Archive for October, 2012

MLM and Revised FTC Endorsement Guidelines

Many people endorsing MLM products, both distributors and companies themselves, seem to be unaware of the Revised FTC Endorsement Guidelines (PDF) from 2009.

Many may recall a time where advertisers cherry-picked the person who lost over 100 pounds on a diet and in small letters at the bottom of the screen there was a disclaimer “Results not typical.” The FTC has come to say that this isn’t allowed any more as it is deceptive. Instead, advertisements should depict the typical results that a consumer should expect. The FTC wrote up a nice page with an example:

“Under the old Guides, if the endorser’s experience wasn’t representative of what buyers would generally achieve – for example, if the 50-pound weight loss of ‘Mary G., Tucson, Arizona’ wasn’t typical – the Guides allowed the advertiser either to “clearly and conspicuously disclose what the generally expected performance would be in the depicted circumstances or clearly and conspicuously disclose the limited applicability of the endorser’s experience to what consumers may generally expect to achieve.” Despite the unequivocal requirement that the disclosures must be clear and conspicuous, some advertisers flouted this directive by cherry-picking their best case scenario, touting those results in banner headlines, and dropping an all-but-invisible footnote with the cryptic statement, ‘Results not typical’ or ‘Individual results may vary.’

No more. As the revised Guides make clear, testimonials reporting specific results achieved by using the product or service generally will be interpreted to mean that the endorser’s experience is what others typically can expect to achieve. That leaves advertisers with two choices: 1) Have adequate proof to back up that claim, or 2) ‘Clearly and conspicuously disclose the generally expected performance in the depicted circumstances.'”

How does this apply to MLM? MonaVie has warned their distributors about the claims: 5 Tips Every MonaVie Distributor Needs to Know About the New FTC Guidelines with a couple of examples:

“Ex. ‘MonaVie Pulse restored my eyesight.’ – While that maybe an honest opinion, it is not a typical result, and therefore, any such opinion posted online or said offline would be in violation of the current guidelines, unless there is valid research to support the claim.”

Many MLM distributors of juices make claims such as these… or saying that MonaVie helped them with cancer, heart disease, or some other medical condition. Not only are these illegal health claims that can’t be made due to laws from the FDA, they can’t by made due to these guidelines. Many MLM distributors say, “But I believe that. It is my testimonial and my freedom of speech to express my opinion on it.” The truth is that MLM distributors gave that up those rights when they signed to became distributors. As an MLM distributor, you have to represent what is adequately proven, such as extensive clinical trials that the juice helps with cancer.

Another example that MonaVie gives is this:

Ex. ‘I made $25,000, in one month with MonaVie, and you can too.’ While this statement may be true… the result is not ‘typical’. Such statements would be in violation of the current guidelines. Whenever discussing earnings, you should refer to the Income Disclosure Statement and provide the link or the actual document.

So are MLM companies abiding by these guidelines that have been in place since 2009? Nope. Let’s take the ViSalus scam for example. The ViSalus Compensation Plan (PDF) on page 8 describes a scenario where a distributor would earn $72,000 per month by having a pyramid of nearly 10,000 distributors who each buy 3 ViSalus Balance Kits a month. First most single people, the youth demographic that ViSalus targets would buy one balance kit per month. Second, by definition a typical distributor could not have 10,000 distributors underneath them… the distributor depicted is literally 1 in 10,001 case (it’s actually much more because each of those distributors have to be buying all those balance kits). At the end of the compensation plan in small letters ViSalus give the “results not typical”-type disclaimer. This is a clear violation of these FTC guidelines of them cherry-picking a scenario where a person would earn over $850,000 a year rather than a scenario that is typical… 99% of MLMs lose money.

It’s something to think about as MLMs give examples of how much you could earn. Are they sticking with the FTC endorsement guidelines and giving an average case of what people do actually earn? Ask for an Income Disclosure Statement and look at it very carefully. Sometimes MLMs like MonaVie will hide distributors by claiming that they aren’t active just because they haven’t signed anyone up. If the MLM doesn’t offer an Income Disclosure Statement, you should run in the other direction.

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