DSSRC Administrative Closure #341
The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that sells high-quality kitchenware, cookware, and home products regarding six earnings claims that appeared on the Company website and on Facebook. 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 four salesforce member testimonials and statements such as, but not limited to: “… within six months I had enough money for a down payment on a house,” “I determine what my paycheck will be,” “I was able to buy my car, my house, and send my children to college,” and “… quit my high school teaching career…”. The Facebook post stated “Buy and sell products … make great $$$ profit from the comfort of your home, plus you can get free products and other great benefits like $$$ [emojis of gifts] and [emojis of planes].” DSSRC was also concerned with a sliding scale of earnings featured on the Company website that depicted income starting at $500 and up to +$2,500.
This inquiry was initiated by DSSRC as part of its continuous independent monitoring of product and income claims in the direct selling industry and following an investigation conducted earlier this year by a consumer advocacy group into earnings claims made by direct selling companies.
After its receipt of the DSSRC Notice of Inquiry, the Company took corrective action to address the online claims at issue, successfully removing all five claims that were identified in the inquiry. DSSRC determined that the Company’s actions were both necessary and appropriate.
According to section 13 of the Federal Trade Commission’s, 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
With respect to the sliding scale of income that was featured on the Company website, DSSRC Guidance on Earnings Claims in the Direct Selling Industry (the “DSSRC Guidance”) notes that offering a scenario from which a current or prospective salesforce member could reasonably infer that he/she will earn a certain level or range of income is an earnings claim and DSSRC would expect the direct selling company to possess evidence showing that the maximum amount that is referenced in the online claims is income that could be generally expected by a typical company salesforce member.2
Finally, Section 6 of 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.
In conclusion, DSSRC found that the Company made a bona fide, good-faith effort to address its concerns by promptly removing all six of the online posts. Based upon the actions taken by the Company in the spirit of voluntary self-regulation, the inquiry was administratively closed.
(Administrative Closure 341, closed on 12/16/24)
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[1]See Section 13, https://www.ftc.gov/business-guidance/resources/business-guidance-concerning-multi-level-marketing#deceptive.
[2] See Section 2(A), dssrc_guidanceonearningsclaimsforthedirectsellingindustry.pdf.