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Background on Referral-Based Marketing
(RBM) law
During historic litigation from 1974 – 1979, Amway Corporation prevailed against the FTC and established the Referral-based Marketing, Referral-Based Marketing and Direct Sales industry as a legitimate channel of distribution. The decision produced the “Amway Safeguards Rule”, which details a comprehensive set of legal standards to determine the legitimacy of a RBM (see list below). Krystal Planet has met and/or exceeded every item on this list: |
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Legal Qualifications for RBM |
Guideline Met? |
Comments |
| Referral-Based Marketing companies must be real sales organizations that market real products to consumers. |
Yes |
Krystal Planet Corporation (KP) markets tradable renewable certificates (TRCs) and future TRCs that are certified by a 3rd party independent auditing firm. Additionally, there are many competing companies offering similar products to consumers which have passed FTC inspection. |
| Products sold must have a “real world” marketplace and realistic and intrinsic value measured by the price-quality relationship. |
Yes |
KP sells products that are competitively priced with other sellers of TRCs. In addition to competitive pricing, KP offers consumers more value with the gift program and a tax deduction may be available (if the customer elects to donate TRCs to a non-profit).
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| Product prices should be competitive and not inflated. |
Yes |
KP’s TRCs are actually priced lower than most competitors after taking into account the value of the gift program and option to receive a charitable tax deduction. |
| Sign up costs should be low, requiring no substantial cash investment.
Sales kits should be sold near company cost to distributors. |
Yes |
KP has no initial enrollment fee that is required. Many other RBM companies charge $100 to $1,000 or more for initial start-up costs. |
| Distributors who are “business builders” are responsible for providing supervision, sales support, and product training to the downline sales organization. |
Yes |
KP offers brochures and selling tools which Distributors can purchase for a low cost. Distributors are responsible for providing all sales support, supervision and product training for their downline sales organization. |
| Companies should not make any earnings representations unless those claims are based on a track record of sales performance. |
Yes |
KP does not make earnings representations as a part of any official sales literature.
Occasionally, earnings ranges will be provided on conference calls based on actual compensation averages of KP Energy Consultants
(Ecos). |
| Companies should provide an official “Buy Back” policy for unsold, unopened restockable product (can include a restocking fee) |
Yes |
All products are shipped as ordered. There is no need for distributors to hold a product inventory. |
| Compensation plans must not pay commissions to distributors for head-hunting or recruiting. |
Yes |
Commissions and bonuses are based on product sales, not recruiting other distributors.
There are no ‘pyramiding’ bonuses available in the KP Compensation Plan. |
| Compensation plans must not encourage or require mandatory purchases of peripheral/accessory products and services. |
Yes |
There is only one mandatory purchase of an accessory products or service: the Global Business Center. However, KP has been advised by its RBM attorneys that a) the website cost of $20 per month is minimal, b) Ecos can pay for the global business center from commissions by making a few retail sales and/or recruit a few Ecos, and c) providing a full-service website to Ecos with streaming audio & video, regular updates, real time sales tracking, etc. for only $20 per month is a reasonable business expense. |
| Distributors must personally use or sell a minimum of 70% of their previously purchased product inventory before placing an order. |
Yes |
All products are shipped as ordered. There is no need for distributors to hold a product inventory. |
| Commissions are paid solely on products/services purchased or sold by the distributors or for sales to other distributors. |
Yes |
Commissions are paid solely on products/services purchased or sold by the distributors or for sales to other distributors. There are no ‘recruitment bonuses.’ |
| Distributors should emphasize retail sales to
non-participant consumers outside the Referral-Based marketing organization. |
Yes |
We encourage distributors to market our products and services to retail customers outside the Referral-Based marketing organization.
Some Ecos and Planet Partners may enroll retail customers who want to help their communities build renewable energy projects in their areas. |
| Distributors must engage in retail selling and qualify under the “ten retail customer policy” in order to receive commissions and bonuses.
Note: this guideline has been removed, relaxed, or rescinded in most cases. |
Yes |
KP’s compensation plan pays $100 in commissions for every thirty (30) retail customers who subscribe to the FutureWind service at $30 per month (every 300 Eco Points pays $100 in commissions in a 1/3, 2/3 split).
Krystal Planet has numerous retail (non-distributor) customers on FutureWind, Krystal Wind, Krystal Clean Power and other services. Additionally Krystal Planet has several customers that purchase products. |
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ADDITIONAL
INFORMATION:
1) Other legal issues. Krystal Planet has also taken additional measures to ensure full compliance with all known regulatory statutes: a) multiple ‘positions’ in the matrix are not available for sale, at any price; b) becoming a distributor (Eco) or a customer are distinct and separate enrollment processes; and c) retail sales are encouraged.
2)
Is this a pyramid? What matters is not the structure (pyramids are everywhere), but whether the pyramid is legal or not. There are many resources to determine whether a company operates an illegal ‘scheme’ or has a legitimate business. General Motors, the government, the church, and virtually everything else operates in a pyramid structure. Nearly every large organization is structured like a pyramid, since the pyramid is mathematically, socially, and architecturally the strongest structure known to man. GM has one Chairman/CEO, some Board members, some executive management, a few more in upper management, a few more than that in middle management, and so on, down to the workers on the line. Governments have one President, a Cabinet, their senior staff, junior staffers, and soon. The Catholic church has one pope, then Cardinals, Bishops, etc.
What to look for is whether the company actually sells products & services, or if they are only marketing ‘opportunity.’ An illegal scheme may be selling the chance to earn a large payday if you recruit enough others to ‘join’ the organization – but no products or services have been sold to the end user. Krystal Planet is not an illegal pyramid, as our focus is on marketing and selling TRCs (or green tags) and a variety of energy savings and renewable energy products. Each Green Tag has its own serial number (they expire in 18 months from the time they are produced) and cannot be sold more than once. Krystal Planet uses an independent auditing firm to issue an audit report at the end of every calendar year tracking the serial number of every kilowatt hour worth of Green Tags sold by Krystal Planet. This audit statement is generally available by March 31st of the following calendar year and is available upon request. Furthermore, every KP customer receives a monthly statement (electronic or in paper) showing the serial number, kilowatt hours, and source of every Green Tag product sold. Finally, Krystal Planet guarantees in writing (in the terms and conditions) that every FutureWind Green Tag sold will result in 1,000 kWh of ‘green energy’ injected into the national transmission grid, either at one of Krystal Planet’s wind energy facilities or that of a 3rd party wind energy facility if for any reason Krystal Planet does not build enough wind energy facilities quickly enough (see the FutureWind brochure for more information).
3) The Federal Trade Commission (FTC) currently defines pyramid schemes -- and many state laws defines them as -- plans which:
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"concentrate on the commissions you could earn just for recruiting new distributors," and which
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"generally ignore the marketing and selling of products and services."
4)
Additional websites (U.S. government and private) for due diligence are:
www.ftc.gov/bcp/conline/edcams/pyramid
~ www.sec.gov/answers/pyramid.htm
www.usps.com/websites/depart/inspect/pyramid.htm
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