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.
