Groupon Sued For Having Short Expirations On Coupons
from the class-action-madness dept
While I’m still not as convinced as some that Groupon really is a sustainable long-term business, it is an interesting one to watch. And, with any massively successful business, it’s no surprise that lawsuits — especially of the class action type — follow. The latest is that Groupon is being sued for having its deals expire too soon under the Credit Card Accountability Responsibility and Disclosure Act of 2009. That act does include a provision that gift cards cannot expire for at least five years. So it seems that the basis of this class action is to claim that the deals offered by Groupon are the equivalent of a “gift card,” rather than a standard coupon, which can expire in much shorter time frames.
This seems like a pretty big stretch. It’s not hard to see that Groupon is much closer to offering a coupon for sale, rather than a gift card. Furthermore, if we just look at the reasoning behind this provision in the law, again, that suggests this lawsuit is frivolous. The idea behind the five year expiry on gift cards is that it’s often not entirely clear when those cards expire (they’re often not marked) and since they work differently than a coupon (i.e., stored value of some kind, rather than a discount on a particular item) people often hold onto them for much longer. In this case, the expiration date of what’s being sold is clearly stated, so comparing it to the situations with gift cards is misguided. The whole thing just seems like yet another attempt by class action lawyers to cash in at the expense of a successful company.
Filed Under: class action, coupons, expirations, gift cards
Companies: groupon
Comments on “Groupon Sued For Having Short Expirations On Coupons”
There is a Big Difference
Gift cards, as covered by California Law, are generally cash equivalent. You give Border’s $20 and they hand you a $20 gift card. Those shouldn’t expire because they are cash equivalents and it doesn’t lock Borders into any specific deal–and, of course, Border’s is making money on the interest, or the equivalent for not having to borrow money, so to let Borders punish people for letting Borders earn interest on their money by letting Borders top off their interest by stealing customers principle in its entirety by having the cash equivalent “expire” is unconscionable.
The Groupon gift cards are not cash equivalent, they are discounted offers for a specific product or services. They lock a retailer into a certain offer. The lawsuit is about a “certificate was good for 30 minutes of play for up to 10 people for $55.” Discounted gift cards are not covered by CA law–I can’t speak to the Federal law.
Groupon’s stance on the matter seems fair to me –
“A Groupon is good until its expiration date; at that time, the merchant will still have to honor what you PAID (NOT face value), for five years or in accordance with state law. It’s five years in Illinois, and that’s the most strict in the country, so that’s what we ask merchants to abide by.
So if I spend $20 to buy a $40 Groupon for one dozen roses at Flower Shop, when it expires the merchant owes me a $20 credit to their store. They don’t have to give it to me in one dozen roses, but they do have to give me a credit (not cash) for what I paid.”
They don’t even totally expire on the expiration date either. They would just end up being worth what you paid for them after the expiration date.
—————–
What happens if my Groupon expires?
All is not lost! Once a Groupon reaches its expiration date, it loses its promotional value, but you can still redeem it at the price you paid for the length of time stated by gift certificate laws in your state.
http://www.groupon.com/faq
The suit has merit.
As you mentioned, part of the reasoning behind the gift card law is due to unclear expiration dates on gift cards. But another part of the reason is that money was paid for those gift cards (as noted by Scote above). The government said businesses aren’t allowed to sell people special currency that magically loses its value over time.
A groupon is only like a coupon, when you don’t have to pay for it. If you are paying for the deal ahead of time, it’s exactly like a gift card IMO.
-DeAngelo
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Re: The suit has merit.
No, it doesn’t.
If you buy a groupon for $30 for a haircut that normally costs $60, and you let it expire, it’s still worth $30, it’s just not worth the $60.
And if it expires and you can’t redeem it (say, service no longer offered or something), groupon will refund your money.
This lawsuit is a pure moneygrab.
Re: The suit has merit.
I have to agree with DeAngelo’s reasoning….. if it walks like a gift card, talks like a gift card, and looks like a gift card…. to say it’s a coupon is intellectually dishonest.
I was on the side of the people saying “This is a coupon!” until I figured out that you had to pay for it. Then, I realized “Hey, it’s a gift card which does specific terms!”
Re: Re: The suit has merit.
…to say it’s a coupon is intellectually dishonest.
