ASHLEY: Welcome to Outgrowth: A Slice of Pro Beauty with your hosts Ashley Gregory Hackett.

JAIME: And Jaime Schrabeck. As consumers and professionals, we’re constantly bombarded with marketing and advertising. How do we know what to believe and who to trust?

ASHLEY: To learn more about how we can avoid falling for false claims, we welcome special guest Bonnie Patten, the Executive Director of Truth In Advertising. Let’s grow together. 

JAIME: Welcome to Outgrowth, Bonnie.

BONNIE: Oh, thank you so much for having me.

JAIME: I happened to discover Truth In Advertising through Twitter. And so we’re so pleased to have you with us today.

BONNIE: Well, you know, we love participating in social media. It’s a lot of fun so I’m glad you found us there.

JAIME: Bonnie, as the executive director of this organization, would you please describe what your mission is?

BONNIE: Sure. So Truth In Advertising, or TINA.org for short, works to out, stop, and prevent deceptive marketing. And we do that in a variety of ways. We have a website where we publish articles and, you know, as we have alluded to, we’re active on social media platforms, but we also have attorneys who will file complaints with state and federal agencies as appropriate when we find deceptive advertising that companies are not willing to immediately correct.

ASHLEY: Now the organization has a really broad scope. I know a quote is “all ads except political ones.” What types of false advertising or deceptive advertising would you say are the most common or that TINA focuses on?

BONNIE: Right. So the scope of what we do is incredibly broad, basically advertising and marketing of all kinds in all sectors of the economy, but we do happen upon deceptive advertising in certain markets more frequently. For example, the wellness industry is an example of one industry where we find a lot of deceptive ads. We’ve also been very active with regard to multilevel marketing and pyramid schemes and the deception in the marketing around those venues. We also have done a lot with made in the USA marketing, and then, more generally, with negative option offers.

JAIME: Would you describe what a negative option offer is because I’m not familiar with that term?

BONNIE: Sure. What you’re probably most familiar with is when you see an ad on TV, or on a social media, or in the internet that says free trial offer or things along those lines. And what happens when you go to sign up for that free trial offer is that they say, well, you still need to pay for shipping and handling. And when you hand over your credit card information, what you probably don’t see is that they’re signing you up for a continual payment to receive the good or service until you opt out. So that’s where it’s a negative option in that you are required to do something to stop the charges. So a lot of these we like and use, if you subscribe to let’s say, you know, Netflix or a newspaper online, those are examples of negative option offers, but they’re also used by a lot of supplement companies and even lingerie companies, when consumers don’t know that what they’re getting into is something that’s going to charge their credit card repeatedly.

JAIME: Dating myself here, Columbia House Records comes to mind.

BONNIE: Yes, indeed.

JAIME: I just never knew what it was called. So thank you for describing that. I think we’re all familiar with that type of company, but I didn’t realize that that was the name. Thank you.

BONNIE: Oh, no, my pleasure. And you know, if you want to get technical and legal, there’s actually an acronym called ROSCA, which stands for the Restore Online Shoppers’ Confidence Act, which is focused on the internet and basically the law says  that consumers need to be made aware of the negative option offer before you can start charging them and that’s where TINA really focuses when we see these kinds of ROSCA violations.

ASHLEY: I can think of a lingerie company in particular that was in hot water, I think maybe in the last year or 18 months about this. So hopefully that led to some change to business practices, but you mentioned MLMs, which is definitely something that I think  is part and parcel with the beauty industry only because beauty professionals have a tendency to try to find ways to supplement their income, whether it be through a slow time or retail-type products they can offer to their clients. When it comes to MLMs, what specifically does the law prohibit?

BONNIE: Well, when it comes to MLMs, there’s no general, specific law focused on that industry per se. But what the law says is that when you’re going to market a business opportunity to someone, you must be honest and truthful. And to the extent that you are marketing perhaps atypical results, whether that be through health or wellness and atypical results, you know, weight loss, or even potential income, that you must clearly and conspicuously disclose what a typical distributor in the MLM industry would earn, or the typical results that a consumer would get, and that’s where we find a lot of MLMs getting into hot water when they market these companies, the business opportunity, as well as products using either just false and deceptive claims or atypical claims.

