It is not the judgement itself that the article focuses on, but the findings and all the concluded proceedings against Lyoness and its successor companies that are increasingly being mentioned in the international media.
Lyoness has always reinvented itself, whether by changing the company names or through numerous company mergers. Also, at renaming its financial products, Lyoness was not lacking creativity.
Lyconet Marketers present the snowball system Lyoness to unsuspecting prospective customers as a presumed transparent and plausible system, but as soon as they invest in it – may it be as a “sponsor” or under another melodious name – there is only one winner left.
The most accurate statement concerning the snowball system Lyoness is noted in the judgement of 4 June 2019: “The final economical effect is always that the lion’s share of the money that was paid in remains with Lyoness and can be posted as income.”
It is no surprise that also in this case, Lyoness brought the case to the Court of Third Instance. So far, they have not won a case. They are playing for time but at the latest when Lyoness/Lyconet is being asked to prove that it is not a snowball system the Lyoness crisis management has to pass. It is a snowball system and has already been judged as such.
Hereinafter the Swiss newspaper article:
(Translation of the press article)
Lyoness based in Buchs has to pay back 13,200 Francs
The County Court of Werdenberg-Sarganserland supports a plaintiff at first instance.
The two holding companies Lyoness Europe AG and Lyoness International AG based in Bahnhofstraße 22, Buchs have internationally been in the headlines for years. They are the holding companies for numerous national companies of the Lyoness group – according to themselves the world’s largest shopping community and active in 47 countries.
Hunting for discounts for purchases at partner companies
For the first time the County Court of Werdenberg-Sarganserland supported a complaint against the subsidiary company Lyoness Suisse GmbH, also based in Buchs. According to the judgement, Lyoness Suisse GmbH has to refund the “vouchers for future purchases” that an owner of a solar technology company had bought for 13,200 Francs. As well as the Canton Court of Zug on 28 February 2017 already did, the County Court concluded that Lyoness is operating an illegal snowball system.
For your understanding: For purchases from partner companies, discounts are credited to the Lyoness customers’ accounts – similar to the Coop Card or the Cumulus Card. Whoever further recruits new customers will also receive discounts for their purchases as well as for purchases of customers that are further recruited by them and so on.
System is not transparent
But not very much can be earned since there is a lack of large partner companies that accept the discount card. Therefore, it is tempting to by “partnerships” or “packages” in order to reach a higher level of the remuneration pyramid. The minimum investment lies at around 3,000 Francs and is open ended. Even for mathematical experts the remuneration system is not transparent, and the promised high earnings cannot be realised. Therefore, the business model was and still is a subject of many legal proceedings in several countries, as the W&O already reported multiple times.
“The money that is paid in stays with the company”
The decision of the County Court of Werdenberg-Sarganserland is one of numerous judgements against the two holding companies Lyoness Europe AG and Lyoness International AG that have been pronounced in the last years. Because by now, the business model has been classified as a snowball system in Austria, Italy, Norway and Switzerland with legally binding judgements. This year in Italy, Lyoness was sentenced to pay a charge of 3.2 million Euro. These decisions now make it possible for many injured parties to claim back their payments. In numerous cases in Austria and Switzerland, Lyoness has been sentenced to refund these purchasing sums, advance payments or “vouchers for future purchases” (Lyoness is known for inventing new names for always the same product). And further complaints are being proceeded. Nor does it change anything that the “discount dealer” has changed the name of the discount card to Cashback Lyconet and later on to Cashback MyWorld.
There are several individual justifications of the County Court of Werdenberg-Sarganserland that are very revealing. With the decision of 4 June 2019, it states: “The final economical effect is always that the lion’s share of the money that was paid in remains with Lyoness and can be posted as income”. It was typical for these financial products that they are “neither completely nor partly paid back in cash”. The mVouchers, so the current name of the “vouchers for future purchases” must not be sold but have to be given away and only to the customers of a Lyconet Marketer.
Additionally, in the case of a determination of the participation in the “Cashback World Programme” (this is another new name for the discount card system), mVouchers become invalid without any compensation, the Viennese Ben Ecker notes. The journalist has specialised in opaque business models. Amongst others, he has been critically monitoring the machinations of the Lyoness empire for years and has been spreading his findings on the internet. In the meanwhile, Lyoness/MyWorld had more and more transferred its recruiting activities to social media like Instagram. Thereby they were focusing on young adults of which some get hopelessly in debt in order to “buy in”, Ben Ecker writes on his website www.benecker.com.
Changing places at the top
The business model also includes that the people at the top of the holding companies change places from time to time. According to the Swiss Commercial Gazette, recently the British Cristopher Thomas is the new Chairman of Lyoness Europe AG and its sister company Lyoness International AG. This year, Lyoness moved its non-profit companies Lyoness Child and Family Found and Lyoness Greenfinity Foundation from Buchs to Graz where Lyoness has been having its operative headquarters since its establishment in 2003. Critics consider these foundations and their unclear cash flows a questionable image instrument.