Following serial “complaint upheld” findings in respect of misleading offers, the Advertising Standards Authority lost patience and referred discount voucher site Groupon to the Office of Fair Trading. The parties have now announced that terms have been reached. It’s unlikely any discounts are involved, as George Pearse reports.
Topic: Regulatory
Who: Groupon and the OFT
When: 16 March 2012
Where: London
Law stated as at: 30 March 2012
What happened:
MyCityDeal, who trade under the Groupon moniker, use "collective buying power" in order to offer their customers vastly discounted deals on a range of products and services. The payoff for the firms offering such goods and services is that they receive both extensive promotion and a minimum number of purchases.
Groupon has enjoyed a fairly meteoric rise to prominence but with it, has emerged real concerns about their compliance with consumer protection rules. In December 2011 the ASA began to refer complaints it received about the company onto the OFT, having upheld complaints brought against the company on 11 separate occasions.
One example of a breach occurred where Groupon offered consumers a £3000 saving on certain cosmetic surgery procedures. The promotion was accompanied by a 24 hour clock, counting down to the end of the promotion, meaning that consumers had a very small window of opportunity in which to decide whether they wanted to partake in the promotion. The offer drew complaints from members of the public and the Independent Healthcare Advisory Service and ultimately, the ASA found that Groupon had breached the CAP Code in relation to social responsibility.
The ASA, in referring the company to the OFT, cited "serious concerns about Groupon 's ability to adhere to the Advertising Code." In particular, Groupon were failing to conduct promotions fairly and were not making significant terms and conditions clear enough. Also troubling the ASA was Groupon's exaggeration of possible saving to customers, as well as the failure to provide evidence that certain offers were actually even available.
OFT extracts undertakings
Following an investigation, the OFT has now announced its acceptance of a range of undertakings from Groupon, to change some of its working practices. The undertakings should help to safeguard both the consumer's and the merchants' respective interests.
Groupon has agreed to ensure reference prices are "accurate, honest and transparent" and to implement "fair" terms and conditions. Such conditions must be displayed in a clear and prominent fashion, with any limitations to the deal appearing before the purchase is carried out.
In relation to health or beauty products, Groupon must ensure that its claims are always substantiated, which means having a sufficient level of proof to support their claim, should an investigation be launched.
Merchants are clearly accounted for in the undertakings, with Groupon agreeing to carry out a "realistic assessment" of a merchant's ability to provide the marketed goods or services within the specified time frame.
Finally, Groupon has undertaken to abide more closely with the Distance Selling Regulations, meaning that consumers should benefit in future from a more effective and efficient refunds policy.
Why this matters:
The undertakings, whilst drafted with Groupon in mind, also serve to provide a clear statement of best-practice for all businesses operating in the collective buying sphere and beyond; substantiating health and beauty claims; abiding by the Distance Selling Regulations; and ensuring that any significant limitations to a product or service offer are clearly labelled, are all of general application to marketers.
The OFT has now given Groupon three months in which to implement these undertakings and has indicated that it will monitor the volume of future complaints very closely.
If it transpires that Groupon is continuing to breach the listed undertakings, the OFT has indicated that it will consider appropriate recourse, which includes applying to court for the respective enforcement order.
Whilst Groupon is a relatively young company operating in new and arguably unchartered terrain, it benefits from no special exemption from the normal legal and code requirements that apply, so for its own sake it is to be hoped that it abides by these undertakings.
