New Republican-majority Commission will decide fate of direct selling regulations
By David Bland
“Some of these proposed rules may be in the public interest and within our legal authority. But whether they are lawful, and whether they are prudent and sound policy choices, are decisions that belong to the incoming Trump Administration.” — FTC Commissioner Andrew Ferguson
In one of its final actions under Democratic leadership, the Federal Trade Commission (FTC) unveiled three significant proposals that could dramatically reshape regulations for the direct selling industry. The January 2025 regulatory package, which would create new standards for earnings claims and business opportunities, emerged just days before the commission’s leadership changed hands following President Donald Trump’s inauguration.
The Commission’s regulatory package includes two Notices of Proposed Rulemaking (NPRM) and an Advance Notice of Proposed Rulemaking (ANPR) aimed at strengthening the agency’s ability to combat deceptive earnings claims in the direct selling channel and other money-making opportunities.
“Phony claims about likely earnings lure people looking for honest income into spending thousands, even tens of thousands, of dollars on multi-level marketing, business coaching and other schemes,” said Sam Levine, who was director of the FTC’s Bureau of Consumer Protection at the time of the announcement.
The first NPRM would expand the existing Business Opportunity Rule, renaming it the “Business and Money-Making Opportunity Rule.” This expanded rule would cover a broader range of opportunities, including business coaching and investment programs. However, in a significant development for the channel, multilevel-marketing companies would be exempt from this rule’s scope.
The relationship between direct selling companies and the Business Opportunity Rule has a complex history. When the FTC first proposed the Business Opportunity Rule in 2006, direct selling companies successfully argued against its application to the channel, effectively securing a functional exemption before the rule’s 2011 implementation. Now, while the FTC proposes expanding the Business Opportunity Rule’s scope, it simultaneously introduces a separate, targeted rule specifically focused on earnings claims from direct selling representatives.
Strict New Standards for Income Claims
The proposed Earnings Claim Rule would establish unprecedented oversight of income representations in the direct selling channel. Under this framework, the FTC would prohibit misleading earnings claims and require companies to maintain comprehensive documentation supporting any statements about potential income.
The rule’s documentation requirements are extensive. Companies would need to preserve written substantiation for all earnings claims for three years, making these records available upon request to regulators, potential recruits and other designated parties. Notably, companies must provide this documentation in the same language used to make the original earnings claim—creating potential challenges for businesses operating across multiple markets.
The FTC’s standards for acceptable substantiation would be rigorous. The Commission specifically noted that anecdotal success stories or limited participant data would not meet the requirements. Instead, companies would need to compile comprehensive market analysis and participant earnings data to support income representations.
The Commission’s parallel ANPR signals potential for even broader regulation. This advance notice seeks input on additional requirements under consideration:
- Publishing participant earnings data on corporate websites
- Implementing mandatory waiting periods for new recruits
- Removing non-disparagement clauses from distributor agreements
- Setting new standards for discussing benefits and compensation
- Requiring context about typical earnings with income claims
- Establishing limits on product efficacy claims
These proposals face an uncertain path forward following President Trump’s day-one Executive Order. This directive requires federal agencies to pause pending rules until new leadership can review them, potentially affecting both the timeline and substance of any final regulations.
Political Transition Creates Uncertainty
Republican Commissioner Andrew Ferguson, set to become the next FTC chair and succeed Democrat Lina Khan, delivered a sharp rebuke to the timing of these proposals. “As I have said repeatedly, the time for the Biden-Harris FTC to issue or propose new rules ended the morning after the presidential election,” Ferguson wrote in his dissent, joined by fellow Republican Commissioner Melissa Holyoak. “Some of these proposed rules may be in the public interest and within our legal authority. But whether they are lawful, and whether they are prudent and sound policy choices, are decisions that belong to the incoming Trump Administration and not to lameduck Biden functionaries.”
Despite Ferguson’s opposition, legal experts suggest the proposals may still advance. “Although new FTC Chair Ferguson dissented to the eleventh-hour Earnings Claim Rule NPRM and ANPRM issued by the prior FTC leadership, there is a prevailing view in DC that the FTC will move forward in finalizing a new Earnings Rule during Trump’s second term,” Brent Kugler, partner at Scheef & Stone LLP, said.
