told. The point is it's almost a game of telephone in the old days. Now we're wise to it. Like you said, Jonathan, training is super important. I wasn't trained, but it's still. It seems like just an insurmountable barrier because how do you. Do you need a time machine to go back eight years and undo the literature that was created eight years ago? You can't do it. So my takeaway is companies, as BK Barako says, you know, skate with your head up because you can get blindsided. I wish AdvoCare fought. They had the benefit of seeing this coming for three years, two and a half years. They were under investigation for two and a half years. They could have litigated. Vemma did not have that luxury. They could have mounted a defense. They could have, you know, relied on those compliance measures, Jonathan, that you talk about. They chose not to. They're gonna write a check. I assume they're gonna walk away with quite a bit. And this thing, in my opinion, is gonna slowly die. And the owners are gonna maintain their wealth and their.

Whatever.

Kevin, you bring something, you bring, you bring something good up there. And so did Jonathan. I believe training is a must. I think it needs to be deep training. It should be at every event. There should be something online. I would go so far we're doing this with a couple, couple clients now where when you join, you've got two or three videos you have to watch that really breaks down income, lifestyle claims and healthcare claims so that people know that. But I want to take, I want to look at the family for a minute at Advocare, because this was a two year almost. We're 2019, so at least two years, maybe even longer of an investigation. As an attorney.

Would. Would you.

Not if, I mean, they've got corporate attorney they got outside attorney isn't part of that two year negotiation. Back and forth isn't. Isn't part of that. You are fighting even though it's not in the public. You're, you're trying to find out how far you can push this, what you can do. And then don't you. Your CFO also at that time's got to look at, hey, we're the biggest and we're the biggest person in the direct sales space with endorsements from the NFL down to high school. We got to protect those too. I mean, there comes a time where it's a balancing act and I think we, we inside of the industry sometimes forget that the dream isn't just for the field. Those families, those executives, those people that have put their blood, heart and tears into these companies also have a dream and they've got it. They've got to make a deciding factor. And BK and I, I love that man, but we debate this issue constantly because he fought his life over his company and, and at the end I would say he won. He got his company back, he didn't get his reps back, he hasn't gotten his revenues back. So when people look at his story and say, yes, BK won, yes, a lot of us rallied around him, but did he really win? Do we want to go from what we have it? I don't know what Advocare did last year. You know, they were I think close to a billion dollars, maybe more. Do we want to leave our dad's legacy in the ground? Do we want to lose this all or where do we fight? Because reps aren't going to be able to fight. If AdvoCare would have fought the FTC, the odds are they'd have come in and taken control. It isn't going to be an Herbalife situation. It would have been a Vemma situation. I don't know. I'm just, I just want to put that side out there. Side note too, just because I know we got people watching us. The CEO, one of the things the FTC said was that he thought that advocare is selling their products in GNC and Walmart. I'm with some, some pretty good advocare people that are still there today and they reached out to the CEO and he is not going to be selling products through Walmart and gnc. They're still going to be used in the model that they're using today. So I wanted to, I just wanted to throw that tidbit in there right now.

Yeah, it's good, Richard.

Alliterating how the FTC doesn't understand the model in some ways. Right. Even though that's not even the full model. But they're not choosing to go retail. They're going to a one level affiliate sale. So different.

Well, yeah, the FTC did use it against them that Advocare participants can't sell online and they can't discount their products. And that makes perfect sense. That is a standard practice in the industry to protect margin and protect the brand. Richard, what are your thoughts after hearing Troy go should advocate or should they have settled? It's a hard, hard call.

You know it is. And you know, I just don't know the inside track. Jonathan probably does. I spent an hour with the former president of Advocare. He was the president in 20, 18, 17 and 18 and he really didn't know much about the whole FTC thing. It was not a big conversation at Advocare. So I really don't know what went on there. The fact that they bailed and didn't fight my sense about my. It's just a guess that there was too much evidence and they would end up like Troy said, like Bima. And you know, the family was. They just owned the business, they weren't building the business. So maybe it just wasn't worth it to them. But you know, I think what we need to do as a profession is number one. I was just anybody out there listening, you know, don't take what happened to Vemma and Herbalife and Advocare as an expectation that that's what's going to happen to our profession or your company. You know, network marketing is not against the law. Recruiting is not against the law. Recruiting lots of people is not against the law. What's against the law is defrauding people, hyping people, you know, telling people that they are going to make a million dollars or they're going to make ten grand a month and telling them from your Bentley. And you know what, we have a lot of fools still in our profession that are put on stages. We put them on our stages and have them parade around with their Rolls Royces and their Bentleys and talking about earning seven figures. And you know, and the reality is, you know, they, they're in a different company every nine months or two and a half years and we keep celebrating these fools. And that's the kind of stuff that we need to stop as a profession. We need to embrace that we only sell relevant products that are priced appropriately that create repeat business. And we need to talk about recruiting in a Responsible, candid, transparent way. That's what we need to do to clean up our house. And then I believe we need to also go on the offense. I don't know how to do that. Kevin. The DSA is not the vehicle to do it. Unfortunately, they don't really understand network marketing. They are not the people that advocate how our model works. They do a great job of lobbying for independent contractor status and other things, but there isn't anybody on the DSA staff that's ever built a network marketing business that understands and they don't want.

