By: David Bland
The Federal Trade Commission (FTC) continues its post-AMG Capital Management push to prepare other weapons for use against direct sellers in the absence of injunctive monetary relief via Section 13(b), which was stripped by the Supreme Court in Spring 2021.
Eleven months after announcing a new rulemaking group to reinvigorate and streamline its Section 18 powers, the FTC conducted a virtual open meeting to announce, accept public comments on, and vote on the publication of its Advanced Notice of Proposed Rulemaking (ANPR) Concerning Deceptive Earnings Claims in the Federal Register. The agenda for this meeting also included a vote on issuing orders to large pharmacy benefits managers (PBM) to study the competitive impact of its policies affecting independent or specialty pharmacies.
By: Jenna Lang Warford
What worked in 2020… no longer really works.
— Suzie Read, National Sales Director, Jordan Essentials
We have to bring the digital experience to a whole other level… So the question is, how do we elevate the experience?
— Garrett McGrath, CEO, The Happy Co.
Responding rather than initiating has been a common strategy for operating a business during the past two years, as many direct selling companies have chosen to “wait it out” and “play it safe” in a time with no relevant precedent. While innovations were often distributor-led, and hugely successful, it’s clear that 2022 requires different growth strategies as the pandemic shifts to the endemic.
By: David Bland
In the wake of the Omicron variant’s global surge, as COVID-19 case counts neared their peak of over 800,000 new cases per day across the U.S., the Federal Trade Commission (FTC) publicized a series of cease and desist demands it sent to 25 businesses over the past six months. Granted under the authority of the COVID-19 Consumer Protection Act, the list included four direct sellers targeted in November and December 2021.
By: Stephanie Ramirez
This is called the direct-selling business, not the direct-recruiting business. Companies are going to need to bring their leaders into the mix and explain that times are changing, so we’ve got to change and they’ve got to change or we’re going to be left behind.
— Mike Sheffield, Founder and CEO, The Sheffield Group
The unprecedented amount of scrutiny brought on by the FTC over the past year has many direct sellers scrambling to shore up policies as well as update and modernize their marketing practices and compensation plans.
The customer is king in this new era of direct selling, and while some legacy companies have remained steadfast with their current plans, new channel entrants are starting fresh out of the gate with unique hybrid models.
Whether it is incorporating affiliate programs or app-based retention tools programs into their model, embracing verified influencers, or constructing a business plan around corporate social responsibility, the direct sellers of the modern age are acutely aware of the importance of showing network marketing’s best face to both regulators and an often-critical public.
By: David Bland
Words matter, and the deliberate deletion of ‘legitimate business activity’ from the FTC’s draft Mission Statement is material and meaningful. This move is likely to trigger another hostile response, creating an unnecessary distraction of the Agency’s own making.
— John Villafranco, Partner, Kelley Drye & Warren LLP
The U.S. Chamber of Commerce, the nation’s most powerful corporate lobbying group and a long-time adversary of the Federal Trade Commission (FTC), sent three letters to Commission Chairwoman Lina Khan on Nov. 19, objecting to recent actions by the Commission that the Chamber considers to be abuses of power.
In an incendiary accompanying statement, U.S. Chamber President and CEO Suzanne P. Clark said: “The FTC is waging a war against American businesses, so the U.S. Chamber is fighting back to protect free enterprise, American competitiveness, and economic growth.”
By: David Bland
I think the FTC’s current aggressive posture is that they are trying to hold high-level executives liable for the actions that happened at a very low level, across a broad array of businesses—not just multi-level marketing or even the earnings claims area.
—Maureen Ohlhausen, Former Acting Chairman
(2017 to 2018), FTC
The Federal Trade Commission (FTC) issued its third Notice of Penalty Offenses in as many weeks on Oct. 26. After putting 70 for-profit colleges on notice earlier in the month for making deceptive claims regarding graduates’ job and earning prospects, followed by a Notice to 700 national advertisers about misleading endorsements, testimonials, and fake product reviews, the Commission turned its focus to companies that offer money-making opportunities.
January Headlines
FTC Launches ‘Operation Income Illusion’
The Federal Trade Commission (FTC), along with 19 federal, state, and local law enforcement partners announced a nationwide crackdown on consumer scams promising income and financial independence. Although no direct selling companies were targeted by this operation, it marked a beginning to the COVID-19-era scrutiny of work-from-home-scams, pyramid schemes and coaching courses, among other businesses.
DSA Rolls Out New Compliance Certification Program
The Direct Selling Association (DSA) began a comprehensive compliance program to be made available to member and non-member companies. The Direct Selling Compliance Professional Certification Program (DSCP-CP) was created for individuals and does not certify an entire company. The program includes four three-hour online sessions for a total of 12 hours and is designed to be taken over several days. Modules include topics such as “Claims Substantiation and Disclosures”; “Product Claims”; “Monitoring and Removal of Claims from Social Media Platforms”; “The Role of Compliance in Your Organization”; and “Conveying the Right Marketing Message.”
By: David Bland
On two separate occasions last month, the Federal Trade Commission (FTC) resurrected a rarely used weapon to put a total of 770 U.S. companies and entities, including an entire business sector, on notice for punitive monetary action should they be found to violate Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices.
On Oct. 5 the Commission announced that it was sending a Notice of Penalty Offenses to 70 of the largest for-profit colleges and vocational schools in the country to notify them that false promises about graduates’ future job and earnings prospects would be met with significant financial penalties. Eight days later, the FTC sent a second set of Notices to 700 companies, including several Fortune 500 corporations, across a multitude of industries and business channels. This notice was in regards to deceptive endorsement practices, including fake product reviews.
By: David Bland
Dallin Larsen, a former Ernst & Young National Entrepreneur of the Year and Utah CEO of the Year, founded Vasayo in 2016. Prior to Vasayo, Larsen founded MonaVie in 2005 and grew that company from zero to nearly a billion dollars in annual sales in less than five years. Under Larsen’s direction, Vasayo’s philanthropic partnership with Hearts & Hands for Humanity has generated enough contributions to build more than 130 wells in Tanzania, Africa, delivering clean water to hundreds of thousands of people.
Founded: 2016
Location: Pleasant Grove, Utah
Website: vasayo.com
SSN: Tell us about your history in direct selling.
My first experience with network marketing was with Nu Skin in 1988. I was in my late 20s and living in San Diego, California. I fell in love with the industry and what it could do for me and my family as well as others. About a year later, a gentleman called to tell me about a new company and asked that I meet with the founder. So, I interviewed with Myron Wentz, the founder of USANA. One thing led to another, and the next thing I knew I was heading up sales for that company. We launched USANA in 1991, and I was with them for roughly 10 years. That’s where I cut my teeth and gained a lot of valuable experience.