To imply that Groupon is saying that it’s not a gift certificate is intellectually dishonest. Groupon not only believes that they’re selling fit cards, but they believe that they’re following the law.
Again and again and again and again and again and again…
Groupon has not claimed to be above those laws. Groupon claims to be strictly following those laws. I know that we usually see cases where companies try to claim that certain laws don’t apply to them, but this isn’t one of those cases.
Re: Re: Re: The suit has merit.
Oops, that was me. Sorry.
Mountain/Molehill.
Groupon’s policies are clear and seem to be within the law. From a spokesperson:
“A Groupon is good until its expiration date; at that time, the merchant will still have to honor what you PAID (NOT face value), for five years or in accordance with state law. It’s five years in Illinois, and that’s the most strict in the country, so that’s what we ask merchants to abide by.
So if I spend $20 to buy a $40 Groupon for one dozen roses at Flower Shop, when it expires the merchant owes me a $20 credit to their store. They don’t have to give it to me in one dozen roses, but they do have to give me a credit (not cash) for what I paid.”
I’m a big fan of Groupon and this policy was made clear when I joined. In addition, a similar statement prints on the Groupon itself so I don’t really see that this guy does (or should) have a leg to stand on.
Re: Mountain/Molehill.
Doesn’t matter whether there is a statement on it or not. The fact is that these things are gift cards, albeit gift cards with specific terms, therefore they are covered under the gift card laws.
Re: Re: Mountain/Molehill.
…therefore they are covered under the gift card laws.
At this point, Christopher, I’m just copying and pasting things that I’ve already stated.
Again and again and again and again and again and again…
Groupon has not claimed to be above those laws. Groupon claims to be strictly following those laws. I know that we usually see cases where companies try to claim that certain laws don’t apply to them, but this isn’t one of those cases.
Not a coupon
Since I have to pay for the services in advance, I don’t see how it could be called a coupon. Its a *pre-paid* gift certificate or card. A coupon implies that you only pay for the services at the time those services are rendered. Groupon offers *prepaid* services and they should be held to the laws that govern such things.
Re: Not a coupon
So what about coupon books like http://providence.entertainment.com/discount/home.shtml
Re: Re: Not a coupon
Again, coupon books are COUPONS. You don’t have to PAY for them, you just go and get one. If you do have to pay for them, then they are not coupons…. they are the equivalent of gift cards.
Re: Re: Re: Not a coupon
Again, coupon books are COUPONS. You don’t have to PAY for them, you just go and get one.
That’s certainly not true. Many entities legally sell books of coupons. There’s no expectation of a cash value, so HR 627 doesn’t apply.
If you do have to pay for them, then they are not coupons…. they are the equivalent of gift cards.
[Citation Needed.]
Re: Not a coupon
You paid $20 for $20. The coupon provides an additional value beyond that (ex. $20 for $40).
Re: Not a coupon
Since I have to pay for the services in advance, I don’t see how it could be called a coupon.
In marketing, a coupon is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product.
Ergo, a coupon.
Its a *pre-paid* gift certificate or card.
Yes, it’s that, as well. Isn’t it grand how items can be multiple things at once?
A coupon implies that you only pay for the services at the time those services are rendered.
No, it doesn’t.
Groupon offers *prepaid* services and they should be held to the laws that govern such things.
No one has said that they shouldn’t be.
The question at hand is whether or not they’ve broken the law, since the portion that you pay for expires just like a gift certificate, according to the law. If you pay $20 for the Groupon, you keep that $20 as long as the law requires.
In fact, better than the law requires, because if the business closes, Groupon refunds you. If you purchased that certificate directly from the business, you’d be SOL.
Any questions?
Re: Re: Not a coupon
Except they aren’t selling you something that grants you a discount. You are paying the full amount up front to obtain a discount. That isn’t a coupon, that is a pre-paid purchase.
In fact, better than the law requires, because if the business closes, Groupon refunds you. If you purchased that certificate directly from the business, you’d be SOL.
This is actually what sinks them. You are effectively buying a groupon gift card, redeemable at X. You have to pay the full amount of the purchase up front. If the business folds, groupon refunds you. Seems like a pre-paid card to me, and that in many places is a “no expiry” thing.
