Groupon is currently facing both state and federal scrutiny. The Connecticut attorney general is evaluating whether the company’s business model runs afoul of state gift card law and federal legislators are questioning the company’s privacy practices.
Attorney General George Jepsen requested information from the company about its business practices, noting in a press release that “it appears what Groupon sells or offers may fall within the definition of a gift certificate under Connecticut law,” which prohibits gift cards with expiration dates.
Jepsen requested that the company explain the terms under which Groupons are sold to and redeemed by consumers, how much revenue is generated by those sales in Connecticut, and how frequently expiration dates are imposed on the sale of goods and services at a discount.
“Discounts on goods and services are good for Connecticut consumers, but only if they are getting the benefit of what they are entitled to under Connecticut law,” Jepsen said. “I have not prejudged Groupon or reached any conclusions. I am hopeful that any issues can be resolved through discussion and cooperation.”
The questions came after the company announced in July that it planned to start collecting more information about its users and sharing it with business partners.
“Groupon offers discounted prices on personalized deals, but it shouldn’t discount the protection of customers’ personal information,” Markey said in a statement about the letter. “We must ensure that consumer information is safeguarded, with clear, distinct permissions and the ability for customers to ‘opt-in’ before their information is shared with third parties.”
To read AG Jepsen’s letter to Groupon, click here.
To read Reps. Markey and Barton’s letter, click here.
Why it matters: Groupon is no stranger to the controversy as to whether its Groupons constitute gift cards. In 2010, a consumer filed a class action against the company alleging that it violates state and federal gift certificate laws that prohibit or restrict expiration dates. The case settled for a confidential amount, but the company changed its terms of service to require that merchants honor any Groupons for the period of time required by the relevant gift card law in the state in which it was purchased. Despite the change, a similar lawsuit was filed earlier this year in California federal court. Also, privacy is a hot-button topic in Washington, particularly with Reps. Markey and Barton, who introduced the Do Not Track Kids Act earlier this year. The legislation would ban online behavioral advertising to persons under age 18 and expand the protections of the Children’s Online Privacy Protection Act (COPPA).