Source Images: Riegler & Partner ; BE Conflict Management
The judge Mathilde Beranek from the Commercial Court in Vienna, Legal Department 58.1 Vienna, convicted Lyoness as a snowball system and declared the company’s General T&Cs to be null and void (Case No. 581 Cg 44/16y-11).
The Austrian Supreme Court’s verdict of 18 May 2017 was already reconsidered during the first proceedings.
Among other decisions, the Commercial Court in Vienna stated the following:
Ultimately, the claim is legitimate notwithstanding the negation of the plaintiff’s status as a consumer. The clauses 13.2 and 13.3 of the General T&Cs, as well as the clauses 8.3 and 8.4 of the Supplementary T&Cs are null and void, separately, as well as in combination, because they limit the customer’s right to a refund of their “down payments/instalments” based on no factual grounds and on reasons which are largely at the discretion of the defendant. Thus, the cancellation conditions are deemed to be not only opaque according to § 6(3) KSchG (10 Ob 45/16i), but also grossly prejudicial.
Even if the point raised by Lyoness that the conditions refer solely to entrepreneurs was accurate, the General T&Cs would nevertheless be null and void due to the violation of § 879(3) ABGB.
The Lyoness General T&Cs from the past have been declared null and void by a court ruling, but also the company’s current General T&Cs have been classified as being immoral. Read more
The cooperation between the Austrian Golf Association and Lyoness no longer exists, as confirmed to us in writing by the Secretary General, Mr. Robert Fiegl.
In March 2015, Lyoness announced a long-lasting and groundbreaking partnership with the Austrian Golf Association and its 100,000 members. However, after only one year the “long-lasting” partnership had come to an end! It seems that the Austrian Golf Association soon noticed that there was nothing to be gained from a cooperation with Lyoness, nor were they a reliable partner. The Austrian Golf Association’s cashback card (a membership card functioning also as a Lyoness cashback card) was terminated approximately 1 year ago. Based on experience, it is questionable if the 100,000 members of the Austrian Golf Association have been deducted from the “whitewashed number of members”.
To what extent have the final convictions in Austria and Switzerland, as well as the pending Cologne public lawsuit influenced the decision makers at the Austrian Golf Association? I shall investigate further.
In any case, it is evident that Lyoness has made a convenient habit of withholding such information. Therefore, it seems safe to assume that Lyoness regularly takes on new (cooperation) partners, then, shortly after, the cooperation is quietly ended, without the knowledge of Lyoness members.
Journalists have treated Lyoness (now “Cashback World”) for a long time as a “pariah” and their latest press release has once again validated this deserved reputation. But have a look for yourself!
Press release from the 31st of May 2015
The way Lyoness expresses itself in its latest press release is of almost unsurpassable arrogance. Now, Lyoness wants to prove that their actions are legally sound by ignoring the judgement pronounced by an ordinary court. Their renaming as “Cashback World” doesn’t change a thing. The CEO Adolf Weisskopf is aware that some members have been waiting for almost 10 years for the company to function properly, but so far only the managers are making any money from it.
Regardless of any sugarcoating, the fact remains that Lyoness has been convicted as a “snowball system” by a final judgement. In the case of Lyoness, the Austrian legal system has failed completely, it is tempting to speak of “Nigerian conditions” or a “judicial banana republic”.
The Supreme Court in Vienna has rejected the appeal
On the 18th of May 2017, the Austrian Supreme Court in Vienna delivered a long overdue, 53-pages-long verdict (Verdict Supreme Court General T&Cs, Ref. no. 10 Ob 45/16i) regarding the General T&Cs of Lyoness and rejecting the appeal made by Lyoness. The verdict, which had been stalled by Lyoness for a long time, sends out a strong signal. Apart from the fact that Lyoness has already been found guilty by a final judgement of being a snowball system, the court of final appeal has decided that all contracts/General T&Cs from 2007, 2009 and 2012 by and with Lyoness are “null and void”.
