The Connecticut Attorney General's office is looking into whether Groupon may be violating state law. The AG, George Jepsen, has sent a letter to the company asking how its certificates are bought and redeemed, how many have been sold in the state, their expiration dates, which retailers have accepted them and their typical terms.
The reason behind the inquiry, he said, is that "it appears that what Groupon Inc. sells or offers may fall within the definition of a gift certificate under Connecticut law. Connecticut law prohibits gift certificates from being sold or issued subject to an expiration date." [PDF]
While one AG’s inquiry may seem to be a hazy, far-off and one-off threat, there has been a trend in recent years for state attorney generals to band together on certain topics, ranging for prostitution listings on Craigslist to minors’ activities on social networking. And Connecticut has been a a leader among the AGs in its investigations.
Do the Math
The AG’s inquiries also take aim at a key piece of advice aimed at participating merchants — do your math — as they price a deal. Clearly, the timeframe for which an offer is available is part of that math. To prepare, merchants need to look at their businesses critically, Groupon spokesperson Chad Nason told the E-Commerce Times. "You need to know your business inside out, from when your busiest night is to the slowest season to what is your average ticket. Groupon will bring a lot of customers to your business — so it needs to be running smoothly before adding these new customers."
Until now, the hard stop on the coupon was a given in the industry. But as more people flock to the deals misunderstandings are apparently grabbing regulators’ attention. People have "never purchased coupons before, and that's what makes it different," Jack Gillis, a spokesman for the Consumer Federation of America told the Wall Street Journal. To navigate this new issue, he said, the key is going to be clear and accurate disclosure. "Full disclosure will really protect [these companies] from a growing sense of unease" among consumers, he said.