ASHLEY: So to piggyback on that, I know obviously the business model of an MLM is recruitment and that’s really the only way it quote/unquote works. Can a company be held accountable for claims that their individual reps make, whether it be through  official channels, like brand social media accounts or through their own social media, making those same income claims, even though they’re not coming from the company

specifically?

BONNIE: Absolutely. FTC law has made incredibly clear that MLM companies are on the hook for the representation of their distributors, and that’s a principle that’s been followed for quite some time. I would like to comment though, that what you really described there is more of a pyramid scheme than an MLM and that what the FTC basically says is that if you were to join a company that focuses almost exclusively on recruitment, as opposed to selling the product or service that the company has, that that is a huge warning sign that what you’re about to get involved in is a pyramid scheme and not a multilevel marketing company.

ASHLEY: Very interesting because the distinction, it seems is very fluid. I know one of the main recruitment strategies of these companies is to directly counteract that obstacle by saying pyramid schemes are illegal. I would never be a part of one, but then literally, actively trying to recruit you out of the other side of their mouth. So I know that there have been some class actions about MLMs and a lot of the MLMs that run sort of parallel to the beauty industry with things like essential oils or shampoos, things like that. Can you speak to what it takes to actually start a class action for any of these companies and what we should be on the lookout for?

BONNIE: Sure. I’ll sort of break that down. It is incredibly difficult to distinguish a legitimate multilevel marketing company from a pyramid scheme. And in fact, even legal scholars will disagree on where that line is to be drawn. And I think what people need to look out for when they’re looking at multilevel marketing companies is really the marketing tends to make it look a lot better than it is, and that the vast majority of multilevel marketing distributors make little to no money. and that’s a pretty well known fact. ARP has done a study that reported more than 70% of distributors reported making little to no money. And when you take that into consideration, it may not be the best option for those looking to supplement their income, as opposed to other options that may be available.

JAIME: Not to pick on essential oil companies, but it’s so easy.  I understand that there’s a recent lawsuit filed against Young Living, and I’m sure it’s not the first, nor will it be the last. It seems like these companies are ripe for violating both types of fraudulent claims, which would be the health and the income claims. Could you go into more detail how those overlap with each other and what it takes to actually prove that that’s the case, because I know for some believing that essential oils work is just sort of ingrained while the medical community, of course, doesn’t feel the same way?

BONNIE: Right. Yes, that’s a good point, and you know a lot of distributors just don’t know the law. So when it comes to essential oil companies and, I’m not afraid to name them, you know, Young Living, doTerra being the two largest, you can go to our website, TINA.org and find a plethora of examples of their distributors making inappropriate income claims and also illegal disease treatment claims. So with regard to health claims, distributors and companies cannot make claims that their product can treat, prevent, or cure a disease or illness, because if they could do that, then they would be a drug and drugs are subject to very strict review by the FDA. So that can’t happen. Even if you believe that, you know, sniffing your essential oil cured your cancer, and you believe it with all your heart, you still can’t say it. Because it’s, we’re talking about commercial speech here, trying to sell something to somebody and in that situation, you cannot make that claim because that essential oil is not a drug that’s been approved by the FDA. With regard to income claims, it’s similar. The standard here is not what a single distributor makes or the one trying to recruit somebody into the business. The standard when you’re marketing a business is what will the typical distributor make. And generally, that’s a very small amount of money, if anything, and it’s not only what would a typical distributor make, it’s not gross, right? What you get before all your expenses, but net. So after you’ve paid for the supplies, for the oils, and whatever you’re using to sell them, and your time and that kind of thing. And that’s where these companies really drop the ball, that they make outrageous marketing claims, financial freedom, time freedom, live the life you want, be your own boss, a six-figure, seven-figure, eight-figure incomes. And on top of that, they say, not only can you make this money, but you can do it and help people with their health, and that’s sort of the double whammy of deception.

JAIME: Does it matter what form that takes, because I can envision now someone just saying, well, I can’t prove it, but anecdotally, this is how it’s benefited me personally and I think it could do the same for you.

BONNIE: If it’s a health claim and they’re saying that it can treat, cure, mitigate, or prevent a disease or illness, they absolutely cannot say that.

ASHLEY: So why is it so hard to nail these companies down? Is it because health claims go under the advisement of the FDA and income claims fall under the purview of the FTC? Or is it that the case law and precedent with companies like Amway have made this a hill that’s too high or expensive to climb?

