Income and Earnings MLM Disclaimer Use 101!
Specific revenue and income requirements attract potential customers. These claims often appear in the context of offering business opportunities and MLM schemes online. Misleading claims about earnings or income are deceptive and generally illegal under Section 5 of the FTC Act. But they present additional concerns about offering business opportunities and selling MLM-type plans.
A basic premise of the FTC's consent disclosure requirements is that an advertiser cannot claim anything through an endorsement that cannot be claimed directly. Advertisers must have a reasonable basis and be able to substantiate any specific claim. Claims of inflated earnings are deceptive and always deceptive. Claiming extraordinary results by citing a specific earnings or income that is not representative of the results achieved by a significant number of consumers is deceptive. Advertisers are not at liberty to make such direct claims without properly qualifying them with appropriate disclosures and disclaimers.
The following summary provides some legal guidance for MLMs and other businesses that must use income or earnings information.
Types of claims
1. Specific Income and Revenue Entitlements
Basically, these are claims based on some specific amount of earnings achieved by using some product or service being sold."Make over $3,000 a week from your couch!" or "I made $22,222 my first month using this powerful system and so will you" are examples of specific income claims.
Not all true income claims are false; the key is to present proper information to support the claim so that it is not misleading. The problem is that these claims are usually exaggerated where the advertiser has no reasonable basis for making the claim. Unless it's an exaggeration, the claim usually boasts extraordinary results and of course doesn't mention this fact prominently to the consumer.
The FTC believes that income claims are highly relevant to consumers' decision-making and are usually the most important factor. Due to the importance of income claims in the buyer's decision and the number of complaints they receive about income claims, the FTC reviews them. (Income claims also include any chart, table or calculation that shows possible results). Indeed, businesses should avoid advertising any specific earnings/income claims. Unfortunately, for most Internet advertisers, using proper disclosure defeats the purpose (ie, the message) of using exaggerated or unusual earnings claims.
2. Vague and general statements
Vague and general statements like "achieve all your dreams" or "get everything you've ever wanted!" it doesn't have to be deceptive. If these claims are framed as an opportunity or possibility or chance that can be realized by hard work, best effort, etc., they do not tend to mislead a reasonable consumer. "Increase your sales" may not be misleading given the overall context of the ad. But "explode your sales overnight" really makes a specific claim and is likely to be misleading.
Of course, the entire context of the claim would be evaluated. It is better to err on the side of caution and simply avoid using these types of claims if possible.
3. Lifestyle and Hypothetical Claims
Lifestyle and hypothetical income claims are considered, at a minimum, implied claims by the FTC. They are usually produced in connection with business opportunities. They will be treated as requests for income and must comply with the same disclosure requirements as any other request for income or revenue. Examples of these types of claims include "look at my new Porsche" or "I go on vacation 10 times a year." The image of someone sitting on the hood of a brand new BMW with a mansion in the background makes an implied lifestyle statement. Someone sitting on a yacht on their laptop as an image on your website is again an implicit lifestyle claim if made in conjunction with an income claim.
These statements give the impression of a certain hypothetical outcome. Avoid these types of claims as they can be just as misleading as specific earnings/income claims.
Use of a specific income disclosure
There are different ways to use disclosure. There is no "exact" location, magic language, or required method of publication. But due to the nature of specific claims for earnings and results, an "in-line" or natural type of disclosure should be used within or immediately after the claim. Disclaimers can flow naturally in the content so as not to disrupt the flow of your message.
The bottom line is that income and revenue disclosure is an integral part of the underlying claim. From the FTC's point of view, these are again "hot button" type claims. Potential customers are likely to buy a product based on their expectations created by earnings or results claims. The less likely potential customers are to notice the disclosure, the more likely the claim is to be false. Simply put, using a disclosure immediately after a claim is made will greatly increase the likelihood that the disclosure will be effective.
