Is Your MLM Ready for New FTC Disclosure Rules?
Are Your MLM Earnings Disclosures FTC-Ready for New Regulations?
When it comes to the world of direct selling, one thing is becoming clear: honesty about earnings is no longer optional. The Federal Trade Commission (FTC) has been watching how multi-level marketing (MLM) companies talk about income. And now, the FTC’s new report makes it clear that changes are on the way.
Many companies have used big income stories to attract recruits for years. But according to the FTC’s latest findings, most participants in MLM programs earn little or nothing. Some even lose money after counting their costs.
If you run or work for an MLM, this is your wake-up call. The FTC is tightening the rules. It’s time to make sure your earnings disclosures are accurate, easy to understand, and ready for the new regulations ahead.
What the FTC Found in Its Latest Report
In September 2024, the FTC released a staff report that reviewed how MLM companies share income and earnings information with recruits and customers.
The report confirmed what many critics have said for years:
Most MLM participants don’t make a profit.
Many spend more money on fees, training, or products than they ever earn.
Some companies use misleading averages that make income look higher than it really is.
Others hide key details like dropout rates or expenses that reduce actual earnings.
The FTC said these reports give a false impression of success. They often highlight “top earners” or “success stories” that represent only a tiny fraction of participants.
To regulators, that’s a serious problem. Why? Income claims are one of the biggest ways MLMs recruit new people. If those claims aren’t realistic, the FTC says they’re deceptive, and that breaks the law.
Why the FTC Cares So Much About Income Claims
The FTC’s main job is to protect consumers from misleading or dishonest business practices. In the MLM world, that means keeping companies honest about what people can really earn.
For years, the FTC has received thousands of complaints from people who joined MLMs after seeing flashy income promises. Many of those recruits later realized the numbers weren’t realistic.
The 2024 report is the agency’s way of saying, “We’re watching.” The FTC wants companies to share clear, truthful, and complete earnings data, not cherry-picked examples or vague phrases like “unlimited potential” or “financial freedom.”
When an MLM exaggerates income, it doesn’t just hurt the recruits. It also damages the reputation of the entire industry. Honest companies get lumped in with bad actors. That’s why following the rules matters, for both legal safety and long-term trust.
What Makes an Income Disclosure “FTC-Ready”?
The FTC hasn’t released its final rules yet, but its report gives strong clues about what they expect to see.
Here are the main things every MLM should do now to stay ahead of the new regulations:
1. Show the Real Numbers
Don’t hide behind “average earnings” or highlight only the top 1%. Use median income instead. The median gives a more accurate picture of what the typical participant earns.
Also, share the percentage of participants who made no money or lost money. The FTC says this kind of transparency helps people make informed choices.
2. Include Dropout and Churn Rates
It’s not enough to show how much money people make — you also need to show how many quit. If 80% of your members leave within a year, that’s something prospects deserve to know.
High turnover rates tell regulators that success stories are rare, and that’s key information for recruits.
3. Show All the Costs
MLM participants often spend money on things like enrollment fees, product samples, travel, and events. The FTC wants companies to include these expenses in their disclosures.
If most participants spend more than they earn, regulators say that must be made clear.
4. Be Consistent and Easy to Read
The FTC doesn’t want fine print or confusing charts. Use plain English and simple layouts so people can easily understand what the numbers mean.
If it takes a lawyer to understand your income statement, it’s not transparent enough.
5. Keep Records
Every income claim, even one on social media, should have proof behind it. Keep documentation to show where the data came from, how it was calculated, and when it was last updated.
This is critical if regulators ever come asking questions.
Common Mistakes That Get MLMs in Trouble
The FTC report also pointed out several mistakes that led to enforcement actions.
Here are a few of the biggest ones:
Highlighting top earners as if they represent typical results.
Using vague claims like “financial freedom” or “work from anywhere” without real proof.
Leaving out expenses that eat up profits.
Failing to update disclosures regularly.
Hiding disclosures deep inside websites or behind logins.
These tactics may seem harmless, but they can quickly trigger FTC action. In some past cases, companies have faced heavy fines or even complete shutdowns for misleading earnings statements.
Why This Matters to the Entire Direct Selling Industry
This report isn’t aimed at just one company, it’s a message to the entire industry. The FTC is showing that income disclosure is now a top enforcement priority.
That means MLMs, affiliate programs, and even coaching businesses that use “income opportunity” language are on notice.
If your company’s income claims don’t match reality, it’s not a question of if regulators will come; it’s when.
Being proactive is much safer (and cheaper) than facing an investigation later. Transparent earnings reports not only keep regulators away, they also build trust with customers and distributors. When people see honesty and clear data, they’re more likely to believe in your company long-term.
How to Start Improving Your Income Disclosure Today
If you’re not sure whether your disclosures meet the FTC’s expectations, don’t panic. There are simple steps you can take right now:
Review your current disclosure: Check if it includes median earnings, dropout rates, and expenses.
Gather accurate data: Make sure your figures come from reliable company records, not assumptions or outdated numbers.
Simplify your language: Rewrite your disclosure in a way that anyone can understand.
Audit your marketing claims: Look at your website, social posts, and training materials. Remove or fix any language that might sound misleading.
Train your distributors: Even one rep making false income promises can get the whole company in trouble. Teach them what’s allowed and what’s not.
Get a compliance audit: A professional compliance review can help you find weak spots before the FTC does. It’s a small investment that can save your business.
What Happens If You Ignore the Warning
Some companies may think, “We’re too small; the FTC won’t notice us.”
That’s not true.
In recent years, the FTC has gone after both big and small companies, even individual promoters. If you make public income claims, you’re on their radar.
Ignoring these new expectations could mean:
Fines or penalties for deceptive marketing
Permanent bans from running MLM businesses
Loss of distributors and public trust
Costly legal battles that can sink your company
The bottom line: compliance isn’t optional anymore. It’s the foundation of running a legal, lasting business in today’s market.
Staying Ahead of the New FTC Rules
The FTC’s staff report is more than a warning; it’s a preview of future regulations. New rules are likely coming that will make earnings claims even stricter and require more proof and documentation.
Companies that start adjusting now will have a big advantage later. When those rules take effect, you’ll already be compliant; while others scramble to catch up.
Final Thoughts
The FTC’s message is simple: tell the truth about income. That means showing the real picture, not just the highlight reel.
If your MLM or direct-selling company hasn’t reviewed its income disclosures recently, now’s the time. Waiting until a regulator comes knocking is too late.
Strong compliance doesn’t just keep you out of trouble; it builds trust, credibility, and long-term success.
If you’re unsure where to start, professional help is available. A compliance expert can guide you through disclosure updates, marketing reviews, and training to protect your business.
Protect Your Company Before It’s Too Late
The FTC is watching. Make sure your income disclosures are clear, honest, and ready for the new rules ahead.
If you want help reviewing your disclosures or creating a compliance plan, book a Compliance Discovery Call today. A short call now can save your business from major headaches later.
