National Consumers League

FTC guidance to multi-level marketers highlights advocates’ priorities

January 9, 2018

Contact: Carol McKay, (202) 207-2831 or carolm@nclnet.org

Washington, DC - The National Consumers League (NCL) is pleased that the Federal Trade Commission’s (FTC) new guidance to the multi-level marketing (MLM) industry broadly reflects the priorities and concerns expressed by a broad coalition of advocacy organizations focused on fighting pyramid schemes. NCL also welcomed the Commission’s message that the benefit of relying on its existing authority under Section 5 of the FTC Act, as interpreted by decades of case law, rather than legislative action, is the best way to protect consumers from pyramid schemes. NCL, along with other national consumer advocacy and civil rights groups, pyramid scheme experts, and prominent direct selling companies, has opposed efforts by the MLM industry and its allies in Congress to weaken the FTC’s ability to investigate and prosecute pyramid schemes.

The following statement is attributable to John Breyault, National Consumers League Vice President, Public Policy, Telecommunications, and Fraud:

The FTC’s new guidance is consistent with existing case law and previous Commission guidance. In addition, it addresses topics such as income and product claim substantiation, internal consumption, and inventory loading that the MLM industry has frequently misinterpreted. Indeed, the guidance once again demonstrates that the FTC already has the tools it needs to do its job and protect consumers from pyramid schemes masquerading as legitimate MLMs.

Despite industry claims to the contrary, pending bills in Congress -- H.R. 3409 and a House appropriations rider sponsored by Rep. John Moolenaar (R-MI) -- would fundamentally weaken the FTC’s ability to hold MLMs accountable when they perpetrate fraud against prospective entrepreneurs. The Commission’s new guidance is clear and sound advice to the MLM industry about where the guardrails should be placed in order to avoid pyramidal behavior, and yet another indication that proposed legislation is unnecessary and, indeed, undermines the FTC’s authority.

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About the National Consumers League

The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.