Groupon’s Exaggerated Deals Will Be Probed By UK Government

Back in June, paidContent reported how the UK’s advertising regulator had started reprimanding Groupon (NSDQ: GRPN) after a growing number of complaints about its daily deals.

Every weekend, that story spikes in our traffic, as disgruntled consumers search for ways to complain about Groupon.

Now, after ongoing complaints, the Advertising Standards Authority is referring the issue up for a full and more serious review by the UK’s business regulator. The ASA issued this statement

“Following repeated breaches of the Advertising Code by MyCityDeal Ltd t/a Groupon, the Advertising Standards Authority is now referring complaints that we receive about Groupon’s ads to the Office of Fair Trading (OFT). We are referring complaints that specifically concern Groupon’s:

  • Failure to conduct promotions fairly, such as not making clear significant terms and conditions
  • “Failure to provide evidence that offers are available
  • “Exaggeration of savings claims

“We are taking this approach because, given Groupon’s track record, we have serious concerns about its ability to adhere to the Advertising Code. It is in the public interest that we refer the matter to the OFT, the OFT being better placed to address any underlying issues concerning Groupon’s trading practices generally.

“In 2011, the ASA has formally investigated and upheld complaints against Groupon’s advertising on 11 occasions. We have also informally resolved 37 cases. We will continue working closely with the OFT on these issues to ensure consumers are protected.”

Complaints mostly centre on over-inflated savings claims. Groupon has variously breached ASA rules on misleading advertising, substantiation, exaggeration, administration, pricing and qualification.

  • One restaurant deal said customers could “Save 74%” – a saving actually calculated against the most expensive item on the menu.
  • Groupon’s German office has been buying Google (NSDQ: GOOG) UK keyword ads for offers that don’t exist, like “70% off train tickets”, “All you can eat in London £3” and “Bouquet of Flowers in London from £8”.
  • A plastic surgery discount was irresponsible and went against the industry’s codes of practice.

Groupon’s November IPO raised $700 million, valuing it at $12.8 billion. But the OFT can’t be bought off – it may reprimand Groupon and demand it more stringently substantiate its deals.

The OFT’s statement says…

“The OFT has opened an investigation into the trading practices of MyCity Deal Limited (trading as Groupon UK (‘Groupon’)). The OFT is considering whether Groupon is complying with consumer protection legislation, including in relation to certain of its advertising practices.

“The opening of this investigation follows complaints the OFT has received in relation to Groupon’s trading practices. As part of its investigation, the OFT is also considering concerns that have been raised with the OFT by the Advertising Standards Authority (‘ASA’), in light of complaints the ASA has received.

“This investigation is ongoing and the OFT will not be in a position to determine whether it considers the law has been infringed until it has completed its investigations and assessed the available evidence.”