LivingSocial users may need to read the new fine print on their daily deals if they want to understand how it works. The social commerce giant was forced to clarify the expiration date and refund policy for its vouchers as part of its agreement to pay $4.5 million to settle a consumer fraud class-action suit.
According to court documents filed Oct. 19 in U.S. District Court for the District of Columbia, LivingSocial has agreed to establish a settlement fund to pay out claims, as well as “revise several portions of its business practices.” The proposed settlement ends the legal battle brought by a group of five plaintiffs, led by Melissa Forshey, who sued DC-based LivingSocial in April 2011 claiming she was unable to redeem an expired voucher for Jack’s Boathouse in Georgetown.
LivingSocial’s daily deals usually offer two expiration dates — one for the “paid value” and another date for the “promotional value.” The paid value is how much the consumer spent on the deal, while the promotional value, which expires much sooner, refers to the discount. For example, if a LivingSocial user accepted a $25 daily deal for a $50 five-course meal at a restaurant, but was not able to redeem the deal before the deadline, he still would be allowed to receive $25 worth of the meal, even without the discount.
The settlement forced LivingSocial to change its terms and conditions for daily deals “so that the expiration dates on its vouchers and Web site are more clear and understandable to consumers.” That means LivingSocial is required to spell out a deal’s paid and promotional value; explain how expiration dates work; offer a refund for unredeemed vouchers within seven days of purchase; and set the expiration date of a deal’s paid value to at least five years. LivingSocial put some of those proposed changes in place well before the settlement.
Plaintiffs in the lawsuit argued that the sale of online prepaid discounted coupons with short-term expiration dates is illegal under the federal Credit Card Accountability Responsibility and Disclosure Act, as well as under similar state laws. The plaintiffs claim that the coupons are gift certificates under federal and state laws, and are therefore subject to federal and state law limitations on expiration periods. LivingSocial disagreed that its deals fall under regulations governing gift certificates.
Now that a settlement has been reached, LivingSocial users with lapsed coupons can submit claims to a portion of the $4.5 million, or up to 100 percent of the paid value “of any LivingSocial deals that is unredeemed and unrefunded and whose promotional value has expired,” according to court documents.
Source: Washington Business Journal