5M1b Ltr to FTC Re MLM Income and Health Claims FINAL
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June 30, 2021 VIA EMAIL Samuel Levine Acting Director, Bureau of Consumer Protection Federal Trade Commission 600 Pennsylvania Ave. N.W. Washington, D.C. 20580 [email protected] Dear Mr. Levine: For far too long multilevel marketing (MLM) companies have used deceptive marketing to promote the business opportunity and sell their wares.1 In fact, the problem is so longstanding and pervasive that the MLM industry’s self-regulatory body, the Direct Selling Self-Regulatory Council (DSSRC), stated just last month that: Though the industry has made significant strides to curtail the dissemination of unsupported claims regarding income potential …, there is still a great deal of work ahead of us to assure that the product and earnings claims communicated to consumers and potential salesforce members are truthful and accurate.2 Moreover, industry trade group, the Direct Selling Association (DSA), published an article in its January 2021 journal that stated, “[d]irect sellers will never be able to wholly prevent distributors from making improper claims.”3 Such pessimism is cause for concern as improper health and income claims not only deceive consumers but also lead to social, emotional, and physical harms, and financial hardship.4 Given this backdrop, TINA.org urges the Commission to implement a penalty offense program targeting the direct selling industry and its market-wide practice of utilizing deceptive earnings representations and false health claims.5 For more than 40 years, the FTC has consistently pursued individual MLM companies making false and deceptive marketing claims. Unfortunately, this approach has had no apparent deterrent effect on the industry6 as is amply demonstrated by multiple TINA.org investigations.7 The Commission has issued numerous final cease and desist orders following fully adjudicated administrative proceedings clearly indicating, among other things, that false earnings representations and misleading health claims are deceptive and thus unlawful.8 And while there can be no doubt that many direct selling companies are fully aware that such claims are unlawful pursuant to Section 5 of the FTC Act, in order to eliminate any claims of ignorance, all such companies in the U.S. should be provided with actual notice of the law so that civil penalties may be imposed against lawbreakers. To that end, attached in Appendix A is a list of more than 660 direct selling companies operating in the U.S. together with available contact information in order to assist the FTC in providing notice. Further, as is our usual practice, TINA.org is forwarding a copy of this letter to all the direct selling companies listed in Appendix A for which contact information was available together with applicable final cease and desist orders attached hereto. It is time that the Agency stop playing a game of whack-a-mole with the MLM industry and instead implement an enforcement program that will finally deter the systemic harm caused by the constant and continual use of deceptive marketing within direct selling. Only when it is no longer economically advantageous for MLM companies to deceive consumers and low-level distributors alike will there be progress toward truth in advertising. TINA.org hopes that the FTC will not delay in joining TINA.org’s efforts to put the MLM industry on notice that its time for using deceptive marketing without facing substantial penalties is up. Sincerely, Laura Smith, Esq. Bonnie Patten, Esq. Legal Director Executive Director Truth in Advertising, Inc. Truth in Advertising, Inc. 1 See Rohit Chopra & Samuel A.A. Levine, The Case for Resurrecting the FTC Act’s Penalty Offense Authority, U. PA. L. REV. (forthcoming), https://ssrn.com/abstract=3721256 (“there is no debate that the problem those [Business Opportunity Rule] disclosures were designed to correct – false earnings claims – is widespread and illegal. Yet this problem persists year after year. For example, early in the COVID-19 pandemic, the Commission sent warning letters to nine multilevel marketing firms allegedly making false earnings claims”)(with regard to multilevel marketers “the Commission observed that false earnings claims are ‘not uncommon,’ are key to recruiting distributors, and have been challenged in more than twenty FTC actions from 1990 to 2006.”). See also FTC Letters Target More Unproven MLM Health and Earnings Claims, https://www.consumer.ftc.gov/blog/2020/06/ftc-letters-target-more-unproven-mlm- health-and-earnings-claims (“Today, the FTC sent warning letters to six MLMs. The letters tell them to immediately stop their distributors from telling people their products can treat or prevent COVID-19, that they’re likely to make significant money if they join the MLM, or both. The FTC says these claims violate truth-in-advertising laws.”) 2 Peter Marinello, The Critical Components for Self-Regulation in Direct Selling, BBB National Programs, May 11, 2021. 2 3 See John Sanders & Katrina Eash, Reducing Regulatory Risk: Changes You Can Make to Pass the FTC’s Scrutiny, Direct Selling Journal, at 77 (Jan. 2021). 