In this blog entry, I will publish the latest press release by Lyoness, in which Lyoness comments on the verdict by the Austrian Supreme Court dealing with the company’s General Terms and Conditions. I will voice an opposing point of view, uncover any lies within the press release and will explain why many of the statements provided by Lyoness are false (my comments/adjustments are in red).
The verdict, comprising 53 pages, is clear. Lyoness must have been very concerned since the suit in question was filed, as it has far more members who are subject to the old Terms and Conditions than it would like to admit. Tens of thousands of its members have not switched to the new General T&Cs. The present final judgement by the Austrian Supreme Court is in line with a large number of civil judgements and it refers to all members (and not only to entrepreneurs), considering the Supreme Court’s explicit clarification that no distinction is to be made between alleged entrepreneurs and consumers. Lyoness disagrees with this last point!
LYONESS PRESS RELEASE:
LYONESS: THE SUPREME COURT’S DECISION (“DECISION ON CLAUSES”) RELATES TO CLAUSES OF THE TERMS AND CONDITIONS WHICH ARE NO LONGER BEING USED.
Lyoness accepts the verdict from July. The clauses have not been used since 2014. Lyoness will deal directly with any customer claims.
It is disconcerting that they are referring to the “July” verdict. It seems that either they haven’t read the verdict or they don’t have it at hand, as the sentence was pronounced on the 14th of May 2017.
Graz (OTS) – The Supreme Court’s decision regarding the legitimacy of clauses of Lyoness’ General Terms and Conditions refers to clauses which have not been used since 2014. The Supreme Court is therefore only assessing clauses which are no longer part of the current Terms and Conditions. Moreover, 60 out of the 61 clauses which were at that time subject to complaints made by the Austrian Consumers Information Association (VKI) applied only to entrepreneurs. Due to restructuring measures, since 2014 these entrepreneurs have been part of a separate business segment with its own contractual arrangements. Only one of the clauses which were declared unlawful, referred to members of the purchasing group. That clause has also been invalid since 2014.
It is ABSOLUTELY INCORRECT that other than one exception, all clauses refer only to “entrepreneurs”. This was explicitly stated by the Supreme Court in its verdict.
Obviously, the verdict applies mainly to the customer loyalty program and the purchasing group, because tens of thousands of members are still subject to the old General T&Cs. Lyconet did not even exist back then and even the General T&Cs from 2014 have not been accepted by everyone.
Customer claims will be dealt with directly. (Class) actions are not necessary according to Lyoness, because the company will deal with any customer claims directly as it has done in the past. Lyoness suggests to directly contact firstname.lastname@example.org for any requests, so that they can help their customers fast and in an unbureaucratic way.
Lyoness is mocking its members by trying to portray lawsuits as being unnecessary, because of Lyoness’ supposed gestures of goodwill. So far, a lawsuit has always been necessary with them and one thing is for sure, the lawyers of Lyoness do not shy away from lying in court. Moreover, even signatures have been faked by Lyoness members (as was proven in a recent case).
The Supreme Court’s verdict does not concern the purchasing group or the customer loyalty program. The cross-sector and cross-border cashback and customer loyalty program is not affected by this verdict. Our approximately 7 million members can therefore continue to benefit from purchasing advantages at around 75,000 partner companies in 47 different countries.
This verdict concerns ALL members!
And what about the vendors? The Supreme Court’s verdict is also interesting from that perspective and should be brought to light and commented on by the media. Especially in the years 2011/12/13 tremendous amounts of money were made at Lyoness by selling their country and business packages. At that time, there were different vendors covering various markets and offering the possibility to pay by cashback card and not only using gift vouchers. In Austria, among those accepting the CBC there were some renowned companies. Those vendors had to pay per CBC transaction 1.5 – 15% (depending on the industry) to Lyoness.
Lyoness is a customer loyalty program and not a pyramid scheme. Already in 2016, the Higher Regional Court of Vienna made it clear that Lyoness is not a pyramid scheme according to § 168a of the Austrian Criminal Code. Consequently, all investigations concerning this matter were stopped.
It is IMPERATIVE to clarify that Lyoness has been found guilty several times of being a snowball system, which is equally illegal. Lyoness IS a snowball system and not only due to their alleged sales and distribution activities.
