Direct Sales and MLM

Is the DOJ Showing Its Hand?

By
Clay Brewer

The FTC is at it again in its enforcement against direct sales, but this time the Department of Justice (DOJ) stepped in on behalf of the United States to receive a “permanent injunction, civil penalties, and other relief” against 3 doTerra International distributors who publicly marketed the idea that certain doTerra essential oil products would assist in preventing COVID and assist in mitigating issues upon contraction of COVID.Generally, the understanding is that regulators bring matters based off of consumer complaints. In some instances, regulators can take action based on the urgings of consumer protection agencies i.e., Truth In Advertising (TINA). This was certainly the case with the FTC’s case against Vemma. It appears to be the case here. TINA particularly took issue with doTerra distributors making disease claims, especially as it relates to COVID-19. The fact that neither the DOJ nor the FTC issued a press release or any information on their own website (that I was able to locate at least) is interesting as well. Anyone who has any experience in the industry understands that the company is held to account NOT ONLY for its own statements but also for the statements made by the distributors in the field. The very WORST possible claim a seller can make about a health product is the product’s ability to help prevent/treat COVID. We would much rather have a client lie about their product’s ability to regrow missing limbs than to make COVID claims. I’d like to again emphasize the fact that these were complaints targeted directly against the distributors in their personal capacities and not (known to the public at least) against doTerra the company. For the cherry on top, these three distributors were all healthcare providers (MD, ACNP, RN). The 3 distributors settled with the DOJ for $15,000 and their consent to certain provisions.

Why Does This Matter?

On one hand, it may not really mean much in the grand scheme of things. On the other, it could show where the government’s agenda lies with the FTC led matters being less politically tasteful or maybe even not a priority. While the FTC is a regulatory agency insulated from direct President intervention, the DOJ is much more of a political entity directly within the Executive branch of government. Did COVID claims by healthcare providers check the priority list at the DOJ to cause them to intervene here? Does the fact that President Biden recently announced that the “public emergency” is set to end have any impact? COVID is still a disease so would not the ordinary routes of enforcement still work? I do not see this case changing much if the COVID-19 Consumer Prevention Act (CCPA) was not used, but I could be missing something. The fact that the distributors settled significantly lower ($15,000) than what a civil penalty could amount to (ordinarily $50,120) is interesting as well. Is it because 5(m)(1)(B) was not satisfied and so 5(m)(1)(A) by nature of the CCPA is needed and, thus, not available after the emergency ends? Nevertheless, the DOJ settled for a slap on the wrist of $15,000 in addition to the distributors agreeing that they wouldn’t do things that are already well known shouldn’t be done. What was the purpose here? Perhaps more information or civil suits will be announced, but, for now, all we can do is speculate and keep our ear to the ground. If it were me as a prosecutor, it seems like nothing is being done here but collecting scalps for a resume. Yes, my cynicism is showing here.

What Happened Procedurally?

So where did the DOJ come from and why? Well, the complaint alleged violations of the FTC Act and the CCPA and any violation of the CCPA, for as long as COVID is deemed a “public emergency,” is considered a rule violation of the FTC Act. As a result, we start there and the term “rule violation” is important here. In short, Section 16(a)(1) of the FTC Act requires the FTC to notify the Attorney General (meaning the DOJ) of any action, specifically those for civil penalties. If, after 45 days, the DOJ does not seek to bring a case, then the FTC is permitted to proceed on its own accord. This denial to intervene is why we ordinarily see cases titled Federal Trade Commission versus X. But because the DOJ is involved, you will notice that these complaints begin with the United States of America versus X. Now, there’s nothing in the text of the complaints that raises any earth-shattering revelations for the industry but assessing this action in the greater context of enforcement pathways and the current political arena does cause one to ponder certain questions that could be of benefit to understand.

What Was Said?

TINA provided in their complaint some of the claims made within the Zoom call the DOJ found problematic: https://truthinadvertising.org/wp-content/uploads/2022/01/1_28_22-complaint-re-doTerra-COVID-19-claims_Redacted.pdf

“A lot of these things that we use in doTerra do both, they will kill the virus, stop viral replication as well as decrease inflammation...”
“...when you have long haul ... continue On Guard soft gels, two of those, very important ... [the ingredients] have had some great studies behind them as far as helping with COVID, post inflammatory response, and viral replication.”
“It’s keeping people out of the hospital and that’s what we’re here to do. We really are here to help save lives, to keep people out of the hospital, and we’re going to give you all the tools that we’ve used here. ...All of us here are doTerra wellness advocates...I really believe that this is a pandemic of nothing more than the untreated... There are proven and effective outpatient treatments and we’re going to share those with you.”

In short, the presence of “studies” means nothing if the government refuses to recognize those studies. When it comes to COVID and other health-related claims, the important factor is that the government recognizes those studies, not simply that studies exist. It’s not an easy thing to wrap your head around, but that’s the nature of the law as it currently sits. Fair, not fair. That’s not the test.

Compliance is Paramount & No One Is Safe

Despite the intricacies of who reported what and why, the core topic of discussion lies within the DOJ’s decision to act upon FTC notification in this particular case and what it can tell us about the priorities in D.C. What we do know, not like any of this has changed though, is that compliance is paramount. It’s somewhat unbelievable how often we are still asked to provide advice on claims, especially those that either explicitly or implicitly mention COVID. Well, the answer remains NO! Second, the somewhat unusual avenue taken in this case in particular is the fact that (at least as of yet) there has been no action taken against doTerra itself and only these three individual distributors. Is it due to their heightened credentials and the claims being made? It would make sense from a logical standpoint, I suppose, to hold health care providers to a higher bar when it comes to health claims. This should put all companies on notice who have health care providers in their field and all distributors who are health care providers. Regardless of that expert’s opinion, there is still a price to pay if the government doesn’t see you as touting their mantra.

More Insight

February 26, 2024
By
Clay Brewer
Thoughts A Brewin' Newsletter 7: The California Risk
Learn more
Learn more
February 8, 2024
By
Clay Brewer
Thoughts A Brewin' Newsletter 6: Culture is Dead
Learn more
Learn more
January 29, 2024
By
Brooks Brasfield
Breaking Bad? Navigating the Corporate Transparency Act for Small Business Owners and Commercial Real Estate Investors
Learn more
Learn more