Web discount firm Groupon 'broke advertising laws'
UK regulators could force US company to drop some of its eye-catching deals
Saturday 03 December 2011
The online discount firm Groupon could be forced to drop some of its most eye-catching deals after it was revealed the voucher provider has broken advertising laws almost 50 times this year.
Groupon has been referred to the Office of Fair Trading (OFT) by the Advertising Standards Authority (ASA). It has now emerged that the OFT had already been secretly investigating the site since July.
The US-based website, which offers people reductions on anything from theatre tickets to cosmetic surgery, has several hundreds of thousands of subscribers in the UK and currently boasts a market value of $12.7bn (£8.1bn).
Three areas of complaint against the company are now under investigation – that it exaggerates claims of savings, that it does not provide evidence that offers are available, and that it fails to conduct promotions fairly with clear terms and conditions.
The ASA said it was "taking this approach because, given Groupon's track record, we have serious concerns about its ability to adhere to the Advertising Code". The OFT confirmed it was "considering whether Groupon is complying with consumer protection legislation, including in relation to certain of its advertising practices".
The ASA deals with specific complaints about existing adverts and is able to ban them from appearing again. The OFT, however, has the more far-reaching power to obtain court orders obliging companies to change their business practices.
Areas in which it could potentially take action include those against firms implying levels of discount that are unobtainable, for example, or promoting offers as time-limited when in fact they are not. Heather Dickinson, a spokeswoman for Groupon, said: "Groupon constantly strives for business practices that are in the best interest of consumers... We are cooperating fully with the OFT to ensure that the rights of consumers are protected."
To support the argument for her case, Ms Dickinson pointed to a survey which said that 75 per cent of active subscribers would recommend the website.
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Organisers of a Christmas grotto complained about Groupon after they had to tell legions of angry customers their vouchers for a magical train ride were not valid. The furore even caused one of its elves to resign.
Penny Ward, who set up the attraction in York, said she informally agreed to use the website's services, but was then inundated with 2,000 families, despite never signing a contract or mentioning a train ride.
Groupon maintains that she agreed to the deal in both an email and a phone call.
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