DSSRC Administrative Closure #322

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") regarding 24 earnings claims disseminated on Facebook, Instagram, Twitter, and on the Company website. DSSRC was concerned that the claims conveyed messages suggesting that potential independent contractors could achieve significant income through participation in the Company's business opportunity. This inquiry was initiated by DSSRC as part of its continuous independent monitoring of product and income claims in the direct selling industry and following an investigation conducted earlier this year by a consumer advocacy group into earnings claims made by direct selling companies.

The Company promptly responded to the inquiry. In its response, the Company noted that compensation related to the Company’s multi-level compensation plan was only one of several ways that individuals may earn income and, in fact, that most of the compensation that can be earned by such individuals is based upon commissions for the sale of real estate and not related to the Company’s multi-level compensation plan or recruiting. Accordingly, the Company maintained that many of the claims identified in the inquiry were not “earnings claims” for purposes of a DSSRC self-regulatory inquiry. Nonetheless, the Company informed DSSRC that immediately after receipt of the DSSRC Notice of Inquiry, it contacted several of the individuals responsible for disseminating the claims at issue and requested that the posts be modified or discontinued.

In response, DSSRC acknowledged the Company’s actions and agreed with the Company’s position that several of the social media posts identified related to real estate commissions and not compensation from a direct selling business model. Notwithstanding, DSSRC informed the Company that it remained concerned that five of the posts identified could be reasonably understood to refer to the company’s multi-level compensation and revenue share model. In response, and in the spirit of voluntary self-regulation, the Company had each of the five remaining social media posts modified or discontinued.

DSSRC expressed its appreciation to the Company for its actions to address the concerns in this inquiry. Based upon the Company’s genuine, good faith efforts to adequately address DSSRC’s concerns, the inquiry was administratively closed.

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