BONNIE: That’s a great question. I mean I think the FDA and the FTC have been fairly active in this area when you consider the amount of companies, and the industries, and marketplaces that these two agencies have to regulate. I think one of the huge issues is they just don’t have the resources to ensure that they can go after all the bad actors out there. And while many MLM companies have been the brunt of warning letters by the FDA, and we’re seeing a lot of activity on the side of the FTC, especially during the pandemic, sending warning letters to MLMs. The problem I think is that there’s just so many bad actors out there. For example, on TINA.org, we have more than 3000 examples of inappropriate income claims by MLMs and we have more than 2000 examples of illegal disease treatment claims made by MLMs on our website.

ASHLEY: And how would someone engage with that? What would they search or is it linked right on the TINA homepage?

BONNIE: So the easiest way to search it would be by company. Generally, what we do at TINA.org when we’re doing an investigation is that we will make a database and we will list every example in our sampling. We like to be very open and honest with what our allegations are based on so all of our evidence is clearly on our site for anybody to view.

JAIME: What’s remarkable about your site is that you can literally spend hours researching, following up on what it is that you’re doing as part of your organization.  And it’s not just providing information to consumers, but the fact that you’re actually pursuing investigations and legal action when it’s warranted.

BONNIE: We have been incredibly successful in getting companies to stop deceptively marketing products and services to consumers, and we’re quite proud of that, and a lot of times it really is a question of naming and shaming. We put it out there for the world to see, and then it’s up to the company to decide how they’re going to react. And nine times out of 10, companies will stop the deceptive advertising or take down posts on, you know, social media and websites.

ASHLEY: Well since you mentioned naming and shaming, which is maybe one of my favorite activities, I would love to talk a little bit about the exact companies that I see and Jaime sees mentioned when it comes to beauty professionals looking for great alternatives and crowdsourcing ideas about is this a good product to get into, and then the reps just kind of come out of the woodwork and say, yes, yes, yes, companies like Monat or Monet, however it’s pronounced. I hear a different one every day, or  something like Deva Curl, things that we know that there are pending class action litigations or that they are identified as MLMs, what should we look out for as kind of the concerned consumer?

BONNIE: No. That’s a great question and I think we’ve touched upon the problem that the regulatory agencies don’t have the resources to really police this industry to the extent that is really warranted. So that means that consumers have the burden of really doing a lot of their own research. A lot of times what we advise at TINA.org is ignore the flashy marketing, the great colors, and everything that’s said on the front of a package, and immediately flip it over, and read the back of the package, because that’s generally where you’re going to find more honesty. But unfortunately, even if you are to do that, a lot of times, the marketing is so ambiguous that you don’t know what the company is representing. For example, terms like clean, natural, those can have very different definitions between a company and a consumer, sustainable, and they’re just not legally defined so it gives companies a lot of wiggle room to determine what they’re going to say with their marketing.

JAIME: Never underestimate the power of smell to market a product.

BONNIE: Indeed, and that’s an issue in of itself, right? Fragrance, you can have a hundred chemicals in fragrance and you have no idea what that is. And the difference between synthetic and natural fragrance, from a chemist point of view, is not very big.

ASHLEY: I’ve always found that fascinating because it’s considered a trade secret, they don’t have to disclose what’s actually in that fragrance. But you’ve brought up one of our favorite topics as well, which is greenwashing. And since Jaime and I are both coming from the nail side of things, we’re both licensed manicurists, we see  a lot of advertising and marketing language around vitamin-infused, 10-, 12-, 15-free when it comes to nail polish, non-toxic, a lot of these buzzwords that clients will repeat to a service provider saying, I want you to use these types of products on me. Do you have any resources that can help maybe one of our listeners arm themselves with some great information to give back to their clients?

BONNIE: A lot of times what we try and do on our website is talk about how this marketing terminology is basically useless. One of my other favorite terms, in addition to those you’ve mentioned, is hypoallergenic, right? Because we’re all different and what one person may be allergic to is very different than somebody else. So how can you ever say that that’s going to fit everybody’s definition kind of thing. So I think what consumers need to know is that these kind of phrases are really there to push product, and that they’re not looking out for the health benefit and welfare of consumers, and that they need to understand that.

