DSSRC Administrative Closure #298

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company (“Company”) that sells health, wellness, and beauty products, regarding 11 product performance claims and two earnings claims that were disseminated by salesforce members on Facebook, Pinterest, Instagram and X.

DSSRC expressed concern with claims stating that that the Company’s products could reduce anxiety, depression and arthritis, lower blood pressure and increase mental clarity. Additionally, DSSRC requested that the Company address representations communicating that typical Company salesforce members can earn full-time income and achieve financial freedom.

Following commencement of the inquiry, the Company noted that all but two of the posts were disseminated in 2020 or earlier and provided DSSRC with detailed information regarding Company policies, procedures and guidance that it provides to its salesforce members to promote truthful and non-misleading claims related to its products and business opportunity. The Company also informed DSSRC that it proactively monitors its salesforce members for compliance with Company policies and has procedures in place to respond to any salesforce member action that violates applicable laws and regulations. The Company further stated that it has a compliance team dedicated to day-to-day compliance monitoring that provides ongoing support to salesforce members to help ensure that they understand how to apply Company policies to their marketing practices and to promote a culture of compliance.

The Company informed DSSRC that it had already identified and sought to remediate most of the claims prior to its receipt of DSSRC’s Notice of Inquiry. The Company sent warning letters to the salesforce members responsible for the social media posts at issue, requesting that they remove and/or modify the content in an effort to address DSSRC’s concerns. The Company was successful in facilitating the removal of three of the posts (including the two posts communicating the subject earnings claims). The Company then proceeded to suspend or terminate the accounts of those salesforce members who did not resolve their posts or respond to the Company’s requests. In addition, the Company reported the remaining posts to the social media platforms involved, in another attempt to remove non-compliant claims. DSSRC was provided with all relevant correspondence sent by the Company to the salesforce members and the respective social media platforms.

DSSRC agreed that the Company’s actions were necessary and appropriate. With respect to product performance claims, DSSRC has noted in past cases that health-related claims must be supported by competent and reliable scientific evidence. Though the FTC expects that advertisers have a reasonable basis for all product claims, the standard of substantiation for health claims is particularly rigorous. The FTC has defined the health claim substantiation standard as requiring “competent and reliable scientific evidence” in the form of “tests, analyses, research, or studies that (1) have been conducted and evaluated in an objective manner by experts in the relevant disease, condition, or function to which the representation relates; and (2) are generally accepted in the profession to yield accurate and reliable results.”

Regarding the earnings claims, Section 6 of the DSSRC’s Guidance on Earnings Claims for the Direct Selling Industry 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 “residual income,” “unlimited income,” “full-time income,” “replacement income,” “quit your job,” or any substantially similar statements or representations. 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.”

Based upon the Company’s bona fide, good faith efforts to remove several of the posts at issue, take the appropriate enforcement measures against those individuals who did not comply with Company policies and procedures, and contact the social media platforms regarding the unauthorized claims, DSSRC administratively closed the inquiry and will continue to monitor product and income claims disseminated by the Company.

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