LuLaRoe: The Leggings MLM That Told Recruits They Could Make $70,000 a Year While Most Participants Lost Money

LuLaRoe LLC, the multilevel marketing company that sells women's clothing — including its signature patterned leggings — through a network of independent consultants, agreed to pay $4.75 million to resolve findings by the state of Washington that it made deceptive income representations to prospective and current consultants, including specific earnings claims implying that consultants could earn $70,000 annually through selling and recruiting, while its own income disclosure documents showed that the median consultant earned a small fraction of that amount before subtracting the cost of required inventory purchases.DOCUMENTED

The case illustrates a recurring pattern in multilevel marketing income claim enforcement: the gap between the earnings claims that companies use to recruit new participants and the actual earnings distributions that the companies' own data reflect. Federal consumer protection enforcement of MLM income claims has focused on this gap — when a company's recruitment marketing features specific income figures or lifestyle representations that the realistic distribution of participant outcomes does not support, those claims mislead prospective participants into making significant financial commitments based on income expectations that the company's own experience contradicts.REVIEWED

The Recruiting Claims

LuLaRoe's consultant recruitment events and materials — including recorded presentations, social media content created by existing consultants, and corporate training materials — featured specific income claims presented as achievable outcomes for the typical new consultant. The $70,000 figure was used in presentations alongside lifestyle imagery suggesting that LuLaRoe income could replace or supplement a professional salary. These representations were not framed as exceptional success stories but as representative of what a motivated consultant could achieve through the company's system.DOCUMENTED

The representations were materially inconsistent with LuLaRoe's own income disclosure statement — a document the company was required by many states to provide to prospective consultants that disclosed the distribution of consultant earnings. The income disclosure showed that the median consultant's annual retail sales revenue was substantially lower than the promoted figures, and that the top of the earnings distribution was concentrated in a small minority of consultants whose results were far from typical. The disclosures also did not account for inventory costs, meaning even the stated sales revenue figures overstated net income.DOCUMENTED

The Inventory Requirement

LuLaRoe consultants were required to purchase minimum quantities of inventory to maintain their active status in the company and to qualify for the purchasing prices that made retailing to customers economically viable. The minimum inventory requirements represented significant upfront financial commitments — in some cases tens of thousands of dollars — before a consultant had established a customer base or demonstrated that they could sell the products in their local market. Consultants who failed to sell their purchased inventory found themselves holding merchandise they could not return for full value, with a financial loss that offset or eliminated any revenue their sales had generated.DOCUMENTED

The combination of inventory requirements and the difficulty of selling fashion items in a market where many neighbors and friends were also LuLaRoe consultants — the market saturation problem inherent in MLM geographic expansion — meant that many consultants experienced net losses on their participation. The Washington attorney general's investigation found that a significant percentage of LuLaRoe consultants in the state had lost money on inventory purchases that they could not sell, and that the income claims in LuLaRoe's recruiting had not adequately prepared them for this financial risk.DOCUMENTED

LuLaRoe's income disclosure showed the median consultant earned under $5,000 in retail sales annually — before subtracting the cost of the inventory those consultants were required to purchase, which in many cases exceeded their sales revenue entirely.

MLM Income Disclosure and Its Limitations

Many states require MLM companies to provide income disclosure statements to prospective consultants showing the distribution of earnings among participants. These disclosures are designed to give prospective participants realistic information about typical outcomes before they commit money to joining. The effectiveness of the disclosure depends on whether it accurately represents the full picture — including costs, not just revenue — and whether it is provided in a context where prospective consultants can evaluate it before signing up rather than after they have already been persuaded through a high-energy recruiting presentation.REVIEWED

Federal and state enforcement of MLM income claims has focused on cases where specific income representations in recruiting materials are materially inconsistent with the outcomes shown in the company's own disclosure data. The standard is whether the claims — taken as a whole, including the specific figures used, the context in which they appear, and the prominence given to caveats about typical outcomes — create a misleading impression about what a typical participant can expect to earn. LuLaRoe's use of a specific $70,000 figure without disclosure of how atypical that outcome was in the context of its own income data was the central misrepresentation the settlement addressed.REVIEWED

Distribution to Former Consultants

The $4.75 million settlement was directed to former LuLaRoe consultants in Washington state who had lost money on unsold inventory purchases during the covered period. The settlement administrator contacted former consultants using records provided by LuLaRoe, and consultants who had documentation of their inventory purchase costs and resale efforts received distributions proportional to their documented losses. Former LuLaRoe consultants in other states who experienced similar losses may have similar claims under their states' consumer protection laws, and should contact their state attorney general's consumer protection division for information about any related enforcement proceedings.DOCUMENTED

The broader MLM income claim enforcement pattern reflects sustained regulatory attention to the gap between what companies tell prospective consultants they can earn and what actual income data shows most participants earn. The FTC has maintained that income claims in MLM recruiting must be substantiated by what typical participants earn — not by what the most successful participants earn — and that companies must disclose that most participants earn little or nothing before recruits commit to purchasing inventory or paying enrollment fees. Prospective MLM recruits who are evaluating an opportunity should request and carefully read the company's income disclosure statement before attending any recruiting event or viewing any promotional material, and should specifically ask what percentage of participants netted any profit after subtracting their inventory and participation costs from their gross sales revenue.

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