The Australian Competition and Consumer Commission (ACCC) has instituted proceedings against Lyoness International AG, Lyoness Asia Limited, Lyoness UK Limited and Lyoness Australia Pty Limited (together ‘Lyoness’) for operating a pyramid selling scheme and engaging in referral selling.
Although Lyoness has been investigated by regulators for conduct in other countries, this is the first court action taken against Lyoness alleging that the Lyoness Loyalty Program constitutes a pyramid scheme.
Pyramid schemes involve new participants providing a financial or other benefit to other existing participants in the scheme. New participants are induced to join substantially by the prospect that they will be entitled to benefits relating to the recruitment of further new participants. Pyramid schemes may also offer products or services, but making money out of recruitment is their main aim, and often the only way for a member to recover any money is to convince other people to join up. In contrast, people in legitimate multi-level marketing schemes earn money by selling genuine products to consumers, not from the recruiting process.
The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through