British regulators extend scrutiny of Groupon

Less than a month after Groupon’s controversial IPO, British regulators are carefully examining the company’s advertising and trading methods.

The Office of Fair Trading — the U.K.’s equivalent of the Federal Trade Commission — looks set to step up its ongoing investigation of the company’s business practices after another watchdog joined the fray.

The Guardian reports that Groupon UK was referred to the OFT by another regulator, the Advertising Standards Agency, which monitors complaints about commercials for false and misleading claims. It has found Groupon to be a persistent offender of advertising rules, found in breach of its codes almost 50 times so far in 2011.

In a statement on the ASA’s website, the organization says it is referring complaints to the OFT about Groupon’s failure to conduct promotions fairly, failure to provide evidence that offers are actually available and for making exaggerated claims about the amounts that can be saved.

“We are taking this approach because, given Groupon’s track record, we have serious concerns about its ability to adhere to the Advertising Code. It is in the public interest that we refer the matter to the OFT, the OFT being better placed to address the underlying issues concerning Groupon’s trading practices generally.”

Groupon’s UK operation was previously known as CityDeal, a pan-European service run from Berlin that was acquired by the Chicago-based company in May 2010. It has proven controversial from the beginning, raising many complaints from customers and clients and in July the OFT announced that it was undertaking its own investigation of the business.

An OFT spokesman would not comment on the ongoing investigation, but the “will not be in a position to determine whether it considers the law has been infringed until it has completed its investigations and assessed the available evidence”.

Groupon issued a statement saying that it was cooperating with the investigation:

“Groupon constantly strives for business practices that are in the best interest of consumers. We are constantly evolving business process to ensure customers receive the best possible experience at the highest standards. We are cooperating fully with the OFT to ensure that the rights of consumers are protected.”
But though Groupon is the only daily deals business under official investigation right now, it may not be alone for long. As the Guardian points out:

The OFT is expected to launch a wider investigation into the online daily deals market, which has seen a proliferation of daily deals companies including Groupon’s arch-rival Living Social, to examine advertising and pricing practices.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.