To be adverse to the ftc.

No, they're, they're politicians. We need like a czar. We need a, we need a network marketing czar. Like, remember when Lee Iacocca was like, you know, he took on, you know, the government and, you know, took a stand for the auto industry. We need somebody like that. A Jesse Ventura, a Lee Iacocca, somebody.

Richard Brooke.

Yeah, I don't know, my mouth gets me in trouble sometimes. But we need to take a stand for this model. This model is an extraordinary wealth building opportunity. And yes, it may only work for 1/10 of 1%. But you know, Troy, you talked about you can't shift somebody's mind. I had a conversation, Jonathan, after your event a couple of years ago, I had lunch with Bonnie Patton. And you know, she's pretty anti network marketing. You know, part of her case was, well, you know, you know, your, your, your failure rate is, your success rate is dismal. Hardly anybody succeeds. How can you promote such a business model? And I asked Bonnie, I said, bonnie, do you have any children? And she says, yeah, I have a daughter. I said, so tell me this. If your daughter told you as a young girl that she wanted to be an Olympian, she wanted to be a gold medal ice skater, would you tell her that that's ridiculous and you're not going to support her in doing that because the odds of her succeeding are insurmountable. Or would you encourage her? Would you champion her? She said, well, of course I would champion her. And you know what? She, she turned about three shades of red because she got the point that just because the odds are dismal does not mean, Kevin Thompson, that you can't be one of the ones. And all you have to do, Kevin, is do the work. You know, when you look at the numbers, 95% of the people that we call distributors, they're just customers. Yeah, that's true. If companies would classify them as customers and don't classify somebody as a distributor until they actually have a customer, an active customer, and don't classify somebody as a network marketer until they actually have recruited someone. Then Instead of having 100,000 distributors, we'd really only have a thousand distributors.

I think that is changing and from what I'm seeing with clients of ours and in the industry, I mean a lot of clients are segmenting their customers and distributors. The trends have been in place for a while. And Kevin, I know you're really up on top of those. I would say just to alliterate to what you said earlier, Richard, I mean I think one of the dangers of this case and the developments that have happened is that other companies start to think that oh, ergo I and there goes our future. I don't think that's the case at all. I think there is a case to be made to fight for the model. Like you were saying, get the best attorneys, the litigants, the regulatory guys, and defend what this model is. I don't know that that happened in this recent case. I do know that there are companies out that are very worried about the developments here. I mean there's a lot of things that challenge the actual model in statement today. But I think it's imperative for companies to fight back on this. And I don't know how much of a precedent this case will set legally or fences us in more, if there's more guideposts now. But absolutely. I think the general message to the industry is we need to fight for what's right here.

Kevin, I want to expound upon two things that Richard and Jonathan raised and that's one, it seems as if there needs to be a very important industry wide shift in just how the income opportunity, the sales opportunity is. I mean we really need to focus on that for anyone and everyone starting out at the ground level. It's supplemental income, right? I mean it doesn't need to be and they hit Advocare a lot over this, as you pointed out, sometimes by going back as far as five and six years. But you know, presenting the opportunity for everyone as you're going to make a substantial amount of income needs to stop, unfortunately. It needs to just be at least to start out with this is a great way for you to supplement your income and then the more successful you become at it and do it, you know, the greater your earning potential can come. So that's the first thing. The second thing I want to mention too is really, and this is a bit more of a subtle legal nuance and we're going to, Kevin and I are going to get into this more with a blog article that we plan to write. But, you know, the ftc has presented very conflicting viewpoints. On what exactly an ultimate user is.

Right.

