Australian Organization Accuses Lyoness Of Being A Pyramid Scheme

 

The Australian Competition and Consumer Commission (ACCC) will today begin its case against Lyoness, alleging it is operating a pyramid scheme.

Tony Zeaiter and Paul Maait each invested $3,000 in Lyoness to become premium members of the Australian arm of the company.

When it launched in Australia, they said 'You'll have a minimum of 500 people under you, and you'll get a percentage of whatever these people do', Mr Maait told the ABC.

[They told us] 'You don't have to go out and sell, you don't have to go out and recruit people. We will give you 500 people and, you know, you've really got it made if you get in at this time'.

Mr Maait said both he and Mr Zeaiter were impressed with what they saw at the presentation about the company in Sydney.

There was literally thousands upon thousands of people joining and when they told us like Woolworths were able to get six million people to join their rewards system, it was quite believable that this could actually happen, he said.

But partnerships with major retailers such as Woolworths and Harvey Norman did not eventuate.

They haven't been able to deliver on the promises that they made to people like us in order for us to work hard and put the effort in and get some return on the money that we put in, Mr Maait said.

And I don't know of anyone else who at the time who was involved who has actually made any gain of any kind out of it.

The men hope the ACCC's court action could help them to eventually get their money back.

Company denies wrongdoing

Lyoness is pledging to vigorously defend itself against allegations it is operating as an illegal pyramid scheme. It denies it has broken any Australian laws.

Lyoness rejects allegations raised by the Australian Competition and Consumer Commission, it told the ABC in a statement.

Lyoness is committed to full compliance with the law and to dealing honestly with Australian consumers.

Based in Austria, Lyoness is a shopping network that operates in 46 countries around the world and has more than 40,000 Australian members.

The company encourages people to buy premium memberships, and to introduce family and friends to the company to become members.

They've done wrong by so many people, so many people that were really struggling … They're crooks, they need to be pulled into line.

As well as the pyramid scheme allegations, the ACCC also alleges Lyoness breached laws on referral selling, which is when a someone is induced to buy goods or services on the promise of a future commission.

Both referral selling and operating pyramid schemes breach Australian Consumer Law and carry penalties in the millions of dollars.

Lyoness has also been investigated by regulators in other countries such as Norway, Poland and Sweden.

In its statement of claim, the ACCC names Lyoness Australia as the first respondent, with Lyoness Asia, Lyoness UK and Lyoness International also targeted in the action.

Lyoness said benefits were exclusively generated by shopping activities within the Lyoness community.

Members receive benefits when they shop, whether they introduce other members or not, the company said.

Lyoness members may introduce members and receive benefits when the new member shops in the Lyoness community, but no benefits come from the introduction alone, the company said.

Daily business is not affected. This court action has no effect on Lyoness members, loyalty merchants or staff, and Lyoness may be contacted by them in the usual way, it said.

Since the proceedings are before the court, Lyoness will make no further comment to media.

More Australian members not happy

Australian businessman Grant Powell bought a premium membership for himself and two others, and invested in the company to help start the business in Asia and the Middle East.

He said that investment has not paid off.

The message for consumers is: if you can't see where the money is coming from, if it's reliant on referrals to get you your payday, well then be very, very wary.

Tom Godfrey from consumer group Choice

They've done wrong by so many people, so many people that were really struggling and really hoped it would ease their debt burden, they've just lost more money, he told the ABC.

They're crooks, they need to be pulled into line.

Mr Powell said he tried complaining to the company, without success.

Knowing what I know now and looking back it was, I think that it was definitely a pyramid scheme, he said.

Mr Powell also hoped the court case would help him get his money back.

Consumer group warns about 'referral selling'

Tom Godfrey from consumer group Choice said people should be wary of any business that relies on so-called referral selling.

I think it's deeply concerning that there's a company out there that's relying on individuals to essentially enter a scheme, to drive money into a scheme to reward people at the top of what some are alleging is a pyramid, Mr Godfrey said.

Referral selling is where you as an individual get money from other people signing up to a scheme. Basically, no products or services are sold – it's literally about pouring more people in.

The message for consumers is: if you can't see where the money is coming from, if it's reliant on referrals to get you your payday, well then be very, very wary.

There are lots of different models out there and some of these are quite complex.

I think as a consumer if you cannot work out where the money is coming from, where the goods and services are being sold and relying on referral income, then be deeply worried about it and certainly ask questions.

 

Originally reported by: ABC