Re: Re: Re: Not a coupon
It cannot possibly be a pre-paid purchase, because the purchase happens when you exchange the money. 😛
Anyway, it may be a regular purchase, instead of a credit purchase, but if so, HR 627 no longer applies and contract law would kick in, meaning that the expiration is valid, since you agreed to it at purchase. 🙂
“Since I have to pay for the services in advance, I don’t see how it could be called a coupon. Its a *pre-paid* gift certificate or card.”
Yes, that is a valid point. But groupon easily gets around that, as noted above, by insuring that the cash value you paid doesn’t expire–only the special deal. So to the extent it is a pre-paid gift card you loose zero cash value.
Groupon
Glad to hear the coupons still have the cash value. I’ve “lost” enough that I stopped buying them. Now I’ll print them up and use the cash value.
“Anonymous Coward, Mar 3rd, 2011 @ 9:49pm
You paid $20 for $20. The coupon provides an additional value beyond that (ex. $20 for $40).”
Except it may not. Groupon isn’t actually generous, they only do that to the extent required by state law–and not all states have gift card laws. So, given that they recognize this issue, and say that the cash value remains, depending on state law, maybe they are vulnerable to a federal class actions suit.
It is more complex than I initially thought. :-p
Re: Re:
…they only do that to the extent required by state law–and not all states have gift card laws.
No, Groupon extends the same protections to users in all states, according to what’s required in the strictest state. In addition, they provide additional protections if a business closes or refuses to provide service.
…maybe they are vulnerable to a federal class actions suit.
Of course they’re vulnerable to a lawsuit. That doesn’t mean that the plaintiffs have a leg to stand on, just that they paid a filing fee.
Then again, maybe not...
Not according to their own FAQ:
http://www.groupon.com/faq
But, you are right, they do have additional protections, they do say they will pay you back if you have a bad experience, I’m not sure if that includes “coupon expired” but it seems like it:
http://www.groupon.com/blog/cities/the-groupon-promise/
Which would seem to make the lawsuit redundant. But the law isn’t so simple. If something violates the law, it doesn’t necessarily matter if there is a policy that offers some mitigation, the company may still be in violation. However, given the generous refund policy, damages would seem to be nill.
Re: Then again, maybe not...
In general, when people refuse to use the reply function, it looks like they’re attempting to hide their (usually) lame response from the person to which they’re responding. Just FYI there, Scote.
Anyway, as I previously pasted, this is from Groupon’s spokesperson:
A Groupon is good until its expiration date; at that time, the merchant will still have to honor what you PAID (NOT face value), for five years or in accordance with state law. It’s five years in Illinois, and that’s the most strict in the country, so that’s what we ask merchants to abide by.
In short, they ask merchants to abide by the law in the strictest state.
Again, there is a much lengthier and more detailed summary of their policies printed on every Groupon. I suggest that you find a copy and read it in full, instead of relying on a small FAQ blurb.
Re: Re: Then again, maybe not...
Re: Re: Re: Then again, maybe not...
Seeing as how I quoted your statement–including your name…
Many users go to their profile and click straight through to their comments to see responses, as opposed to slogging through entire threads. That’s why it looks bad, not because you didn’t quote me.
…and responded to it thoroughly that seems like a really stupid and unfounded accusation on your part.
It may seem like an accusation – to someone who didn’t actually read what I wrote. To everyone else, it looks like a simple exchange of information to a newcomer.
I read the comments flat rather than nested, so the reply feature is not something I generally think of as relevant.
I gathered that, which I why I took a moment to to tell you how it looks to the rest of us.
Perhaps it would behoove you not to presume nefarious motivations on the part of others.
Pot? This is the kettle. You’re black.
Groupon Deals
A groupon is only like a coupon, you don’t have to pay for it. If you are paying for the deal ahead of time, it’s exactly like a gift card IMO.It is a valuable way to use this type of group buying site. groupon script
groupon
Nice article i knew that Microsoft and other giants like Google would have the deals business sooner or later and anyways the deals system is now very common but i dont think they would be able to fight against groupon deals…. i think groupon deals would be way ahead of Microsoft’s because groupon is real!!!! and ms would be cloning groupon! so they better find their new ideas to put in business!
Yeah, every time I'm out 50 bucks...
I think “lawsuit.”
