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The reach of group buying sites, also known as ‘daily deals’ or ‘deal of the day’ sites, has exploded in recent years.

While many business jump at the chance to be featured on sites such as Scoopon, a recent Australian Competition and Consumer Commission (ACCC) action shows it could do more harm than good.

Negative brand association is a nightmare for any business, large or small. Affiliating your business with a third party always comes with a degree of risk, and group buying sites are a prime example.

The ACCC has announced it is taking federal court action taken against Scoopon, claiming it misled both consumers and businesses.

The consumer watchdog is alleging Scoopon engaged in misleading and deceptive conduct and made false and misleading representations to businesses and consumers alike.

The site sells vouchers for heavily discounted goods or services, and negotiates deals with businesses before marketing the deals to their members and the public through various means including social media.

The ACCC and other Australian Consumer Law (ACL) regulators have received a significant number of complaints since the group buying industry emerged in Australia in 2010.

“The ACCC has worked closely with other ACL regulators to address issues and improve practices in the sector to reduce consumer and business detriment,” ACCC Chairman Rod Sims said.

In the case of Scoopon, the ACCC believes it misled consumers regarding their ability to redeem vouchers, their refund rights, and the price of goods advertised in relation to some of its deals. The ACCC also alleges that Scoopon represented to businesses that there was no cost or risk involved in running a deal with Scoopon, when a fee was in fact payable to Scoopon.

Further, it is said that Scoopon misled businesses by claiming that between 20 per cent and 30 per cent of vouchers would not be redeemed when there was no reasonable basis for this representation.

“Businesses must have reasonable grounds when making representations to consumers and to other businesses. The ACCC is working to ensure that consumers making purchases online are not misled and that online traders take adequate steps to meet their obligations under the Australian Consumer Law,” Sims said.

Scoopon has refuted the claims, and a spokeswoman said it would be reviewing the ACCC’s allegations and work to resolve the issues raised.

“Since we began, Scoopon has improved its processes for selecting and managing deals to improve our customer experience and is a founding signatory to the ADMA Code of Practice, which is aimed at increasing consumer confidence in dealing with group buying platforms,” the spokeswoman said.

The ACCC is seeking declarations, injunctions, community service orders, pecuniary penalties and costs.

The matter has been filed in the Federal Court, Brisbane, and is listed for a hearing on 25 July.

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Stephanie Zillman

Stephanie Zillman

Stephanie is the editor-at-large of Dynamic Business. Stephanie brings with her a passion for journalism, business, and new ideas. On her days off, you might find her reading a book on the beach.

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