On June 8, 2011, the UK Advertising Standards Authority (ASA) found that online coupon provider Groupon, Inc. had misrepresented the ordinary selling price of a third party service that was advertised to Groupon’s online subscribers, and ordered Groupon to remove the advertisement from circulation.  The ASA also ordered Groupon to ensure its compliance with proper advertising policies, so as to prevent similar events in the future.  The decision is one of several regulatory decisions by the ASA in recent months, illustrating that – despite disclaimers to the contrary in the terms of use - “deal-a-day” online websites offering “red flag” or “last minute” for third party products and services may not be immune to scrutiny for representations made in online advertising in the UK, and possibly elsewhere.  Whether such services could rely upon the exception in Canada’s Competition Act for those who “print, publish or otherwise disseminate” an advertisement has not been tested.

The ASA decision came in response to a complaint that Groupon had overstated the savings for a third party salon treatment that was offered to Groupon subscribers at “£24 instead of £90”. The ASA found that Groupon did not have adequate evidence to substantiate the ordinary selling price of £90 in order to make the savings claim (Groupon had relied on an e-mail price list provided by the third party salon which quoted the regular price of the treatment).  The ASA ruled that the advertisement could not appear again in its current form, and informed Groupon that it would need to obtain documentary evidence of its suppliers’ pre-discount prices for future advertising.

In Canada, Advertising Standards Canada (ASC) is a similar independent, self-regulated advertising body to the ASA in the UK, with a mandate to protect the integrity and viability of advertising in Canada by monitoring and enforcing compliance with the Canadian Code of Advertising Standards.  The ASC works along side regulators, such as the Competition Bureau in Canada, to enforce compliance with misleading advertising laws.

Under Canada’s Competition Act and the ASC’s Code, claims and representations made by advertisers must be supportable, and advertisements may not include exaggerated claims as to the worth or value of an advertised product or service, with the result that exaggerated savings claims or “sales” claims can and do attract consequences under Canadian misleading advertising laws.  As in the U.K., evidence in support of these claims would likely be required.  At the same time, there is an exception under section 74.07 of the Competition Act for companies that “print, publish or otherwise disseminate representations to the public in the ordinary course of their businesses”, such as newspapers and other media outlets selling advertising space, which may arguably apply to online coupon websites. 

Whether the U.K.’s decision will raise “red flags” in Canada for “deal-a-day” websites such as Groupon, LivingSocial, Yipit and Dealbot, remains to be seen.