I’m thinking that someone with that mentality isn’t really going to “get” Whirlyball, no matter what the price is. Their concepts of “fun” and “fair play” are hopelessly skewed.
Odd set of ideals over at the Whirlyball site: You apparently can’t play while intoxicated but they do recommend Whirlyball for “cocktail parties” and “St. Patrick’s Day.” Maybe the rules bend when you’re getting drunk on their dime.
http://www.whirlyball.com/what/cantplay.php
http://www.whirlyball.com/who/
Another fun fact: Intoxication is a “condition” on par with cardiac disease and pregnancy.
Which leads to another theory: perhaps if the complainant had been able to sober up by the expiration date, the situation could have been avoided. Or hit their due date. Whatever.
Re: Yeah, every time I'm out 50 bucks...
Another fun fact: Intoxication is a “condition” on par with cardiac disease and pregnancy.
For the purposes of this game, yes, absolutely. It makes perfect sense. The term condition, in this context, refers to the state of health or fitness. All of these conditions are equal – or on par – in the sense that they’re all conditions that would make this game too dangerous for you.
Groupon’s problem is that they cannot bypass laws for pre-paid services by labeling them a “coupon”. A coupon generally is something you don’t pay for, a gimmie, a discount, a lead on.
What Groupon sells is discounted pre-paid services. As such, it falls much more closely to the idea of pre-paid gift card or other, and is subject to those rules.
Now, here is an even better question: Does Groupon only pay the retailer when the coupon is used, or do they pay them on sales of coupons up front?
Re: Re:
A coupon generally is something you don’t pay for, a gimmie, a discount, a lead on.
Really? Can you show me a definition that says that? Preferably a legal definition. Thanks.
What Groupon sells is discounted pre-paid services. As such, it falls much more closely to the idea of pre-paid gift card or other, and is subject to those rules.
No one has stated that Groupons are not subject to laws surrounding gift certificates, not even Groupon. In fact, Groupon specifically references those laws in their fine print on the bottom of every Groupon.
Now, here is an even better question: Does Groupon only pay the retailer when the coupon is used, or do they pay them on sales of coupons up front?
Retailers are paid around the time of purchase, not at use. I can’t see why it’s relevant, though. Will you expound on this line of thinking? 🙂
Re: Re: Re:
Rose, most legal definitions of a coupon pertain to bonds and securities, not to free give aways. However, there is this:
“
1.
a portion of a certificate, ticket, label, advertisement, or the like, set off from the main body by dotted lines or the like to emphasize its separability, entitling the holder to something, as a gift or discount, or for use as an order blank, a contest entry form, etc.
2.
a separate certificate, ticket, etc., for the same purpose.”
Not legal, but you get the idea.
Groupon cannot, in their terms, override applicable law. That is, if there is law about pre-paid sales (even discount) in a state, those laws will always apply, no matter the terms as written.
Retailers are paid around the time of purchase, not at use. I can’t see why it’s relevant, though. Will you expound on this line of thinking? 🙂
The line of thinking here is pretty easy. If Groupon only paid on redeemed coupons, they would have a big motivation to sell short term items that expire rapidly, to avoid actual delivery while retain the funds. If they pay out on purchase, the motivation is more on the retailer than groupon. Of course, if the redemption level is lower, the net cost to the retailer is less as well, because they have more income to cover their special. (sell 100 coupons for $50 off. If people pay for 100 of them and redeem only half of them in the allotted time, the effective cost is almost zero).
If groupon was giving away coupons and collecting on redemption only, they wouldn’t have any issues. But since they are selling a “cash value” gift certificate of sorts, it is pretty hard for them to avoid state law.
Re: Re: Re: Re:
Rose, most legal definitions of a coupon pertain to bonds and securities, not to free give aways.
Could that be because coupons don’t have to be ‘free give aways’?
1. a portion of a certificate, ticket, label, advertisement, or the like, set off from the main body by dotted lines or the like to emphasize its separability, entitling the holder to something, as a gift or discount, or for use as an order blank, a contest entry form, etc.
2. a separate certificate, ticket, etc., for the same purpose.”
Not legal, but you get the idea.
Yes, I do get the idea. I hope you get the idea as well. The idea being that I was right and the definition of a coupon has nothing to do with cost and everything to do with value.