JAIME: This may be really specific, but the claim of being cruelty-free, is that defined in the law?

BONNIE: No, it is not defined in the law. That’s an interesting kind of thing. There are a lot of third-party groups that have definitions of what cruelty-free means, but even among those third-party groups like PETA or Leaping Bunny, their definitions on what is cruelty-free are different and the testing regime that they have to be able to put that bunny logo on a product is different. So you really need to examine if your definition of cruelty-free meets one of these other organization’s definition.

JAIME: That brings up the point of these third-party organizations, which are not government agencies, endorsing a product through some sort of certification. And that’s where I get fairly upset about this idea of greenwashing because the consumer doesn’t know any better. They don’t know what the symbols represent or the words mean. So it’s very easy for salons and beauty professionals to just repeat these same claims without realizing that they’re repeating false information.

BONNIE: Oh, you’re absolutely right. I mean we’ve had so many examples of companies from pillows to supplements saying that they’ve got the endorsement of this organization or the approval, and not disclose things like we’re paying to get this stamp put on our marketing, or we own this organization that is endorsing us. There is a huge amount of deception with a lot of these endorsements. That’s a real problem.

ASHLEY: So once one of these claims is brought out to its conclusion, or if you bring something to the attention of a regulator and they determine that yes, a violation has occurred, what does that really mean? Are there consequences or penalties that a company would have to pay or is it just change the packaging quietly and no one will know?

BONNIE: Well, I think it’s actually all of the above. So there have been a multitude of examples from TINA.org’s own work in which a regulator will go after a company for their deceptive marketing or false advertising and the company has a few options. One, they can settle the case, and turn into an agreement that they won’t do that kind of deceptive marketing in the future, and they could be penalized, and we’ve seen that in state cases we’ve done against Gwyneth Paltrow’s Goop or MyPillow. And then there’s other cases where we’ve brought a complaint to the FTC. An example would be Vemma where it’s alleged to be a pyramid scheme, and the company ends up dissolving basically, and having to pay a huge amount to settle the case. But then there are other cases either where there’s no money available to make victims whole, or the agencies decide not to use a monetary penalty or seek restitution, where they will just try and stop the false marketing that’s happening.

JAIME: Are the penalties always civil in nature, or can they be criminal?

BONNIE: It really depends on the actions of the company or individual and the state or federal agency that goes after them. So not many people know this as consumers, but for example, the Federal Trade Commission does not have the authority to penalize companies. They are a statutory agency created by Congress and Congress did not give them that authority. However, they can file suit in conjunction with the DOJ, the Department of Justice who does have a lot more options available to them and there are times when really with frauds, out and out frauds, where there can be significant penalties and even jail time.

ASHLEY: The FTC has sort of met my notice in its attempt to regulate influencer claims, and I’m really kind of fascinated to know how does social media contribute to the larger problem of false advertising ,and how does it make your work more complicated?

BONNIE: So social media influencer marketing has really exploded as social media platforms have exponentially grown, and I think more and more marketing dollars are being shifted  to influencers, and away for more traditional forms of marketing. Why?  Because it really presents consumers with a much more authentic, balanced sort of targeted type of marketing. Those who follow social media influencers really love to get that peek into their lives and they want to emulate those influencers in a lot of ways. So that marketing with people that have influence on consumers is incredibly powerful, effective, and it’s a lot cheaper than television ads. So there’s been a huge explosion in this kind of advertising and it’s impossible to keep up with all the deception on these social media platforms that’s happening by influencers.

ASHLEY: Now I know there’s a lot of super mega influencers who’ve found themselves in a bit of hot water. Does the FTC investigate, to your knowledge, only those super mega influencers, or should somebody with say a few thousand followers ensure that they disclose as well?

BONNIE: The FTC to date has never really gone after an independent influencer on their own. They’ve really focused on the companies that are hiring these influencers, but that said, in some of their actions they’re not just looking at mega influencers, you know. They are and will look at what macro, micro, nano influencers that might pop up in a case and that they have gone after claims with much smaller influencers.

JAIME: Bonnie, would you summarize what it is that influencers are supposed to do when they are receiving compensation for promoting a product?

