FTC nails 10 MLMs for illegal disease treatment, earnings claims related to coronavirus crisis

By Hank Schultz

- Last updated on GMT

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Getty Images

Related tags coronavirus COVID-19 disease claims MLM Direct selling regulations

The US Federal Trade Commission has sent 10 warning letters to network marketing companies whose participants it alleges have been making illegal COVID-19 treatment claims and earnings claims related to the pandemic crisis.

FTC posted 10 warning letters to multilevel marketing companies on Friday based on its monitoring of the social media activity of those companies’ business participants.  The warning letters were based on both disease treatment claims and earnings claims violations. 

Warnings address both disease, earnings violations

 While the  earnings claims citations could have been made at any time, in this case the agency’s concern seems to be about those earnings claims targeting potential new distributors who have been thrown out of work because of the coronavirus crisis.  The network marketing firms cited by FTC run a gamut of companies selling dietary supplements, essential oils, cosmetics and other personal care items.  The warning letters were based on the content of both on social media posts and videos that were posted online.

In the disease claims + earnings claims category, the following companies were issued warning letters:

In the earnings claim category, FTC sent warning letters to the following firms:

And finally, a lone warning was sent based on illegal disease claims only to:

FTC: Companies are responsible for what distributors say

According to the US Food and Drug Administration (FDA), there currently are no products that are scientifically proven to treat or prevent the virus.

“MLMs and other companies that distribute their products through networks of distributors are responsible for the product and earnings claims those distributors are making,”​ said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “During this health and economic crisis, we are on the lookout for false income claims for work-at-home opportunities, in addition to spurious health claims that products can treat or prevent COVID-19.”

The warning letters refer to an FTC guidance document​ that states that MLMs and other direct selling companies are responsible for what their distributors say about the company’s product or services.  This includes making earnings claims that do not include specific information about how much the average participant earns (as opposed to the top end earnings potential) or even what the average participant might lose in entering into the business opportunity.

FTC sent a number of additional warning letters last week to companies making illegal disease claims, but this is the first such raft of letters aimed at the direct selling industry. Like the other previous letters, FTC gave companies 48 hours to respond on how they plan to comply with the demands made by the warning letters to cease all illegal or improper disease treatment and earnings claims.

"I think the FTC  intended for this public action not only to remind MLM companies of their responsibilities, but perhaps more so to inform consumers listening to distributors in these times to be wary about claims that products can prevent COVID-19 or that they can make easy money. While the FTC recognizes that there is little MLM companies can do to prevent a distributor intent on making inappropriate claims, and that the internet is vast and it is impossible to catch every one, it expects them to have policies and procedures in place to educate distributors, to monitor for inappropriate claims, and to take corrective action when discovered,”​ said attorney Ivan Wasserman, a partner in the firm Amin Talati Wasserman.

Through a spokesman, doTerra had this to say: "DoTERRA received a letter from the FTC on Friday, April 24th, and we responded on Monday, April 27, by detailing how we have addressed the agency’s concerns and outlining our ongoing, extensive compliance efforts. doTERRA is steadfast in our efforts and resolve to comply with relevant laws and regulations and will continue to vigorously hold our salespersons in compliance with these laws."

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