DSSRC Administrative Closure #328

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that markets weight loss and health management products regarding 15 earnings claims disseminated on social media as well as the Company’s website which contained a video describing the Company’s incentive trip. DSSRC was concerned that the claims conveyed messages suggesting that potential independent contractors could achieve significant (e.g., “six figure” or replacement income) income, financial freedom, or free cars and trips 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 informed DSSRC that it is committed to removing unsupported earnings claims and ensuring that atypical claims—even when truthful—are accompanied by clear and conspicuous disclosures making clear that the experience of a particular individual is not typical of others. The Company further informed DSSRC that it counsels its salesforce members about making only truthful claims that can be substantiated and including disclosures regarding the atypicality of their success whenever they associate aspects of their success with their participation in the Company’s business opportunity.

With respect to specific earnings claims identified in this inquiry, the Company was successful in having nine of the claims modified or removed from social media. With respect to the remaining claims, the Company noted that the posts contained an extensive disclaimer that makes clear that the Company’s business opportunity provides supplemental income. Specifically, the disclaimer stated that the earnings depicted was “not representative of the average earnings” that salesforce members could expect and that only a small number of salesforce members “will achieve income that is within the range of this testimonial.” The Company noted that those disclosures are adjacent to the income claims and are in the same size and font.

While DSSRC appreciated the inclusion of a prominent disclosure, DSSRC informed the Company of its position, articulated in DSSRC’s Guidance on Earnings Claims for the Direct Selling Industry, that “atypical earnings claims should also be accompanied by a clear and conspicuous disclosure regarding the income that can be generally expected by the typical salesforce member in the depicted scenario.” Thereafter, the Company agreed to revise its standard disclosure to include such a disclosure of generally expected results.

With respect to the video on the Company’s website that describes the Company’s incentive trip, the Company noted that the webpage on which the video appeared contained a clear and prominent link to a chart that detailed the qualifications needed to earn the incentive trip. After consulting with DSSRC, the Company committed to include a disclosure of the number of salesforce members that typically earn Company incentive trips.

DSSRC appreciated the Company genuine, good faith efforts to adequately address DSSRC’s concerns in this inquiry. Accordingly, the inquiry was administratively closed.

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