In the context of direct selling, “opportunity,” in addition to the chance to make money, is a reference to the “business opportunity” of a direct selling/MLM marketing program.

The word “opportunity” is a generic term for the chance to advance, better one’s economic state, health, social position, etc. However, in the context of direct selling, “opportunity,” in addition to the chance to make money, is a reference to the “business opportunity” of a direct selling/MLM marketing program.

Two dozen states and the FTC regulate the offering of business opportunities in a parallel fashion to their regulation of franchise opportunities. Because of the low threshold of entry fees, typically, modestly-priced at-cost sales kits, the business opportunity of MLM companies is generally exempt from state business opportunity laws. In addition, the FTC has indicated that it generally does not view the offering of an MLM opportunity to trigger the FTC Business Opportunity Rule. Of course, multiple states have adopted specific MLM statutes to provide guidelines for the offering of a MLM opportunity. All of these statutes can be found in the statutes library at www.mlmlegal.com.

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Our next Starting and Running the Successful MLM Company Conference takes place October 27 and 28, 2016 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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The FTC and most states under deceptive claims laws, prohibit unsubstantiated or misleading claims about products.

MLM companies and direct sellers are among the biggest sellers of health and cosmetics products in the world. Some of the largest companies are traded on the New York Stock Exchange (NYSE), such as Avon or Herbalife. Because of concerns about safety of its customers, as well as U.S. Food and Drug Administration (FDA) and Federal Trade Commission (FTC) regulatory scrutiny of labeling and product claims, MLM companies expend tremendous financial and professional resources to remain compliant with the rules promulgated by the FDA for the marketing of health, cosmetic and personal care products. The FDA publishes extensive guidelines for product claims. In the dietary supplement area, Congress has instructed the FDA on such guidelines with DSHEA, the Dietary Supplement Health Education Act of 1994. And, even with DSHEA exemptions for substantiated “structure function claims,” any claims in the nature of therapeutic treatment of actual medical conditions, are prohibited. And if such claims are made, the products may be removed from the over the counter market as unapproved “drugs.” In addition, the FTC and most states under deceptive claims laws, prohibit unsubstantiated or misleading claims about products. MLM companies, in turn, publish extensive compliance guidelines for distributors as to what may be represented or prohibited by way of “unauthorized product claims” in the marketing of products. Companies take this issue quite seriously, as inappropriate product claims that trigger regulatory action create a risk for the opportunities of all distributors as well as companies.  

View these related articles:

What Are Unauthorized Earnings Claims?

As a consultant, what can I say about a MLM company’s nutritional/dietary supplement products?

For more information on the network marketing industry visit www.mlmlegal.com and www.mlmattorney.com.

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Our next Starting and Running the Successful MLM Company Conference takes place October 27 and 28, 2016 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

Visit us at www.mlmlegal.com to learn more.

Q:  Why do companies restrict the type of advertising carried on by their distributors?

A: Company rules regarding advertising are usually very detailed. Companies are zealous about protecting their trademarks. In addition, they want to avoid inappropriate claims about earnings opportunities or product properties, such as medical claims. The rights of the distributor and the network marketing company are determined by their contract, and specific restrictions on advertising are contained in the distributor agreement and the company’s policies and procedures.

For additional information on advertising and the network marketing industry, visit the following links:

“FTC Guidelines on Endorsements and Testimonials- Regulation of Advertising” Article

“Chasing The Competition” Article

“FTC Guidelines on Endorsements and Testimonials – Resource Center” Article

“FTC – Regulation of Advertising” Article

FTC Endorsement Guidelines Impact MLM/Direct Selling Blog Post

“MLM Startup – The Basics” MLM Corporate Startup Essentials

Comparative Guidelines for Advertising

What is the Relationship between MLM and the FTC?

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