DSSRC Administrative Closure #266

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company (“Company”) that specializes in hemp-based CBD oil products regarding eleven product claims and four earning claims that were disseminated on Facebook and YouTube.

DSSRC contacted the Company and expressed concern that the posts included representations that prospective salesforce members can achieve “financial freedom”, earn “full time” or substantial income,” and/or earn “residual or passive” income through participation in the Company’s business opportunity. In addition, some of the posts communicated the message that the Company’s products could treat a number of series health-related conditions including high blood pressure, anxiety, depression, insomnia, PTSD and COVID-19.

The Company recognized that the product and earnings claims at issue were not appropriate and did not attempt to provide evidence to support the claims. Shortly after commencement of the inquiry, the Company immediately contacted the salesforce members responsible for the posts to have the claims removed. The Company was successful in removing twelve of the fifteen social media posts that were identified by DSSRC and noted that the three remaining posts were all disseminated in 2019 or earlier. The Company also informed DSSRC that the accounts for individuals responsible for disseminating the three remaining posts have been terminated and the posts have all been reported to the social media platform where they were originally disseminated.

DSSRC determined that the actions taken by the Company were necessary and appropriate.  More specifically, section 6 of DSSRC’s Guidance on Earnings Claims for the Direct Selling Industry notes that 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 are prohibited when made to a general audience of prospective or current salesforce members. Such words and phrases include statements such as “residual income”. It is further noted in this section 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 the term “financial freedom”.

With respect to the health-related performance claims, as DSSRC has noted in past cases, it is well established that health-related claims must be supported by competent and reliable scientific evidence. The Federal Trade Commission generally defines competent and reliable scientific evidence as: “test, 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.”1 In the absence of such evidence, health-related performance claims will be deemed unsubstantiated.

In conclusion, DSSRC determined that the Company demonstrated that it made a good faith attempt to address DSSRC’s concerns and have the posts removed. Given the Company’s bona fide efforts to address DSSRC’s concerns, the subject inquiry was administratively closed.

(Administrative Closure #266, closed on 02/6/23) 

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[1] See, Vital Basics, Inc., C-4107 (Consent April 26, 2004); see also In Re Schering Corp., 118 F.T.C. 1030, 1123 (1994).