Groupon cannot, in their terms, override applicable law. That is, if there is law about pre-paid sales (even discount) in a state, those laws will always apply, no matter the terms as written.
That may be true, but it has nothing to do with this case. This case is not about pre-paid services or sales. It’s about whether or not Groupon is treating their gift certificate sales legally.
The line of thinking here is pretty easy. If Groupon only paid on redeemed coupons, they would have a big motivation to sell short term items that expire rapidly, to avoid actual delivery while retain the funds. If they pay out on purchase, the motivation is more on the retailer than groupon.
I see. You were looking for an ulterior motive on Groupon’s part. 😛
Of course, if the redemption level is lower, the net cost to the retailer is less as well, because they have more income to cover their special. (sell 100 coupons for $50 off. If people pay for 100 of them and redeem only half of them in the allotted time, the effective cost is almost zero).
No, Groupon takes a nice chunk out of it. I’ve heard it’s something like like 50% but I don’t have any firm numbers there.
But since they are selling a “cash value” gift certificate of sorts, it is pretty hard for them to avoid state law.
Again and again and again and again and again and again… Well, first time to you, but oh, man, again on this thread.
Groupon has not claimed to be above those laws. Groupon claims to be strictly following those laws. I know that we usually see cases where companies try to claim that certain laws don’t apply to them, but this isn’t one of those cases.
Federal law says...
(B) GIFT CERTIFICATE- The term `gift certificate’ means an electronic promise that is–
`(i) redeemable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo;
`(ii) issued in a specified amount that may not be increased or reloaded;
`(iii) purchased on a prepaid basis in exchange for payment; and
`(iv) honored upon presentation by such single merchant or affiliated group of merchants for goods or services.
——
So, Groupon’s coupon is a gift certificate. The law also says that it shall be unlawful to issue a gift certificate with an expiration date less than 5 years.
The purpose of this law is to protect the consumer from buying a gift certificate only to discover that it has expired before you can use it. This is a familiar bait and switch tactic. The fact that Groupon or the vendor will give you something else of equal value is irrelevant. You paid for something and they refused to deliver.
Re: Federal law says...
GIFT CERTIFICATE- The term `gift certificate’ means an electronic promise that is–
`(ii) issued in a specified amount that may not be increased or reloaded;
The fact that Groupon or the vendor will give you something else of equal value is irrelevant. You paid for something and they refused to deliver.
Incorrect, according to yourself. If a gift certificate is for an amount, not an item and you keep the amount for five years, as required by law, then where’s the refusal to deliver?
Groupon's not a coupon
In my meeting with the local rep, she said that they prefer to call them vouchers when they’re talking to a merchant — coupon has a negative, cheap connotation.
In general, You do not purchase a coupon – a merchant gives you a coupon. Therefore, the merchant can create their own rules.
A discounted gift card is purchased, so consumer protection laws protect the purchaser.
And some of us read the threads flat–so we see all the comments in the order they were posted–so we can just read the new ones without having to slog through entire nested threads.
It seems to me that you were being pompus over not having my reply where you wanted it. Too bad. It isn’t all about you.
Re: Re:
This is hilarious. In the past, posters have been criticized for skipping the reply button because they really were trying to hide their lame responses. I let you know, not because I think that’s what you’re trying to do, but because you seem new here.
You replied with some BS about how I was obv. criticizing you (because attempts are help are criticism?) and then, ironically, telling me that I should refrain from attributing nefarious purposes to the actions of others. Now you’ve done that yourself something like twice more since then and I can’t help but laugh at you.
Of course it’s not about me. If it were about me, I wouldn’t have attempted to relay any information to you. As for pompousness, again, you’re black.
Massachusetts
In Massachusetts, while the ‘coupon’ part of a Groupon can expire in a short period of time, your cost doesn’t. So if you paid $10 for a $20 meal, you can always bring in the coupon to get $10 off, even after it expires.
groupon
Groupon is full of it…I would love to know the terms of their settlement. There is plenty at stake for them…and they were smart to settle as quickly as possible…But someone will eventually hold their feet to the fire and they will have to assert their position on this matter…something they have yet to do.
Class Act Lawsuit
Where do I sign up to be included in the lawsuit? Please advise. Thank you.