Groupon investigated for advertising malpractice

The Advertising Standards Authority (ASA) had started its own investigation, but referred Groupon to the OFT because of the sheer volume of individual complaints.

The ASA has ruled that the company had broken the advertising code 11 times, and was responsible for a further 37 breaches that were settled informally. The 11 adjudications included a charge of misleading consumers about the amount of money they could save by purchasing a night at a hotel, and an exaggerated claim about savings made on the purchase of eyelash extensions.

Groupon UK, owned by My City Deal ltd, offers discounted daily deals to email subscribers if consumers purchase the offer by midnight. The company markets products and services in 43 countries around the world.

The OFT today said it had already launched a secret investigation into the online daily discount website in July.

“Groupon floated on the American stockmarkets just a few weeks ago. But its share price today is 20 per cent down. One of the concerns that investors have is the business model. But I imagine they’ll be most be concerned by the fact that the high profile British regulator is investigating the way that the business works.”
Read more from Technology Editor Benjamin Cohen on his blog.

The consumer watchdog is unable to comment in detail about ongoing investigations, but Pritie Billimoria told Channel 4 News that the watchdog wants to ensure that new and developing business models do not exploit consumers.

The watchdog has particular concerns about new online pricing practices, including “drip” pricing, where the price rises through the buying process, “reference” prices, where there is a high reference price compared to the sale price, and time-limited offers.

ASA’s ‘serious concerns’

The ASA’s Matt Wilson told Channel 4 News that the organisation had “serious concerns about Groupon’s ability to adhere to the advertising code”.

Of particular concern is the company’s failure to conduct promotions fairly, failure to provide evidence that offers are available and exaggeration of savings claims.

Only last week, the ASA upheld a complaint from the Healthcare Advisory Service about a Groupon email offering discounted cosmetic surgery if consumers purchased the deal within 24 hours, which it said could pressurise people into making significant life-altering decisions within a tight time-frame.

In a statement, the company said: “Groupon constantly strives for business practices that are in the best interest of consumers.

“We are constantly evolving business process to ensure customers receive the best possible experience at the highest standards. We are cooperating fully with the OFT to ensure that the rights of consumers are protected.”

Groupon has also been criticised by small businesses, who complain they have lost money and are put under too much pressure when their discount offers become too popular.

What do you think of Groupon? Your views from Channel 4 News on Facebook

Sheila Knight: They have been ok when i have applied for local fitness class discounts but i am still waiting for a set of outdoor lights to arrive. Said 28 days and that is coming close now.

Anthony Ward: Yes, my first use of Groupon went badly when the restaurant denied knowledge of the offer so I’ve not used it since, seemed too much like a scam somehow.

Penny Mumford: Never had a problem – great way to buy presents for people!!

Nick Rawle: I have used them as a merchant and while I have not been dissatisfied with the service they have offered me, I have not received all the support that was initially promised, and have realised that the model doesn’t suit the intended growth path of my business.

Mary-Anne Wright: I’ve had mixed experiences. Some have been absolutely fine, no complaints, but other times I have had real problems booking the service I’ve paid for (e.g. haircut) because the place is too busy to cope with all the extra business.

Caroline Quane: Used them a fair bit, only ever had problems with the retailers being arsed about it, but I complained, Groupon refunded me and on one occasion they even gave me another £5 credit for my troubles! Score…