Groupon violates California state and federal gift certificate laws that prohibit or restrict expiration dates, according to a recent class-action lawsuit.
Plaintiff Anthony Ferreira claims that Groupon’s Daily Deals, a list of discounts at local businesses, constitute gift certificates. Ferreira paid $25 for a Groupon gift certificate redeemable for $50 at retailer Nordstrom Rack on Nov. 21, 2010, which expired on Dec. 31, according to the complaint, and he did not use his Groupon deal before it expired.
Under some state laws, expiration dates on gift certificates are prohibited; under the federal Credit Card Accountability Responsibility and Disclosure Act, gift certificates must be valid for at least five years.
“Groupons” constitute promises that meet the statutory definition of “gift certificate,” the suit alleges, because they are promises purchased on a prepaid basis in exchange for payments that are issued in a specified amount not to be increased or reloaded, and are redeemable at a single merchant that honors it upon presentation.
Groupon also subjects its almost 40 million international members to other deceptive and unfair conditions, such as requiring consumers to redeem the deals in the course of a single transaction and preventing them from redeeming an unused portion for a cash amount, according to the complaint.
The suit, which also names Nordstrom and other Groupon retail partners as defendants, seeks to certify a national class of plaintiffs, estimated in the millions. In addition to restitution and punitive damages, the plaintiffs want the defendants to fund a corrective advertising campaign.
To read the complaint in Ferreira v. Groupon, click here.
Why it matters: Groupon faced a similar lawsuit in 2010, which the company settled. While financial details of the settlement are unknown, 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. In addition to federal gift card requirements, states have enacted various laws that prohibit or restrict expiration dates on gift cards. Companies should be aware of the patchwork of laws and consider whether their offers might constitute a gift certificate under statutes.