By Robert FitzPatrick of Pyramid Scheme Alert
In a feature report, a major metropolitan newspaper, the Atlanta Journal-Constitution, examined the MLM scheme, Stream Energy/Ignite, focusing on the question of whether the company is operating a disguised pyramid scheme. Stream is a reseller of utility services, gas and electricity, and operates in several states. Ignite is the multi-level marketing sales division.
The company uses a pyramid pay plan to enroll salespeople, each of which pays several hundred dollars to join the plan and then an additional monthly charge to participate. The newspaper asked Pyramid Scheme Alert president, Robert FitzPatrick, to analyze the company’s payout disclosure. The analysis revealed that less than 2% of Ignite salespeople make any profit. Stream Energy/Ignite is the subject of a class action lawsuit brought by consumers claiming the company operates a pyramid scheme.
Stream officials told the newspaper that it has 400,000 customers and 172,000 salespeople, an apparent ratio of less than two retail customers per salesperson. The company did not divulge exactly how many of the salespeople are also “customers”.
To gain commissions from “downline” purchases and sales each salesperson is required under the pay plan to have four customers, (called Energy Accounts). However, in order to qualify for rewards, the plan allows the new recruits to count their own personal purchases as two retail sales. Personal purchases, therefore, become an additional investment made by new recruits to get in on the recruitment-related rewards.
The analysis also showed that less than 2% at the top of the Stream/Ignite sales pyramid received 55% of all commissions. The article noted that the Governor’s Office of Consumer Protection… “will investigate the matter again, due to issues raised by the AJC (Atlanta Journal-Constitution).”