4 See Multi-Level Marketing Businesses and Pyramid Schemes, https://www.consumer.ftc.gov/ articles/multi-level-marketing-businesses-and-pyramid-schemes (“Most people who join legitimate MLMs make little or no money. Some of them lose money. In some cases, people believe they’ve joined a legitimate MLM, but it turns out to be an illegal pyramid scheme that steals everything they invest and leaves them deeply in debt.”) 5 See 15 U.S.C. § 45(m)(1)(b). 6 Fifteen years ago, the Commission noted that false earnings claims are commonly used in the MLM industry to recruit distributors, and that the FTC had challenged such misleading marketing in more than 20 actions between 1990 to 2006. See Notice of Proposed Rulemaking, Business Opportunity Rule, 71 Fed. Reg. 19054, 19070 (Apr. 12, 2006). 7 See, e.g., TINA.org industry-wide investigations of health and income claims used by DSA-member companies, https://www.truthinadvertising.org/dsa-health-summary-of-action/ and https://www.truthinadvertising.org/mlm-income-claims-summary-action/; MLMs Continue to Break the Law Despite FTC Warning, Dec. 15, 2020, https://www.truthinadvertising.org/mlms-continue-to-break- the-law-despite-ftc-warning/. See also TINA.org federal and state regulatory complaints regarding MLM companies (Vemma, https://www.truthinadvertising.org/vemma/; Jeunesse, https://www.truthinadvertising.org/jeunesse/; Kyani, https://www.truthinadvertising.org/kyani-summary-of-action/; SevenPoint2, https://www.truthinadvertising.org/sevenpoint-summary-of-action/; Nerium International, https://www.truthinadvertising.org/nerium-summary-of-action/; Team National, https://www.truthinadvertising.org/team-national-summary-action/; Stream Energy, https://www.truthinadvertising.org/stream-summary-action/; New U Life, https://www.truthinadvertising.org/new-u-life-summary-of-action/; Herbalife, https://www.truthinadvertising.org/herbalife-2020-summary-of-action/; LuLaRoe, https://www.truthinadvertising.org/lularoe-summary-action/). TINA.org DSSRC complaints (Young Living, https://www.truthinadvertising.org/young-living-summary- action/; doTerra, https://www.truthinadvertising.org/doterra-summary-action/; IML/IM Mastery Academy, https://www.truthinadvertising.org/iml-mastery-academy-summary-action/; Le-Vel Thrive, https://www.truthinadvertising.org/level-thrive-summary-action/; Beautycounter, https://www.truthinadvertising.org/beautycounter-summary-action/; Primerica, https://www.truthinadvertising.org/primerica-summary-action/). TINA.org warning letters to MLM companies (Jusuru International, https://www.truthinadvertising.org/jusuru-summary-of-action/; 4Life Research, https://www.truthinadvertising.org/4life-summary-of-action/; Market America, https://www.truthinadvertising.org/market-america-summary-action/). 8 See, e.g., In the Matter of POM Wonderful LLC, et al., Docket No. 9344, Final Order, Jan. 10, 2013, modified on June 14, 2016; In the Matter of Koscot Interplanetary, Inc., 86 F.T.C. 1106 (1975), collectively attached hereto as Appendix B. 3 See also In the Matter of Amway Corp., Inc., et al., 93 F.T.C. 618 (1979); In the Matter of Holiday Magic, Inc., et al., 84 F.T.C. 748 (1974); In the Matter of Nat’l Dynamics Corp., 82 F.T.C. 488 (1973), aff’d in part and rev’d in part, 492 F.2d 1333 (2d Cir. 1974), cert. denied, 419 U.S. 993 (1974). 4 APPENDIX A Company Website Mailing address Email contact 1 123GoGreen https://www.123go.green/ Platinum Synergy Group [email protected] PO Box 27060 RPO Forest Glen Kitchener, ON N2E 3K2 Canada 2 25dollar1up https://25dollar1up.com/home.php V & G Global LLC [email protected] 15480 Annapolis Rd. Ste 202 #160 Bowie, MD 20715 3 4Life Research http://www.4life.com 9850 South 300 West [email protected] Sandy, UT 84070 4 5Linx Enterprises https://5linx.com/ 400 Andrews St., Ste 400 [email protected] Rochester, NY 14604 [email protected] 1 South Clinton Ave., Ste 800 Rochester, NY 14604 5 7K Metals https://about.7kmetals.com/home 2235 East 25th St., Ste 290 [email protected] Idaho Falls, ID 83404 6 A Maker’s Studio https://amakersstudio.com/ 478 N Hollywood St. [email protected] Memphis, TN 38112 7 Abby + Anna https://www.shopabbyanna.com/ customersupport@shopabbyann a.com 1 8 ACN, Inc. https://acn.com/us-en/homepage 1000 Progress Place [email protected] Concord, NC 28025 9 Acti-Labs https://www.acti-labs.com/me/labs/ 4904 Colt Rd. [email protected] Rockford, IL 61109 [email protected] The Stables Shipton Bridge Farm [email protected] Widdington, Saffron Walden, Essex, CB11 3SU 10 Adbarkit https://adbarkit.com/ 2a Tibbits Ave [email protected] Green Island, NY 12183 11 adornable.u https://www.adornableu.com/ PO Box 92172 [email protected] Southlake, TX 76092 m https://www.adornableu.com/ 12 AdvoCare https://www.advocare.com/ 2800 Telecom Pkwy [email protected] International, LLC Richardson, TX 75082 13 Aerus LLC (formerly https://www.beyondbyaerus.com/Site/ 14841 Dallas Pkwy [email protected] Electrolux LLC) Ste 500 Dallas, TX 75254 14 Affiliate Institute https://affiliateinstitute.com/ 304 S.