Back up those earnings claims — and other lessons from the FTC’s Labor Task Force work

A healthy labor market is critical to the country’s success. That’s why last year, FTC Chairman Andrew N. Ferguson formed a Labor Task Force to maximize the agency’s broad-based jurisdiction and interdisciplinary expertise to confront deceptive, unfair, and anticompetitive labor practices that harm American workers. The Labor Task Force is yielding significant benefits for Americans. For example, the FTC recently brought a series of cases that charged the recruiters or leadership of several multi-level marketing companies (MLMs) and an investment training and business scheme (which is also an MLM) with making misleading claims about what participants might earn.

In MLMs — where participants market and sell products or services and recruit new participants to also market, sell, and recruit — the promise of significant earnings can be a powerful incentive for people to invest time or money. And when recruiters and companies fail to deliver on their promises, it can cost people not only that time and money but also the opportunity to pursue other genuine, income-generating work.

In Wellington and Merritt, for example, the FTC alleged that senior-level participants in separate MLMs used false or baseless earnings claims to recruit people to join their MLMs. According to the FTC, despite claiming recruits could earn hundreds of thousands — and even millions — of dollars, the MLMs’ own income disclosure statements showed that most people made little or no money. Similarly, in Forever Living, the FTC alleged that the health and wellness MLM and two of its executives used deceptive earnings claims to attract new participants, most of whom made no money or even lost money.

The FTC and State of Nevada also charged International Markets Live, a wide-ranging MLM scheme that generated more than $1.2 billion since 2018, with using false or baseless earning claims to convince consumers to purchase training on how to invest in financial markets. The scheme used similar claims to persuade consumers to buy into a multi-level-marketing business venture, which involved marketing the trading training services to others. To settle the allegations, the company and its principals have agreed to a nearly $800 million judgment (a portion of which will be suspended due to inability to pay) and to turn over assets estimated at nearly $90 million. The FTC intends to use these assets, together with $13 million collected under a previous settlement in this matter, for consumer refunds.

When people are deciding whether to take on work or to invest in a business opportunity, they deserve to know how much they’ll make. If you’re marketing, promoting, or participating in multi-level marketing or any other business opportunity:

• Make sure you can back up your earnings (or lifestyle) claims. You must be able to support any claims you make about how much money someone can earn from buying your products or services or joining your money-making opportunity. (And remember: unusually successful earnings by a handful of people don’t by themselves support making a claim that others will or are likely to make the same income. Any claims you make should be about what a typical MLM participant is likely to earn.)
• Know that MLM companies, like all money-making opportunities, can be held liable for their distributors’ deceptive marketing. And those same distributors — who recruit others by claiming they can make significant amounts of money — can also be held liable for the accuracy of their claims.
• The Trump-Vance Commission has reinvigorated the FTC’s fraud program. Know that the FTC won’t hesitate to take action against recruiters or companies that defraud workers with claims of false earnings that few, if any, will achieve.

Find more guidance related to multi-level marketing.