Business Blog
FTC staff report analyzes 70 MLM income disclosure statements
Think your MLM income disclosure statement is a model of clarity? Think again. Think your disclosure supports claims that participants can earn lots of extra money if they join? Think again (again). Those are just two of the major takeaways from a new FTC staff report that analyzed income disclosure statements from dozens of MLMs.
The FTC staff report documents an analysis of 70 publicly available income disclosure statements from a wide range of MLMs — big and well-known to smaller companies. The report found that these income disclosure statements showed most participants made $1,000 or less per year — that’s less than $84 dollars per month. And that may not account for expenses. In at least 17 MLMs, most participants didn’t make any money at all.
The staff report also documents (and provides numerous examples of) how most of the publicly available MLM income disclosure statements used all the following tactics:
- Emphasizing the high dollar amounts made by a relatively small number of MLM participants.
- Leaving out or downplaying important facts, like the percentage of participants who made no money.
- Presenting income data in potentially confusing ways.
- Ignoring expenses incurred by participants — even though expenses can, and in some MLMs often do, outstrip income.
Read the full report to learn more and consult the FTC’s Business Guidance Concerning Multi-Level Marketing for advice on how to comply with the law.
Writer assumed all their readers would know what MLM means. I subscribed to get FTC information as many interesting things are reported. I had to look up on the internet to find out what MLM means. I suggest when using codes like this it is noted what the letters mean for readers such as myself who are not that knowledgeable on all the shorthand codes.
Congratulations to the FTC Staff who drafted and contributed to this Report. It is clear, cogent and comprehensive. It thoroughly debunks the notion that the MLM "disclosure statements" currently used by many MLMs, including prominent members of the Direct Selling Association, provide useful and reliable information for consumers considering investing in an MLM "opportunity." In fact, these disclosure statements are part of the larger problem of deceptive earnings claims by MLM companies and distributors. The Report demonstrates the urgent need for an earnings claim rule covering MLM.
Bravo! Now it's time to do something about it and crack down on these scams.