Lyoness under preliminary investigation in Italy
In what very well could be an early death-knell for Lyoness, Italian authorities have announced a preliminary investigation into the company.
The Italian Antitrust and Consumer Protection Authority (AGCM) published a bulletin on September 24th.
Details of the regulators investigation into Lyoness feature in the PDF version of the bulletin on page 23.
The AGCM state their investigation has been initiated due to a “large number of complaints” about Lyoness.
Specifically, the AGCM is investigating Lyoness for misleading advertising, unfair commercial practices, contractual violation of consumer rights and the use of discriminating or unfair terms and conditions.
Not surprisingly, the finer details of the AGCM’s investigation sounds like your typical Ponzi pyramid affair.
Lyoness, in the exercise of his own activity of promotion and a system of cashback, has put in place an unfair commercial practice that requires significant amount (of money) for access to the Multi Level Marketing.
(The MLM entry fee) and other significant amounts are presented as “advances” with respect to the cash back future earnings.
The methods for presenting the sales scheme created by Lyoness – and by affiliates promoting it – appear to be potentially based on incomplete representations (that are) not transparent and (create a false impression for) consumers who pay money to enter the System.
(i) the terms and conditions of the (Lyoness) Program presented to consumers, which explain the nature of the commitment that the consumer assumes by signing up for (Lyoness) membership;
(ii) the actual probability of obtaining profits by adhering to the scheme proposed by Lyoness;
(iii) to the normatively provided information. (Ozedit: Not sure what (iii) is supposed to mean)
Lyoness affiliates invest funds in shopping units and then set about recruiting others who do the same.
Once enough new investment has been made, Lyoness take a percentage of it and use it to pay existing affiliates a ROI.
The cashback side of the business is used to justify this baked in Ponzi scheme.
What’s never disclosed to consumers, as AGCM will no doubt find out, is that the length of time and raw dollars required to generate similar income, as opposed to straight investment in units, is not comparable.
Lyoness uses cashback to lure unsuspecting consumers into its Ponzi net.
Once they’ve got shopping units under them, they eventually realize they’re not realistically going to see that money unless they invest and then get others to invest.
The exception is individuals who manage to convince thousands, if not hundreds of thousands of shoppers to sign up under them – typically through large groups.
In the past we’ve seen this shamelessly take place through government councils and sporting clubs.
AGCM’s investigation is significant for Lyoness, as for well over a year now Italy has made up the bulk of new investment into the company.
At the time of publication Alexa cite Italy as providing 46% and 32% of traffic to the Lyoness and Lyconet websites respectively.
Lyoness’ business model typically sees the company focus on migrating to a new market when either recruitment collapses or regulators shut it down.
Victims in existing markets are promised riches if they help recruitment efforts in the chosen new country, which also serves to stop them cooperating with authorities and/or filing complaints against the company.
Unsuspecting consumers are targeted in the new country for a set period of time. If Lyoness fails to take off then a new country is targeted.
If, as in the case of Italy, Lyoness takes off, consumers are milked dry until recruitment dries up or regulators step in.
Wash, rinse and repeat.
As of yet a successor country for Lyoness to pillage if Italian recruitment is shut down hasn’t emerged.
Poland, sitting at 13% of traffic to the Lyconet website, could be a contender but it’s still too early to tell.