DSSRC Administrative Closure #229

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company (“Company”) regarding certain earnings and product claims that were disseminated on social media by Company salesforce members. More specifically, the earnings claims at issue in two social media posts referenced replacement income that could be realized through the Company’s business opportunity (“quit my 9-5 and made $11,500 in the first month” and “I was able to quit my 9-5 and sell over $15K in 4 weeks.”). The six social media posts that conveyed product claims (three YouTube Videos and three Facebook posts) all pertained to the efficacy of the company’s product to provide protection to consumers against COVID-19.

On the day following its receipt of DSSRC’s Notice of Inquiry, the Company contacted DSSRC and explained that it had identified all 4 salesforce members responsible for the posts (2 distributors from the U.S. and 2 located overseas) and that it immediately sent emails to all 4 individuals and then followed up with phone calls to the 2 U.S. distributors. Accordingly, all six of the social media posts identified by DSSRC have been removed.

The Company also stated that it takes its compliance obligations seriously, and periodically updates and enhances its compliance protocols to keep up with the ever-changing conditions in the field. The Company further advised DSSRC that the following actions have been taken by the Company to more effectively educate its distributors and monitor the field:

The Company has contacted its monitoring vendor and requested that it focus its monitoring efforts on any internet or social media postings that mention or allude to COVID-19 or the pandemic, including but not limited to pacing a “critical” tag on all coronavirus-related posts.
The Company sent an email to all of its distributors, reminding them that it is a violation of Company’s Policies and Procedures to state or imply that consuming any of the Company’s products can treat, cure or prevent any disease, including COVID-19.
The Company conducted a series of Zoom meetings with the Company’s leaders, reinforcing the importance of self-policing the field, and asking them to do everything possible to ensure that their teams do not make income or medical claims, including, especially, coronavirus related claims.
The Company has recently added three additional members to its Compliance team in order to better monitor, address and prevent violations of the Company’s Policies and Procedures, and to properly educate and discipline distributors that commit violations.
Within days after receiving DSSRC’s inquiry, the Company posted a reminder that making health or income claims is against the Company’s Policies and Procedures on its official Facebook account.

DSSRC appreciated the Company’s good faith efforts to address its concerns and notes that the actions taken by the Company were necessary an appropriate.

As stated in section 6 of the DSSRC Guidance on Earnings Claims for the Direct Selling Industry, While DSSRC will evaluate any claim based upon the context in which the claim appears and the potential net impression of such claim to the audience, 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.”

With respect to the product performance claims that were communicated by the Company’s salesforce members, DSSRC notes that such health-related claims must be supported by competent and reliable scientific evidence. The Federal Trade Commission (FTC) standard of competent and reliable scientific evidence has been defined in FTC case law as "tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results. The Company did not attempt to provide evidence to support its COVID-19 claims and acknowledged that such claims are in clear violation of its Policy & Procedures.

Pursuant to the immediate attention given to this matter and the prompt actions taken by the Company to address DSSCR’s concerns, the inquiry was administratively closed.

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