National Consumers League

Advocates urge FTC to protect consumers from pyramid schemes


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November 3, 2017

Contact: Cindy Hoang (202) 207-2832, cindyh@nclnet.org   

Washington, DC--Today, a coalition of consumer advocacy organizations, civil rights groups, and pyramid scheme experts joined the National Consumers League (NCL) in calling on the Federal Trade Commission (FTC) to make any guidance it offers to the direct selling industry about pyramid scheme enforcement as strong as possible. 

In 2016, the FTC signaled that it would issue updated guidance to the direct selling industry on how to avoid pyramidal business practices and stay in compliance with the FTC Act. Next week, Acting Chairman Maureen Ohlhausen will be a featured speaker at the Direct Selling Association’s Fall Conference, a venue that the FTC has used in the past to offer guidance to the industry.

The advocacy groups’ letter calls on FTC to ensure that any guidance it offers:

  • Reaffirms case law stating that multi-level compensation should be primarily tied to sales of goods and services to customers outside of the business opportunity;
  • Draws on the lessons of previous FTC investigations and settlements, such as the Commission’s successful actions against BurnLounge, Vemma, and Herbalife;
  • Reiterates that compensation based on internal consumption by distributors must be subject to reasonable and transparent limits; and
  • Makes clear that multi-level marketing companies must be able to substantiate income and health claims and monitor their distributors to ensure that prohibitions against deceptive claims are enforced. 

“The direct selling industry has been furiously lobbying in support of thinly-veiled pyramid scheme legalization bills in Congress,” said John Breyault, NCL’s vice president of public policy, telecommunications, and fraud. “By issuing strong, unambiguous guidance, the FTC has an opportunity to rebut spurious industry claims that there is regulatory confusion and strengthen consumer protections against pyramid schemes that harm millions of consumers. Such guidance will reaffirm how ethical direct selling companies should operate to stay on the right side of the law.” 

In addition to NCL, the letter was signed by Consumer Action, Consumer Federation of America, Consumers Union, Consumer Watchdog, League of United Latin American Citizens, MANA, National Association of Consumer Advocates, National Consumer Law Center (on behalf of its low income clients), Public Citizen, U.S. PIRG, William W. Keep, PhD, and Peter J. Vander Nat, PhD. 

To view the full letter, click here.

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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.