Multi-Level Marketing in the FTC’s Sights

by Bill McClellan on Jan 11, 2018 3:39:03 PM Government Relations


Over the years working at ERA, I have developed a long standing tradition to start the new year. After returning to work from vacation I keep an extra close eye on the Federal Trade Commission (FTC)’s website and announcements to see what they have announced as priorities in the year to come.

This year, on January 4, 2018, the FTC issued a press release focused on the staff releasing new business guidance to help multi-level marketers (MLMs) understand and comply with the law.

It doesn’t take a rocket scientist to figure out that after giving industry participants to digest and enact this new guidance that the FTC will be looking for enforcement cases to pursue in the MLM space.

You can find the FTC’s MLM business guidance here. The FTC answers a series of 18 questions that include:

-What is direct selling? What is multi-level marketing?

-Under Section 5 of the FTC act, what is a pyramid scheme with an unlawful compensation structure?

-How do deceptive MLM compensation structures harm consumers?

-Does the FTC Act require MLMs to retain sales receipts?

-What are some elements of a successful MLM compliance program?

-How does the FTC consider compliance with industry self-regulatory standards in the assessments of MLMs?

If you have MLM business practice elements in your business, or know someone who does, I would encourage you to take 15-20 minutes to review this new guidance from the government.

As always, if you have questions we encourage you to reach out to your respective compliance attorney to make sure your practices are above the threshold. It looks like 2018 and 2019 might be the era of MLM enforcement at the FTC and its best to get things in order now rather than later.

 About the Author


Bill McClellan serves as ERA's Vice President of Government Affairs. Prior to joining the association, Bill worked as a lobbyist at the Georgia Automobile Dealers Association, covering the state legislature and Georgia's congressional delegation. Before working for the GADA, Bill managed political campaigns at both the congressional and state constitutional levels.

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