DALLAS (KRLD) - A North Texas dietary supplements company has been forced to change its entire marketing strategy because the feds now call it a "pyramid scheme."
For more than a quarter-century, Advo-Care -- founded in Carrollton and now based in Plano -- has used the multi-level marketing strategy which is considered legal as long as most of a company's profits come from authentic product sales.
But pyramid schemes are definitely illegal -- and a company is considered a pyramid when the bulk of the profits come not from outside sales but from distributors bringing in more and more recruits who must first buy thousands of dollars in inventory and then bring in more new people under them to keep the pyramid going.
The FTC has ruled Advo-Care is the latter and the company has agreed to a $150 million settlement to make charges go away.
Five months ago, the company notified its distributors it is changing its compensation from the multi-level model to commissions on actual product sales.