The regulatory climate around direct sales never slows down and is always shifting. With that being said, what are the compliance and regulatory hot button topics direct sellers should be aware of right now? FieldWatch’s Jonathan Gilliam explores these topics in his recent Direct Selling News (DSN) article. Here is an excerpt:
What the FTC is looking at right now.
“At the Direct Selling Association (DSA) Legal and Regulatory Conference held in Washington, DC from December 9–11, Lois Greisman, Associate Director of the Division of Marketing Practices at the Federal Trade Commission (FTC), delivered remarks that underscored a clear regulatory shift: the FTC’s growing focus on misleading income claims and inadequate disclosures rather than traditional structural pyramid scheme analysis alone. Greisman’s comments were delivered in an interview-style session conducted by John Villafranco, partner at Kelley Drye & Warren LLP, a law firm well known for its regulatory and compliance work in the direct selling and advertising space.
Greisman’s presentation provided insight into the FTC’s current enforcement priorities, ongoing investigations and expectations for companies operating in direct selling and business opportunity spaces. Central to her remarks was the FTC’s recent report on income disclosure statements (IDS), which she characterized as revealing widespread deficiencies across the industry.
FTC Findings on Income Disclosure Statements
Greisman explained that the FTC’s review and subsequent report of income disclosure statements found that most disclosures fail to include critical information necessary for consumers to understand actual earning potential. One of the most significant shortcomings identified was the lack of expense disclosure. According to Greisman, many income statements present earnings figures without accounting for known and recurring expenses that materially reduce income.
She emphasized that when income figures are presented, it is often unclear whether they reflect gross income or net income, leaving consumers unable to accurately assess profitability. This ambiguity, she suggested, can lead consumers to form unrealistic expectations about earnings.
Greisman’s position is that companies should disclose known expenses that “eat up” earnings, such as enrollment fees, required purchases, subscription costs, training fees and other ongoing expenses that participants are likely to incur. Failure to disclose such expenses may result in a misleading net impression, even if the income figures themselves are technically accurate.”
To continue reading Jonathan’s full DSN article, click here.