All loyalty programmes (e.g. Miles&More) have to make financial provisions for non-monetary benefits like collected points or frequent flyer miles, as consumers can decide to redeem them at any point. As an example, Lufthansa has to set up millions on its balance sheet for its high-status miles-club members’ non-expiring frequent flyer miles.
Depending on the marge of the distributor, Lyoness promised its members vouchers up to a certain percentage of the invested sum after making down payments of EUR 2,000. The resulting entitlements for those EUR 2,000 payments make out at least 10% of the payed sum. These should have been financially provided for, even when they haven´t been redeemed. Considering Lyoness’ promise that all would be easy, as everyone would shop, it should’ve counted on a big share of the prepaid vouchers being actually required. This means that millions in vouchers or funds should’ve been set up for this. The same way, the involved distributors should´ve set up voucher reserves to be able to deliver them in cases of full payments. None of this seems to have been taken care of.
Allegedly, the Austrian fiscal authority only shows an interest in operating business activities in Austrian territory involving Austrian companies. Therefore, it suited Lyoness well to close the contracts with consumers and members through a Swiss company. The Swiss members, on the other hand, made the deal with the company Lyoness-Management GmbH, located in Graz (!!) This was never questioned, although the actual recruitment of Austrian members was done in Austria, the recruited distributors were approached from Austria, the vouchers on the orders were from Austrian companies and all connected advertising measures and materials were produced in Austria. Using a Swiss contract partner without operational offices in Buchs (no proof of actuality!), who wasn’t involved operationally, should be fiscally relevant. (The same applies to any other country)
We will see how the remaining voucher partners and the financial police react.
The court has made a very clear final decision in the case (case file 31 C 651/16z 11) which will surely apply to all damaged parties: They acted as consumers and never stood a chance of obtaining the advantages promised without recruiting new members.
The court’s reasoning shows a comprehensive view of what happened. Several crucial aspects that are mentioned in the reasoning should be shown in context and put together, in order to clarify the nature of the advertised “shopping community” and the “pyramid scheme” or MLM-System behind it.
The highlighted business model, based on down payments on voucher orders and on the necessity to recruit new members as fundament of the pyramid scheme, was defined as unlawful by the court.
Lyoness pretended that the business model “customer card + Cashback” was all about “shopping”. In fact, there was no significant turnover based on Cashback, but only on the vouchers themselves. This is actually a complicated and cumbersome way of payment for consumers, who have to pick it up personally at a Lyoness’ point of sale. It was much easier to “virtually” sell vouchers through the mentioned “down payments” of EUR 2,000 and grant the right to vouchers, summing up to EUR 20,000-100,000 and more, in cases where the paying member covers the difference, makes a purchase or recruits new paying members.
Lyoness took advantage of renown brands for all down payments, as well as for “country and business packages”. The brand’s reputation was used to improve the image and credibility of the system (as for sure no one would’ve trusted or made down payments for “Lyoness vouchers” only). Even today, these brands are perhaps not aware that their brands/vouchers were named and consigned on the “order contracts”. This was also done abroad, where it wasn´t possible to pay with them. We are in the process of informing the concerned distributors that their credibility and image have been illegally misused to generate a larger turnover through down payments. From this perspective, the so called “voucher partners” would be directly linked to the billions in generated Lyoness turnover and the resulting damages.
How do this companies asses the situation, as their vouchers are now part of a pyramid scheme and thousands of consumers have made down payments on them? Will companies such as Otto, McDonalds, OMV, etc. manage to keep out of the legal responsibility of having perhaps significantly contributed to damage members, as thousands of their vouchers were set up to back up down payments?
As expected, Lyoness lodged an appeal against Salzburg District Court´s decision (31 C 651/16z – 11).
The court of Appeal at the Regional Court Salzburg has now dismissed the appeal (22 R 351/16w) and confirmed that Lyoness is indeed a pyramid scheme.
A further appeal at the Austrian Supreme Court (OGH) is not allowed.