Lyoness has won a court case against the consumer watchdog, which accused the company of operating a pyramid scheme and engaging in referral selling. The Australian Competition and Consumer Commission initiated the proceedings against the Austrian company in August last year.
In his judgment in the Federal Court today, Justice Flick said there could be “no doubting the fact that inducements were held out to prospective members that they would ultimately receive financial benefits other than the discounts they received on purchases made from loyalty merchants”.
However, the court found that any entitlement was dependent not on the introduction of new members, but from those new members engaging in shopping activity. The ACCC also failed to establish that people could become members only by making down payments.
The court made similar findings about referral selling conduct.
“The manner in which pyramid selling schemes operate … is complex and elusive. The present Lyoness Loyalty Program is no exception,” Justice Flick said.
ACCC chairman Rod Sims said the judgment “echoed some of the concerns the ACCC had with the scheme, in particular its complexity and the inducements that were held to prospective members”.
“The ACCC will continue to investigate schemes that encourage consumers to recruit new members,” he said in a statement.
“We will take action where appropriate to ensure consumers are not drawn into schemes where the financial benefits held out to induce potential members to join up rely substantially on the recruitment of further new members into the scheme.”
After the court action last year a number of Australian members came forward to voice their concerns, with some claiming to have lost thousands of dollars in the scheme.
In a statement, Lyoness said it welcomed the decision. “At every stage we have wholly rejected the allegations raised by the ACCC,” Lyoness Australia managing director James O’Sullivan said.
“As a company Lyoness is committed to compliance with consumer laws in every country we operate in. We look forward to continuing to provide a great shopping and loyalty experience for our members and merchants.”
The ACCC says it is “carefully considering the judgment”. “These are very serious matters and we’ll take all the time we need to consider it properly,” Mr Sims said.
The Lyoness Group is dividing its three business areas into two brands: The Lyoness brand encompasses the shopping community and the loyalty program. Their target groups are consumers who want to save money by shopping with Lyoness (Cashback) and loyalty merchants who want to use an international multi-sector loyalty program.
The Lyconet brand encompasses all network marketing activities of the Lyoness Group. Its target groups are self-employed people and companies. The Lyoness Group is currently active in 46 countries on all continents. Over 4 million members take advantage of the Lyoness benefits at over 40,000 loyalty merchants around the world.
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