DSSRC Administrative Closure #194
The Direct Selling Self-Regulatory Council (“DSSRC”) contacted a direct selling company (the “Company”) regarding three Facebook posts and three other online posts disseminated by salesforce members which DSSRC was concerned were communicating inappropriate earnings claims. The posts included references to “Full-time income/employment,” “unlimited income,” “long term residual income,” “significant income,” and “financial independence.”
As noted in the DSSRC’s Earnings Claim Guidance for the Direct Selling Industry (the “Guidance”), “Statements such as ‘quit your job,’ ‘be set for life,’ ‘make more money than you ever have imagined or thought possible,’ ‘realize unlimited income,’ or any substantially similar statements or representations are examples of prohibited lifestyle claims when made to a general audience of prospective or current salesforce members.” Moreover, the Guidance states that “…some words and phrases commonly used in earnings claims can carry a particularly high risk of being misleading to consumers. Such words and phrases include claims such as ‘financial freedom,’ ‘full-time’ income,” ‘replacement income,’ ‘residual income,’ and ‘career-level income.’”
The Company advised DSSRC that upon receiving the Notice of Inquiry, it took immediate steps to eliminate the improper income and lifestyle claims contained within the six links. The Company noted that three of the salesforce members making the identified improper claims were active salesforce members who had not had any prior infractions necessitating corrective action by the Company’s compliance team. DSSRC was informed by the Company that all three of these sales force members promptly removed the unauthorized claims and have been educated as to why the claims were improper.
The other three online posts identified by DSSRC originated from inactive sales force members that the Company had difficulty contacting despite multiple attempts to do so. Furthermore, DSSRC was informed that the improper claims were made via websites created by the inactive sales force members, making it difficult for the Company to demand removal of the materials by the third parties hosting the websites. The Company was, however, successful in working with one third party website host to remove one of the links and it continues to pursue removal of the other two websites containing the subject claims, demanding that the websites be shut down as soon as possible. The Company terminated the accounts of all three of the inactive sales force members.
The Company informed DSSRC that it does not permit sales force members to engage in the conduct identified and that it actively educates its field on prohibited income and earnings claims. The Company noted that it provides guidance to its sales force members on allowable and prohibited claims and earnings disclosures in its Advertising Guidelines, which are available to all sales force members on the Company’s web platform. The Company also recently reiterated the importance of always representing the business opportunity honestly, and abiding by the Company’s Policies, in a monthly compliance bulletin distributed in August 2021.
DSSRC was satisfied that the Company engaged in genuine, good faith actions to address the concerns stated in the Notice of Inquiry by disabling four of the online posts containing the problematic claims, vigorously pursuing the two remaining items and terminating the accounts of the inactive salesforce members that were responsible for the subject claims. As such, the inquiry was administratively closed based upon the expeditious steps taken by the Company to remove the unsupported claims.
(closed on 09/09/21)