Groupon, LivingSocial challenged over terms of daily deals

More and more people have been embracing daily deals, figuring out how to work within the rules and limitations to score sweet discounts from local merchants. The phenomenon has made group discount services one of the hottest sectors online.

But have you actually read the fine print on your latest daily deal, and looked up the applicable law in your state? Depending on where you live, those rules might not actually apply.

Groupon, for its part, puts a dozen lines of disclaimers on each voucher purchased by its users — noting, for example, that “applicable law may require the merchant to allow you to redeem your Voucher beyond its expiration date for goods/services equal to the amount you paid for it.”

Some consumers — and their lawyers — say that fine print isn’t enough.

Proposed class-action lawsuits filed recently against Groupon and LivingSocial allege that the very existence of expiration dates on their vouchers violates certain state and federal laws that govern gift certificates, despite the disclaimers in small type. For example, in Washington state, where two of the suits have been filed, lawmakers have explicitly made gift certificates with expiration dates illegal.

“It is well known in the gift certificate industry that a significant source of the benefit for a business selling gift certificates is that a substantial number of customer never redeem them,” reads one of the suits, filed against Groupon last week in King County Superior Court in Seattle. (PDF, 13 pages.)  “Defendant is seeking to maximize this ‘margin’ in the gift certificate business by misleadingly encouraging consumers to never redeem their gift certificates, or to redeem them for less than the full value to which they are entitled under law.”

The suit also targets other Groupon restrictions, including a requirement that consumers use the vouchers in one visit. A similar lawsuit, involving one of the same consumers, was filed previously against LivingSocial in U.S. District Court in Seattle. Amazon.com is one of LivingSocial’s investors.

Similar cases have been filed in Minnesota and other parts of the country, including one case targeting both Groupon and Nordstrom.

They’re part of an increasing number of suits against daily deal sites over a variety of issues — a result, perhaps, of the success the sites are seeing. The market for local daily deals is expected to surpass $10 billion by 2015, and new daily deal sites are sprouting like weeds.

LivingSocial declined to comment, and Groupon didn’t respond to a request for comment this morning.

But a lawyer who represents similar sites, Deborah Thoren-Peden in Los Angeles, said today that daily deals should be thought of more like temporary sales, or coupons, as opposed to traditional gift certificates. Following that line of reasoning, she said, no one would expect a traditional merchant to keep an item on sale forever.

What’s more, she said, most companies in the daily deal industry act responsibly by alerting consumers, in the fine print and other disclaimers, that laws in their locations may give them additional rights. Thoren-Peden said she believes the industry in general goes “beyond the tenets of the various gift card laws.”

Groupon, for its part, explicitly promises refunds in cases where customers aren’t happy.

But Shaun Van Eyk, a lawyer representing consumer Barrie Arlis in the Washington state case against Groupon, said it’s important to reform the company’s practices before too many others in the industry mimic what it’s doing.

“This is illegal behavior,” he said. “It’s deceptive, and they need to stop.”

Todd Bishop of GeekWire can be followed on Twitter and Facebook.

 

  • James

    Boooo to stupid lawsuits. There’s nothing deceptive about the offers, yes offers, not gift certificates. These lawsuits, if successful, would ruin a business loved by both small businesses and the vast majority of consumers, the same people they’re supposedly trying to protect. If you think Groupon is misleading, don’t buy!

  • Bobby

    @James 100% agree. This is how good things get ruined. No one is trying to deceive you, Mr. Arlis. If you are dumb enough to get excited and impulse buy something that you then forget about and don’t use in a year, you deserve to lose your money.

  • Shane

    I agree, I’ve never felt Groupon was being shady. I mean they send me a warning anytime one of my deals is about to expire. No complaints here. Well, at least on this topic…

    For a long time I felt I was missing the whole Groupon daily deal boat because I live in a remote area. But after a little bit of research I was able to find http://steals4all.com which gathers all the daily NATIONAL Groupon deals that I can buy regardless of where I live.

    For now http://steals4all.com works great! But I would really love to get local deals in my area…

    • Jessie

      Have you tried CityPockets.com out? I just discovered it and think it’s amazing since it organizes all the deals I’ve bought in one place… so I won’t ever forget about something I’ve bought. Check it out.

  • John Richard

    You Can Get all the best daily deals from Groupon, LivingSocial, Tippr in just ONE email thats filtered for the stuff you want from a deal a day http://www.adealaday.com/.

  • C Stout

    I like Groupon’s refund policy if a customer has a problem.  I for one am very unhappy with Living Social in that I attempted to use my deal prior to the expiration but the company could not meet my needs for a month out and just starting the process or making the appointment before the expiration was not good enough to keep it’s value.  I lose out on $180.  Neither the company 3-Day Blinds nor Living Social will work with me on it.  I have unsubscribed Living Social and will be doing business only with Groupon from here on.