The Advertising Standards Authority revealed today that it has referred Groupon to the OFT, after “repeated breaches” by the online business sparked “serious concerns” about its approach to UK advertising regulation. The OFT has secretly been undertaking its own investigation into Groupon, which it started in June but only admitted to today.
It is only the second time that the ASA has referred a company to the OFT – the last being Ryanair in 2008.
“We are taking this approach because, given Groupon’s track record, we have serious concerns about its ability to adhere to the Advertising Code,” the ASA said.
Groupon, which floated on the New York stock exchange with a £8bn value earlier this year, has become very popular in Britain, with hundreds of thousands of consumers signing up to discounts on spa days, cosmetics, trips to the theatre and restaurant meals.
This year, the ASA has already formally investigated and upheld 11 complaints against Groupon and informally resolved a further 37. The complaints centre on the “exaggeration” of the amount of money customers can save with Groupon deals, and “failure” to conduct its promotions fairly.
“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 [and] exaggeration of savings claims," it said.
The most recent complaint was just last week when Groupon was accused of putting consumers under pressure to take out plastic surgery deals, by signing up to the deal before the midnight the offer was emailed out to consumers.
The OFT's probe will investigate whether Groupon is "complying with consumer protection legislation, including in relation to certain of its advertising practices".
"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," it added.
The OFT has increasingly flexed its muscles over the last year. It has claimed that British shoppers end up spending "billions" a year more than they have to because they are "tricked" into buying more expensive goods through deceitful marketing.
One of its main concerns is so-called "bait pricing". This is when shops advertise an eye-catching offer but the great majority of shoppers discover the deal has run out by the time they get to store. The Government body said that 81 per cent of shoppers felt annoyed or deceived by this tactic, but a third still went on to buy something in the store.
A Groupon spokesman said that it "constantly strives for business practices that are in the best interest of consumers".
It added: "We are constantly evolving business process to ensure customers receive the best possible experience at the highest standards. We are co-operating fully with the OFT to ensure that the rights of consumers are protected.”
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