Discovery Vitality stopped it giving away R500,000 in free Ster-Kinekor movie tickets per month, Liberty says – and Virgin Active was bullied too
- Discovery is taking the Liberty Group to court for using their shared customers' Vitality status in a cash-back scheme – which Discovery says isn't allowed.
- Liberty shut down its own Vitality-style rewards scheme – but not, it says in court papers, before Discovery bullied Ster-Kinekor and Virgin Active about doing business with Liberty.
- Discovery retorts that it is "ludicrous" for the older and bigger Liberty to blame Discovery for its own failure to keep a rewards scheme going.
- For more stories, go to www.businessinsider.co.za.
By the middle of 2015 the Liberty Group was giving its customers around R500,000 worth of free movie tickets every month. Then, Liberty now says, Ster-Kinekor suddenly decided to no longer sell it those tickets.
And that, Liberty alleges in new court papers, is because Discovery Vitality stepped in, and effectively bullied Ster-Kinekor.
Liberty also alleges that Discovery similarly bullied Virgin Active, as part of a pattern of behaviour that makes it difficult for anyone to set up a competitor to Vitality.
But it is "ludicrous" for the established Liberty to blame relative newcomer Discovery for its own failure to compete, Discovery retorts.
The allegation from Liberty – that Discovery Vitality uses exclusive contracts to stop (or at least make make it hard for) Vitality partners to do business with competitors – forms part of documents before the high court in Johannesburg.
There Liberty is defending itself against a legal challenge from a group of Discovery companies that have asked the court to effectively stop Liberty from riding on the coat-tails of Vitality.
Liberty says it wants to reward its life-policy customers for being healthy and so living longer, but those customers don't want another wellness scheme, so it credits them with their efforts towards Vitality status or on the Momentum Multiply programme.
Discovery says by using a Vitality status in its calculations and rewards, Liberty is competing unlawfully and infringing on its trademark.
Liberty is fiercely defending its use of Vitality status, saying it is the clients who own their status. And, along the way, it also accuses Discovery of what amounts to squashing competition.
"The reason that there are so few wellness programmes on the market (in reality, only two of any significance) is because Discovery Vitality has foreclosed the market to its rivals through a series of exclusionary relationships with the key services providers to a wellness programme provider," says David Jewell, Liberty's managing executive for retail solutions in an affidavit.
To get a "ticket to the game" competitors to Vitality needs to do business with gym and cinema companies, Liberty says. But Discovery has sown up the market.
And, according to Liberty, Discovery is willing to put the squeeze on those partners.
Liberty says its own now-defunct rewards scheme, Own your Life Rewards, had a standing arrangement to buy large numbers of movie-ticket vouchers from Ster-Kinekor – apparently at full price – as long as it gave those away for free rather than reselling them.
Then, according to Jewell's affidavit and emails attached to it, Discovery stepped in. Liberty says Ster-Kinekor told it that any deal "would in future be subject to Discovery Vitality approval".
On Friday Ster-Kinkor told Business Insider South Africa it would not comment on a matter before the courts to which it is not a party.
Et tu, Virgin?
Although it does not provide similar detail or evidence, Liberty has told the court it believes much the same thing happened with gym company Virgin Active, which also "radically and unilaterally altered" an agreement with Own Your Life.
"Based on the sudden change in its stance and the similar timing of events, Own Your Life Rewards inferred that Virgin Active had been subjected to similar commercial or legal pressures applied by Discovery Vitality," says Jewell.
"Virgin Active is not party to the legal proceedings you refer to and as we have not had sight of the court papers from which you have drawn your inference, we are unable to comment," the gym company told Business Insider SA.
'Ludicrous' to blame Discovery
On Friday Discovery told Business Insider it could not go into detail about Liberty's allegations because the court case was ongoing and pleadings had not yet closed – but that "we dispute these allegations made in Liberty’s answering affidavit as a diversion from the key issue of Liberty’s unlawful competition and trademark infringement".
Vitality has strong and healthy partnerships across a variety of lifestyle sectors," said Hylton Kallner, CEO of Discovery Life.
"We have not prevented anyone from creating partnerships and programmes to reward their client base. Liberty is older and larger than Discovery Life, so blaming Vitality for Liberty’s inability to successfully build its own wellness programme and partnerships is ludicrous. We take objection to the accusations of us employing bullying tactics, and will respond in the appropriate forum as our case proceeds."
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