Making income claims and the FTC


Are you making income claims?


making income claims


I just finished reading an article by a network marketer who was crying foul. Apparently, she didn’t like the fact that other businesses get to make income claims, but network marketing companies, direct sales companies and MLMs can’t. Her example came from this past Sunday’s schedule of football games. There were commercials galore that invited football fans to play 1 week fantasy football. I saw those commercials, too.


There were big checks and income claims throughout. There were testimonials from past winners. You name it, they did it. There were definitely trying to entice people into playing. If the commercial ended there, they would have been breaking the law. At the end of every commercial, and the blogger admits this, there was a disclaimer offered. It was in small print, at the bottom of the screen, but it was there.


It said that the average winnings, by the people who actually won, was some relatively small number. The number isn’t the important part of this discussion. The fact that there was an income disclaimer offered makes it legal to make all of their enticing and apparently, atypical claims.


The FTC is very clear about making income claims. It doesn’t matter if it is a fantasy football league, a network marketing company or a stock broker, if they make an income claim, they have to provide an income disclosure statement, of some sort. They aren’t just picking on multilevel marketing.


The income claims can be written,

verbal or in the form of a picture


The FTC says that there are 6 different ways that an income claim can be made. All of these income claims must be true and backed up in writing. If an income claim is made and it is false, then it is illegal.


You can make statements of the average or median earnings of all distributors


average income claims


Again, these kinds of income claims are usually made by the network marketing company. If you have seen an income disclosure statement that has been issued by a network marketing company, then you’ve probably seen this type of claim.


You can make statements of non-average, non-median earnings achieved by a substantial number of distributors


These are income claims that are, generally, made by a network marketing company. Most rank and file distributors wouldn’t know these figures, unless they asked for them. It would be like saying that most or the average Gold Star distributors make $100,000 per year.


You can make statements of earnings ranges


This is also the kind of income claim that is made by a network marketing company and seen in an Income Disclosure Statement.


Anyone can make an income testimonial


Testimonials can be made by anyone, in the company. An example would be someone telling a story of how they were able to make enough money to bring their spouse back home, to be a full time parent.


You can make what are known as “lifestyle” claims


pictures of your vacation are an income claim


If someone has a website and puts a picture or pictures of their new car, new house or their fabulous vacation, they have made a “lifestyle” income claim. The implication is that they bought these things with money made through network marketing.


You can give hypothetical examples of incomes


If you have ever seen or given a business presentation, then you or the presenter has made this kind income claim.


If any of these income claims are made, then a copy of the company’s Income Disclosure Statement must accompany these claims. Otherwise, the company or distributor has broken the law.


One thing that you should be aware of is that all network marketing companies are responsible for the income claims that are made by their distributors. This means that if anyone in your company is out there making income claims and isn’t providing the proper documentation, then the company could be held liable for their distributor’s actions.


Just ask Vemma, they’ll tell you about that. They aren’t the first to get shut down for this, they are just the latest.


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