MLM Con Artists Steve and Gina Merritt Want to Pass a Law That Would Protect all MLM Con Artists

In August of 2026 a website called “Writethepromise.org” was launched.   The website discusses a proposed law called “The Direct Selling Clarity Act” which, it asserts, will put direct sellers who make earnings claims on “equal footing” with franchise owners, realtors and insurance agents.   The bill would supposedly draw a clear legal line between direct selling and illegal pyramid schemes, and permit direct sellers to “share success stories” with a standardized disclosure.

The text of the bill has not been revealed.   Internal links in the website to “the Act” lead to a “plain language summary,” but the actual text is nowhere to be found.   I asked the website’s automated assistant (“Ask Promise”) for the text of the bill and received several evasive responses but was eventually given the email address for the “Campaign Director.”   I have sent an email to this individual and if I receive a response I will post it here.

I would have no objection to a bill that confirms the Koscot definition of pyramid scheme, or which prohibits deceptive earnings claims by MLM companies and distributors, and requires appropriate disclosures to prospective MLM distributors.   I am, however, very concerned about permitting MLM distributors to make testimonial earnings claims.   It is well established that even where claims of high earnings are literally true they are deceptive when they are atypical and there is information asymmetry between the MLM company and its high level participants on the one hand, and prospective and low level participants on the other.^[1]   The FTC has made very clear that testimonial earnings claims are unlawful under these circumstances.

Who is behind Writethepromise.org?   You might think it would be the Direct Selling Association, which has been active in both Congress and state legislatures in promoting legislation that protects MLM companies for many years.   But the DSA has not publicly said anything about the bill.   Instead, it appears to have been independently developed by Steve and Gina Merritt, two high level distributors for the MLM LifeWave.   Here’s where the plot thickens. 

On April 27, 2026 the Federal Trade Commission announced that it was filing a complaint against Steve and Gina Merritt.   The complaint alleges that the Merritts used deceptive earnings claims to entice prospective distributors to join LifeWave.  The FTC alleged that the Merritts repeatedly claimed people could earn substantial income from selling LifeWave products and recruiting new members.  The FTC provided the following examples in its press release:  

For example, in a video posted to their YouTube page in May 2025 from a recruiting meeting, Gina Merritt said, “We’re going to make you a – can I say buttload – a buttload of money…I cannot wait to help you guys get to the top rank and make $25,000 or more a week.”  Steven Merritt also said at that same meeting, “The money keeps coming, even if you don’t show up, and you can’t stop it. It’s like a spigot of water but a spigot full of $100 bills throwing at you, coming at you. You can’t stop it. Anybody want that?

According to the FTC’s complaint LifeWave’s own income disclosure statements show that most people make little or no money.  In fact, the FTC alleged that according to LifeWave’s 2024 income disclosure statement, 79% of active participants earned nothing in commission payments in 2024, and that, at most, only 0.035% of active participants earned more than $25,000 a week in 2024.

As frequently occurs with this type of case, prior to the filing of the complaint the FTC had negotiated a settlement with the Merritts.   The settlement called for the Court to issue an injunction against the Merritts.  Under this injunction, which the Court issued on April 30, 2026, the Merritts are prohibited from misrepresenting or assisting others in misrepresenting how much money others can earn from various business ventures.  This includes prohibiting them from misrepresenting:

• Expressly or by implication, including through images of homes, vehicles, purchases, or travel, earnings that participants will or are likely to make;
• The amount of earnings that they or other participants have actually earned;
• The reason participants do not earn substantial compensation; and
• Any other fact material to consumers concerning the business venture.

In addition, they are prohibited from making any representation, expressly or by implication, regarding the amount of earnings that a participant can expect to earn unless it is not misleading, they can substantiate in writing the earnings claim when it is made, and they provide evidence upon request to any individual who expresses an interest in becoming a participant.   The Merritts must send a notice to all of their downline distributors notifying them about the FTC’s allegations and the order’s prohibition on their making deceptive and unsubstantiated earning claims, and they must submit compliance reports to the FTC every year for the next 10 years.

Evidently the Merritts feel that they were unfairly singled out by the FTC.   They state that

After more than three decades in the industry, the Federal Trade Commission brought action against [the Merritts] — not over a defective product, not over harm to any customer, but over how they had described their business, the earnings of the people in their organization, and photographs taken in their own home. The same descriptions that had been accepted without question for decades were now called deceptive under a standard they had never been given and could not have read.

The Merritts assert that they are not fighting to “reopen their own case,” but to protect “every honest direct seller in America.”   Their website includes instructions and templates for writing letters to Congress in support of their bill.   Specifically, they want the letters to be directed to Senator Marsha Blackburn (R. Tennessee), Senator Eric Schmitt (R. Missouri) and Representative Richard Hudson (R. North Carolina).   

The Merritts’ argument in favor of their bill boils down to two basic points, both of which are fundamentally flawed.

They first claim that there is something wrong with the FTC making rules about MLM without express authorization from Congress.   For instance, they assert that:

Congress has never once mentioned ‘direct selling’ or ‘multi-level marketing’ in the FTC Act. Every rule enforced against direct sellers was written by the agency itself — never voted on by elected representatives.

