Features

Direct sellers included in Notices of Penalty Offense for Product Claims

By:  David Bland

On April 13 the Federal Trade Commission (FTC) put 670 companies, including several direct selling companies, on notice regarding the need to substantiate product claims. In a fourth round of warning letters since the Commission resurrected the use of its Penalty Offense Authority (POA) in October of 2021, The Notice of Penalty Offenses Concerning Substantiation of Product Claims reminds the recipients that the promotion or advertising of products using deceptive or unfair practices is a violation of Section 5 of the FTC Act and subjects them to civil penalties of $50,120 per violation.

Companies receiving letters include major corporations such as Amazon, PepsiCo, Novartis and Walmart. Many direct sellers also received the notice, including Amway, Arbonne, Isagenix, Herbalife, Mannatech, Nature’s Sunshine and Nu Skin.

Current and former high-level doTERRA wellness advocates agree to civil penalties and injunctions

By:  David Bland

“The FTC, in my opinion, is going to continue to push on egregious misleading claims no matter the form; I do not think their enforcement efforts will be limited to COVID-type claims.” —Katrina Eash, partner, Winston & Strawn LLP.

The U.S. Department of Justice (DOJ), together with the Federal Trade Commission (FTC), announced on March 3 permanent injunction orders and civil penalty judgments against three current and former distributors for doTERRA International LLC. doTERRA, a Utah-based direct seller founded in 2008, markets essential oils, health supplements and personal-care products.

The government actions were in response to allegedly deceptive COVID-19 product claims made in public webinars by the high-ranking distributors in January 2022. The distributors —a California-based pediatrician, a Georgia-based nurse practitioner, and a Utah-based former registered nurse—allegedly promoted their products to prevent, reduce the severity of, or cure COVID-19 and Long COVID-19. The doTERRA representatives also made claims about counteracting negative side effects of the COVID-19 vaccine.

Wilson’s departure will leave Republicans without a voice on the Commission until the seat is filled 

By:  David Bland

On Feb. 14, the Federal Trade Commission’s lone Republican Commissioner, Christine Wilson, announced in a blistering Wall Street Journal op-ed that her resignation was imminent due to her belief that Commission Chair Lina Khan has been abusing her power. 

Nominated to the FTC in 2018 by President Trump, Commissioner Wilson is an antitrust lawyer who has penned several dissenting statements to push back on Khan’s ambitious agenda, including the Commission’s November 2022 Policy Statement that more broadly construes “Unfair Methods of Competition.” The FTC had also presented a rulemaking proposal in January 2023 to ban virtually all noncompete contracts.

By:  SSN Staff

On Jan. 31, The Direct Selling Association (DSA) filed public comments on the Federal Trade Commission’s Advanced Notice of Proposed Rulemaking (ANPR) on the Business Opportunity Rule (BOR). The ANPR was released in November 2022, at which time the Commission asked the public to comment on the broadening of the rule and also on the effectiveness of the current BOR.

Established in 2012, the BOR sets guidelines for those selling a business opportunity to ensure that potential buyers receive the information required to make an informed decision. The rule prohibits sellers from making deceptive claims about the opportunity and mandates key disclosures to be provided via a disclosure document, including identifying information about the seller, information and substantiation of the seller’s earnings claims, documentation of any legal actions against the seller, the cancellation and refund policy, and a list of purchasers from the previous three years. 

CEOs confident that improvements of key metrics will reverse the losses of 2022

By:  Dave Rauf

Herbalife

Herbalife boosted profits by 42% in the fourth quarter, as the company’s key business metrics stabilized and it leveraged a significant reduction in expenses during the final three months of 2022. 

The direct selling giant beat  analyst expectations for the quarter, and its new CEO, the returning Michael Johnson, said a plan has been put in place to return to growth in the “near term.” 

The seller of supplements and weight-loss products reported total fourth-quarter sales were down 10.4% to $1.2 billion. That includes a 9% slide in North America sales.