More pyramid schemes for you. The US's Federal Trade Commission has asked a federal court to close down an interesting digital music service called BurnLounge because it claims the company is operating what amounts to a pyramid scheme, and that a large number of consumers who get involved in the venture are likely to lose out.
BurnLounge is a scheme that allows music fans to sell music from their favourite artists via their own pages on the service's platform, and to earn a cut on any sales generated from their page. However, in order to do that they must first buy a BurnLounge subscription and, the FTC argue, once signed up subscribers are excessively encouraged to sign up other sellers and, in fact, earn much more from recruiting new sellers than selling music. It is that fact which seemingly has led to the pyramid scheme allegations.
The FTC has filed its complaint against the service in the US District Court For The Central District Of California, and a hearing is due to take place next week. In a statement issued yesterday the Commission said: "The BurnLounge compensation program primarily provides payments to participants for recruiting of new participants, not on the retail sale of products or services, which will result in a substantial percentage of participants losing money. The defendants are operating an illegal pyramid scheme".