Rethinking the FTC’s Approach to Earnings Claims

The FTC’s continued focus on earnings claims in multi-level marketing (MLM) reflects a legitimate, if overbroad, concern: protecting consumers from deception. But a new analysis suggests that Biden-era proposed rules may be solving the wrong problem—and doing so in a way that imposes real costs on legitimate businesses and participants.

In Flawed Foundations: A Critical Assessment of the FTC’s Proposed Multi-Level Marketing Earnings Claims Regulation, economists identify fundamental methodological errors in the FTC’s past cost-benefit analysis. Correcting for those errors—including the unrealistic assumption that the FTC would stop bringing enforcement actions—the proposed rule fails the Commission’s own cost-benefit test under any plausible set of assumptions.

That conclusion aligns with concerns the U.S. Chamber raised in a letter to the FTC last year, urging the Commission to reconsider and revoke these rules. Those concerns take on added significance in today’s regulatory environment. The FTC is increasingly operating like other executive agencies and, as a practical matter, is expected to adhere to the same economic analysis principles applied through OMB and OIRA review. Those principles require a clear accounting of real-world baselines, avoidance of double-counting benefits, and a disciplined comparison of incremental costs and gains. On that score, the current proposal falls short.

Moreover, the MLM industry today looks very different from the one that drew scrutiny decades ago. Industry-leading firms have invested heavily in compliance systems, standardized disclosures, and monitoring practices that address many of the concerns associated with earlier eras—when exaggerated income claims and opaque compensation structures were more common.

It is also important to recognize what MLM models provide: a pathway to entrepreneurship. For many participants, these platforms offer a flexible, low-barrier way to build a business or generate supplemental income. Some pursue large-scale operations; others treat it as a side hustle. That variability mirrors outcomes across the broader small business economy.

None of this suggests enforcement should be relaxed. Targeted action against bad actors remains essential. But broad rulemaking is a different tool—one that imposes rigid requirements across an entire industry, including firms already operating responsibly.

The better approach is straightforward: continue enforcing existing law, provide clear guidance, and invest in consumer education. That path protects consumers while preserving legitimate opportunities for entrepreneurship.

The FTC’s goal is the right one. But effective policy requires getting both the diagnosis and the remedy right. On this record, the case for a new rule has not been made.

About the author

Ashley Gum