Long ago, the federal government passed the FTC Act. The intention of the Act was to prevent deceptive practices in the marketing of products and services. The basic legislation was fairly straight forward and broad in its language.
Since then, the FTC has policed the commercial marketplace to examine claims about products made by marketers. It makes no difference whether the claim is that you will make money in real estate, a potion you put hair in your hair, lose weight with an herbal supplement, or that you will save money on your gas bill. In all of these situations, the FTC examines whether or not a marketing practice and claim is supported by impartial substantiation and evidence.
If the FTC believes that support is lacking, it will request that the marketer modify its claims or make proper disclosures to explain what the typical consumer should expect of a product or service. The outcome of a matter may be resolved by a letter of assurance, by a consent agreement or by a consent settlement and judgment. If the FTC’s position is disputed, the FTC may even file suit in a federal court to enforce its position.
The bottom line is that an inquiry from the FTC is not to be taken lightly. Better yet, an MLM company should make sure that its product claims have adequate substantiation and evidence behind them and at least have sufficient evidence to avoid a knock on the door by the FTC.
For more information about the FTC’s guidelines visit mlmlegal.com’s FTC Guidelines on Endorsements and Testimonials Resource Center page.
The article “FTC Guidelines on Endorsements and Testimonials: Regulation of Advertising” may also prove helpful.
Or, watch the video What is the Relationship between MLM and the FTC?