Representatives of the European Commission, the Italian, and Romanian governments have achieved an extensive decision at the ECJ!
For many years, the lawyers of Hubert Freidl’s Lyoness have argued that all marketers are independent entrepreneurs and therefore not entitled to a refund.
After hundreds of rulings in Austria, the ECJ (European Court of Justice) has, for the first time in Case C-455/21, with the decision dated June 8th, 2023, sent a clear and international signal!
During the hearing, in addition to the Chamber President himself, three other judges were responsible for the decision.
Written statements were submitted for the formation of the judgment by:
- Representatives of Lyoness Europe AG,
- The Romanian government, represented by E. Gane and L. Liţu as representatives,
- The Italian government, represented by G. Palmieri as a representative, assisted by G. Greco, Avvocato dello Stato, and
- The European Commission, represented by A. Boitos and N. Ruiz García as representatives.
After hearing the Advocate General, the decision was issued.
The judgment of the European Court of Justice (ECJ) – Fifth Chamber – dated June 8th, 2023, clarified significant questions regarding consumer protection and the interpretation of Directive 93/13/EEC. It takes a detailed look at the business practices of Lyoness, also known as Lyconet and myWorld, and its potential classification as a pyramid scheme.
This article aims to explain the Lyoness judgment and its implications for those affected.
What is Directive 93/13/EEC (European Economic Community) – Consumer Protection in the EU?
Directive 93/13/EEC aims to protect consumers from abusive clauses in consumer contracts. It defines a consumer as a natural person acting outside their professional or business activity. A clause that has not been individually negotiated is considered abusive if it creates a significant imbalance in the rights and obligations of the parties to the contract.
In the case of Lyoness, the business model, which includes cashback and network marketing, had been assessed differently in various countries, with classifications as a pyramid scheme also made. However, members of the cashback and network marketing scheme were quickly introduced to other business areas and labeled as “marketers,” implying a form of self-employment.
This case is the basis for the ECJ judgment: Mechanical Engineer vs. Lyoness Europe AG
The plaintiff, a mechanical engineer without commercial or professional business activity, entered into a membership contract with Lyoness Europe. This system offers members discounts and other benefits when shopping with affiliated merchants and allegedly provides passive income. He challenged several clauses of the membership contract as “abusive” and brought the case to court.
The crucial question was: Who is a consumer, and what defines them as such?
The core issue in this case revolves around the question of who qualifies as a “consumer” under the European directive. The plaintiff argued that he was a consumer because he did not engage in commercial or professional activity within the system. Lyoness Europe, on the other hand, argued as usual that the plaintiff engaged in economic activity within the system.
However, the ECJ clarified in favor of the plaintiff:
“Customers of Lyoness are only not considered consumers when their relationship with Lyoness can be attributed to their general commercial or professional activity.”
The Lyoness Judgment: What Was Decided?
The ECJ made the following essential decisions regarding the interpretation of Directive 93/13/EEC and the definition of a “consumer”:
- The decision regarding whether the plaintiff can be considered a “consumer” is admissible.
- Directive 93/13 grants protection to all consumers, regardless of whether the law of a third country applies to the contract.
- The court emphasized that the protection under the directive assumes that the consumer is in a weaker negotiating position compared to the trader.
- Whether a person is considered a “consumer” must be examined by the national court, considering whether the contractual relationship is outside of a commercial or professional activity.
- Finally, the court determined that a person does not lose their status as a “consumer” solely by receiving certain benefits.
What Does the Lyoness Judgment Mean for Those Affected?
The Lyoness judgment has significant implications for those affected and strengthens the allegations brought forward. It further emphasizes consumer protection and makes it clear that a person does not lose their status as a “consumer” solely by receiving benefits. This means that those affected who feel vulnerable in their relationship with Hubert Freidl’s company receive significant legal support. It is important to note that the judgment also has implications for marketers’ ability to reclaim their contributions.
The Lyoness judgment is a crucial milestone in the interpretation of Directive 93/13/EEC and the definition of a “consumer.” It emphasizes consumer protection and is likely to serve as a basis for future judgments. However, it also highlights the importance of those affected seeking information when faced with questions or uncertainties.
Hubert Freidl’s long-standing facade of success has significantly deteriorated since the announcement of his company’s IPO. What he has always needed was “paying consumers” that his lawyers legally classified as “entrepreneurs,” a practice that persisted for far too long due to a slow-moving judiciary.
Our advice to all those affected: Act now!