The Federal Trade Commission guidelines mandate that multi-level marketing businesses must make their distributors’ earnings claims publicly available. FTC provides clear standards that MLM companies must maintain while making claims about the earnings of their distributors. This is to ensure that direct selling companies do not present prospects with false earnings to lure them into joining their business.
The Direct Selling Association has also included earning claims as part of their Code of Ethics, an effort to create a safer environment for direct selling distributors and customers.
The above-mentioned infographic explains how to develop your earnings claims document by including the necessary information and presenting it in a clear and concise manner.
Information provided is a reflection of state and federal regulations issued by regulatory bodies and DSA’s Code of Ethics regarding MLM earnings claim.
While creating the multi-level marketing earnings claim document, you must ensure:
Product knowledge and usage: The product training must contain information regarding all the products, their usage, unique selling points, buyer personas, demos, instructions, and any other important aspect that the distributor must know before using it.
The earnings claim should be meaningful and backed by evidence.
You must not highlight the earnings made by top earners as the generic earnings.
Making lifestyle claims or promises related to material gains is considered earning claims. If these claims don’t match with the achievements of most of your distributors, you must not include them in your multi-level marketing earnings claim document
Thought-provoking claims such as “free yourself from nine to five” or “quit your job and join our business” should not be included.
Keep in consideration that the “net impression” is considered the “earnings claim,” created by combining the published numbers, words, promises, and images, i.e., the overall message conveyed to the audience.
What should be included in the earnings claim document?
The earnings claim document should be as thorough and clear as possible. It should be backed by details of each sale made by distributors and the average expense incurred to generate those sales.
When the earnings made by top distributors are included, the average income goes much higher than what many distributors are making. It can be considered deceptive, as it misleads prospects about what they could earn. Therefore, you must provide a separate view of the top earners and average earners.
You can further break this down into monthly and annual earnings to give distributors a clearer, more detailed view. It’s also recommended to separate data for first-year distributors from that of more experienced ones.
If you operate in different US states, providing state-wise MLM earnings claims will even help distributors more in their decision-making.
Apart from earning disclosure, there are several other compliance requirements that you can check using our compliance checklist.
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