Despite this political uncertainty, the Direct Selling Self-Regulatory Council at BBB National Programs (DSSRC) continues to advocate for rigorous compliance across all platforms—including websites, social media and company events.
The proposals would significantly expand the FTC’s enforcement capabilities. If implemented, the new rules would enable the Commission to pursue both civil penalties and consumer refunds from companies making deceptive earnings claims—addressing limitations imposed by the Supreme Court’s AMG Capital decision on monetary relief under Section 13(b).
Former Director Levine emphasized this enforcement goal: “The proposed rules would help the FTC deter illegal conduct with civil penalties and put money back in consumers’ pockets.”
The proposed MLM rule would specifically prohibit:
- Making misleading earnings claims without reasonable substantiation
- Misrepresenting MLM opportunities as employment opportunities
- Making claims that could prevent consumers from benefiting from truthful earnings information
- Providing recruitment materials containing false or unsubstantiated earnings claims
Proposed Standards Set Higher Bar for Compliance
The FTC’s approach signals a departure from its historical case-by-case enforcement strategy. Previous oversight relied primarily on individual enforcement actions and periodic guidance, including the 2018 Business Guidance Concerning Multi-Level Marketing. The new proposals would create a comprehensive regulatory framework rather than depend on incremental enforcement actions.
Companies operating across borders would face unique challenges under the proposed requirements. The mandate to provide earnings claim substantiation in all languages where claims appear would necessitate extensive documentation and translation systems across every market where distributors operate.
The substantiation standards themselves set a high bar. Companies would need to maintain comprehensive written materials supporting any earnings claims, including:
- Statistical analysis of participant earnings
- Documentation of business costs and expenses
- Market research supporting earnings potential
- Evidence of typical participant experiences
- Data showing the context of any testimonials used
The Commission explicitly stated that “anecdotal information or data about a small number of participants will not be sufficient to show a reasonable basis” for earnings claims. Meeting this enhanced standard would require significant expansion of companies’ data collection and analysis capabilities.
These proposals emerge amid broader scrutiny of earnings claims across various business models. While recent FTC enforcement actions have targeted gig economy platforms, coaching programs and investment schemes, the direct selling channel now faces specific regulatory attention. The Commission’s focus appears to extend beyond any single business model to address earnings claims across multiple industries.
Broader Channel Impact
The proposed requirements would further complicate an already complex regulatory landscape. Many states maintain their own requirements regarding earnings claims and business opportunities, creating a multi-layered compliance challenge that companies must navigate alongside any new federal rules.
The potential waiting period requirement suggested in the ANPR represents another significant operational consideration. If implemented, companies would need to redesign their onboarding processes and develop new systems for tracking cooling-off periods before accepting payments or registrations from new recruits.
Industry stakeholders will need to carefully evaluate how these federal proposals interact with existing state regulations and self-regulatory standards. The DSSRC continues its monitoring role while companies assess potential new federal requirements.
Planning Amid Regulatory Uncertainty
Companies and industry stakeholders face multiple considerations as these proposals move forward. These include evaluating current compliance programs, assessing documentation capabilities and reviewing operational processes that could be affected by the potential new requirements.
Many direct selling companies have already begun analyzing their earnings claims documentation systems and considering technology upgrades that may be needed under the proposed rules. Industry executives are also weighing options for participating in the public comment process, either through direct submissions or industry associations.
The proposals have prompted reviews of existing compliance programs throughout the channel. Companies are examining their current practices against the proposed standards while assessing potential operational impacts of new requirements like waiting periods and enhanced documentation rules.
Industry legal experts are advising companies to prepare for some form of rule while advocating against the most burdensome provisions. “I think most companies can live with an Earnings Rule that codifies what many view as compliant earnings claim business practices,” Kugler said. “The industry should be prepared to push back on proposals that contain unnecessary and costly requirements that penalize companies rather than further ensure that prospects clearly understand the potential for earnings.”
The timing and final form of these rules remain uncertain, but the proposals signal continued regulatory focus on earnings claims that is likely to persist regardless of administration changes. The complex implementation requirements outlined in the proposals could significantly affect how companies manage earnings claims, train representatives and document compliance.
