Lyoness warning: Portuguese Consumer Protection Assoc
The Portuguese Consumer Protection Association, otherwise known as DECO, is
is an independent non-profit association with charity status.
It is the largest consumer association in Portugal and possesses a ‘Public Utility’ status.
Following a series of complaints by Lyoness investors, DECO recently issued a warning against participation in the scheme.
Not surprisingly, DECO has no problems with the free member shopping side of Lyoness.
According to Lyoness, there are about ‘74,600 members in Portugal, who have access to discounts on more than 700 member companies‘.
Rather, it’s the Lyconet MLM side of Lyoness DECO has raised concerns about.
DECO claim that Lyconet is Portugal makes up about 3% of Lyoness’ business operations. The association however has begun to see signs of a “possible pyramid scheme”.
Two recent complaints from Lyconet affiliates spell out the pyramid nature of the business.
A man and a woman said they had been “approached” by colleagues at work, to collaborate on a business that could generate good income.
In the first case, the woman was invited to invest two thousand euros to qualify to be able to attract new customers, receiving a percentage of the amount each customer spends.
(After investing) 500 euros, the woman changed her mind and asked for her money back.
She also called for the intervention of Deco, to mediate with Lyconet.
Lyconet initially mediated with DECO, however communications then “stopped suddenly (and) without explanation”.
Lyoness later told the association that “in most cases”, complaints about the company were due to a “lack of information”.
What that has to do with them refunding an affiliate their investment, who knows.
Upon further investigation into Lyconet’s business model, Deco has raised concerns about
the ability to recruit affiliates and then earn bonuses based on purchases made by other members.
This sounds like they’re talking about recruiting shoppers and earning of their purchases, but infact it’s affiliate recruitment.
As per Lyconet’s business model, affiliate’s invest in shopping units and then get paid when they recruit others who do the same.
The association states that “it is this second aspect that leads to questions about Lyoness, it is quite complex and the company itself discloses little information.”
There has been research done in other countries, but the results “are not conclusive.”
Hence, the advice is “caution to those who are enticed to make additional payments and recruit new members.”
When Deco raised these concerns with Lyconet, the company told them:
It is necessary to distinguish between the systematic dissemination of rumors and the facts.
Rather than do that though, by explaining how using newly invested affiliate funds to pay off existing investors isn’t a Ponzi scheme, Lyoness instead hired Portuguese lawyers to give them the all-clear.
The company resorted to (hiring) legal consultants and lawyers, (and) asked them (for) advice on their business model.
In Portugal, the law firm PLMJ concluded in 2011, that the model is legal:
“We believe that it (is) arguable that the Lyoness system does not have recruitment requirements. Within that context, it should not be considered to be a prohibited pyramid scheme,” the opinion said.
Sounds to me like the old “you don’t have to recruit affiliates to earn a ROI” argument we saw back in the Lyoness AU days.
What they don’t tell you though is that shopping generates little to no units, with it much faster to just recruit new affiliates who dump money directly into the scheme.
They get units, you get paid and then they recruit new suckers to get a ROI on their units. Y’know, a Ponzi scheme.
Unfortunately those that do attempt to focus on recruiting shoppers (typically because they’re lied to about the feasibility of doing so by Lyconet affiliates), usually wind up with stalled binaries that don’t go anywhere.
They get screwed and, unless they go to court against Lyoness, wind up getting screwed.