DSSRC Administrative Closure #242
The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company (“Company”) that sells women’s beauty products regarding certain earnings claims that were disseminated on social media by the Company’s salesforce members. The claims at issue originated from eight social media posts disseminated on Facebook and one disseminated on YouTube. The seven Facebook posts included claims that salesforce members can generally expect to achieve financial freedom by participating in the business opportunity. The YouTube video included unsubstantiated claims that a salesforce member could earn a range of wide range of money in bonuses.
Shortly after being contacted by DSSRC, the Company contacted each of the salesforce members responsible for the posts at issue in the inquiry and effectuated the removal of the posts. The Company informed DSSRC that it took its compliance obligations seriously and intended to implement a series of protocols in response to DSSRC’s inquiry. The Company further advised that it would take the following actions to effectively educate its salesforce members and monitor the field regarding the appropriate dissemination of earnings claims:
- Identify problematic social posts and counseling distributors as to the issues of communicating product and income claims with hard dollar amounts. They will be advised of the FTC’s position on “financial freedom” and “residual income” claims, as well as receive additional training on ways to properly describe the Company’s compensation plan.
- Retain a consultant in the direct selling industry to serve alongside the head of sales in counseling and educating salesforce members.
- Maintain a compliance log of training and corrective actions taken with respect to each of its salesforce members identified in DSSRC’s inquiry. The log will be instituted and mandated by the retained direct selling consultant.
- Develop and provide a live video training class for its distributors, specifically on income claims and product claims.
With respect to the specific posts in DSSRC’s inquiry, the Company successfully removed six of the seven posts at issue. DSSRC administratively closed its inquiry and expressed its appreciation to the Company for its good faith efforts to address the concerns in the inquiry and for its commitment to provide further education to salesforce members regarding proper claim dissemination. DSSRC will continue its dialogue with the Company to reconcile the one remaining post.
(Administrative Closure #242, closed on June 21, 2022)
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