DSSRC Administrative Closure #340
The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that sells skincare, makeup, haircare and other personal care items regarding fourteen earnings claims and one health claim that appeared on Facebook, Instagram and Tik-Tok. DSSRC expressed concern that the posts conveyed claims regarding the potential income a typical salesforce member could earn from the Company's business opportunity. The posts at issue included statements such as, but not limited to, “financial freedom,” “financial independence,” “unlimited income,” and quantified claims referring to “six figure business” and a “$1,000 monthly consistent bonus.” The health claim at issue stated that the Company’s products “Improve joint pain…Heal inflammatory skin issues like acne, eczema and psoriasis.”
After its receipt of the DSSRC Notice of Inquiry, the Company did not attempt to substantiate the claims but, instead, made a good-faith effort to contact the salesforce members responsible for the claims and facilitate their removal. The Company’s actions resulted in the discontinuation of eleven of fourteen earnings claims identified by DSSRC and the one health claim at issue. DSSRC determined that the Company’s actions were both necessary and appropriate.
According to section 13 of the Federal Trade Commission’s (FTC) Business Guidance Concerning Multi-Level Marketing, “Truthful testimonials from MLM participants who earn large amounts of money or career-level income likely will be interpreted as representing that their experience is representative of what others should expect to receive. Given the reality of MLM participant experiences, such a testimonial is atypical and not representative of what most MLM participants will achieve. Presenting atypical earnings to consumers considering an income opportunity is likely to generate a deceptive impression.”1
Moreover, Section 6 of the DSSRC Guidance on Earnings Claims (the “DSSRC Guidance”) states that some words and phrases are prohibited when made to a general audience of prospective or current salesforce members. Such words and phrases include statements such as “full-time income,” “replacement income,” “career-level income,” or any substantially similar statements or representations. It is further noted in Section 6(A) of the DSSRC Guidance that some words or phrases carry a particularly high risk of being misleading to consumers when communicated in a general context. Such words and phrases include but are not limited to “financial freedom,” and “time freedom.”
Regarding the one health claim, the FTC Health Product’s Compliance Guidance states that in addition to conveying product claims clearly and accurately, marketers need to ensure that there is adequate support for their claims. Under FTC law, advertisers must have a reasonable basis for their product claims before disseminating an ad. The FTC’s substantiation standard is a rigorous one, particularly when claims relate to health. More specifically, when applied to claims about the efficacy or safety of health-related products, the FTC’s substantiation standard is one of “competent and reliable scientific evidence.” The FTC has more specifically defined that standard as “tests, analyses, research, or studies that (1) have been conducted and evaluated in an objective manner by experts in the relevant disease, condition, or function to which the representation relates; and (2) are generally accepted in the profession to yield accurate and reliable results. In addition, the FTC requires that the research must be “sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true.”
With respect to the three social media posts communicating earnings claims that remain publicly available, the Company demonstrated to DSSRC that it made a genuine attempt to contact the individuals responsible for the posts. Specifically, the Company confirmed in writing to DSSRC that it: a) reached out to individuals responsible for the posts requesting that the claims be removed; b) contacted the social media platform where the posts appeared, to inform them of the unauthorized posts and c) added comments to the posts to inform the public that posts were unauthorized.
In conclusion, DSSRC found that the Company made a bona fide, good-faith effort to address its concerns by removing 12 of the 15 claims at issue and demonstrating that it made a good faith attempt to facilitate the removal of the three social media posts that remain publicly available.
Based upon the actions taken by the Company in the spirit of voluntary self-regulation, the inquiry was administratively closed.
(Administrative Closure 340, closed on 12/16/24)
© 2024 BBB National Programs
[1]See Section 13, https://www.ftc.gov/business-guidance/resources/business-guidance-concerning-multi-level-marketing#deceptive.