The German Bundesgerichtshof (Federal Court of Justice) (BGH) held today that loyalty points are a type of currency that should not simpy expire.
Rewe, a grocery store chain across Germany, ran a promotion in 2011 in which you could collect stickers based on in-store spending and use those stickers to send away for knives at a steeply discounted price. I actually remember the promotion and still have some of the stickers I collected from it…
The promotion was advertised to run from early in the year to June and Rewe procured 3.2 mlilion knives for the promotion. Only there was a problem–the program was highly popular and Rewe ended the program two months early when their supply of knives became exhausted, despite millions more consumers dutifully saving stickers and even going out of their way to shop at Rewe.
The court held that such action was misleading to customers (“consumer deception”) and that based on previous promotions, Rewe should have reasonably anticipated demand would be greater.
More generally, the court explained that loyalty points are a type of currency that cannot simply expire. Rather, a company must offer an alternate redemption offer, not just no redemption offer.
The full ruling (in German) of the BGH is here.
Is this case analogous to an airline cancelling or devaluing the points in its loyalty program?
Yes and no. Rewe never offered any “until supplies last” caveat while Lufthansa Miles & More in Germany and frequent flyer programs around the world, including all U.S.-based airlines, explicitly reserve the right to modify or cancel loyalty programs without notice.
But if the court’s words are construed broadly, a principle emerges that if consumer expectations are unreasonably disregarded, the court will step in to remedy the issue. Calling loyalty points a type of currency does not change the fact that currencies fluctuate in value all the time. Nor does it change the unfortunate fact that sometimes currencies are devalued overnight (Iceland, Argentina, etc) and that banana republics do exist in this world.
Thus perhaps the use of the word “currency” was not the right word. Instead, the court should have viewed points as a contract between customer and company that cannot be abrogated by one party in an unreasonable matter.
Take United Airlines for example. For months the video below has been playing prior to safety videos on flights–
But with United’s massive devaluation of its Star Alliance partner award chart, now the video seems rather misleading–it draws business to United (including my business) by promising something then changing the terms of that promise later on in a massive way. Think paying more than twice as much for the same award is reasonable? I do not.
And yet I question the sagacity of a court micromanaging an airlines’ loyalty program. Consumers react to change by adjusting their spending habits and United’s gutting of its partner award charts means my flying on United will drop precipitously next year. The cost-proposition no longer makes sense. Perhaps airlines should be left to manage their own internal affairs as long as no blatant mistruths emerge.
Still, when a grocery store advertises knifes till July and cuts out in May, it makes you think of Delta’s decision to devalue its award chart for a second time after impliedly promising that rates would not change until next July.
I can picture a moment in the future when a court just might say “not so fast” before an airline devalues its loyalty program to a point in which its advertising becomes deceptive. Delta may have stepped over the line…