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Marketers Pitching Income Opportunities Draw FTC Scrutiny (1)

April 24, 2020, 8:18 PM; Updated: April 24, 2020, 10:10 PM

Marketing companies pitching treatments for the coronavirus and opportunities to earn money amid the economic fallout are drawing scrutiny from the Federal Trade Commission.

The commission said Friday it sent warning letters to 10 multi-level marketing companies for allegedly making unsubstantiated claims about health benefits, business opportunities, or both. It warned the companies that false or misleading claims would violate the FTC Act.

The warning letters are the first to include allegations over potential earnings related to the fallout from the pandemic, the agency said. It has previously sent warning letters over fake coronavirus treatments.

“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 consumer protection bureau, said in a statement.

“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,” he said.

The warnings about these claims “come at a time when millions of people are out of work and facing financial challenges as a result of the pandemic,” the FTC said.

Earnings Opportunities

Multi-level marketing companies rely on a network of independent distributors to buy and resell their products and to bring in other distributors, the agency said.

The companies typically offer participants a cut of the sales made by new distributors they have recruited. Most people who join make little or no money, the FTC said.

But that fact has not stopped some distributors from making exaggerated claims about how much money participants could make, it said.

“Even truthful testimonials from participants who do earn significant income or more will likely be misleading unless the advertising also makes clear the amount earned or lost by most participants,” the FTC said.

The companies that received letters for coronavirus treatments include Arbonne International LLC, doTERRA International LLC, Modere Inc., Pruvit Ventures Inc., Total Life Changes LLC, Tranont, and Zurvita Inc.

The warning letters to those companies, except for Zurvita, as well as to IDLife LLC, It Works Marketing Inc., and Rodan & Fields LLC, included allegations of unsubstantiated earnings-related claims.

The companies have 48 hours to tell the FTC what they have done to rein in their distributors, the agency said.

A Rodan & Fields spokesperson said the company “takes seriously the importance of adhering to and ensuring our Consultant Community follows all FTC guidelines and best practices” and “does not tolerate non-compliant or misleading income claims.”

A representative from doTERRA said the company is “working to address” the FTC’s concerns.

Pruvit, IDLife, and It Works Marketing couldn’t immediately be reached for comment. Representatives for the other companies didn’t immediately respond to requests for comment.

(Adds comments from two companies in 14th and 15th paragraphs.)

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Alexis Kramer at akramer@bloomberglaw.com

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