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 “For doing this, the schemer promises the investment club creator a cut of each dollar that club members invest,” says Perlman. “The club creator is also told to teach the investment club members how to start their own clubs, for which they will receive compensation and then pass on compensation to the initial club creator, and so on.”

 Participants paid a subscription fee and were getting paid in points that they could redeem for BurnLounge products. They were also paid bonuses for recruiting new members

 The FTC eventually shut them down, and in 2015 mailed out 52,099 checks worth almost $1.9 million back to consumers who lost money in the scheme.

 Agents were hired by Fortune Hi-Tech Marketing to sell products made by legitimate companies like Dish Network and Frontpoint Home Security, as well as different health and beauty products.

 The problem was that salespeople made more money from their recruiting, while the annual fees they paid helped make the higher-ups rich.

 The company eventually settled a lawsuit with the FTC and paid nearly four hundred thousand people who were scammed a total of more than $5.5 million.

 The Bottom Line

 In the end, pyramid schemes only benefit the people at the top of the pyramid. To avoid potential involvement in any iteration of these schemes, consider this advice: “If an opportunity does not have a product or service and you have to recruit members, consider it a pyramid scheme,” said Files. “If it promised astronomical returns and is not a licensed or registered investment, consider it a Ponzi scheme.”

 What is Utility Warehouse? Is it a power supplier or a discount club? Does it provide broadband or is it a sales opportunity? And most importantly, is it a steal of a deal or are they just out for your wallet? We’re breaking down all the details of Utility Warehouse.

 Utility Warehouse is, among other things, a UK energy supplier. How does Utility Warehouse work? They allow customers to bundle their energy tariffs with other services like Utility Warehouse mobile, broadband and exclusive discounts, all together in one simple bill. They even guarantee that their full bundle of services will provide the lowest price. To get more information on Utility Warehouse’s customer services, see our full review.

 You may or may not have already heard of Utility Warehouse. They do have several high-level celebrity spokespeople like Absolutely Fabulous star Joanna Lumley, Dawn French and Jennifer Saunders, which seem chosen to appeal to the middle-aged crowd. Even with their celebrity partners, Utility Warehouse has generally invested less in national advertising than their competitors, preferring to rely on word of mouth.

 This leads to the more negative coverage that Utility Warehouse has received, which centers around their partnership programme, which could also be called a sales team. Becoming a partner means signing up to try and find new customers and more partners for Utility Warehouse.

 According to promotional materials and a Utility Warehouse contact, successful referrals are rewarded with cash incentives and other rewards. This structure has led to some critics referring to Utility Warehouse’s partner scheme as a pyramid scheme.

 Sales Scheme or Pyramid Scheme?

 Utility Warehouse partners are private individuals who are tasked with recruiting new members, or customers, as well as more partners. Because there is no traditional salary, the way to make money is through customer recruitment and later on by sponsoring other partners.

 To increase their earnings, partners must advance through the Utility Warehouse leadership scheme, which starts out at Distributor and maxes out with National Network Leader. Recruitment incentives increase at every level, and rising through the ranks involves recruiting more customers and “sponsoring” new partners. Because income would vary based on partner’s position in the leadership scheme and achieving monthly sales incentives, it is difficult to calculate potential earnings with any certainty.

 Source: Utility Warehouse

 Partners higher up in the structure have higher incentives and receive a commission on sales made by partners below them. This structure is highly reminiscent of multi-level marketing brands that have been accused of being sophisticated pyramid schemes, such as Herbalife and Amway. Quite tellingly, the company has yet to provide information on how many partners make it to the highest station. Even more tellingly, the graph made by Utility Warehouse to explain the scheme has a distinctly pyramidal shape.

 What is Network Marketing?

 But is Utility Warehouse a pyramid scheme? Their supporters refer to it as a network marketing or multi-level marketing company, but what’s the difference?

 A network marketing company is a company that outsources their sales to individuals who don’t earn a fixed salary or company benefits, their earnings are based on commissions and earning sales or recruitment incentives. Network marketing companies claim to be different from pyramid schemes because their distributors make money through sales, not merely through recruitment.

 Mathematically, only the first members to join and the rare individual with access to a large online or personal network have any chance of making money.

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 Basically, the hallmark of a pyramid scheme is that earnings are primarily earned through recruiting other partners, not through sales. The idea is that you can recruit just five distributors, who then recruit their own five distributors, etc., leaving you at the top of a “pyramid” of money making sales.

 Many critics of network marketing companies have pointed out that while there may be a final product, the profit generated is largely based on recruitment, which would make many network marketing companies defacto pyramid scams.

 Utility Warehouse Partnership: by the Numbers

 Utility Network claims that at the lowest rung of their sales model, commission for recruiting a customer averages at about £20 per customer, and the typical recruitment process should take about an hour. Payment at higher levels depends on the specific structure of the partner’s team and customer base.

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 Recruitment materials have advertised becoming a Utility Warehouse partner resulting in making “thousands a month” recruiting new members and other partners with little training and no experience required.

 Critics have noted that based on the overall number of reported earnings and active partners, the average partner earns only £42 per month. Add that to the fact that partners have an initial fee of £100 just for joining (£50 for Utility Warehouse members), and the potential for profits seem minimal.

 Supporters will note that splitting the average evenly is unrealistic, meaning that a few members are indeed earning considerable incomes as Utility Warehouse partners. Still, anyone thinking of becoming a partner should go in with their eyes open, knowing that the vast majority of partners make far less than the promoted “thousands per month”.

 The Verdict on Utility Warehouse

 It’s worth repeating that the criticism directed at Utility Warehouse concerns their partner sales programme, not issues related to Utility Warehouse’s product offerings for customers.

 When it comes to the partnership scheme, there are two key questions to answer:

 Is it a pyramid scam?

 While some individuals may disagree, the official and legal answer is no. Utility Warehouse’s partner programme is as of now a completely legal network marketing sales scheme.

 Is it a good opportunity?

 You can find more than a few individuals claiming to have achieved success as a Utility Warehouse partner on social media. However, we should keep in mind that tales of success are frequently used as a recruitment tool to grow that same individual’s team and profits. Based on the numbers, it’s clear that your chances of making large sums of money are very low.

 Utility Warehouse Webmail

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 As a way to connect their members and partners, the Utility Warehouse has their own Webmail feature within their “Clubhouse”, the Utility Warehouse online hub that offers discounts to their members.

 Although billed as a free service, the Utility Warehouse webmail login requires already being a Utility Warehouse member, meaning you’ll need to have already signed on to pay for Utility Warehouse’s energy, broadband or other services.

 Utility Warehouse Clubhouse

 If you’re still thinking about becoming a Utility Warehouse partner, one of your selling points will be the Utility Warehouse Clubhouse, their online hub for customer benefits. The majority of benefits come in the form of cashback rates on online purchases from various brands. That means if you purchase products from The Body Shop via the Clubhouse webpage, 4% of your purchase will be discounted from your bill. The Utility Warehouse cashback card is a pay-as-you-go card that offers similar cashback benefits.