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.
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Filed Under: class action, coupons, expirations, gift cards
Companies: groupon

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  1. icon
    Rose M. Welch (profile), 4 Mar 2011 @ 4:24pm

    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. :P

    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.

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