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Summary:

British watchdogs have told Groupon that it needs to clean up its act, after a record number of complaints about the way the company advertises its offers and behaves towards users.

Groupon screenshot

Groupon screenshotOver the last year, the U.K. arm of Groupon has been the subject of a record number of complaints about the way it advertises deals to users, makes claims about products on sale and treats users.

Now the company has been told in no uncertain terms that it needs to stop and clean up its act.

After an investigation that was started in December by the Office of Fair Trading — Britain’s equivalent of the Federal Trade Commission — the site was told that it had breached consumer regulations on a wide range of occasions and given a three month deadline to fix its wrongdoing, or face legal action.

In a statement from the OFT on Friday, the organization said that “widespread” breaches and serious worries about the way it works.

“The investigation found widespread examples of Groupon’s practices which in the OFT’s view breached consumer protection regulations,” said the watchdog. “The OFT has specific concerns over practices involving reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants.”

The list of requirements is broad, relating to a number of different areas where Groupon has been accused of misleading customers and partners:

  • Reference prices (adverts that compare an original reference price against a sale price), including savings, are accurate, honest and transparent.
  • Groupon carries out an accurate, honest and realistic assessment of a merchant’s ability to provide goods or services in the quantity or time frame suggested. 
  • Products display clearly, prominently and on the same screen or before purchase all the limitations which apply to any deal.
  • Groupon takes reasonable steps to ensure that health or beauty product claims are supported by adequate substantiation.
  • Terms and conditions are fair.
  • Groupon applies refunds policies and cancellation rights in accordance with the Distance Selling Regulations.
  • Groupon’s European operations were not originally built by the Chicago-based company, but purchased with the acquisition of MyCityDeal in 2010. The site was spun out of controversial Berlin incubator Rocket Internet two years earlier.

    The company had previously said it would cooperate fully with the OFT investigation, and that it was “constantly evolving business process to ensure customers receive the best possible experience.”

    1. Matt Collins Friday, March 16, 2012

      Seems a decidedly toothless response from the OFT. If Groupon UK have been breaching the rules, shouldn’t they face immediate legal action, not given a telling off and another 3 months to continue getting away with it?

      1. That would be a bit rash, no? If they repeatedly, despite warnings, breach regulations, then they should face legal action immediately. But surely it’s better to warn first and shoot later?

        1. It depends how you look at it. If someone steals some cars repeatedly over a period of time then gets found out, do you send them a letter asking them kindly to not steal any more cars and you’ll check up on them in 3 months’ time to make sure they aren’t? There’s little difference.

          While advertising regulations can be vague and weak, the Distance Selling Regulations are very clear and anybody who is selling anything as a business on the Internet should be well aware of their requirements otherwise they are not competent to be in business in the first place.

          If you wanted to be soft on Groupon, then a reasonably substantial fine should be the starting point, leading to prosecution with more severe penalties if they don’t comply in future.

    2. Reblogged this on sucamxxx and commented:
      To be honest i have never really liked Groupon or its idea of business. I know people love it because they think they are getting a good deal but what about the businesses that have to advertise on there and discount their goods so much that they actually lose money? Its all greed where people want so much for nothing. Yet if it was their own business they wouldnt like it.

      1. I’m not a huge fan either, but to say that businesses “have to advertise on there and discount their goods so much that they actually lose money” is a bit far-fetched. Groupon is a customer acquisition tool for marketers. Businesses choose to use Groupon. Businesses choose how many offers they will sell so they know the cost of running the campaign.

        The problem most advertisers face is that they don’t consider the cost properly, they don’t understand the impact of signing up so many customers all at once on being able to service those customers, and, biggest mistake of all, is that they confuse giving bargain-hunting customers a one-off massive discount with enticing people to use their service in a way that will retain them for repeat business.

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