This statement is deceptive, in that it implies that that all industries regulated by the Federal Trade Commission are mentioned in the FTC Act.    In fact, there are scores of FTC  regulations that apply to numerous industries and trade practices that are not specifically mentioned in the FTC Act.   These include regulations concerning the sale and marketing of automobiles, alcohol, funeral services, jewelry, home insulation, retail food store advertising, mail, internet or telephone orders, private vocational schools, environmental claims, door-to-door selling, testimonials and endorsements, amplifiers, leather and negative option plans.   There is nothing wrong with this.  Congress has given the FTC the authority to adopt trade regulation rules to protect consumers and businesses from unfair or deceptive practices in trade or commerce.   The FTC must follow a strict set of procedures in order to adopt a trade regulation rule, and Congress retains the authority to modify or eliminate any rule.

There are several FTC rules that are particularly relevant to MLM.  In 1979 the FTC adopted the Franchise Rule, which requires franchisors to provide a detailed set of disclosures to prospective franchisees at least 14 days before they buy a franchise, and which prohibits franchisors from making deceptive earnings claims.   Congress has never enacted a law which defines what a franchise is or what disclosures must be provided.  Congress has the power to change or eliminate the Franchise Rule, but in the 47 years since the rule was adopted it has never done so.

Similarly, in 2012 the FTC adopted the Business Opportunity Rule which requires all sellers of business opportunities (except for multilevel marketers) to provide certain disclosures to prospective business opportunity purchasers at least 7 days before they sign a contract or pay any money, and prohibits business opportunity sellers from making deceptive earnings claims.   Again, Congress itself did not define what a “business opportunity” is or specify what disclosures must be provided, nor has it exercised its power to change or repeal the Business Opportunity Rule.

In 2025 the FTC proposed an Earnings Claim Rule that would prohibit MLM sellers from making deceptive claims concerning the income that participants might earn.   This proposed regulation is much less extensive than either the Franchise Rule or the Business Opportunity Rule because it does not require pre-sale disclosures; it simply requires MLM promoters to refrain from making deceptive earnings claims.   Nevertheless, the powerful MLM lobby argued loudly that this regulation would harm their businesses, but they have never explained why.    Franchisors and Business Opportunity sellers are prohibited from making deceptive earnings claims.   Why shouldn’t MLM sellers be governed by a similar requirement?

The Merritts also claim that the FTC unfairly singles out MLM in restricting the use of testimonial earnings claims.   They argue that:

A franchise owner, a realtor, and an insurance agent can all share their income story freely. A direct seller who speaks the same words faces FTC enforcement action. Same words. Same truth. Different treatment.

This argument is wrong on at least two levels.   First, the Merritts incorrectly compare the situation of a franchise owner selling their own individual franchised business to that of an MLM promoter selling the opportunity to start a new MLM business.    Selling an existing business, including a franchised business such as a McDonald’s restaurant, involves a going concern with a specific location, physical assets and an actual earnings history.   There is nothing wrong with an owner of such a business providing accurate historical financial statements to a prospective purchaser of that business.   This is very different, however, than selling either a new franchise or an MLM opportunity.   In that case there is no actual earnings history, and the use of testimonial earnings claims based on other franchised locations or the experience of high level MLM participants would likely be deceptive.

Second, by “income story” the Merritts mean a testimonial earnings claim, such as when a high level MLM distributor gets up on stage at a convention and brags about the huge checks they receive, or the lifestyle they can afford as a result of participating in an MLM.   This is, of course, exactly the type of conduct which was the basis for the FTC’s complaint against the Merritts.   The FTC has made very clear that such claims, even when they are literally true, can be deceptive when they are atypical or when there is informational asymmetry, which is always the case with MLM.   Moreover, the claim that the FTC treats testimonial earnings claims by MLM sellers differently than other types of business is simply incorrect.

Franchisors, and franchise sellers, are governed by the FTC’s Franchise Rule, which prohibits them from making deceptive earnings claims.    A franchisee, i.e., a franchise owner, who is only selling their own existing outlet, is not governed by the Franchise rule.   But franchisees who are selling franchises other than their own outlets are considered to be “franchise sellers” under the Franchise Rule and are prohibited from making deceptive earnings claims.    

And it is important to note that franchisees, as well as realtors and insurance agents, are subject not only to the FTC Act’s prohibition of unfair or deceptive acts or practices in trade or commerce, but to other laws concerning fraud and deception.   A franchisee, realtor or insurance agent makes a deceptive or fraudulent statement in connection with the sale of their own existing business, or in connection with the sale of a new franchise, license or agency, would be in violation of the FTC’s general prohibition of unfair or deceptive acts or practices.   They would also likely be liable for common law fraud, as well as state laws prohibiting deceptive conduct in trade or commerce.   The distinction the Merritts attempt to draw between MLM and other businesses simply does not exist.

In fact, MLM is not currently subject to the rigorous disclosure regulations that govern both franchising and other business opportunity sellers under the FTC’s Franchise Rule and Business Opportunity Rule.   The true unfairness under current law is that unlike franchising or other business opportunity sellers, MLM sellers are not subject to any pre-sale disclosure requirement, or to any law or regulation specifically prohibiting deceptive earnings claims.  

The Merritts’ “Direct Selling Clarity Act” should be seen for what it is:  An act drafted by MLM con artists designed to protect MLM con artists.

^[1] See Bosley, S. A. (2026).  Information asymmetry in multilevel marketing: can disclosures and disclaimers help?  In Grant-Smith, D. and Gross, C. (Eds.), Critical Perspectives on Multilevel Marketing (pp. 62-78). Edward Elgar.