DSSRC Administrative Closure #301

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that markets health, fitness and beauty products regarding five earnings claims disseminated by members of the Company's salesforce on Facebook.

DSSRC communicated its concern to the Company that the subject posts conveyed messages suggesting potential salesforce members could achieve "financial freedom" and have the opportunity to earn “unlimited income” and “residual income” through participation in the Company's business opportunity.

Promptly responding to the inquiry, the Company took immediate action by removing four of the five posts. The remaining post which referenced “residual income” was disseminated in 2019 from a salesforce member located in India. The Company contacted the compliance officer at its EMEA affiliate in India who reached out several times to the individual responsible for the post (and provided DSSRC with a copy of the correspondence) and indicated that it was prepared to commence enforcement proceedings pursuant to the Company Policies & Procedures against the individual should he continue to be unresponsive to the Company’s request. Furthermore, the Company indicated that it has contacted Facebook to report the post content as a violation of its intellectual property.

DSSRC determined that the Company’s actions were necessary and appropriate. Section 6 of DSSRC’s Guidance on Earnings Claims for the Direct Selling Industry cautions companies from communicating certain words and phrases when addressing a general audience of prospective or current salesforce members. Such expressions include "residual income," "unlimited income," "full-time income," "replacement income," "quit your job," or any substantially similar statements. The Guidance underscores that certain terms, like "financial freedom," pose a high risk of being misleading in a general context.

As DSSRC has noted in previous self-regulatory inquiries, when a direct selling company is made aware of improper income claims that were communicated by an individual that was not within its geographical control it is acknowledged that the direct selling company may not be able to require such salesforce members to remove a social media post. In that instance, DSSRC nonetheless recommends that the direct selling company make a bona fide good faith effort to have the improper claim removed.

Here, given the Company's good faith efforts in removing the problematic earnings claims in four of the five posts and its ongoing commitment to addressing DSSRC’s concerns regarding the remaining post which was posted by a salesforce member located in India, DSSRC administratively closed the inquiry.

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