As richard pointed out, I mean, you have some people that, while categorized as participants or distributors, Their behavior really is more indicative of that of a customer. The ftc itself, in an advisory memo, has even said that, you know, a distributor can be an ultimate user. It can be someone that is just buying the product for its intrinsic value. And yet, with some of these enforcement orders, it seems as if they're getting away from the hard numbers and statistics. Of what kind of percentage needs to be reflected on distributors buying versus customers buying, frankly. Because that's a really messy equation. And I think it lessens their argument when they start looking at the statistics and looking at some of the purchasing patterns. On how much distributors are buying versus customers. Because, as I've already pointed out, They've said in the past that a distributor can act as an ultimate user. And I think that's even reflected in this particular order.

I mean, as long as their motivation is pure, as long as they're buying for the right reasons. And here they're saying they're buying for the wrong reasons.

And the complaint itself, I mean, they don't even really get into that distinction until the very end. I mean, it comes on, I think, page 19 or 20, when they start discussing a little bit like the percentage of preferred customers within the last two years. And how from, I think it's 2014 to 2018, Advocare sold a billion dollars worth of sales. But they primarily came from distributor purchases. I don't think that's a mistake. That it comes on the back end of it. After they've already focused on your more low hanging fruit of, you know, inappropriate income claims.

So you guys hit on something. Richard brought up the customer factor. Jonathan brought up the fact that the trend is shifting. I'm going back in my brain. I think it was. It was michael johnson on herbalife's investment call. That got ackman fired up. Because when they asked how many customer versus rep herbalife didn't have. Yeah, that wasn't a KPI they had. And when I checked with some of the software guys, that's not a report a lot of companies have ever asked for. They just wanted to know the recruiting numbers. And as an industry, when you think about it, we're always talking about, hey, we brought in 100,000 new reps last month. We brought in 200,000 reps last month. Maybe we need to help the industry realize, hey, you need that as a KPI, you need to know how much are your customers. Maybe help educate them into to what Richard Jonathan's been talking about. Hey, split this up and figure out a qualifying there. If the guy's never recruited somebody, don't let them be a rep. Bring them in Genealogy. Yeah, do something.

Well, guys, let's want to wrap this up. Thank you so much for your time. I think there's a lot to be learned from the discussion. The ftc. I wish they behaved more like the sec. Usually the SEC leads with a subpoena, which actually the FTC did here, but the SEC actually they issued a report regarding cryptocurrency not to get into the weeds. It was called the DAO report. Dao report. And basically they use that as a yard marker. Any sort of violation after that notice was fair game. Anything before the SEC let it go. And so when you had the herbalife settlement hitting in 2016, but you have the FTC using data from 2011 and 2012, it just seems very outcome determinative. It's almost like they're a dog chasing a car and they weren't expecting to catch the car and they caught it. Advocare said, hey, we're done. No mas. Just take our money and let's end this. So all that being said, there's a lot of takeaways. The main takeaway is culture training. As Jonathan said, monitoring. There's a sales plug for you, Jonathan, for fieldwatch, Paying attention to what the field is doing, doing whatever you can. And like Richard said, odds are the FTC is not going to shut down your company. This is a surprise for a lot of people because for the most part, AdvoCare was a pretty responsible company. Maybe it could be argued they did some screwy things with their income disclosure statement, how they calculated numbers. It doesn't mean you shut down the whole model. My God, companies on Wall street, they're not perfect, right? They pay a fine, they go on with their business, network marketing. The FTC just wants to put them down. You know, they want the scalps. There was a question in the press release or the press conference and the guy said, hey, did you break new ground here? The FTC basically said, no, not a whole lot new that we can learn. It's kind of a new angle the FTC took, focusing on culture. But we know opportunity driven demand is bad. We know having purchase requirements is bad. I'm not confident Advocare had purchase requirements. Probably encouraged. I don't think they have the requirements. So anyways, thank you guys. Anybody else want to pop off before we end it?

I would say just one last thing is that I think those of you who are watching this, who are in a company, most likely your company is going to fight this. If gosh forbid, there's a knock on the door, most companies are going to fight this with all its might. I wouldn't take this as a harbinger of things to come is how I would tell the field. Keep doing what you're doing, do good work, your company's there for you in most cases and things will continue as is.

Yeah.

I will add one thing to what Jonathan just said. If you are a rep, you need to make sure you're doing it right. Because both in the Vemma case and now in the Advocare case, the reps are being held accountable just like the companies are. So you need to be doing it right. You guys need to lead in the field. Don't expect the company or just throw all the responsibility on the company. You might be writing a million dollar check yourself if you're not careful.

Four million dollar settlement with the reps in this case.

Ouch.

We good, Richard?

Good.

Sayonara, everybody. Thank you. Thank you guys so much, guys.

Thank you. Kevin. Thanks guys. Good to see you.

Thanks, guys.