Groupon ordered to change its ways by UK’s Office of Fair Trading

16 Mar 2012

Daily deals giant Groupon has been ordered by the UK’s Office of Fair Trading (OFT) to change its trading practices. After an investigation, the OFT ruled that Groupon breached consumer protection regulations.

The OFT said today it has accepted undertakings from MyCityDeal Ltd, which trades as Groupon, to change some of its trading practices.

The OFT investigation found widespread examples of Groupon’s practices it says breached consumer-protection regulations. 

In particular, the OFT expressed concerns about reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants.

Groupon, which the OFT said engaged openly and constructively throughout the investigation, has three months to implement the following changes:

  • 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 investigated

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.

“Collective buying and discount schemes can offer real benefits for both consumers and merchants,” Cavendish Elithorn, senior director in the OFT’s Goods and Consumer Group, said.

“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 co-operated 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,” Elithorn said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years