Lyoness a pyramid scheme in Italy, fined 3.2 million euro
Following a boom in local investor recruitment, Lyoness caught the attention of Italian authorities.
Italy’s Competition Authority (AGCM) announced a preliminary investigation into Lyoness in September 2018.
The investigation concluded in late December, resulting in Lyoness being declared a pyramid scheme.
As per AGCM’s investigation,
the promotion system used by the company Lyoness Italia Srl to spread among consumers a formula for the purchase of goods with cashback (ie with the return of a percentage of the money spent at affiliated merchants), is incorrect because it integrates a system with pyramid characteristics.
For those unfamiliar with Lyoness’ business model, the company uses a cashback ruse to mask pyramid recruitment. Those recruited invest in units, which pay a fixed ROI once enough new investments have been made.
Or as the AGCM put it;
(Lyoness’) promotion system, using the pretext of described advantage of purchases with cashback, actually involves the recruitment of a large number of consumers who are required, after having assumed the role of sales manager, to pay an entry fee particularly high to access the first commission level (equal to € 2,400.00) and start the “career” as Lyconet Premium Marketer.
Subsequently, they must recruit other consumers, as well as make additional payments to confirm and progress in the “career”.
Of particular note is that the AGCM investigation revealed cashback shopping within Lyoness only accounted for about 16% of Lyoness’ revenue in Italy.
The remaining 84% was sourced from direct investment in shopping units.
This is due to the fact that, by design, the amount of volume required to trigger a ROI is unfeasible through cashback.
The achievement of high levels of Shopping Points- the compensation scheme remuneration mechanism – is essentially possible only with the payment of sums of money by the participating consumers or by the subjects recruited by the latter.
According to information provided to the AGCM by Lyoness,
many tens of thousands of consumers have paid the aforementioned sums of money to enter, participate and remain in the system, (but) only a very few individuals have actually managed to achieve significant positions.
AGCM also took issue with how Lyoness presented its business model, labeling its marketing practices “deceptive”.
In addition to be declared an illegal pyramid scheme, AGCM has also fined Lyoness €3.2 million EUR.
BehindMLM began warning consumers of Lyoness’ Premium member Ponzi scheme back in 2012.
Unfortunately Lyoness manages to continue migrating to different countries once caught or local investor recruitment collapses.
Lyoness has also tried to mask the scheme by renaming “accounting units” to “shopping units”, and changing the company’s name to Lyconet and more recently, Cashback World.
At the time of publication Alexa estimates that Italy makes up a whopping 47% of traffic to Lyoness’ website. Italy is also the top source of traffic to the Lyconet website (35%).
Which country Lyoness will migrate to having lost its largest investor market remains to be seen.