Agency targets 10 companies for alleged COVID-19-related income and health claims from the field
By: David Rauf
“During this health and economic crisis, we are on the lookout for false income claims for work-at-home opportunities, in addition to spurious health claims that products can treat or prevent COVID-19.”
—Andrew Smith, Director, FTC Bureau of Consumer Protection
“Your business opportunity participants and representatives must immediately cease making all express and implied earnings claims that would be false or misleading to current or prospective participants.”
—Excerpt from the FTC’s COVID-19 letter to Rodan + Fields LLC, April 24, 2020
The Federal Trade Commission (FTC) has a message for direct sellers: Keep the COVID-19 pandemic totally out of your sales and recruiting spiels.
In all, 10 direct sellers have received letters from the FTC. They include: doTERRA International, Prüvit Ventures, Total Life Changes, Tranont, Modere, Arbonne International, Zurvita, Rodan + Fields, IDLife and It Works Marketing. Six of the 10 companies (or their distributors) made both improper health and income claims, according to the FTC, while the rest made claims that fit into one of the two categories.
One of 10 warning letters issued by the Federal Trade Commission to direct selling companies on April 24
In a series of advisory letters in late April, the FTC sent a stern warning to a group of direct sellers to avoid using the ongoing global health crisis to promote products with any language suggesting a treatment or cure for the coronavirus. The same goes for using the COVID-19-induced economic downturn to recruit new sales team members.
Specifically, the FTC said it had identified unsubstantiated coronavirus-related product and income claims made by distributors in the field for 10 different direct sellers. Each company was instructed by the regulator to remove the claims and respond within 48 hours with a description of corrective actions taken.
“MLMs and other companies that distribute their products through networks of distributors are responsible for the product and earnings claims those distributors are making,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said in a release announcing the advisory letters. “During this health and economic crisis, we are on the lookout for false income claims for work-at-home opportunities, in addition to spurious health claims that products can treat or prevent COVID-19.”
Katrina Eash, a lawyer at Winston & Strawn LLP who represents some of the direct sellers that received an FTC letter, says the companies involved need to move quickly to address the issues with the regulator. She recommends that direct sellers send out a press release or a mass email to distributors alerting them that references to COVID-19 are off limits, and then designate one person from their respective compliance teams to monitor for any claims relating to the respiratory disease.
“We are currently in a regulatory environment where these companies have got to get ahead of this,” she says. “They have got to double down on enforcing those compliance policies and procedures in light of this COVID-19 crisis.”
Misleading product and income claims have always been a sure way to get into trouble with the FTC.
But now the stakes are even higher, some say, as the channel has been pressured recently by a heightened scrutiny. The FTC has made it clear that companies are responsible for monitoring their field when it comes to improper claims.
A general rule of thumb for direct sellers when it comes to income claims is to provide a disclosure or the claim is considered misleading.
A health-related claim can be made legally if it’s in the context of a structure/function claim. However, it needs to be backed by some sort of scientific proof. But making a disease claim such as saying a product can help with arthritis, heart disease or cancer crosses the line.
In this case, just about any health-related claim involving the novel coronavirus could be deemed improper because there are currently no products on the market with scientific backing to treat or prevent it.
Kevin Thompson, an attorney who specializes in direct selling, says he’s not surprised that the FTC reacted so forcefully in addressing claims related to the pandemic. In March, the FTC, along with the Food and Drug Administration, warned seven e-commerce companies to stop selling products that claim to cure or prevent the novel coronavirus, and subsequent COVID-19 disease.
“The FTC is making it crystal clear that COVID-19 is completely off limits,” he says. “You can’t even flirt with any sort of grey area and make a statement that loosely implies some sort of beneficial effect. There is no context that works if you’re referencing COVID-19.”
Social Media Posts Named in FTC Letters
Some of the the questionable COVID-19-related claims from the direct sellers include the following, according to the FTC:
One social media post by a Modere salesperson: “In the midst of all this corona virus hype, we should all be focused on IMMUNE HEALTH Guys forget about toilet paper!!!! This is WHAT YOU NEED!!!!!”
A social media post by a doTERRA salesperson included bottles of the company’s essential oils and read: “This is to inform us all that the pH for corona virus varies from 5.5 to 8.5…. All we need to do, to beat corona virus, we need to take more of an alkaline foods that are above the above pH level of the Virus. Some of which are: Lemon… Lime… Tangerine… Orange… #covid… #doterra #doterraph #doterraphillapines.
A video by a distributor from Prüvit Ventures was titled “How to make money from home with the new Prüvit promo,” and was accompanied with the statement: “I can tell you that there’s thousands of people that are out of work right now. They’re all looking for a way to go earn money. This is a great stimulus package, because you get to teach somebody how to go earn $1,730 literally in their first 10 days in the business.”
An income claim made online by someone in the field at Arbonne International said: “Living in quarantine and where 14 million people applied for unemployment just last week … I’ll stick with the opportunity to change people’s lives … turn a small investment into six figures …. #arbonne … #quarantine #2020”
Eash says it’s hard to draw generalizations about claims the FTC targeted, but the agency has been “closely, closely scrutinizing” exactly these types of statements for years.
“These are examples of the classic business opportunity claims the FTC has said they do not want to see,” says Eash. “A lot of them are making those claims in the context of both a health crisis and an economic crisis. That makes those opportunity claims more enticing to the consumer and more misleading to the FTC.”
She adds: “Because of the FTC’s heightened scrutiny of direct sellers, what it boils down to is we’re telling our direct selling clients to inform their field that there should be no mention of COVID-19, the economic crisis or mass layoffs. That’s the safest way for companies to proceed.”
The next step for companies that received letters about COVID-19 claims, says Eash, is a “quick and decisive” response.
“They need to demonstrate to the FTC that they take their concerns seriously, that they acted to correct the specific examples, and have put in place a plan to ensure these types of representations get caught by the company and can be addressed without FTC intervention moving forward,” she says.
Eash adds, “For companies that don’t take those steps, they are likely to invite further FTC scrutiny.”
In a statement, Joseph Mariano, president of the Direct Selling Association (DSA), says the FTC letters provide important guidance and a warning to companies, along with their sales field, about making accurate claims. Some of the companies that received the advisory letters are DSA members.
Moving forward, Mariano says companies should avoid promoting any claims that tout a coronavirus or COVID-19 treatment, or that make unsubstantiated earnings claims related to the pandemic and economic crisis.
“DSA member companies have committed to doing what’s right for their customers, salespeople, and communities in this time of crisis and consumer vulnerability,” Mariano says. “And I expect the companies who have been alerted to inappropriate or unhelpful claims will take prompt action to remedy those claims.”
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