Consumer Protection

Consumer Groups Support FTC’s Efforts to Regulate Companies Making Deceptive Earnings Claims

Washington, D.C. — CFA joins the National Consumers League (NCL) in filing comments supporting a potential rulemaking by the Federal Trade Commission (FTC) to address deceptive earnings claims. Companies like multi-level marketers, for-profit colleges, and gig economy platforms routinely solicit consumers by promising that they will earn a certain amount of money or be able to live a certain type of lifestyle by using their products, but these promises frequently turn out to be false and unsubstantiated. These companies have long escaped regulation by the FTC, which may be about to change.

The FTC issued its Advanced Notice of Proposed Rulemaking (“ANPRM”) in February, seeking comments about the scope, applicability and impact of a trade regulation rule which would challenge deceptive or unfair marketing using earnings claims. CFA joins the NCL in support of a rule, and the comment letter points to the problematic history of multi-level marketing companies and gig economy platforms. The FTC has a long enforcement history of pursuing these claims as violations of the FTC Act, but after a recent Supreme Court decision, its ability to return money to consumers through the FTC Act is severely impacted. Pursuing violations of a rule would return this critical tool to the FTC, which CFA fully supports.

“99% of multilevel marketing recruits lose money,” the comment letter states, citing a 2011 statistic from the Consumer Awareness Institute. The comment letter also points to unsubstantiated and evidence-free earnings claims by gig-economy companies and explains how these companies target minorities and women. CFA joins NCL in asking the FTC to regulate companies making these claims by requiring substantiated data prior to making such claims, requiring “verifiable, easy-to-understand” income disclosures, and prohibiting deceptive lifestyle claims and imagery.

“Too many consumers have been enticed by unsubstantiated and false claims about income and lifestyle by these companies,” said Erin Witte, CFA’s Director of Consumer Protection. “We are glad to comment in support of the ANPRM and urge the Commission to take the next step in the rulemaking process so that the FTC can continue its work of returning money to defrauded consumers.”

A copy of the comment letter can be found here.

Contact: Erin Witte, 202-569-9807