Groupon is probed after breaching advertising rules 50 times in a year

The Office of Fair Trading has launched an investigation into Groupon after the daily deals website was found to have broken UK advertising regulations almost 50 times in less than a year.

The Advertising Standards Authority (ASA) said it had “serious concerns” about the ability of Groupon, which offers daily deals on everything from meals out to hair cuts, to adhere to the Advertising Code. It has referred the company to the Office of Fair Trading (OFT).

The ASA said it was referring complaints concerning Groupon’s failure to conduct promotions fairly, such as not making clear significant terms and conditions, failure to provide evidence that offers were available and exaggeration of savings claims.

However, the OFT said it had launched its own investigation into Groupon, in secret, in July.

The investigation became public after ASA voiced its concerns.

Groupon, which launched three years ago, is the online market leader offering daily discount vouchers for a range of products such as beauty treatments, restaurant meals and car hire. It has over a million customers in Scotland alone.

However, there have been growing concerns among consumers, including claims some companies have taken on more business than they can handle leading to some advertised offers being unavailable.

The ASA said in a statement that in 2011 they had investigated and upheld complaints against Groupon’s advertising on 11 occasions and had also informally resolved 37 cases.

“We will continue working closely with the OFT on these issues to ensure consumers are protected,” the statement said.

The OFT confirmed it had opened an investigation into the trading practices of MyCity Deal Limited, trading as Groupon UK.

“The OFT is considering whether Groupon is complying with consumer protection legislation, including in relation to certain of its advertising practices,” it said.

“The opening of this investigation follows complaints the OFT has received in relation to Groupon’s trading practices.

“As part of its investigation, the OFT is also considering concerns that have been raised with the OFT by the Advertising Standards Authority, in light of complaints the ASA has received.

“This investigation is ongoing and the OFT 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.”

A spokeswoman for Groupon said: “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 co-operating fully with the OFT to ensure that the rights of consumers are protected.”

In September, the ASA issued Groupon with a reprimand over a teeth whitening deal that claimed to offer a 75 per cent discount. A consumer had complained that the original £350 value of the teeth whitening treatment had been exaggerated. The voucher website was offering the product for £89.

Last night, a spokesman for Which?, the consumer magazine, which in May signed up to all the major group buying sites including Groupon, to examine savings, said: “When we carried out our research, group buying sites did have the cheapest deals available, but sometimes the discounts seemed exaggerated or there were additional costs.

“The key thing is to do your research before you buy; easier said than done when there’s a ticking clock and a limit on deals available. Always check the retailer’s own website and look for customer reviews before buying.”

• How do group buying sites work?

Group buying sites such as Groupon, LivingSocial and Kgb Deals claim to offer discounted services to consumers.

How they work – Signing up for sites is free. Customers register their e-mail address and location and are then e-mailed offers daily. Sites can operate slightly differently but customers are usually a few hours or a few days to book deals.

Some deals have a “tipping point” whereby they are only activated when enough people buy them. Most offers have a sell-by date.

Consumer rights - Which? said protection for consumers under the Distance Selling Regulations does not tend to apply to leisure services and is most useful for products.

There is no guarantee of a refund if you are paying by credit card.