Burnlounge’s President Responds To FTC Lawsuit

We’ve never been a huge fan of Burnlounge and this week when the Federal Trade Commission asked a court to shut the service down and freeze its assets we thought that our fears had been confirmed. 

In our in-box this morning came this detailed rebuttal from Stephen Murray, co-founder, President of Entertainment and Chief Creative Officer of BurnLounge.  We’re still skeptical, but it seemed worth sharing. In the end the courts will decide.

"Following a hearing on June 8, the Court denied the FTC’s request for a Temporary Restraining Order (TRO). The Court’s denial of the FTC’s request is a significant development. We believe that it supports our contention that BurnLounge has conducted its business lawfully. Nevertheless, we are actively working to understand and address any legitimate issues and concerns that the FTC may have." 

"Our business continues uninterrupted and we will defend ourselves in subsequent court hearings.  Through our revolutionary business model, we will continue to afford our customers the opportunity to allow fans to benefit from doing what comes naturally: recommending their favorite music to family and friends.” (more after the jump)

BurnLounge and FTC

Q. Why is the company under an Federal Trade Commission (FTC) investigation?

On June 6, 2007, the FTC filed a complaint in the U.S. District Court challenging a portion of the company’s business model.  We believe that the complaint does not reflect the reality or substance of our business, and we are working with the government to address their concerns in the hope that this matter will be quickly resolved.

Q. What is the current situation?
Following a hearing on June 8, the Court denied the FTC’s request for a Temporary Restraining Order (TRO). The Court’s denial of the FTC’s request is a significant development. We believe that it supports our contention that BurnLounge has conducted its business lawfully. Nevertheless, we are actively working to understand and address any legitimate issues and concerns that the FTC may have.

Our current business model is based on network marketing. Products are sold through a network of consumers who establish online music stores. While this model has been embraced by many of our retail partners, it has been the source of some criticism. Some other companies using a similar structure have been labeled as “pyramid schemes” and scams. With some companies, this criticism has been fair. That’s why there’s a body of law that exists to regulate this kind of model, to prevent abuse and protect consumers.

Q. Does the company’s business model adhere to the law?

Yes.

Q. How is BurnLounge addressing the situation?

BurnLounge remains committed to strict compliance with all applicable laws and regulations. We honor all obligations made to consumers, retailers, artists, and partners. The company respects the FTC’s interest in enforcing reasonable protection for all individuals; we wouldn’t want it any other way. 

It’s important that people look carefully at our model to fully understand how it works. That includes the regulatory agencies charged with protecting consumers. We’re prepared to continue to participate actively in this inquiry. We are absolutely certain that our model will stand up to the most rigorous scrutiny.

BurnLounge is working with retailers, investors, and partners to ensure that our business continues uninterrupted. The founders of this company are working with the FTC to try and resolve any issues and address any concerns that the FTC has with this industry or our business.

Q. What is the current state of business?

The Company’s business continues uninterrupted, and we will continue to assert our rights and defend ourselves in subsequent Court hearings. Through its unique and revolutionary business model, BurnLounge continues to afford its customers the opportunity to enjoy sharing their tastes in music and films, while providing an avenue for them to express their entrepreneurial talents.

Q.  What is the business model?

BurnLounge has a revolutionary product whose value speaks for itself: software that lets anyone open their own digital download store and connect with friends. A model that allows fans to earn rewards every time they recommend a movie or an album to someone, and in doing so, to become digital retailers. A model that allows our retailers to turn their stores into actual businesses. 

With any revolutionary business model, it takes time to educate both the public and the regulatory bodies about its complexities and its benefits. In fact, most BurnLounge users operate their stores and BurnPages at absolutely no cost. We ask for nothing. Our free business model is based on revenue from music and movie downloads. For users who want more features and products, we offer other fee-based packages with extra products such as BurnLounge Presents, BurnLounge University and BurnLounge EventPass.

Q. What do you expect the outcome of the FTC investigation to be?

We believe that we are operating an innovative business that is legal and compliant with all of the applicable laws and regulations. We believe that a rigorous review of our business model will bear out that contention, and we will continue to participate with the government in that review. If there are changes to our operating structure that are warranted and appropriate, we’ll consider them. In the meantime, we will continue to foster this new marketing opportunity for artists, and continue to allow fans to benefit from doing what comes naturally: recommending their favorite music to family and friends.