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Direct Selling Self-Regulatory Council Issues New Guidance on Earnings Claims

DSN Staff
Direct Selling Self-Regulatory Council Issues New Guidance on Earnings Claims

July 9, 2020

 

BBB National Programs’ Direct Selling Self-Regulatory Council (DSSRC), in partnership with the Direct Selling Association (DSA),  released new Guidance on Earnings Claims that defines and identifies earnings claims to ensure all representations made by direct-selling companies or members of their salesforce comply with legal and self-regulatory standards.

This new guidance is the most comprehensive ever released for direct-selling companies and comes at a time when DSSRC and the Federal Trade Commission (FTC) have seen an increase in questionable earnings claims during the ongoing coronavirus pandemic. The new Guidance on Earnings Claims will go into effect on August 1, 2020.

One of the greatest challenges for direct selling companies is ensuring all representations by their salesforce members comply with legal and self-regulatory standards. The Guidance on Earnings Claims is based on statutes, regulations and guidance documents issued by regulatory agencies, judicial precedent and decisions from self-regulatory organizations.

“The dissemination of truthful and accurate earnings claims is imperative for direct-selling companies,” said Mary Engle, executive vice president, Policy, BBB National Programs. “We encourage these companies to embrace this new guidance to help shape their advertising strategies and plans for salesforce education”

This new guidance for the direct-selling industry will be key in identifying the wide range of content types that are reviewed and could potentially mislead consumers, such as testimonials and success stories that do not represent the experience of a majority of participants, examples identified include “be set for life” or “financial freedom” that leave a net impression on an audience of participation leading to a lavish lifestyle, or neglecting to disclose the mandatory costs of participation.

This guidance will help companies in the direct-selling industry understand:

  • What qualifies as a misleading earnings claim,

  • A company’s responsibility for claims made by members of its salesforce,

  • What happens when a misleading claim is identified by DSSRC,

  • Recommended best practices for direct-selling companies to help them avoid self-regulatory challenges, and

  • Specific examples of the most common misleading earnings claims referred to regulatory agencies for corrective action.

“DSA members have always committed themselves to the highest level of ethics and consumer protection in their businesses,” said Joseph N. Mariano, president, Direct Selling Association. “This new guidance will complement the obligations that DSA members commit themselves to under the DSA Code of Ethics regarding fair and accurate income claims. This DSSRC guidance provides all direct selling companies and salespeople—even non-DSA members—clear direction as how to best ensure that earnings claims are fair and accurate, and helps individuals make fully informed decisions when considering a direct selling opportunity. We look forward to our continued collaboration with DDSRC and BBB National Programs to provide this kind of guidance to direct selling companies, salespeople, and customers.”

“We hope direct-selling companies will welcome our new guidance as they work with their compliance teams and salesforce members to communicate appropriate representations regarding the unique business opportunities afforded by the direct selling channel,” said Peter Marinello, vice president, DSSRC.

Click here to access the Guidance on Earnings Claims.

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