Global “cash back” rewards scheme Lyoness which offers special deals on Apple technology and a range of other products and services has come under the ACCC spotlight “for operating a pyramid selling scheme and engaging in referral selling” the first time, despite investigations by regulators in other countries.
According to the US Lyoness corporate site, Lyoness offers a “global loyalty rewards program dedicated to providing a rewarding and mutually beneficial relationship between their unparalleled community of international shoppers and merchants.”
The description continues, stating: “A free Lyoness membership provides shoppers with exclusive benefits from online shopping, gift card purchases, the Lyoness cash back card and mobile cash back with over 40,000 merchants at more than 250,000 locations!”
Now the ACCC alleges that the local Lyoness operation has operated as a pyramid scheme locally from mid-2011 and continues to operate the scheme, saying that: “Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.”
ACCC Chairman Rod Sims said: “Pyramid schemes are often sophisticated and may be operated under the guise of a legitimate business. Although these schemes can appear to be legitimate, the most significant inducement for new members to get involved is to earn ‘residual’ or ‘passive’ income from new members signing up,” ACCC Chairman Rod Sims said.
“The concern with pyramid schemes is that the financial benefits held out to induce potential members to join up rely substantially on the recruitment of further new members into the scheme. For these schemes to work so that everyone can make a profit, there would need to be an endless supply of new members.”
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“Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity,” Mr Sims said.
The ACCC also alleges that the conduct by Lyoness breached Australian Consumer Law (ACL) prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event, and is seeking declarations, pecuniary penalties, injunctions, an order requiring the Lyoness website to link to the case report and costs.
The first Directions Hearing in these proceedings will be at 9.30am on 16 September, 2014 before Justice Flick in Sydney.
