UK Multi-Level Marketing


INSIGHT
Published
Nov 2nd '22
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Multi-level Marketing (MLM) is a way of selling goods and services where the profit isn’t just made from the products themselves, but also the recruitment of new people into the company.

 

Companies that follow this model but do not sell a product are likely to be considered Pyramid Schemes, and are illegal in the UK. Any marketer with concerns that their company may be operating this kind of business model is advised to seek independent legal advice.

 

MLM posts are advertising

Most MLM companies have individual sellers or representatives who advertise their products on social media, along with posting opportunities for others to join the company. Sellers are reminded that where they post content that falls within the remit of the Advertising Code, they will be considered the advertiser, and will be responsible for that content complying with the Committee of Advertising Practice (CAP) Code. See also: Remit: Social Media.

 

  • Product ads

MLM companies can sell a variety of goods and services, from beauty products to bard supplements to party supplies, and sellers need to ensure that they hold evidence to substantiate any objective claims they make in their ads. See also Misleading Advertising.

 

However, there may be rules around particular products that also need to be adhered to. Sellers should ensure that they are aware of any rules surrounding the products they are selling, as they are responsible for their own ads. Detailed below are useful guidance links relating to some of the most popular MLM products:

 

 

  • Recruitment ads

Social media posts encouraging others to join an MLM are likely to be viewed as recruitment advertising by the Advertising Standards Authority (ASA). These also need to follow specific rules. For instance, any earnings claims marketers make in their recruitment ads need to be representative of what the average person can earn. CAP understands that, generally, those partaking in MLM opportunities are likely to earn differing amounts, and so would advise against quoting any direct figures in ads. Claims such as “you can earn a profit” are likely to be acceptable, provided the seller can prove that the average person can make some sort of “profit”.

 

Marketers should also ensure that they do not exaggerate the availability of any added incentives, such as holidays and cars (Oriflame Cosmetics SA, 2 November 2022).

 

In 2022, the ASA investigated claims for FM World that stated “£1200 in bonuses in your first 3 months”, “Over 30k in bonuses” and “30% instant commission from day 1”. The advertiser stated that the misleading claims were an “accidental act” that had arisen because of short term cooperation with their “associates” (sellers). However, the ASA maintained that the responsibility lay with FM World and upheld against all claims (FM Cosmetics Distribution UK Ltd t/a FM World, 12 October 2022).

 

Sellers should also ensure that they include all material information in their ads – that is, all of the information someone would need to know in order to make an informed decision about whether to join the MLM themselves. This means making clear (for example) the nature of the opportunity, joining fees, starter kit fees, etc. For example, the ASA investigated claims for the MLM Oriflame that stated applicants could achieve a mentoring bonus up to £550 for every person brought into the company. In addition, the ad stated applicants would receive a £150 starting bonus and £1100 advancement bonuses and also could obtain multiple inclusive incentive trips to the Balearics and Dubai. The ASA found that the ads did not include all material information and significant limitations relating to these opportunities, and therefore prospective newcomers to the company were not provided with sufficient information in order to make an informed decision about whether to join (Oriflame Cosmetics SA, 2 November 2022).

 

See also Recruitment: General and Guidance pack for MLM Sellers – Recruitment.

 

  • Testimonials

Any testimonials that are used in MLM ads are the responsibility of the seller – and the seller needs to hold documentary evidence that a testimonial or endorsement used in a marketing communication is genuine and hold contact details for the person who, or organisation that, gives it (rule 3.45). Furthermore, sellers need to hold evidence for any objective claims made in any testimonials, as they have adopted and incorporated the testimonial into their advertising. See our guidance on Testimonials and Endorsements for more information.

 

  • Promotions, giveaways & prize draws

Sellers are reminded that any promotions, including competitions, prize draws and giveaways, need to adhere to Section 8 of the CAP Code. For example, sellers need to ensure that they include all significant conditions for their promotion in the actual ad (such as a closing date, geographical or age restrictions, and how to enter). Any seller looking to run this kind of promotion on social media (or elsewhere) is encouraged to review our guidance on Prize DrawsCompetitions and Promotional Marketing prior to marketing their promotion.

 

Source: CAP

 

Read:

 

Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the ASA. CAP’s AdviceOnline entries provide guidance on interpreting the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing.

 

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