The Polish business and law journal GAZETA PRAWNA published an article on the UOKiK decree on 12 February 2020.
The loyalty programme as run in forty-seven countries has turned out to be a poor investment in Poland, according to the President of Poland’s Office for Competition and Consumer Protection (UOKiK) in his conclusion.
Proceedings (80 pages) against Lyoness that began in 2013 came to a conclusion on 30 December in 2019 with the UOKiK president’s decree, ending with a statement that the Lyoness Loyalty Programme was de facto based on recruiting new members into the Lyconet/Lyoness scheme, thus undermining the collective interests of Polish consumers. Briefly: Lyoness was found to be a pyramid scheme with earnings to be made solely by recruiting new members into the Lyconet scheme. Dorota Karczewska, legal consultant and lawyer at the WKB Wierciński Kwieciński law firm, recommended that the Lyoness case be referred to law enforcement agencies.
The decree includes an order to reimburse advances already paid by consumers for vouchers or gift cards from Lyoness Europe AG within four weeks after the decree comes into force unless these advances have already been exchanged for vouchers or gift cards.
The UOKiK decree states the following: “The business activities of the business operator are focused on promoting the structure of the Lyoness Cashback scheme in such a way as to recruit members into the Lyconet sales structure. Members may have been able to participate to an insignificant degree and earn limited commission by recruiting a certain number of additional Cashback members into the Lyoness scheme, but were only able to make substantial earnings once the recruited Cashback members joined the Lyconet scheme at an entrance fee of €2,400 (discount voucher advance payment) and other charges (advance payments) in order to achieve premium marketer status.
“The case against Lyoness was extremely complex. Identifying the actual working mechanism of the pyramid scheme proved difficult for the Office, which led to a very long and drawn-out investigation. Lyoness has also continually changed its corporate name and respective owners,” adds Dorota Karczewska, legal consultant and lawyer at WKB Wierciński Kwieciński. Former vice-president of the Office of Competition and Consumer Protection Baehr, then still an office admin, filed an application for declaration as early as in 2017 to rule that Lyoness was a pyramid scheme (“New priority of the Office of Competition and Consumer Protection: Combating pyramid schemes,” DGP of 11 May 2017). According to Baehr, this decree should only be one element of state action in the Lyoness pyramid scheme matter: “We need the law enforcement agencies to respond.”
Italy has ruled against the business practices of Lyoness, and Norway has prohibited them. Some national jurisdictions have found, inter alia, the terms and conditions to be so complex and opaque (presumably by design) as to conceal any potential legal infractions from the authorities on initial review.
Network Magazine Editor-in-Chief Maciej Maciejewski has mixed feelings. Maciejewski was one of the first in Poland to question the Lyoness business model.
“I’m pleased that the efforts of the Office and of investigative journalists have borne fruit after so many years. It’s a shame it took so long. This shows that UOKiK doesn’t have enough room for manoeuvre in analysing pyramid schemes. It took a while for financial professionals to follow up on suspicions that Lyoness/Lyconet is a pyramid scheme. Law enforcement agencies should conduct a search on the company premises, and confiscate and examine their computers. Meanwhile, the tools they had available only allowed UOKiK to play cat and mouse with Lyoness,” according to Maciejewski.
Lyoness/myWorld will of course trivialise and play down this decision and present it as insignificant nonsense towards its members while also opening itself to further official action as we have seen in Norway and portraying itself as a bona fide company using sponsoring campaigns in the sports industry to uphold and cash in on the illusions of its members.