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Will Groupon Be Better Now, Following Regulation?

Commits to improvements as OFT investigation closes

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Will Groupon Be Better Now, Following Regulation?
[ Business]

Groupon has been surrounded by controversy for various reasons for quite some time. Sometimes it’s a flub like the Super Bowl ad that some were offended by. Other times, it’s more directly related to Groupon’s business.

This time, it’s an investigation by the UK’s Office of Fair Trading, which is generally likened to the Federal Trade Commission here in the US. The OFT announced today that Groupon is changing its practices with regards to the investigation, which was opened last July. The investigation is now closed.

Here’s the official case description from the Office of Fair Trading:

OFT opened this investigation following complaints it received in relation to Groupon’s trading practices. As part of its investigation, OFT also considered concerns that have been raised by the Advertising Standards Authority (‘ASA’), in light of complaints the ASA received.

As a result of its investigation, OFT formed the view that there were specific examples of Groupon’s practices which appeared to be in breach of the CPRs, the UTCCRs and DSRs. In particular, OFT identified concerns with reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants.

During the investigation Groupon engaged constructively with the OFT. They cooperated throughout.

As required in this case under the Enterprise Act 2002, the OFT consulted with Groupon to ensure that those practices are not continued or repeated. Following this consultation, Groupon signed undertakings to comply with the law. The undertakings require that Groupon does not continue or repeat the conduct of concern in this case.

Groupon has also agreed to provide the OFT with details of any consumer complaints relating to matters within the scope of the undertakings three, six and nine months following the provision of undertakings. This is so the OFT can monitor whether the undertakings are effective and Groupon is complying with them.

Groupon has been warned that should evidence come to light that it is breaching any of the undertakings, OFT may consider applying to court for enforcement orders to ensure compliance with consumer protection legislation.

OFT has now closed its investigation into this matter having secured these undertakings, subject to reviewing any consumer complaint information from Groupon in the following three to nine months.

In December 2011, the ASA started to refer to OFT, complaints it received that were within the scope of OFT’s investigation. It will continue to refer such complaints to OFT over the next three months whilst Groupon improves its processes, after which, the ASA will resume investigating any complaints it receives.

Groupon responded to the OFT on its own Lifestyle blog, saying:

Frankly, we’re grateful that any time someone takes the time to give us feedback on how to better serve our customers. Many of their suggested changes were already underway, and the rest we will implement with haste.

To the Groupon customers that experienced the negative side effects of our growth: we’re sorry. We believe that the only way to build a company that lasts is to provide the best customer experience in the world, and it pains us when we fall short.

Our commitment is this: we are going to get this right. We won’t stop until we are known for having the best customer service in the UK. And we appreciate your help in getting there. If you see ways that we can improve, or if you feel we aren’t living up to our end of the bargain, please let us know .

Groupon says it is making or has made improvements in the areas of: price/discount clarity, merchant capacity planning, deal “time remaining” clarity, errors in deal descriptions, substantiating marketing claims and the seven-day refund period.

Groupon says it now checks and rechecks reference prices (which discounts are based on) and makes sure that what is says is being offered is actually being offered. It also shows the sources for all of these.

With regards to merchant capacity planning, Groupon runs merchant businesses through a “capacity calculator” and consults with them to determine the appropriate limit, provides them with free online scheduling (with appointment booking), confirms with the merchants prior to promotion, and has now started an ongoing due diligence program with live and continuous checks based on customer/operational feedback throughout the various stages of the deal.

Groupon is also making changes that let it run offers for many time periods, including a 72-hour offer, and is updating its FAQs to explain time-remaining clocks.

The company says it is “beefing up” its quality control processes by doing credit checks on all merchants, fact-checking all offers before launching, confirming/agreeing to fine print of all offers with merchants, and emailing previews of offers to all merchants before being featured.

Groupon says it has established an internal compliance database to track claims that merchants want them to make when offers are described, and that it will continue to populate this database and provide extracts to regulators for compliance reporting. Interestingly, the company says its fact-check team confirms that all health and beauty claims are backed by scientific evidence, and that it is working with the Advertising Standards Authority on that.

Finally, Groupon has expanded its customer support so all callers can be answered, and says will continue to review customer support metrics to maintain “high levels of service”.

No word on whether or not controversial deals, such as a recent Milwaukee deal for a Jeffrey Dahmer tour, will be minimized.

Will Groupon Be Better Now, Following Regulation?
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  • John Wiggill

    Chris, nice article.

    I think the best regulation by government is no regulation. Let the consumer decide! It won’t take long for business to disappear when deals aren’t what Groupon says they are.

    We seem to expect the “government” take care of every aspect of our lives, but in the end what we do is entirely up to us.

    I’m a geek and I’ve participated in a few groupons and was satisfied with the results.

    I say governments butt out and let the market decide. Any good company is concerned about what their customers think of them and act accordingly, because if they don’t, they won’t be in business for long.

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