For example, the statement "I made $5,322 in the first 6 months and you can too," might be followed by the sentence "most customers should expect to make around $100 in the first six months." Similarly, "Get a line of credit in as little as 2 months" could be followed by "most customers should expect to receive a line of credit within 8 months." "Earn up to $1000 a week with my proven system" could be followed by "most members earn around $50 a week." Of course, there must be a reasonable basis for any disclosure.
Using a natural in-line type of posting can be a very effective way to get the information out there while maintaining sales. After all, voluminous and inconvenient publication text can scare away some potential customers. Placing the disclosures next to each earnings or results claim is a much smoother and easier way to transition to disclosure. Businesses should follow this method where possible. may not be appealing from a marketing standpoint, but the only legal alternative is to disclose what they can expect when they claim exaggerated earnings.
If the claimed claim requires a lengthy disclosure, using natural disclosure will not work. But given the nature of these types of claims, in-line disclosures generally shouldn't be too lengthy.
Using the General Income Statement
A specific disclosure within or alongside the claim itself and a general income exclusion statement should be used. The disclaimer should state that not every user of the product that is the subject of an earnings claim will earn any money, let alone any amounts claimed. Anything less will land businesses in hot water, as viewers of these types of claims can be led to believe that they too will undoubtedly achieve the same results. Prospects need to understand that there is a certain amount of risk and that there is no guarantee that they will achieve the same income.
If there is a possibility that even a single customer who purchases the product will not receive income, the request for income should not be made without proper disclosure. In reality, businesses making these claims should assume that there will be buyers who will not make any money, as it depends on many different factors, including individual skills, desires, work ethic, etc. Most customers can actually make money. . But it only takes one to make this claim technically misleading!
Ideally, disclaimer text should be placed prominently on all pages where any claims are made. However, it can be placed on a separate page if viewers notice the disclaimer link and are compelled to click on it. Businesses should use a separate “Important Income Exclusion Statement” link somewhere prominent on the site if the language is not displayed directly on the page. Disclaimer links should not be placed at the bottom of the page where viewers cannot scroll down to find them. I recommend placing it in the top navigation bar, visible sidebar, or some other prominent place on the home page, and any income or earning claim, example, or customer testimonial will appear on every web page.
MLM pyramid scheme earnings claims are illegal!
Specific income claims or proof of income can present serious problems when used in conjunction with offering business opportunities and in conjunction with selling MLM programs. They are a problem with any business, but specific earnings and income requirements are especially common when offering business and MLM opportunities.
Claims of earnings related to an illegal pyramid scheme are deceptive! These claims do not reveal that most consumers who invest are not receiving substantial income, but are actually losing money. In fact, the FTC has said so and in many cases has used deceptive earnings claims as a way to go after pyramid schemes. More MLM schemes are likely to resemble illegal pyramid schemes than not. By publishing false or exaggerated earnings claims, MLMs offer pyramid schemes simply so that any new entrant who pays a sign-up fee can earn huge amounts of profit simply by following the plan. However, since the profits mainly come from new members, it is impossible to make big profits. This is due to the exponential number of new members required to maintain the profit flow.
The FTC disfavors income claims related to franchise offerings and business opportunities in general. In National Dynamics Corporation vs. FTC (1975) The FTC ruled that distributors “should be allowed to make a wide variety of plain, true and non-misleading statements regarding the earnings of their distributors. prevented from arguing about the high earnings achieved by a minority of buyers without suggesting that those earnings are unrepresentative. If respondents lack evidence that the high reported earnings of a few distributors are in fact representative of the earnings of a large number of other distributors, then it is clearly misleading for them to portray the minority results reported to them without a clear indication of their unrepresentativeness.”
MLM Claims Earnings State Laws
There are state laws that specifically regulate MLM plans and business opportunities. Some states outright prohibit such claims. For example, Massachusetts and Wyoming directly restrict income and income certification requirements from MLM companies. Georgia, Maryland, Louisiana, and Puerto Rico regulate earnings claims from MLMs and business opportunities. Maryland and Puerto Rico do not recognize earnings claims if the desired results cannot be achieved by a "substantial number" or "reasonable number" of participants. Georgia stipulates that an MLM company or sales opportunity cannot represent any earnings or income