Targeting multi-level marketers (MLMs) and other “money-making opportunity sellers” has been among the U.S. Federal Trade Commission’s (FTC) top priorities in recent years. The FTC has pursued several enforcement actions targeting MLMs and other sellers, and it has pursued several rule changes (with varying levels of success) aimed at ensuring that consumers and investors have access to the information they need to make informed decisions.
Given that this is the case—and given that MLMs and other money-making opportunity sellers (MMOS) remain prevalent online—it appears that this is likely to remain a top priority for the FTC going forward. This article takes a look at the FTC’s enforcement initiatives to date as well as what the second Trump administration’s efforts to shrink the federal bureaucracy may mean for the FTC’s efforts in the months and years ahead.
“Multi-level marketers and other money-making opportunity sellers have been in the FTC’s crosshairs for several years. As efforts to promote these opportunities have proliferated online—particularly on social media—the FTC has taken aim at fraudulent money-making schemes resulting in consumer and investor losses. In doing so, however, it has targeted many legitimate businesses as well.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
The FTC’s Recent Initiatives Targeting MLMs and Other Money-Making Opportunity Sellers
What is the current status of the FTC’s efforts to target multi-level marketers and other money-making opportunity sellers? And how did we get where we are today? Here is a look at the FTC’s recent initiatives that are responsible for the current state of MLM and MMOS enforcement in the United States:
1. Enforcement Actions Targeting Major MLMs, Retailers, and Academic Institutions (2016-2021)
One of the FTC’s first significant enforcement actions targeting MLMs was its enforcement action targeting Herbalife in 2016. As a result of the enforcement action, Herbalife agreed to “fully restructure” its MLM business and pay a $200 million settlement. The FTC had charged Herbalife with “deceiv[ing] consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products,” as well as improperly, “reward[ing] distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product . . . .”
A short time later, the FTC entered into a $100 million settlement with DeVry University following allegations that the academic institution, “misled prospective students with ads that touted high employment success rates and income levels upon graduation.” The FTC further alleged that DeVry, “misled consumers in violation of the FTC Act by claiming that 90 percent of graduates actively seeking employment landed jobs in their field within six months of graduation,” and “by claiming that graduates with bachelor’s degrees, on average, had 15 percent higher incomes one year after graduation than the graduates with bachelor’s degrees from all other colleges or universities.”
In a more recent example, the FTC entered into a $61.7 million settlement with Amazon in 2021 following allegations that the online retail giant improperly withheld tips from its Amazon Flex drivers. According to the FTC, while Amazon advertised that drivers would “receive 100% of the tips you earn while delivering with Amazon Flex,” the company instead used tips to make up the difference between its advertised hourly rate and the actual hourly rate it paid its drivers.
2. Notice of Penalty Offenses Concerning Money-Making Opportunities (2021)
At the same time that the FTC was pursuing these enforcement actions against well-known companies and institutions, it was also targeting smaller MLMs and other entities and individuals that were promoting business coaching and money-making opportunities online, particularly through social media. In response to growing concerns about the proliferation of fraudulent “opportunities,” the FTC issued a Notice of Penalty Offenses Concerning Money-Making Opportunities in 2021.
A Notice of Penalty Offenses is, “a document listing certain types of conduct that the Commission has determined . . . to be unfair or deceptive in violation of the FTC Act . . . .” In its 2021 Notice of Penalty Offenses, the FTC identified the following practices (among others) as constituting statutory violations:
- Misrepresenting that participants “will be or are likely to be profitable.”
- Misrepresenting that participants “will or are likely to earn any specific amount or percentage.”
- Misrepresenting that “a substantial number of participants have made or can make the represented profits or earnings.”
- Misrepresenting that represented profits or earnings “are the ordinary, typical, or average profits or earnings made by participants.”
- Representing the profits that participants may be able to make “without knowledge, or with only limited knowledge, of the actual profits or earnings usually and ordinarily received by participants.”
- Misrepresenting that prospective participants “will be screened or evaluated for suitability” or that they “do not need experience in order to earn income.”
- Misrepresenting the “amount or type of training that will be given to participants.”
- Misrepresenting the position that is being offered, “such as by failing to disclose that it is a sales position when such is the case.”
- Misrepresenting that prospective participants must “act immediately” in order to participate in a money-making opportunity.
- Misrepresenting that a money-making opportunity “is risk-free or involves little risk.”
3. Notice of Proposed Rulemaking Regarding Deceptive or Unfair Earnings Claims (2022)
In response to continuing concerns about online money-making opportunities—and about earnings-related representations in particular—the FTC issued a notice of proposed rulemaking regarding deceptive or unsubstantiated earnings claims in 2022. Among other things, the FTC sought comments on its proposed definition of “earnings claims,” in relation to MLMs and other money-making opportunities, including whether this definition should include lifestyle claims (which the FTC described as, “claims that participating in a money-making opportunity will lead to a material change in lifestyle—such as getting to go on expensive vacations, quitting your job, or buying a luxury car.”
4. Report and Non-Binding Guidance Concerning Multi-Level Marketing (2024)
After failing to gain traction with its proposed rulemaking in 2022, the FTC conducted a study and issued a report examining earnings MLM participants expect, and it followed up this report with a non-binding guidance document for MLMs. To deter deceptive earnings claims, the FTC’s non-binding guidance document also addresses the legal distinctions between legal MLMs and illegal pyramid schemes.
It is also worth mentioning here the FTC’s Business Opportunity Rule. This rule “applies to commercial arrangements where a seller solicits a prospective buyer to enter into a new business, the prospective purchaser makes a required payment, and the seller – expressly or by implication – makes certain kinds of claims.” While not all money-making opportunities fall under the FTC’s definition of a business opportunity, some may. Under the rule, money-making opportunities that qualify as business opportunities are subject to various disclosure and earnings claim-related requirements.
5. Notice of Proposed Rulemaking Regarding Multi-Level Marketing (2025)
In early 2025, one week before President Trump took office for his second term, the FTC issued another notice of proposed rulemaking once again seeking to formally address published MLM earnings claims and other money-making opportunity sellers. In an accompanying press release, the FTC described deceptive earnings claims as a “widespread problem” in the MLM industry that was responsible for “significant financial and other harm to consumers.”
Where Will the FTC Go from Here?
Of course, when President Trump took office on January 20, 2025, one of his first orders of business was to place a freeze on new regulations—and he followed this up with new restrictions on rulemaking going forward. As a result, it remains to be seen how the FTC will proceed with its rulemaking efforts (if at all) in 2025 and beyond.
Importantly, however, while the FTC has sought to implement new regulations that would make it easier for the Commission to target MLMs and other money-making opportunity sellers suspected of defrauding consumers and investors, the FTC has also already made clear that it is willing to rely on its broad authority under the FTC Act to pursue these types of cases. As a result, regardless of whether any regulatory updates materialize, enforcement remains a very real concern for MLMs and other sellers that may be in violation of the law.
What Can (and Should) You Do if You Have Concerns?
With all of this in mind, what can (and should) you do if you have concerns? As with all federal enforcement-related matters, a cautious and proactive approach is best. Multi-level marketing companies and others that fall under the FTC’s oversight should take steps to ensure that their promotional practices are compliant—including that their earnings claims and lifestyle claims (if any) do not contain any express or implied misrepresentations.
For those that are already facing scrutiny from the FTC, engaging experienced FTC defense counsel promptly is essential. Regardless of the veracity of the FTC’s allegations, executing a strategic and effective defense will be critical for avoiding unnecessary consequences, including civil penalties.
