The Federal Trade Commission has long mandated that clear sellers ' income disclosure statements effectively and TVIEXPRESS consistently echo the experiences of the average distributor.

The FTC updated firm advice on April 30 for multilayer advertisers, or MLMs. ]1 ]

The FTC's judgment of whether an MLM is operating as a arch system and offering an immoral reimbursement construction is based on the following 2024 direction: it includes present principles and practices.

The 2024 guidance lists a number of other requirements regarding what constitutes false income, in addition to the FTC's emphasis on the fact that images about income opportunities if echo the income of a typical distributor [2 ] and that any income says had become based on reliable factual evidence.

We discuss the 2024 guidance from an economic standpoint with regard to several of the FTC's current ideas regarding how MLMs should approach their income and earnings reports, which are typically income disclosure statements.

We note that there is not a preferred disclosure for all consumers [4 ] and that each individual company's unique compensation structure will be reflected in its IDS, even though an IDS is intended to be an accurate estimate of the earnings participants can generally expect from engaging with the MLM's business.

We also acknowledge a potential conflict between the IDS as a marketing tool intended to draw potential customers and the IDS as a risk management tool, which might require direct sellers to take conservative measures of participant earnings and avoid regulatory scrutiny.

Retail sales are recognized as a potentially significant source of income for distributors, but IDSs typically do not report retail profits because direct sellers typically do not communicate distributor sales to final customers. In the IDS, including these retail profits would improve their accuracy and, in some cases, enhance its appeal to potential customers.

Capturing Participants ' Costs

The 2024 guidance repeatedly states that "[c ] laims about earnings should take into account both what participants earn and what they spend. ]" ]5 ]

To determine whether a participant has made a profit or lost money, expenses like those for product purchases, tools, services, conference travel, and training must be subtracted from any revenue earned. ]6 ]

The FTC claims that the IDS should be held accountable for all expenses incurred by business owners, but the FTC insists that the IDS should not currently disclose or quantify business expenses that result in lower net earnings. ]7 ]

These costs fall into two broad categories: those that are typically unobservable and those that are observable in the business intelligence of the businesses.

The observable expenses include direct costs, such as costs for registration and renewal, costs for distributor websites, marketing and sales aids, and costs related to enrollment and rank/eligibility maintenance.

Direct expenses can typically be determined using company-wide data or the information on distributor-level purchases, commonly referred to as order-line data. ]8 ]

From the company-wide data, some typical and recurring expenses, such as general enrollment costs and Tviexpress costs to attend required trainings or conferences, can be inferred.

However, these statistics typically cannot account for the price differences between individual participants, as some participants may have different enrollment requirements.