Which online retailer has been hauled before the Australian Competition and Consumer Commission (ACCC)?
The ACCC has instituted proceedings against Lyoness for allegedly operating a pyramid selling scheme and engaging in referral selling.
Lyoness has rejected all allegations raised by the ACCC and has vowed a vigorous defence.
The member-based shopping site has operated the scheme in Australia since 2011.
It offers cash back rebates to members who shop through the platform, use Lyoness vouchers or present Lyoness cards at certain retailers.
This is the first court action against Lyoness which alleges the loyalty program is a pyramid scheme.
While cash back offers are not illegal, the scheme also offers commissions to members who recruit new shoppers who make a down payment on future purchases.
The platform has been investigated by regulators in other international markets.
Target, Oakleys and Deals Direct are among those listed on its Australian portal.
ACCC chairman Rod Sims said it is not only illegal to establish a pyramid scheme, but to promote and participate in it.
"Pyramid schemes are often sophisticated and may be operated under the guise of a legitimate business.
"Although these schemes can appear to be legitimate, the most significant inducement for new members to get involved is to earn ‘residual’ or ‘passive’ income from new members signing up.
"The concern with pyramid schemes is that the financial benefits held out to induce potential members to join up rely substantially on the recruitment of further new members into the scheme.
"For these schemes to work so that everyone can make a profit, there would need to be an endless supply of new members."
The ACCC has also alleged Lyoness breached the ACL prohibition on ‘referral selling’.
This is where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.
The ACCC is seeking declarations, pecuniary penalties, injunctions, an order requiring the Lyoness website to link to the case report and costs.
The first Directions Hearing in these proceedings will be on September 16 in Sydney.