Groupon faces multitude of legal headaches in US Groupon may have rather more legal woes than people generally think. The problem isn't particularly that it's doing anything wrong - it's that the major limitation on most innovation is the old way of doing things. In this case, that's the laws about the old ways of distributing and using coupons. Research from Harvard seems …
My advisor suggested I stay far away from a Groupon offering for these very reasons. That and the fact that the businesses accepting the coupons are, by and large, not seeing any benefit from the service and actually losing money because of it. The wave of "ohhhh it's NEW" will crash when word spreads through the small business community that Groupon doesn't work.
We all know that Facebook has a lock-in. Everybody is already on it, and unless you convince all your friends to move to a competitor, you have to keep using it (assuming you want a social network, natch).
But even assuming the business model of Groupon works, what stops a competitor from offering the exact same service? What would stop small business to go to that competitor? Or consumers?
Illegal, possibly, but enforced at the whim of the supine competition commission who only every few hundred years or so wake up to stretch and yawn and turn over and go back to sleep. Honestly, if I had a quid for every piece of serious large-scale market abuse that the competition commission don't touch, I'd list myself on FTSE 100.
@AC, i get Groupon ads on my Droid 2 Global.... for Minneapolis/St. Paul. Which is like 300 miles away.
Anyway.. the Groupons being worth cash is not too big a problem. Coupons have been like this for as long as I can remember.. they are listed as having a cash value of 1/100th of 1 cent. And to redeem them, they have to be physically mailed somewhere (so, shipping costs exceed the cash value the mailer would receive.) In other words, a law that is on the books but fairly worthless.
As for the rest? I really don't know. I mean, "brick and mortar" retailers have national campaigns involving coupons all the time, I assume there is a general set of guidelines that don't run afoul of laws in most locations, and probably in the rest they just say the coupons are invalid. I won't be surprised if they don't technically run afoul of rules in other locations and they are just never called out on it. How compatible are these with Groupon? No idea.
Well the newspaper coupon can say that its cash value is 1/200 of a cent, but since the coupon holder did not pay for it, the assignment of value to the coupon is a harmless legal fiction that protects the coupon issuer and does not do so at the expense of the coupon holder.
If you have paid $50 for a Groupon, then real money has changed hands and if a fictitious value is assigned, and if that fictitious value is less than the Groupon holder has paid for it, then that assignment of fictitious value is no longer "harmless"; it causes harm to the Groupon holder. I have to imagine that , under current laws, most jurisdictions would not countenance such a practice.
All these laws are well-known. You hear radio ads for special offers that say things like 'not in rhode island' in the gabbleprint at the end. Every supermarket clip-sheet or flyer has lists of the exceptions at the bottom.
Are we to understand that Groupon had not built this in before cutting code? never mind the IPO this should be in the requirements spec.
If they were trading willy-nilly I'd be inclined to mark them 'avoid' myself. Surely not? in the domain of the landshark?
" there's the slightly bizarre insistence by some states that unused vouchers and coupons are actually the property of the state itself, analogous to forgotten-about bank accounts or people dying intestate."
It's not bizarre. The purpose is to ensure the banks etc don't have an interest in making it difficult for depositors/whoever to find out if they have unclaimed deposits/balances.
Not really - release early, release often, if you're to compete at all. They're out there signing up countless customers, while you're sat in meetings with lawyers sweating over the red tape and dreaming of a release. By the time you manage it, if you manage it, the land has been well and truly grabbed.
Facebook can tell you that. That's online business 101 for you, you can thank me later.
Groupon probably won't be long enough for it to matter much. They're burning through cash and generating terrible word of mouth with their source of revenue - small businesses.
Businesses would be better off to control their own advertising or at least enter deals under more favourable terms with existing coupon providers.
'Anyway.. the Groupons being worth cash is not too big a problem. Coupons have been like this for as long as I can remember.. they are listed as having a cash value of 1/100th of 1 cent. And to redeem them, they have to be physically mailed somewhere (so, shipping costs exceed the cash value the mailer would receive.) In other words, a law that is on the books but fairly worthless.'
Henry, I'm not 100% sure on this, but I strongly suspect that only coupons which are ostensibly free can have a negligible cash value of this sort. If someone has paid x for a voucher then I suspect the law prohibits the issuer from claiming that it's only worth 0.00001 of a cent.
As for the rest, the big thing most people have noticed with these vouchers are that the deals have rapidly gone from being quite interesting as businesses try them out to being a perpetual cycle of cheap gym membership, dance classes, salons and so on that have relatively low marginal costs and are struggling because their business model was drawn up in the go-go years and based on people having more money than they knew what to do with. When enough of those go out of business that the ones who are left have a sensible clientele base I see the enormous number of Groupon wannabes bursting faster than you can say 'wow, that's a really pretty bubble'.
The only reason I can see to invest in it is if you're the lead character in Brewster's Millions.
Sales person turns up, full of BS as usual.
Ok! I said what do I get from a £100 sale, took me 10 minutes to drag out of her that we ended up with around £40.
Not worth the hassle!
I'll leave these types of systems to businesses who want to turn their client base into "Tyre Kickers!"
They can GroupOFF - Groupon customers are just after the cheap deal (not that I blame them) - there is little or no loyalty for the retailer. I read in a previous article many retailers lose money with Groupon, many more break even - so it will get focussed on even more £200 beauty treatments (reduced to £50) that were never even worth £50.
A colleague went for a Groupon 'afternoon tea' offer - they said it was very disappointing and probably only worth what they paid (at most) - certainly not what it was claimed to be worth.
Another friend went for a haircut with some impossible discount - only to find out it was done by a trainee.
Personally I'm bored of fish pedicures - it does not even tickle any more...
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