Think your MLM income disclosure statement is a model of clarity? Think again. Think your disclosure supports claims that participants can earn lots of extra money if they join? Think again (again). Those are just two of the major takeaways from a new FTC staff report that analyzed income disclosure statements from dozens of MLMs.
The FTC staff report documents an analysis of 70 publicly available income disclosure statements from a wide range of MLMs — big and well-known to smaller companies. The report found that these income disclosure statements showed most participants made $1,000 or less per year — that’s less than $84 dollars per month. And that may not account for expenses. In at least 17 MLMs, most participants didn’t make any money at all.
The staff report also documents (and provides numerous examples of) how most of the publicly available MLM income disclosure statements used all the following tactics:
- Emphasizing the high dollar amounts made by a relatively small number of MLM participants.
- Leaving out or downplaying important facts, like the percentage of participants who made no money.
- Presenting income data in potentially confusing ways.
- Ignoring expenses incurred by participants — even though expenses can, and in some MLMs often do, outstrip income.
Read the full report to learn more and consult the FTC’s Business Guidance Concerning Multi-Level Marketing for advice on how to comply with the law.
