FTC to MLMs: You Lie, You Pay

Note: Adjusted for inflation, the maximum civil penalty amount has increased to $50,120.

Today the FTC put the multilevel marketing (MLM) industry on notice that its time for using deceptive income claims without facing penalties (of as much as $43,792 per violation) is up. With the support of all five FTC commissioners, the agency announced Tuesday that it is implementing a penalty offense program that targets the direct selling industry (among others) and its marketwide practice of utilizing deceptive earnings representations.

For far too long MLM companies have used income claims to promote the business opportunity despite the fact that the FTC has said most people who join legitimate MLMs make little or no money. MLM companies have even used deceptive earnings claims during the pandemic to recruit those adversely affected by the downturn in the economy as documented by the FTC and TINA.org. In June, TINA.org sent a letter (together with a list of more than 660 direct selling companies) to the FTC urging it to implement a penalty offense program targeting the industry. We did this because we believe that such a program would be an efficient and effective way to address the pervasive problem of deceptive marketing used to promote the MLM business opportunity. Today the FTC did just that – providing notice to the industry that civil penalties may be imposed against those companies that make inappropriate income claims going forward.

TINA.org has catalogued well over 3,000 examples of MLM companies using deceptive income claims, reached out to more than 100 direct selling companies asking them to stop violating the law, and urged compliance with the law at several industry events. With this latest action, the agency has amplified TINA.org’s efforts. Our message to the industry hasn’t changed – we’re on it – ready to document every deceptive claim of time and financial freedom, record every misleading lavish lifestyle video and catalogue every compensation plan and earnings disclosure that purports to demonstrate how distributors can make bank.