BONNIE: Sure. So the minute they’re getting compensation, though it doesn’t have to be compensation, there’s other things. If they’re getting something for free or they’re doing it because it’s their husband’s company, whatever it may be, they need to clearly and conspicuously disclose the material connection they have either to the company or to the product or service that they’re endorsing. And the easiest way to really comply with the law at this time is to put #ad at the very beginning of a post or within a video throughout. It really depends on the social media platform. But the ultimate goal and way to ensure that you’re not going to violate the law is to make crystal clear to those watching, listening, reading that what they’re seeing is not organic content and that what they’re seeing is actually marketing or a commercial ad, as you might call it.

ASHLEY: We’ve seen social media platforms step up toward a role that’s more of enforcement even in the last 24 hours and I’m wondering if you’re celebrating the fact that TikTok has banned all MLM content on the platform.

BONNIE: Well, I think it’s an interesting position to take, but to date, it’s been more in words than in deeds. I think that there are still many MLM distributors on TikTok that are making inappropriate income claims and illegal disease treatment claims. And even those that have been reported are not being taken down. So while it’s an interesting step in their terms and conditions, it’s not going to matter much if they don’t follow through.

ASHLEY: That is very good to know because they definitely touted the fact that they took that position, but they haven’t been as vocal about not doing anything about it.    I’m wondering if you’re seeing a larger trend toward other platforms responding in kind and if TINA will have any role in joining that chorus.

BONNIE: You know one thing that’s sort of interesting about our organization is that we’re not anti-business, right? We love a good commercial. And in fact, every Friday we like to put up a commercial someone in our organization has spotted and think is fun or informative. And ads really can be incredibly beneficial, right? They teach us about new products, things we could be interested in, solutions to problems we might have, et cetera. So our focus is not on shutting down any industry per se, but just ensuring that companies and individuals don’t lie to consumers, you know. As crazy as that sounds, that’s something we have to work for. So if MLMs were to completely follow the law, that would be great and we wouldn’t have to spend so much time on that industry. So we don’t really take a position on gagging an industry as much as we do about the content of the marketing.

JAIME: Bonnie, what is the consequence for an individual who is repeating the information that’s presented by the company that they’re participating with? It seems like the consequences will land with the larger fish, in this case the major multimillion, multibillion dollar company, and I’m concerned that individuals will get involved thinking that there’s very little risk to them personally if something goes wrong.

BONNIE: As a practical matter, they’re probably right, but nevertheless, there is exposure that’s possible, and it is not uncommon in the recent past for the FTC not only to go after the company with MLMs, but also top distributors that are making claims.  Additionally, one of the experiences that TINA.org has all the time is that when we will put up a database of inappropriate claims, the companies will immediately go after the distributors for those inappropriate claims because the last thing they want is to get on our radar or any other state or federal agency’s radar. So they are pretty quick to slap down distributors that are going rogue when it comes to marketing claims.

JAIME: I’d like to think that just in terms of our own professional credibility that we wouldn’t want to align ourselves with companies that act out in this way.

BONNIE: Right. I think one of the problems is if we’re speaking specifically about MLM companies is that they target really desperate people, right? Especially during this pandemic, people that have lost jobs or people with health issues and those susceptible populations really want to believe the deceptive marketing they’re hearing. They really want to believe that this is going to be the answer to their prayers, that it’s going to give them the money to put food on their table and a roof over their head, or that it’s going to treat, cure, mitigate the health problems that they’re having. And when that happens, these victims end up really parroting what they’re being taught which is to market the product and the business deceptively.

JAIME: I can’t believe I’m saying this, but setting aside the coronavirus pandemic, what other issues of equity do you find in false advertising? Does this tend to run through different communities based on culture or socioeconomic status or is there any other thread that you can see where certain companies market?

BONNIE: You know that’s a really interesting question because if anything were to bring the world together, it would be our susceptibility to fraud, and schemes, and scams. It does not discriminate at all. The schemes, and scams, and frauds can be different, but no one is immune from being scammed. People that do this kind of thing may target different groups depending on what the kind of scam is, but all the data that’s been collected shows that we’re all very susceptible to being scammed.

ASHLEY: When it comes to companies that make claims that are ultimately subjective, like beauty, something like let’s say, I don’t know, Goop comes to mind, where your mileage may vary therefore, we can’t be held accountable to any claims we’ve made, whether they’re overt or implied.

