FTC Business Guidance on Multi-Level Marketing: Plain-English Summary
The FTC business guidance on multi-level marketing is the closest thing to an official rulebook for the industry. It doesn’t ban MLMs. It explains how the agency tells a lawful direct selling business from a pyramid scheme and what you can say about earnings.
Key facts
- Issued by: U.S. Federal Trade Commission
- Type: Business guidance, not a binding rule
- Core test: Are rewards tied to real retail sales to real customers?
- Earnings claims: Must reflect what the typical participant achieves
What the Guidance Says About Legitimacy
The FTC says the product-versus-recruitment question is central. Pay that rewards recruiting, rather than sales to customers outside the participant network, is a warning sign. For the full comparison, see MLM vs pyramid scheme and is network marketing legit.
FTC Guidance Multi-Level Marketing: Earnings Claims
The agency states that any earnings claim should reflect what the typical person to whom it is directed is likely to achieve. Showing top earners without context can mislead. If you don’t have reliable evidence, the guidance says not to make the claim.
Claims include lifestyle images, rank screenshots and statements about “potential.” Each can count as an earnings representation.
Who Is Responsible
Both the company and individual participants can be liable. Recent cases against promoters make this concrete; read our overview of MLM regulation for context.
How to Apply the Guidance
If you’re a participant, keep substantiation for anything you say about income, disclose material connections, and point to the company’s income disclosure. If you’re researching, use our research checklist.
Key Takeaways
- The guidance is not a ban on MLMs.
- Typical results, not best results, are the standard.
- Participants can be liable for their own claims.
- Recruitment-driven pay is a red flag.
Frequently Asked Questions
Is the FTC guidance law?
It’s guidance describing how the agency applies existing law, mainly Section 5 of the FTC Act. It isn’t a standalone rule, but the agency enforces the underlying law.
Does the FTC say MLMs are illegal?
No. It distinguishes lawful multi-level marketing from pyramid schemes based on how the business is structured and paid.
What counts as an earnings claim?
Any statement or implication about income, including lifestyle images, rank titles and testimonials, can be treated as an earnings claim.
Where do I read it?
On ftc.gov under business guidance concerning multi-level marketing.
Sources
- FTC: Business Guidance Concerning Multi-Level Marketing
- FTC: Disclosures 101 for Social Media Influencers
QastMe does not endorse any company. Information is for education only and is not financial or legal advice. Earnings in direct selling vary widely, and most participants earn little or no money. Review each company’s income disclosure statement before deciding.
Stay ahead of the industry. Get the latest network marketing news, company reviews, and lead-generation guides at QastMe.org.
Free: The 2026 Network Marketing Lead Playbook
30 ethical lead sources, a 7-day action plan, and the compliance rules that keep your business safe.
Want leads now? See QastMe lead options.
