Groupon Changes Practices After OFT Smackdown

Groupon has promised to change some of its practices after an Office of Fair Trading (OFT) investigation raised concerns about how it operates.

The OFT said Groupon has cooperated with the investigation, whilst the voucher site said it takes the OFT’s concerns “very seriously”.

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The OFT launched its investigation in July 2011 after it received a number of complaints from consumers. In December, Groupon was referred to the OFT by the Advertising Standards Authority (ASA) after it was found to have breached a number of UK advertising codes. The investigation revealed “widespread examples” of Groupon’s practices that breached consumer protection regulations.

“While we’ve endeavoured to meet the massive public demand for our offers while maintaining our bar for service, there are times we’ve failed,” said Groupon in a blog post. “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.”

Specific concerns were raised about practices involving reference pricing, advertising, refunds, unfair terms and the diligence of its interactions with merchants. Groupon has pledged to address these concerns so its practices comply with the law. It has three months to achieve this, or faces tougher punishment.

Promised Changes

Groupon said since June 2011 it checks and rechecks the reference prices supplied by merchants so they are sure that what is being offered is genuine. The company has also agreed to help merchants plan deal limits in line with their capacity, so they are not overwhelmed by demand. A new online scheduling system will be made available to retail partners so customers will be able to book appointments at the time of purchase.

Changes will also be made to Groupon’s website that will allow deals to be extended for longer periods of time so consumers can consider major purchases. The limitations of the European site make it is easier to run a 72 hour offer as three sequential 24 hour deals, placing an unnecessary sense of urgency on the customer.

The company has also promised to check deal descriptions and substantiate market claims to ensure accuracy, while its customer support service will also be expanded.

Consumer Protection

“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,” said Cavendish Eltham, senior director in the OFT’s Goods and Consumer Group. “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.”

“As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth,” added Groupon’s UK managing director Roy Blanga in a statement sent to TechWeekEurope. “We have independently made many improvements since early 2011 and have worked transparently and constructively with the OFT to identify areas that require further changes.  We take their concerns very seriously and will be willingly implementing the recommended changes.”

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