MLM Income and Earnings Disclaimer Use 101!Specific earnings and income claims entice potential customers. These claims are often made in connection with offering business opportunities and with MLM plans online. Misleading earnings or income claims are deceptive and illegal in general under Section 5 of the FTC Act. But, they pose other concerns in connection with offering business opportunities and in selling MLM type plans.
The basic premise behind FTC endorsement disclosure requirements is that the advertiser cannot claim through an endorsement anything that cannot be claimed directly. Advertisers must have a reasonable basis and must be able to back up any specific claim made. Exaggerated earnings claims are deceitful and are always deceptive. Claiming extraordinary results by making a specific earnings or income claim that is not representative of the results achieved by a substantial number of consumers is deceptive. Advertisers are not free to make such direct claims without properly qualifying them through the use of appropriate disclosures and disclaimers.
The following summary provides some legal guidelines for MLM and other businesses that must use income or earnings disclosure(s).
Types of Claims
1. Specific Earnings & Income Claims
These are basically claims based on some specific amount of earnings achieved by using some product or service being sold. Earnings claims are “any statements from which a prospective purchaser can reasonably infer that he or she will earn a minimum level of income.” Earn “up to $10,000 each month,” “Make over $3,000 a week from your couch!” or “I made $22,222 my first month using this powerful system and so can you” are all examples of specific earnings claims.
Not all truthful income claims are improper; the key is presenting proper disclosures to support the claim so that it is not deceptive. The problem is that usually these claims are exaggerated where the advertiser has no reasonable basis for making the clam. When they aren’t exaggerated, the claim usually boasts about extraordinary results and, of course, fails to mention this fact prominently to the consumer. Both practices are deceptive and violate Section 5 of the FTC Act!
The FTC believes earnings claims are highly relevant to consumers in making their decisions and typically are the single most decisive factor. Due to the significance of earnings claims in a purchaser’s decision and the number of complaints that it receives about earnings claims, the FTC scrutinizes them. (Earnings claims also include any chart, table, or calculation that demonstrates possible results). Businesses should really avoid advertising any specific earnings/income claims altogether. Unfortunately, for most Internet advertisers, using proper disclosures will defeat the purpose (i.e. the message) of using the exaggerated or uncommon earnings claims to begin with.
2. Vague & General Claims
Vague and general claims such as “achieve all of your dreams” or “get everything you ever wanted!” may not be deceptive. If those claims are phrased in terms of an opportunity or possibility or a chance that can come true with hard work, maximum effort, etc., they tend not to mislead the reasonable consumer. “Explode 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 & Hypothetical Claims
Lifestyle and hypothetical income claims are viewed, at a minimum, as implied claims by the FTC. They are usually made in connection with business opportunities. They will be considered income claims and the same disclosure requirements as with any other earnings or income based claim must be followed. Examples of these types of claims include “check out my new Porsche” or “I vacation 10 times a year.” A picture of someone sitting on the hood of a brand new BMW with a mansion in the background presents an implied lifestyle claim. Someone sitting on a yacht on their laptop as an image on your website is yet again an implied lifestyle claim if made in connection with an earnings claim.
These claims give off the impression of a certain hypothetical outcome. Avoid making these types of claims as they can be just as deceptive as specific earnings/income claims.
Using Specific Earnings Disclosures
There are different ways to use disclosures. There is no “exact” placement, magic language or a required manner of making a disclosure. But, given the nature of specific income and results claims, an “in-line” or natural type of disclosures within or immediately after the claim should be used. The EarnWithSocial.ca disclaimer can flow naturally within the content in order not to disrupt the flow of your message.
The bottom line is that income and earnings disclosures are an integral part of the underlying claim. Again, these are ‘hot button’ type claims from the FTC’s point of view. Potential customers are likely going to purchase a product based upon their expectations created by the earnings or results claims made. The less likely potential customers are to notice a disclosure, the greater the probability the claim will be deceptive. Simply put, using disclosures immediately after an earnings claim will greatly increase the odds the disclosure will be effective.
As an example, the claim “I made $5,322 dollars in my first 6 months and you can too,” could be followed by the sentence “most customers should expect to make around $100 in the first six months.” Similarly, “Obtain a credit line in as little as 2 months” could be followed by “most customers should expect to receive a credit line within 8 months”. “Earn up to $1,000 per week with my proven system” could be followed by “most members earn approximately $50 per week.” Of course, there must be a reasonable basis for making any disclosures in the first place.
Using natural in-line type disclosures can be a very effective way to disclose necessary information while preserving sales. After all, bulky and awkward disclosure text may scare some potential customers away. Placing disclosures next to each earnings or results claim is a much smoother and an easier way to transition to the disclosure. Businesses should follow this method where possible. For instance, “although these results are extraordinary, some customers have made $5,000 or more each week using this system and we believe you can too.” This type of disclosure may not be appealing from a marketing standpoint, but the only lega