DSSRC Administrative Closure #313

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that markets nutritional supplements, bath and beauty care treatments, aromatherapy, home accents, and motivational products regarding seven product performance claims and four earnings claims that were disseminated by the Company's salesforce on Facebook and Youtube, including one claim that appeared on the Company website. DSSRC expressed concern with statements implying that the Company’s products provided relief from kidney disease, depression, diabetes and skin conditions such as psoriasis and eczema and with earnings claims implying that Company business opportunity participants can achieve financial freedom and can make “$20K in bonuses.”

Promptly responding to the inquiry, the Company took immediate action in its attempt to facilitate the removal of all of the posts and was successful in removing four of the seven posts with product performance claims, two of the three posts which communicated earnings claims and the financial freedom claim from the Company website.

With respect to the four remaining posts at issue, DSSRC determined that the Company demonstrated a good faith effort to address its concerns. More specifically:

Regarding the one remaining social media post that referenced earning “20K in Bonuses,” the Company reported to DSSRC that the salesforce member’s account was terminated in February 2022 and that she failed to respond to the Company’s takedown request. The Company submitted a request to Facebook to remove the post shortly after receiving DSSRC’s Notice of Inquiry. In addition, the Company added a remark in the comment section of the existing post indicating that the Company prohibits salesforce members from communicating income claims in promotion of the Company’s business opportunity. The Company provided DSSRC with copies of all of the aforementioned correspondence.

The three remaining product performance claims at issue were disseminated in YouTube videos.¹ In addressing these videos the Company attempted to contact the individuals responsible for the posts, contacted the social media platform where the post appeared (and initiated a trademark takedown demand) and, when possible², indicated in the comment section of the post that the representations made in the video are inaccurate and were made without authorization from the Company and that the Company products are not intended to diagnose, treat, cure or prevent any disease.

The third video was disseminated by a third-party entity with no affiliation to the Company. Notwithstanding, the Company sent two warning letters to the email indicated in the video description but received no response. A trademark takedown demand was subsequently submitted to the platform.

DSSRC confirmed that the remaining Facebook post references a product that is unrelated to the Company that was the subject of the self-regulatory inquiry.

The Company furnished DSSRC with copies of all the aforementioned correspondence regarding the posts that included product performance claims which remained publicly accessible.

DSSRC determined that the actions taken by the Company to address the concerns in this inquiry were necessary and appropriate. For purposes of a DSSRC inquiry, an earnings claim is any claim, express or implied, communicated by either the direct selling company itself or by its independent salesforce members that conveys a level or range of actual or potential earnings that may be earned by salesforce members. Section 1 of DSSRC’s Guidance on Earnings Claims for the Direct Selling Industry (the ‘Guidance”) states that it is misleading for a direct selling company and/or its salesforce members to make any earnings claims unless the direct selling company and/or its salesforce members have a reasonable basis for the claim at the time the claim is made and have documentation that substantiates the claim at the time the claim is made.

Moreover, section 6 of the Guidance 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.

With respect to product performance claims, while the FTC expects that advertisers have a reasonable basis for all product claims, the standard of substantiation for health-related product 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.” Health claim substantiation evidence must generally take the form of randomized, controlled human clinical trials (“RCT”), with animal and in vitro studies generally being insufficient without RCT confirmation, and anecdotal evidence being insufficient. Moreover, the evidence relied upon must be relevant to the advertised product with respect to, among other things, dosage, formulation, and method of administration.³

As DSSRC has noted in previous inquiries, when a direct selling company is made aware of an improper claim that was made by an individual and the company recognizes the claim to be untrue and unsupported, DSSRC acknowledges that the direct selling company may not be able to require the individual to remove such claim if the individual is no longer active with the company. In that instance, if the social media platform where the subject post was made provides a mechanism for reporting trademark or copyright violations, DSSRC recommends that the direct selling company promptly utilize such mechanism and seek removal of the subject claims and posts. If efforts to utilize a mechanism for reporting trademark or copyright violations are unsuccessful or if the subject claim occurred on a website or platform without a reporting mechanism, DSSRC recommends that in addition to making a bona fide good faith effort to contact the individual as described above, the Company contact the website or platform in writing and request removal of the subject claim or post.

In conclusion, DSSRC determined that the Company demonstrated that it made a bona fide attempt to address DSSRC’s concerns by removing seven of the eleven claims that were brought to its attention and taking the appropriate steps to have the remaining social media posts at issue removed. Given the Company’s good faith efforts to address DSSRC’s concerns, the inquiry was administratively closed.

(Administrative Closure #313, closed on 03/25/24)
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[1] Two of the videos with product performance claims were disseminated by the same YouTube user account and the account was suspended by the Company after the individual failed to respond to the Company’s request