Groupon Inc. (GRPN)’s U.K. unit breached consumer-protection rules and must change its pricing, product claims and advertising practices, according to the U.K.’s consumer watchdog.
Groupon must ensure its discounts are “honest and transparent,” that the merchant providing the goods is able to meet demand and that “health or beauty product claims are supported by adequate substantiation,” the Office of Fair Trading said in a statement on its website.
“As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth,” Roy Blanga, the company’s U.K. managing director, said in an e-mailed statement. “We take their concerns very seriously and will be willingly implementing the recommended changes.”
The company, the largest provider of online daily-deal coupons, pulled a 2011 advertisement that aired during the Super Bowl following public criticism that it made light of repression in Tibet. Chief Executive Officer Andrew Mason later apologized for the ad.
Blanga said in a telephone interview that the company sells more than 1 million coupons a month, and the regulator was concerned only with “a small proportion” of them.
“The discounts are going to be the same or roughly the same,” Blanga said. “What the consumers will see is more clarity.”
Groupon rose 5.69 percent to $17.84 yesterday. The Chicago- based company had priced its shares at $20 each in its November initial public offering.
The OFT said it started its investigation in July 2011 following complaints from consumers. In December 2011, Groupon was separately referred to the OFT by the Advertising Standards Authority following a finding of multiple breaches of U.K. advertising rules.
“Collective buying and discount schemes can offer real benefits for both consumers and merchants,” said Cavendish Elithorn, senior director of the OFT’s goods and consumer group. “The market is growing rapidly, but it’s important that consumers benefit from consumer protection law as well as from the discounted offers.”
The U.K. government is preparing to merge the OFT with another regulator, the Competition Commission.
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