DSSRC Administrative Closure #331

The Direct Selling Self-Regulatory Council (DSSRC) contacted a direct selling company ("Company") that markets nutritional supplement products regarding 23 social media posts that communicated earnings claims and four social media posts regarding product performance claims. The claims were communicated on Facebook, Instagram, YouTube and on Company blogs. DSSRC was concerned that the earnings claims conveyed messages suggesting that potential independent salesforce members could achieve significant income, including full-time income, unlimited income and financial freedom through participation in the Company's business opportunity. DSSRC also expressed concern regarding the depictions of checks showing income that may not be generally expected by the typical Company salesforce member.

The inquiry also included four social media posts indicating that the Company’s products could treat a number of serious health conditions including, but not limited to, cholesterol, heart disease, inflammation, depression, gum disease and digestive disorder.

This inquiry was initiated by DSSRC as part of its ongoing, 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 immediately responded to DSSRC’s concerns and informed DSSRC that it has a significant global footprint with a presence in over 40 countries. The Company explained that the regulatory requirements in each of these jurisdictions vary, which can cause some difficulty in messaging and consistency. Notwithstanding, because the Company is based in the United States, it works diligently to maintain the U.S. regulatory standards for all of its international markets.

The Company noted that a number of the posts identified in the inquiry were disseminated several years ago by salesforce members who are no longer affiliated with the Company. Despite the challenges in contacting inactive salesforce members and salesforce members located outside of the United States, the Company was successful in removing all of the earnings claims at issue and three of the four product claims at issue. With respect to the remaining product claim (which originated in Africa), the Company informed DSSRC that it could not locate the individual responsible for the social media post despite its best efforts.

DSSRC recognized the Company’s genuine good faith efforts to address its concerns and determined that the Company’s actions were necessary and appropriate.

According to section 13 of the Federal Trade Commission’s (FTC) Business Guidance for Multi-Level Marketers, (the “FTC Guidance”) “Any earnings claim should reflect what the typical person to whom the representation is directed is likely to achieve in income, profit, or appreciation…. Presenting atypical earnings to consumers considering an income opportunity is likely to generate a deceptive impression. At a minimum, avoiding deception requires a clear, prominent, and unavoidable presentation of the typical participant’s revenue and expenses—all of which must be substantiated.” The FTC Guidance also states that truthful testimonials from MLM participants who earn large amounts of money or career-level income likely will be interpreted as representing that their experience is representative of what others should expect to receive and that presenting atypical earnings to consumers considering an income opportunity is likely to generate a deceptive impression.

Moreover, as noted in section 7 of the DSSRC Guidance on Earnings Claims for the Direct Selling Industry, all earnings claims should be supported by substantiation demonstrating that the earnings communicated in the claim are accurate as to the individual or individuals depicted in the claim. 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. Such claims should also be otherwise truthful and non-misleading.

With respect to the one social media post that remains publicly accessible, DSSRC recommended that the Company continue its attempts to identify the individual responsible for the post and, if unsuccessful, it is recommended that the Company reach out to the social media platform where the post appears and request that the post be removed. DSSRC further recommended that the Company include a comment below the post to inform the public of the unauthorized claim.

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

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