Are you on your way to building your direct selling or multi level marketing business? Your next step is to determine how and what you can claim about your business opportunity and your product. During my research I found three amusing and informational videos that help companies and distributors put into perspective how they can avoid making both financial earnings claims and product claims.
Earning Claims (YouTube, 2015)
Product Claims (YouTube, 2015)
Product Buy Backs (YouTube, 2015)
Earning claims are the number one universal concern for the FTC, governments in multiple countries, and the direct selling or multi level marketing companies. Companies striving to have the highest level of compliance will post information about earnings and realistic data on their websites. Google “direct selling income and earnings claims” to see what I mean. But is this truly enough? Independent distributors should also keep track of their earnings and expenses so that they are not tempted to exaggerate the potential.
Your company training should include information about disclosure statements that you are required to give to prospects. Here is an FTC article (Ftc.gov, 2011) on what should be included in a disclosure statement. This single document should be distributed physically to your distributors and also posted on the website for your company. It contains a lot of the information that they will need to know to decide if the business opportunity is right for them. In addition, the FTC recommends that prospects ask these questions and others:
● How many people have you recruited?
● How long have you been in the business or what is your background and unique point of view?
● How much time did you spend last year on the business?
● How much money did you make last year—that is, your income and bonuses, less your expenses?
● What were your expenses last year, including money you spent on training and on buying products?
● What percentage of your sales were made to distributors?
● How much product did you sell to distributors?
● What are your annual sales of the product?
● What percentage of the money you’ve made — income and bonuses less your expenses — came from recruiting other distributors and selling them inventory or other items to get started?
Before you contact a direct selling legal expert, you should consider your product features, sales tactics and claims, and training on income claims for them to be clear and represent the business accurately. Review these with your legal expert and once you speak with an expert in direct selling legal issues, you can refine them to meet the requirements of the countries you will be conducting business in. Each country will have different governmental organizations that act as watch dogs to protect consumers and government interests. You will need experts to guide you in the areas of legal representation. Communicate often with your legal counsel to maintain the best quality control of your sales force and marketing or advertising claims.
Depending on the category of your product you will have different needs. In the United States the governmental organizations you will want to follow for guidance are the FDA and the FTC. I have listed below a few common category layouts.
If your product is a food or nutrition product you will want to know the requirements of the FDA for labeling your product. These guidelines are found online and are a good place to start to understand the FDA’s role in monitoring the labeling of food and supplements (Fda.gov, 2015). Many ingredients have multiple names especially in the health and wellness product lines of direct selling and multi level marketing companies. You will want to find out the rules set in place for using the proper names for ingredients as well as ingredient blends.
If your product has claims about products for medical uses or help with pain or inflammation, be aware of resources online from the FDA in the medical tab on their website (Fda.gov, 2015). This tab has resources discussing products, safety, research, and device regulation. You will want to research which category your device falls into before approaching your direct selling legal counsel. The more time you take to educate yourself about these requirements, the better able you will be to use your time wisely with legal counsel and cut down your costs.
Other organizations you will want to research are any industry level organizations (travel, food, etc.) and the Direct Selling Association (DSA). The DSA has a code of ethics document online that addresses some of the industry best practices surrounding (Dsa.org, 2015) making product claims. In conclusion, I hope that this information helps your company launch and create a foundation that will serve your business and growth from the first day you open.