BONNIE: Right. So now you’re getting into an area of law where companies love to use what’s called the puffery defense. And basically what they’re saying is, oh, you know, people know that when we say it’s clean beauty or, you know, natural that, that’s just a generalized term that no one would believe has any specific factors or variables. And so the example you used would be a perfect example of puffery. So the issue is for these companies and consumers, where is that line drawn? Where is the line between, of course, a consumer’s going to believe you’re just exaggerating and that you’re making it up and a provable fact. And when they get closer to that, it should be able to be proved, that’s where they get into trouble. Reduces wrinkles versus reduces the appearance of wrinkles, with the first one being something you cannot say and the second one being permissible.

ASHLEY: Following up on that, using that very specific language to skirt the line of permissibility, how does something like clinically proven figure in?

BONNIE: Oh, that’s one where we spend a lot of time. That is a hot item in marketing right now, the clinically proven and believe me, how do we figure out it’s not clinically proven? We have to read all the studies that companies love to tout and they’ll put out 40 studies. Why? Because they know consumers aren’t going to read them. And it’s a real, huge issue that, that we’re seeing a lot of usage these days, you know. I, I can think of Neuriva brain supplement that’s marketing heavily on TV now says it’s clinically proven. When we looked at all the studies, they all said more studies were needed, that they hadn’t definitively proved what the company was asserting. So that’s a huge issue for consumers because how are we supposed to know when a company is lying to us when they say clinically proven? I mean one of the issues is that the study that they’re referring to done on the specific product, or are they taking ingredients here and there and throwing up a whole bunch of studies on that specific ingredient within a product, and then just slapping it up there to say clinically proven. If they don’t have a study on that specific problem, that’s a huge red flag that they probably don’t have much going for them.

JAIME: What does it take to actually bring your attention to a company? How does someone make a tip?

BONNIE: We try and make it as easy as possible. You can contact us through forms on our website. We get a lot of tips through social media on Twitter, and you can mail us a complaint. Any way you can think of, we’ve basically got an avenue for someone to give us a tip.

JAIME: Is there a certain threshold of complaints that you need to receive before you’ll pursue?

BONNIE: No, not at all. I mean we are a small organization so unfortunately we can’t pursue every tip we get, but we really do try and get to as many as we can. We will do our own investigation to confirm whatever the allegation or tip says. And then to our best ability, at a minimum, we try to alert other consumers to the issue that’s been raised.

JAIME: Bonnie, let me ask you. Now, of course, complaining or submitting a tip to your organization is not the same thing as submitting a tip or a complaint to a government organization. Can you give us some information about what that process is?

BONNIE: On our website, we have links to allow consumers to complain to just about anyone that’s available on a subject matter, from state to federal regulators. And we also have on our forms, a question for consumers if we can share their information with state or federal regulators. So if a consumer does say yes to that, a lot of times we will submit the complaint directly to the Federal Trade Commission through their consumer  sentinel network. But I would highly recommend that consumers complain to state and federal regulators because it absolutely makes a difference in where they direct their resources and what companies they go after. So you can have an impact and you can make a difference by doing that.

ASHLEY: Where can we find Truth In Advertising on social media to follow along with the work that you’re doing?

BONNIE: The easiest way is probably to go to TINA.org and then you will be able to link right to our Facebook, Twitter, or Instagram accounts.

JAIME: Do you also provide a newsletter to subscribers?

BONNIE: We absolutely do. Every other week, we send out a newsletter to people with tips letting people know about current scams and the like.

ASHLEY: Well this has been incredibly enlightening. I wish we could speak for several more hours because this is something that’s personally very interesting to me, but also  I think we operate in a space that is set up perfectly to fall victim to some of these claims and scams. So I just want to thank you so much for your time today and helping us understand more about the work you do and how we can be more vigilant.

JAIME: We hope this’ll be the first of many opportunities to do that.

BONNIE: Oh, absolutely my pleasure. I really appreciate you guys taking the time to delve into these issues. I think they’re quite important.

JAIME: If you’re enjoying Outgrowth, please leave us a review on Apple podcasts with one click. Just visit bit.ly/outgrowthpodcast.

ASHLEY: As always, you can follow us and comment on recent episodes on Instagram at @outgrowthpodcast.

JAIME: Until next time.

ASHLEY: Be smart.

JAIME: Be safe.

ASHLEY: Bye.