A digital music service accused by the U.S. Federal Trade Commission of running an illegal pyramid scheme has changed its business model and has worked out an agreement with the agency, the company said.

BurnLounge Inc. has eliminated the "network marketing" portion of its business that was targeted by the FTC, the company said.

The FTC's complaint accused BurnLounge of making deceptive earnings claims for members who paid between US$29.95 and $429.95 a year for one of the company's product packages. Members were supposed to be paid to sell digital music and movies to others, but the FTC alleged that BurnLounge's compensation program primarily provided payments for the recruiting of new participants, not on the retail sale of products.