'You have three months to improve', OFT warns Groupon

The Office of Fair Trading has told Groupon it needs to pay more attention to the rules, or else.

by Emma Haslett
Last Updated: 19 Apr 2012
Those following the fate of group buying website Groupon will be familiar with the calamities it’s suffered of late: first, there was bakery owner Rachel Brown, who ended up having to shell out £12,500 to take on extra staff to help her fulfill orders for 102,000 cupcakes from the site. Then, there were the numerous complaints over its ads, some of which the Advertising Standards Authority eventually found to be ‘misleading’. And don’t forget the company’s first quarterly figures, released last month, which showed that despite all the hype over its November IPO, the company had made a net loss of $42.7m (£27m). Bet its shareholders loved that.

Now, the Office of Fair Trading has waded in and warned the company that it’s got three months to improve the way it does business, after an investigation found ‘widespread’ breaches of consumer protection rules. The OFT has rather a lengthy list of concerns: everything from ‘pricing, advertising, refunds’ and ‘unfair terms’ to ‘the diligence of its interactions with merchants’. In other words: it’s time for Groupon to pull its finger out.

In fairness to Groupon, the company has agreed, seemingly without protest, to make extensive changes. It’s promised to do everything from ‘ensuring the advertised discount is accurate, honest and transparent’ to ‘conducting… a realistic assessment that a trader can offer the good and services in the quantity and timeframe suggested’ (so no more Rachel Brown episodes), and ‘ensure terms and conditions are fair’. It also says it’ll apply the rules and cancellation rights used by other online retailers – and ‘adequately substantiate any health and beauty product claims’. So no miracle anti-ageing treatments.

The OFT’s spokesman, the rather fabulously named Cavendish Elithorn, acknowledged that the company had been co-operative about making changes. ‘Groupon has co-operated fully with our investigation and is making changes to its business practices to address our concerns,’ he said. Although we’d argue that it’s a bit worrying the OFT had to do an investigation in the first place.

Still, Elithorn warned that the office would be ‘monitoring the situation closely to ensure that consumers benefit from these improvements’. So Groupon should be afraid. Although it’s not entirely clear what the OFT will do if Groupon does breach the new rules. Subject its senior managers to a piranha fish pedicure, perhaps?

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