Groupon to Change Practices Following OFT Action

Jack Humphrey, Regulatory journalist
March 20, 2012 /

The OFT has accepted undertakings from ‘daily deals’ company MyCityDeal Ltd, which trades as Groupon, to change some of its trading practices following an OFT investigation.

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

Groupon engaged openly and constructively throughout the investigation and has signed undertakings that it will change its practices to comply with the law. The company has three months to implement the changes.

The undertakings require Groupon to change its practices to ensure that in the future reference prices (adverts that compare an original reference price against a sale price), including savings, are accurate, honest and transparent.

Groupon is also compelled to carry out an accurate, honest and realistic assessment of a merchant’s ability to provide goods or services in the quantity or time frame suggested.

Groupon is required to take reasonable steps to ensure that health or beauty product claims are supported by adequate substantiation.

The undertakings provide that Groupon apply refunds policies and cancellation rights in accordance with the Distance Selling Regulations.

The OFT will monitor complaint numbers closely and has required Groupon to inform the OFT of any complaints it receives on each of these practices. Should evidence emerge of a breach of any of these undertakings, the OFT will consider appropriate measures, including applying to court for enforcement orders.

The OFT investigation was launched in July 2011 following complaints from consumers. In December 2011 Groupon was also referred to the OFT by the Advertising Standards Authority following its finding of multiple breaches of UK advertising codes.

Cavendish Elithorn, Senior Director in the OFT’s Goods and Consumer Group, said: “Collective buying and discount schemes can offer real benefits for both consumers and merchants. The market is growing rapidly, but it’s important that consumers benefit from consumer protection law as well as from the discounted offers.

“Groupon has cooperated fully with our investigation and is making changes to its business practices to address our concerns. We will be monitoring the situation closely to ensure that consumers benefit from these improvements.”

 

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