ACCC sues Scoopon for misleading conduct

The group-buying website misled consumers as well as businesses that were putting their deals up on Scoopon.

The Australian Competition and Consumer Commission (ACCC) is taking group-buying website to the Federal Court for misleading consumers and businesses, after receiving a torrent of complaints.

Group-buying sites have been breeding like rabbits domestically and abroad in recent years, offering up daily deals that are activated once a certain sales threshold is passed. According to analyst firm Telsyte, Australians spent around AU$504 million on group-buying websites in 2012.

But there are signs of a decline for the group-buying business as consumers become more wary of deals that seem to over-promise and under-deliver. These heavily discounted deals are also said to be unsustainable for businesses that are offering them through group-buying sites.

The consumer watchdog said that along with other Australian Consumer Law regulators, it has received a significant number of complaints since the group-buying industry began to flourish in 2010.

Buyers of Scoopon deals were misled in terms of their ability to redeem vouchers and refund deals, as well as the prices of goods advertised, according to the ACCC. The watchdog also said that businesses were told by Scoopon that offering up deals through the site would pose no cost or risks when the company actually charges a fee.

Scoopon told businesses that 20 to 30 percent of vouchers would not be redeemed, even though the company has no way of ascertaining whether that would be the case, according to the ACCC.

"The ACCC has made online competition and consumer issues a compliance and enforcement priority," ACCC chairman Rod Sims said in a statement. "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 online traders take adequate steps to meet their obligations under the Australian Consumer Law."

Scoopon has acknowledged it needs to continuously improve its customer service policies.

"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 group buying company said in a statement. "We will review the ACCC allegations made and work to resolve the issues raised."

The case will be heard later this month. The ACCC is seeking declarations, injunctions, community service orders, pecuniary penalties, and costs against Scoopon.