The Federal Trade Commission (FTC) announced it will consider a new “earnings rule” to restrict false or misleading “earning claims” by companies, including multi-level marketing. It is asking consumers to send comments. This is good, yes?
Well, better than nothing, maybe, but the Rule could be as misleading and harmful to consumers as MLM’s fake earnings promises. It could reinforce the Big Lie of MLM as a real business offering real income. It could mislead millions to view MLM is a real “opportunity”, but maybe just exaggerated by promoters. This is not good. Worse than nothing.
Here are guidelines for making a useful comment supporting law enforcement but also not treating, implying or supporting MLM as real “business.”
Tell the FTC MLM does not belong with legitimate businesses.
The proposed FTC rule erroneously includes MLM with actual businesses where people do make income, but most just don’t make as much as advertised. These include Uber or even Amazon. In MLM, virtually no one – less than 1% – makes any net profit at all. MLM’s don’t pay recruits. Recruits pay MLM. The “median” income (half make more, half make less) is below zero .
Comments to the FTC should assert that MLM should be placed in a separate class, as pyramid recruiting scheme, not with businesses that actually pay wages or real commissions on real sales. Classifying MLM with real business can mislead people to think MLM is “legitimate”, but only makes exaggerated promises. In fact, it is a financial trap, not an “income opportunity” of any kind.
- Tell the FTC there are no “earnings” in MLM.
Applying the “earnings rule” to MLM misleadingly indicates that there are actual “earnings” in MLM, but they may just be exaggerated or misleading. In fact there aren’t any “earnings” at all. No one makes sustainable, net profits from “retailing” MLM products. The vast majority of recruits do not try to retail MLM goods due to its obvious unfeasibility. MLM is not “direct selling.” The only “potential” income is from recruiting but recruiting-based “income” is not legitimate “earnings”. It requires the deception that the recruiting chain can expand forever. Recruiting income is just gaining from other’s losses. Any “earnings” promise in MLM is misleading.
Comments to the FTC should explain that money gained in MLM is not “earnings”. “Retail” profit is a myth. The recruiting income is a deceptive money-transfer, not profit. Applying the “earnings” rule to MLM can actually bolster the “retail” disguise and legitimize the recruiting scam. Comments should also state forcefully that there is no “average” income and therefore no way for an MLM to ever disclose truthful data about consumer “income” or losses.
Tell the FTC an “earnings rule” for MLM can never be enforced.
MLMs are structured as “endless chains” and so they don’t need to make specific “earnings” claims. The “infinite” expansion model, by itself, is all that MLMs need to deceptively communicate the claim of “unlimited” income. All MLM recruits are always led to believe they can build their own “downline”, forever, leading to “wealth beyond imagination.” MLM’s false income claims, therefore, cannot be “regulated.” They are baked into the bogus model.
Comments to the FTC should ask the FTC to ban claims of “infinite expansion” and prohibit any “compensation plan” based on continuous recruiting. The FTC needs to outlaw the MLM “endless chain” model, as inherently unfair and deceptive. Comments to the FTC should also state that as long as the FTC allows the “endless chain” of MLM, a rule against its false income promises is futile.