How the FTC’s New Earnings Rule Affects MLM and Direct Selling Companies

In January 2025, the Federal Trade Commission (FTC) introduced a new Earnings Claim Rule that could reshape how multi-level marketing (MLM) and direct selling companies advertise income, success stories, and lifestyle benefits.

This rule isn’t just another update. It’s a signal that the FTC is serious about transparency and truth in marketing. If your business uses income claims, testimonials, or financial promises in any form, you’ll need to adjust, and soon.

In this article, we’ll explain what the new rule includes, why it matters, and what direct selling companies should do right now to stay compliant.

What Is the FTC’s Proposed Earnings Claim Rule?

The Earnings Claim Rule aims to protect consumers from misleading or exaggerated income claims. It’s designed to apply not only to MLMs and network marketing programs but also to coaches, online course creators, franchise operators, and anyone promoting a “business opportunity.”

The FTC’s goal is to make sure that when people join a company or invest in an opportunity, they know exactly what to expect, not a dream, but the real numbers.

Under this proposed rule, companies must:

1. Substantiate every income or earnings claim with verifiable, written proof.

2. Disclose average earnings for all participants or distributors, not just top performers.

3. Keep accurate records of all claims made by the company or its representatives.

4. Avoid deceptive or vague income language, such as “financial freedom,” “quit your job,” or “six-figure potential,” unless these statements can be backed up with real data.

These changes mean that MLM companies will no longer be able to rely on general success stories or “lifestyle marketing” to attract recruits. Every claim must now have evidence behind it.

Why the FTC Is Making These Changes

Over the past few years, the FTC has investigated and penalized multiple MLMs and direct selling programs for false or unsupported income claims.

Regulators have repeatedly found that most participants in MLM programs earn little or no profit, while a small percentage make large amounts of money. Yet, many companies still promote unrealistic income expectations.

The FTC believes that this creates a misleading picture, one that encourages people to join based on hope rather than facts.

By introducing this new rule, the agency wants to:

• Increase transparency in how opportunities are marketed.

• Hold companies accountable for unsubstantiated or exaggerated claims.

• Protect consumers from losing money or being misled.

• Create a standard set of requirements that applies across industries.

In simple terms, the FTC wants everyone to play by the same rules and tell the truth about how much people really earn.

What This Means for MLM and Direct Selling Companies

For legitimate direct selling companies, this rule presents both a challenge and an opportunity.

On one hand, businesses will need to tighten their marketing, update disclosures, and monitor their distributors’ communication more closely.
On the other hand, companies that already operate ethically can use this moment to build greater trust with both customers and recruits.

Here’s what the rule will mean in practice:

1. Proof Will Be Mandatory

If your company says that participants can “earn $5,000 a month” or “replace your full-time income,” you must have records showing that these earnings are typical for a meaningful percentage of distributors.

Vague statements like “earn what you’re worth” or “build unlimited income” will no longer be acceptable unless supported by actual data.

2. Disclosures Must Be Clear and Visible

Companies will need to share clear income disclosure statements that show:

• The average income for all participants.

• The percentage of participants who earn each income level.

• The typical expenses or costs associated with participation.

These disclosures can’t be buried in fine print or hidden in long documents. The FTC wants them to be easily found and understood by potential recruits.

3. Recordkeeping Will Be Required

Every income claim made by the company, its salesforce, or its marketing team must be documented and retained. That means keeping screenshots, emails, presentations, and marketing materials that mention earnings.

When regulators ask for proof, companies must be able to produce it quickly.

4. Distributors Are Also Responsible

The rule doesn’t just apply to corporate offices; it also covers independent distributors, influencers, and affiliates who represent the company.

If a distributor makes a false or exaggerated income claim, the company can still be held liable. This makes compliance training and social media monitoring more important than ever.

The End of “Lifestyle Marketing”

For years, MLM and network marketing companies have relied heavily on lifestyle-focused marketing; images of luxury cars, exotic vacations, and flexible freedom. These images are powerful, but they’re also risky if they don’t represent the experience of most participants.

The new FTC rule will directly challenge this type of marketing.

If your company uses photos or videos showing a high-end lifestyle to suggest potential earnings, you’ll need to prove that such results are typical and achievable for most participants.

If you can’t, those materials could be considered deceptive advertising.

The safest approach will be to shift your messaging from “get rich” to “build real income through effort and consistency.”

Show the real path, not just the dream.

How to Prepare Your Company Now

Even though this rule is still proposed and not yet final, MLM and direct selling companies should start preparing immediately.

Waiting until it’s officially enforced could put your business at serious risk.

Here’s how to get ready:

1. Audit All Income Claims

Review every marketing statement, presentation, social media post, and distributor script that mentions money or success.

Remove or revise anything that could be seen as exaggerated or unsubstantiated. Make sure all claims can be verified with actual data.

2. Update Your Income Disclosure Statement

If your company doesn’t already have one, now’s the time to create a detailed, easy-to-read income disclosure.

It should show realistic earnings, not just best-case scenarios. Transparency now will save you from penalties later.

3. Strengthen Distributor Training

Teach your salesforce what they can and cannot say about income potential. Provide compliant talking points and examples. Make sure they understand the new FTC requirements and how to stay within the rules.

4. Improve Monitoring Systems

Use technology or manual reviews to monitor social media posts and marketing materials from your distributors. Identify any high-risk claims early and correct them before regulators do.

5. Work with a Compliance Partner

This is the most effective step you can take. A compliance partner can review your materials, train your team, and monitor risk across your organization. They can also help you create policies that align with the new rule before it becomes mandatory.

What Happens If You Ignore the Rule

The FTC has made it clear that ignorance won’t be an excuse. Companies that continue to use misleading or unsupported income claims will face steep penalties — including fines, injunctions, and even bans from operating.

For MLM companies, the risks go beyond money. A single enforcement action can damage your reputation, cause distributor losses, and scare off potential recruits or investors.

Compliance is no longer optional; it’s the foundation of long-term success.

Turning Compliance into a Competitive Advantage

While this rule may feel restrictive, it can actually help strong, ethical companies stand out. By being transparent, honest, and proactive, you can build trust with both customers and regulators.

Here’s how to view this as an opportunity:

• Show transparency by publishing real data and success stories that reflect typical results.

• Promote professionalism: highlight your company’s commitment to doing business the right way.

• Build credibility by partnering with a compliance expert who understands FTC expectations.

Companies that adapt early will not only avoid penalties but will also attract people who value honesty and stability over hype.

Final Thoughts

The FTC’s new Earnings Claim Rule is a major turning point for the direct selling industry. It pushes every company to be more transparent, more accountable, and more honest about what success truly looks like.

Yes, it may require extra effort to gather data, update marketing, and train teams. But the reward is worth it; stronger trust, better retention, and a future free from costly compliance surprises.

If your company isn’t sure where to start, you don’t have to face it alone.

Direct Selling Solutions helps MLM and direct selling companies stay compliant, reduce risk, and build lasting reputations. Our audits, training, and monitoring systems are designed to keep you ahead of regulatory changes, including the new FTC Earnings Claim Rule.

Change is coming fast.

Take action now to protect your business before regulators come knocking.

Book a compliance discovery call today and make sure your company is ready for the FTC’s next move.