Network marketing companies, also known as multi level marketing companies (MLMs) have grown in recent years, with many of these businesses focused on dietary supplements.
One such MLM is Market America, founded by former Amway distributor James 'JR' Ridinger. Ridinger describes the business as a 'product brokerage and internet marketing company' that sells a number of products online that fall into the nutraceutical category, as well as other categories such as entertainment and financial services.
Tina.org’s investigation came across 750 deceptive income claims made directly by Market America or Ridinger, with over 450 published in 2020 alone. Through blog posts, YouTube videos, Instagram, Facebook and Twitter posts, as well as hundreds of 'Power Profiles' on its website, Market America advertised that its distributors can achieve time and financial freedom, quit their full-time jobs, earn a six-figure residual income, retire early, and pay off debt, along with other lofty promises.
TINA.org also uncovered claims that Market America positioned itself as a financial solution to the economic downfall resulting from the COVID-19 pandemic.
The ad watchdog group alerted Market America of its findings and issued a warning letter, advising the MLM to promptly remove the deceptive marketing used to promote its business opportunity. In response, Market America did remove the vast majority of the more than 750 deceptive claims flagged by TINA.org and stated its commitment “to ensuring that claims made by the company and its independent distributors are truthful and non-misleading.” TINA.org said it will continue to monitor the company.
According to TINA.org, most people who become involved in multilevel marketing make little to no money, and nowhere close to the kind of life-changing income necessary to achieve the 'time and financial freedom' that Market America often refers to in its video testimonials, which show over 300 ‘Power Profiles’ that depicted distributors touting the thousands of dollars they made in monthly income.
“TINA.org has investigated over 140 MLMs and found that the vast majority make deceptive income claims,” said Executive Director Bonnie Patten. “But by publishing nearly a thousand deceptive income claims on its own platforms, Market America stands out as one of the most egregious cases we've seen. While we are pleased that it has taken swift action to comply with the law, the fact that a company has been inundating consumers with deceptive income claims for years is inexcusable."
Shana Mueller, Director of Marketing & Communications at TINA.org, told NutraIngredients-USA, “TINA.org has definitely seen an uptick in deceptive marketing claims this year, particularly ones related to the pandemic. As our workload has increased, we have shifted resources accordingly.”
MLMs and COVID
Whether it’s exaggerated income claims or coronavirus cures, the FTC has been pushing out warning letters pretty regularly this year.
Speaking at a recent industry event, FTC Commissioner Noah Phillips issued a warning for those making deceptive earnings claims: “I caution you to stay on the straight and narrow because now, more than ever, this is a top enforcement priority for me, and I hope the Agency.”
Guidance for MLMs
In July, the BBB National Programs’ Direct Selling Self-Regulatory Council (DSSRC), in partnership with the Direct Selling Association (DSA) announced a new guidance to help companies avoid making exaggerated income claims.
The guidance cautions companies from using statements like 'quit your job' or promises that distributors will 'be set for life,' or 'make more money than you ever have imagined or thought possible.'
According to the guide, earnings claims must be backed by documentation. The guide also includes a number of hypothetical social media posts that companies can refer to in order to determine what claims would be deemed compliant and what might go too far.