Lisbon, Portugal – The Portuguese Consumer Protection Association, known as DECO, has issued a formal warning regarding the Lyoness multi-level marketing scheme. This action follows a surge in complaints from individuals who invested in the program, raising alarms about its operational structure.
DECO, a prominent non-profit consumer advocacy group with public utility status in Portugal, has no objections to Lyoness's core shopping discount program. This aspect of Lyoness boasts around 74,600 members in Portugal, offering access to reduced prices with over 700 participating companies. The association's concerns are specifically directed at the Lyconet affiliate marketing arm of Lyoness, which accounts for roughly 3% of the company's Portuguese business.
Recent complaints from Lyconet affiliates paint a picture of a business model potentially resembling a pyramid scheme. Two individuals, a man and a woman, reported being recruited by colleagues for a business opportunity promising significant income. In one instance, a woman invested 2,000 euros, intending to recruit new customers and earn a percentage of their spending. After paying 500 euros, she sought a refund and DECO's intervention. Lyconet initially engaged with DECO to resolve the issue but abruptly ceased communication without explanation. Lyoness later informed DECO that most complaints stemmed from a "lack of information" provided to investors.
Further scrutiny by DECO has highlighted issues surrounding the recruitment of affiliates and the earning of bonuses tied to purchases made by other members. While this may sound like earning from shopper activity, the core mechanism involves affiliates investing in "shopping units" and receiving payments for recruiting others who do the same. DECO notes that this recruitment-based compensation structure raises serious questions, particularly given the complexity of the model and Lyoness's limited disclosure of information.
Investigations into similar schemes in other countries have yielded inconclusive results. Consequently, DECO advises extreme caution for individuals enticed to make additional payments or recruit new members into the Lyconet program. When DECO presented these concerns to Lyconet, the company responded by urging a distinction between factual information and the spread of rumors.
Lyoness reportedly sought legal counsel in Portugal to validate its business model. The law firm PLMJ issued an opinion in 2011 stating that Lyoness's system might not require recruitment and therefore should not be classified as a prohibited pyramid scheme. This stance echoes arguments previously made in other jurisdictions, suggesting that recruitment is not mandatory for investors to see a return.
However, critics contend that earnings from actual shopping activity are minimal. The primary method for generating returns, they argue, is by recruiting new affiliates who contribute capital directly to the scheme, thereby paying off earlier investors—a characteristic of Ponzi schemes. Those who attempt to focus on recruiting shoppers often find their efforts stalled, leading to financial losses unless they pursue legal action against Lyoness.