Groupon's business practices got some added scrutiny recently. The Wall Street Journal reported that, in the United Kingdom at least, Groupon keeps all the money paid for vouchers that aren't redeemed by the expiration date. This highlights a difference between Groupon's business here in the US and elsewhere.
In the US, once a Groupon offering is accepted by the required number of buyers, Groupon pays the retailer its share of the deal. If a specific voucher isn't redeemed, the retailer keeps the payment. In the UK, though, Groupon only pays the retailer when a voucher is redeemed. If a voucher isn't redeemed, Groupon keeps the entire payment for itself.
We all love a deal and saving money. Who wouldn't jump at the chance to get double your money: Spend $25 and get $50 in return? Really? Sound too good to be true? That's what some bargain hunters are saying in federal court.
Groupon is a bargain-hunter's Mecca. Every day there's a new deal. You might be able to buy a $50 certificate to your favorite electronics store and only spend $25. Or, maybe the deal is half-price tickets to a local sporting event or theater show.
Groupon partners with stores, restaurants and all types of businesses in your area: It promises to gather a certain number of customers in exchange for a discount on the businesses goods or services. If you and enough other people are interested in the deal, you get the discount, called a "groupon." If not, the deal goes away.
Not So Fast!
Some customers are saying the deals aren't so sweet. In fact, they're saying the deals often are illegal. In January 2011, customers in California filed a class action lawsuit against Groupon, as well as Nordstrom - one of the businesses that makes deals with Groupon.
The lawsuit claims with deceptive expiration dates which is illegal under federal and state laws, including the Credit Card Accountability, Responsibility and Disclosure (CARD) Act and Electronic Funds Transfer Act (EFTA). Groupon and its business partners do this on purpose, the suit claims, knowing that many customers won't be able to use the discounts before they expire. This results in big financial gains for Groupon and the retailers, and lost money for the customers.
CARD Act & State Laws
At the heart of the lawsuits is the federal CARD Act. The law provides many new protections for consumers, especially when it comes to gift cards (and certain gift certificates). For example, gift cards sold after August 22, 2010 must be good for at least five years. Some states, like Illinois, have similar laws covering gift cards and gift certificates in that state.
Is Groupon Covered?
Even assuming the customers are right and Groupon's expiration dates are too short under these laws, one problem with the lawsuits is whether Groupon's offers are in fact gift cards or gift certificates covered by the laws, or if they're really just coupons - like the ones you clip from the newspaper. Coupons can have very short expiration dates - a few days or weeks.
Another problem is Groupon's policies. If your certificate or Groupon expires you can still redeem it at the price you paid, up to the length of time set by the gift certificate laws in your state.
Protect Your Deal
Here are some things you can do to make sure you don't lose out on a deal like one offered from Groupon:
- Read the terms of the offer carefully for any expiration date
- Check to see if the offer calls itself a gift card, gift certificate, coupon or discount. It's a good indication of how the transaction might be treated after the expiration date
- If your offer expires before you can use, call the seller and ask for a refund or a new, identical gift card, gift certificate, or coupon. Most companies want to keep their customers happy and coming back for more
- If you use a credit card to buy a gift card, gift certificate, coupon or discount and the offer expires before you can use it, call your credit card company to see if it offers any type of refund or replacement protection
The key to a good deal is using it to make a purchase and save money. Make sure you understand how your gift card, gift certificate, coupon or discount actually works and use it before you lose it.
Questions for Your Attorney
- What are the laws in my state on gift cards and gift certificates?
- What can I do if a Groupon or similar offer is stolen from me?
- If I return a discount offer, can the seller refuse to refund cash or issue a credit card credit and instead offer credits good only for future purchases of discounts?