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LivingSocial Hit with Groupon-Like Class Action Suit

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For the past several months LivingSocial has been announcing to the world that it was going to overtake Groupon for the number one spot in the daily deals industry and what was once called a distance second must now be referred to as gaining. The Washington, D.C.- based daily deals purveyor, currently sitting in the number two spot, has made some impressive moves, with their $175 million funding from Amazon, an Amazon gift card deal that beat out Groupon’s record Gap deal and a Super Bowl ad that at least didn’t reach the level of suck that Groupon’s controversial ads did.

Of course with success comes the same problems and litany of complaints that the bigger players face and in this case, just like Groupon, LivingSocial has been hit with a law suit claiming that they are violating consumer protection laws by including expiration dates on their “certificates” aka vouchers and that the site is cheating customers out of leftover funds.

The problem comes with the wording and interpretation of the law. Neither Groupon nor LivingSocial call their vouchers gift certificates, and despite the fact that reporters, journalists and even plaintiffs’ attorneys repeatedly call them gift certificates, doesn’t make it so in terms of the law (yet). Even in the case of LivingSocial’s Amazon gift certificate, it could be argued that the site was selling vouchers toward Amazon gift certificates and not the actual gift certificate which would then be the responsibility of Amazon.

What does seen to be confusing for many is that, at least in Groupon’s case, they state that gift certificate laws apply, but to their vouchers, not gift certificates. This is obviously an attempt on their part to make sure they are covered legally, but in reality it only serves to confuse.

According to Ad Law Access a Washington, D.C.-based advertising law information site:

Approximately half the states have laws that either restrict or prohibit expiration dates. In addition, a recent federal law requires gift certificates to be valid for at least 5 years. The plaintiffs in these cases are arguing that the Groupon and LivingSocial deals constitute gift certificates and that the expiration on the deals violate federal and state laws. In addition, the plaintiffs in the LivingSocial lawsuit are arguing that the no cash back provision on the company’s deals violates a Washington law that requires issuers to give cash back, under certain circumstances.

These lawsuits demonstrate that plaintiff’s lawyers are attempting to stretch gift certificate laws to cover various types of offers that don’t fit the traditional mold of gift certificates.

The gift certificate laws as they apply to Groupon, LivingSocial or any other daily deals or group buying site is unclear and will require a court of law to determine exactly where the term “voucher” fits in. In the meantime it does seem like these sites that claim that customer satisfaction is their number one priority, would try to clarify some of these issues in something other than the confusing legalese they are currently using.

 

Krissa Ashton

  • http://www.glenngary.com Glenn Gary

    I have used Groupon and Living Social to increase attendance to my show in Washington DC. They did not sell tickets or gift certificates to my show however. They sold a voucher that could be redeemed within 3 to 6 months for a ticket to my show. Actually, I agreed to honor their voucher for 3 to 6 months and I am the one that set that expiration date. The vouchers was only good for the person that bought it and that person had to show ID in order to redeem it. At least that is what was printed on the sale instructions and the voucher. I did have some voucher holders exchange their vouchers for my Gift Certificates even though that was not part of the daily deals offering. I will also add that the voucher itself did not guarantee admission on a certain date. The voucher stated that it was only good until a certain date pending availability and the holder had to call our box office to make reservations. We determined if we had available seats for the voucher holder the night they requested. If not we suggested another night. We did, however, honor the few request that we received to redeem the vouchers after the expiration date. But we let them use the vouchers as credit toward a full priced ticket instead of the discounted admission.
    When people purchased the vouchers, they knew they had to use them by the expiration date and as show producers we could not agree to honor them longer than that date. The discounted vouchers are used to fill unsold, otherwise empty seats. And while my show has been fortunate to run almost four years, shows can end at any time and without notice. If for any reason that happend before the expiration date, I agreed to refund any money that I received for unused vouchers.
    With the above in mind, I feel it is clear that Groupon and Living Social did not sell “Gift Certificates” but sold vouchers that had to be used by a certain date and the purchaser agreed to these terms before purchasing the vouchers. It is like a Coupon that is good for 50% off but that offer expires by a certain date.
    Glenn Gary

  • Naomi

    Groupon's merchant agreement specifies that businesses follow both “gift certificate” and “gift card” laws. Therefore, they, themselves are referring to their product as a gift certificate or card. Otherwise their legal council would not deem it necessary to put this wording into their agreements.

  • Kris

    yes.. it does say that they need to follow gift certificate and gift card laws, but that is still not saying they are either gift certificates or gift carts. When it comes to law the wording is very exacting and this is where many people are missing the point. Until the courts can step in and clearly define exactly what a voucher is, it's going to remain a gray area and no matter how often we try to call them gift certificates or gift cards (which seems to be a heck of a lot), it's not going to make it so until the law specifically defines what they are.

  • Shollywood

    Poor analogy, Glen. I didn't pay for the typical 50% coupon, you poorly used in your analogy. I have no skin or loss if I don't use a typical 50% off coupon. If I leave it sitting in the seat of my car and forget to use it, it's my loss on a good deal, but not my loss of my hard earned money. However, if I PURCHASE your 50% off Voucher/Coupon, I have a potenial loss, you have my money. Not right, not fair. And in time if you all hold fast on this crazy explanation of VOUCHER with Expiration, this interactive DEAL game will be over very fast. Greed comes before the fall.

  • henna

    Groupon with Livingsocial can increase a many high authorities to collect a mankind resources.
    -When people purchased a vouchers in a ceramic way to reach and it can be discounted in a fulfilled ways.
    -Second one the most full priced tickets they are using in a cheapest way.
    http://grouponclone.contussupp

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