MLM Legal Perspective: What Social Marketing Liability Do Network Marketing Face On Facebook, YouTube and Twitter?

LegalPerspective

MLM Law Firm Grimes & Reese, partner Kevin Grimes wrote a great MLM legal perspective this last week on Social Marketing Liability…

Every network marketing company, whether MLM, party plan or hybrid, is fine-tuning their marketing strategy trying to crack the magic nut that is social media. Whether it’s posting a polished Facebook Fan Page or an ad hoc tweet, everyone is getting into the act.  But it’s independent distributors who are leading the charge; they have adapted it as their favored communication medium to broadcast their message.

KevinGrimes

Social media is indeed a communications phenomenon, and there’s simply no stopping it. Unquestionably it can quickly create the much desired “buzz” that every company desires. But direct sellers MUST understand that they are responsible for all the social chatter that goes on. The FTC has made it clear in its testimonials and endorsements guidelines that it will hold a business responsible for statements and representations made by anyone with a “material connection” to a company. Guess what – your distributors definitely have a material connection to your company, and you are responsible for what they are saying!

ftc

In January the FTC is filed a lawsuit against Fortune HiTech Marketing (FHTM) alleging that it is a pyramid scheme and that it engaged in false and deceptive practices.  As evidence against FHTM, the FTC presented statements and presentations that FHTM’s independent distributors posted on social networks. Among the posts cited by the FTC are:

  • A tweet wherein an FHTM distributor allegedly states: “bring ur friends & learn how 2 make $100K a YR.”
  • Photos of a check presentation ceremony;
  • Distributor photo’s of their commission checks;
  • A top-level FHTM distributor claimed on Twitter that he made more than $5 million through FHTM.

It’s very clear that the FTC is monitoring and gathering evidence from social media outlets, and direct sellers MUST take this message to heart. Understand that social media is indeed a communications phenomenon, but you must not let it go unchecked. Your company is responsible for the statements that your sales force posts, so be clear with your field about the rules they must follow. But that’s not enough. In addition, as part of your regular compliance efforts it’s critical that also actively monitor social media posts made by your sales force and take proper measures when improper posts are discovered. After all, the FTC is watching …

Kevin Grimes:

Kevin D Grimes is a 1982 graduate of Colorado College with a Bachelor of Arts degree and received his law degree in 1985 from the Southern Methodist University School of Law. After serving in U.S. Army Judge Advocate General’s Corps, he joined a general civil law firm with a diverse corporate and litigation practice. He then moved to Melaleuca, where he was exclusively responsible for day-to-day legal support of all departments. After leaving Melaleuca, he began his own law firm to provide comprehensive legal services to direct selling, multilevel marketing, and network marketing companies ranging from start-ups to those of international prominence.

http://www.mlmlaw.com/blog/

FTC Publishes Final Guides Governing Endorsements and Testimonials

FTC publishes final guides governing Endorsements, and Testimonials. These changes affect Testimonial Advertisements, Bloggers, Celebrity Endorsements.

Most of you who subscribe and read our Blog, know we have written articles on this issue over the last year. These changes are HUGE for the little guy, and we all must work to get the word out.

We need to set aside our difference of opinions for a second and make sure we are getting the word out to everyone we can.

As I have said in the past, we do not need the Government coming in and cleaning up our great profession. So if you are a Networker who markets on the Internet, or an Affiliate who runs several niche websites or Blogs, take time right now to spread the word.

You can read the FTC press release here.

Text of the Federal Register Notice FEDERAL TRADE COMMISSION 16 CFR Part 255

Text of the Revised Endorsement and Testimonial Guides FEDERAL TRADE COMMISSION
16 CFR Part 255 Guides Concerning the Use of Endorsements and Testimonials in Advertising

Remember get the word out to all your friends.

To protect yourself I suggest checking out Michael E. Young Esq. who is the Founder of the Internet Attorneys Association.

Living An Epic Adventure,

Troy Dooly