History to “Norwegian authority unmasks Lyoness in trial to close down the company”

It is typical for Lyoness to play down in an “initial assessment” the decision by the Norwegian regulatory authority. As a matter of fact, Lyoness has been targeted by the Norwegian regulatory authority already since 2013, which I have also reported on in blog entries of June 6, 2014 on this website.

The Norwegian authority is unmasking Lyoness by making it clear that the shopping community with their Cashback Card is used as a “mask for the acquisition of new marketers” for the Lyconet business, which is Lyoness’ real source of revenues. The revenues from newly acquired “Lyconet marketers” and sales of the Clouds, which used to be country-, business- and premium packages, constitute with a share in revenues of more than 90% Lyoness’ main source of income.

“The competent authority, which can be literally translated as ‘lottery authority’, has announced in publications on January 11, 2017 a formal decision to prohibit any business activities by Lyoness in Norway. The reason is that the authority has concluded that Lyoness is an illegal snowball system and pyramid scheme. Lyoness can avoid this formal decision, which would entail criminal charges, by discontinuing its operations in Norway within four weeks.

In the 16-page publication, which can be retrieved under the following link https://lottstift.no/wp-content/uploads/2018/01/Lyoness-varsel-om-vedtak-med-palegg-om-stans-av-virksomheten-i-Norge-jan2018.pdf (but only in Norwegian), the authority explains that merely less than 10% of Lyoness’ revenues in Norway in 2016 emanated from the sale of goods and services. The lion’s share of revenues was generated by selling shares in “customers clouds” and “discount vouchers”, which participants can supposedly use to take part in future purchases. In fact, payments to members are being financed through the acquisition of new participants for the system. So, it is a classical snowball system and pyramid scheme, which is illegal according to §16 of the Norwegian “Lottery Act”.

Through this decision also Directive 2005/29/EC concerning unfair business-to-consumer commercial practices is implemented, meaning that there is a standardized regulatory framework within the EU and the EEA on this matter (source: attorney Dr. Schöberl/Vienna).

This decision was based on “documents submitted by Lyoness itself”. It will be interesting to observe in what way the Norwegian Lyoness victims will be indemnified.