Groupon’s Advertising Practices Under Scrutiny In The UK

Apparently violated regulations nearly 50 times in 2011

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Groupon’s Advertising Practices Under Scrutiny In The UK
[ Business]

Top daily deals service Groupon is no stranger to controversy – whether it be related to their early November IPO, or charges from small businesses about the efficacy of the service. But now Groupon faces problems across the pond as the Office of Fair Trading, the UK’s consumer and competition agency, is set to launch an investigation into the company’s advertising practices.

The referral to the OFT comes from another regulator, the Advertising Standards Authority (ASA), who decided to report to the OFT based on 48 advertising code violation perpetrated by Groupon in 2011.

Here’s what the ASA had to say in a statement on their site:

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.

The OFT already has an ongoing investigation of Groupon – one which they started in July. The original investigation concerned trading practices, but they have added the ASA’s complaints about advertising practices to the list.

Last week, the ASA banned a Groupon deal offering a discount on cosmetic surgeries like breast enlargements and rhinoplasties in their customary 24-hour window. They said that the deal was nixed because it forced people to make huge life-altering decisions in a hurried amount of time.

Groupon has responded to the investigation, saying:

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 burst into the UK when they acquired CityDeal, a European deals service headquartered in Berlin, in May of 2010.

Groupon’s Advertising Practices Under Scrutiny In The UK
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  • http://www.facebook.com/transmissionmanagement.com Andy

    The Groupon business model is based on hype and is going to burst just like the dotcoms. How can a model that relies on it’s customers (the businesses taking part in the offers with Groupon, not the end coupon user) losing money with such high risks sustain itself? This unscrupulous behavior is more proof of it’s failure to deliver genuine value to business owners.

  • http://www.PlacesToEatOkay.com Steven

    Groupon is great for when a business already has high enough margins to justify giving 50% off or more, plus a commission to Groupon for each sale. The problem is most of the offers are service based and not product based. Who cares if you can get a massage at 50% off if you don’t have even that to spend frivolously? Let’s face it, we’re in a troubled economy with seemingly no light at the end of the tunnel. With also the explosion of social networking, business have other ways of offering the same deal as they would on Groupon and not have to pay Groupon a commission on every sale. If the economy starts to turn around, then yes, Groupon will be right there on the ground floor of the boom, but for Groupon to survive they need to focus more on products sold at discount prices that people buy all the time.

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