Acting Chairman of FTC Addresses US DSA Fall Conference

Acting Federal Trade Commission (FTC) Chairman Maureen Ohlhausen addressed the US DSA Fall Conference on November 7, underscoring the importance of effective industry self-regulation working in collaboration with government regulators.

The Acting Chairman’s remarks focused on the value and importance of self-regulation, and she complimented US DSA’s commitment to self-regulation and continued enhancements of the US DSA Code of Ethics. In establishing such standards, she noted that industry leaders provide unique insights on the marketplace. Acting Chairman Ohlhausen underscored the importance of true self-regulation to government oversight agencies and how these efforts complement each other.

Acting Chairman Ohlhausen shared some characteristics of what she deems attributes of effective self-regulation, including:

• Commitment and buy-in from the industry;
• Adequately funded mechanisms and independence from industry members;
• Standards that are clear, meaningful, and fair; and
• Effective enforcement mechanisms.

The Acting Chairman also reinforced the legitimacy of direct selling companies in the marketplace. She made clear that any FTC settlement is only binding on the company that enters into such a settlement. In some cases, these settlements can provide insights but should not be viewed as “law” or a one-size-fits-all approach to the issues addressed in such agreements.

Acting Chairman Ohlhausen cited the 1975 case of FTC v. Koscot Interplanetary Inc. as the preeminent source of case law on pyramid schemes. In that case, the court defined a pyramid scheme as “characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive, in return for recruiting other participants into the program, rewards which are unrelated to the sale of the product to ultimate users.”

Acting Chairman Ohlhausen stated that there are nuances regarding this definition that require further consultation with US DSA and its member companies and thanked US DSA for its insights regarding who constitutes ultimate users and the appropriateness of personal consumption of product by the salesforce. She anticipates providing further guidance to the industry on these matters in the near future.

Acknowledging that consumers are best served when the FTC and self-regulators work closely together, Acting Chairman Ohlhausen pledged to continue to build on the good working relationship enjoyed by the FTC and US DSA.