Lyoness declared “Pyramid Scheme” on judgement (case file 21 C 311/15m) from 09/08/2016!

An additional judgement (case file 21 C 311/15m) of the Vienna District Court for Commercial Matters from 09/08/2016 confirms two previous judgements and consolidates previous rulings that define Lyoness as a pyramid scheme. We expect Lyoness to try to play for time and drag on the process with appeals.

Definition (in German) on „Annex, l. 14 to art. 2, UWG (Unfair Competition Law)„:

Extract of the judgement (pages 12 & 13):

According to l. 14 of the annex to art. 2 of the UWG, the establishment, operation or promotion of a pyramid scheme to promote sales that offers consumers a remuneration based mainly on the introduction of new consumers to such a system and less on the sale or consumption of products constitutes a deceptive business practice. The offense described on l. 14 goes further than the one on art. 27 of the UWG and comprises contract systems where the customer has agreed to an absolute paying obligation but the company only to a limited obligation to fulfill the contract. It suffices that the customer has the prospect of obtaining a (factual or alleged) remuneration. Also cases where the company has promised the customer a return and an additional bonus fall into this definition. This bonus doesn’t have to depend solely on the introduction of new customers. It suffices if the customer´s rendered service (if applicable, parallel to the requirement to sell or consume products) is mainly the introduction of new customers (Kucsko in Wiebe/Kodek, UWG2 art. 27 margin note 22). A per se prohibition applies if the remuneration to be obtained is mainly obtained through the introduction of new customers. This is the case if the recruitment of new customers and not the attainable margin is at the forefront…

… In Reality the participation in the system becomes profitable in the first place through the “enhanced customer benefits” within the meaning of P. 7 of the ZAGB (General and Payment Terms and Conditions), which depends mainly on the plaintiff recruiting new customers. The customer´s entitlement to (the actually profitable) loyalty and partner bonuses (up to 18.75% share of loyalty bonuses of recruited customers) arises first if the members recruited directly by the old member form “units” (through purchases or capital investment) or if the new members purchase loyalty bonuses themselves (pt. 7.2 & 7.6 of the ZAGB). From an economic point of view, the remuneration is mainly obtained through the recruitment of new members and their capital transfers to the defendant. In whole, this is therefore a deceptive business practice within the meaning of l. 14 of the Annex to art. 2 of the UWG. The signed contracts are therefore ineffective within the meaning of art. 879 AGBG (Austrian General Civil Code), which is why the plaintiff …

(as things stand today, this judgement will acquire legal force on 10/08/2016!)