The e-commerce marketplace known as Groupon Inc. began its roots in Chicago, Illinois in November 2008. By the end of 2010, it became a global market that reached thirty-five million registered users. Since then, the company has experienced a whirlwind of activity that made it prone to lawsuits. In a list of ten biggest lawsuits in company history, most of them involve consumer violation issues.
More About Groupon
Groupon was founded by Andrew Mason. It first gained the attention of his former employer, Eric Lefkoofsky. He handed a million dollars in seed money to help Mason in this business endeavor. According to a December 2010 publication by Forbes magazine and the Wall Street Journal, Groupon was on par to make a billion dollars in sales faster than any other business in history.
Unfortunately, Groupon’s growth rate wasn’t as impressive by 2011’s fourth quarter as investors hoped. It began a downward spiral that so far lost $9.8 million dollars by the end of the year. Things didn’t look any better come March 2012 either. By then, Groupon’s value dropped by eighty percent.
Since then, Groupon’s roller coaster ride of highs and lows witnessed a whirlwind of changes. This included Mason stepping down as CEO in 2015. Rich Williams took his place until 2020. After Williams, it was Aaron Cooper. Currently, Groupon is CEO’d by Kedar Deshpande, a role he took over from Cooper as of December 2021.
When companies like Groupon behave like a spinning merry-go-round, incidents are bound to happen. Unfortunately, such events can lead to lawsuits. Let’s cover ten of the biggest that’s so far been documented.
10. Groupon vs. Canadians ($535,000.00 USD)
In 2012, Groupon was ordered to pay $535,000.00 USD in a class action lawsuit that was filed against them by a group of angry Canadian consumers. The Ontario Superior Court of Justice Edward Belobaba told Groupon they were to pay $235.000.00 USD in legal fees, as well as any compensation owed to the customers in question prior to March 8, 2013. This wasn’t the first time Groupon was found guilty of breaching consumer protection laws. The dollar amount of this lawsuit settlement could have reached as high as seven million dollars as Canadian customers had up to January 27, 2014, to redeem the vouchers that were involved in the lawsuit.
9. Groupon vs. Chilean National Consumer Service (Sernac) (approximately $2 Million USD)
As a 2016 Christmas present, Sernac filed a class action lawsuit against Groupon. The agency felt the company breached the conditions and consumer confidence with its business practice. There were over almost two thousand claims filed against Groupon through Sernac, enough to bring enforce legal action.
Is this tied to the 2013 complaints that was also filed by Sernac? Yes, but that one was dismissed in 2021 when Sernac didn’t have enough evidence to prove Groupon did anything wrong. The 2016 lawsuit brings the matter up again as the nation’s agency insists Groupon still violated consumer protection laws.
8. Fair Labor Standards Act ($2.5 Million USD)
A class action lawsuit was filed against Groupon by approximately two thousand workers who claimed the company violated the Fair Labor Standards Act. After it was determined Groupon failed to pay its workers overtime between August 24, 2011, and June 30, 2015, they were ordered by the court to fork out what was owed. According to Class Action, Groupon had misclassified its sales reps as exempt from receiving overtime pay.
7. Ambercrombie & Finch vs. Groupon ($5 Million USD)
After failing to honor Groupon-issued gift cards that were given out during the 2009 Christmas season, Ambercrombie & Finch was hit with a lawsuit. The cards were valued at $25.00 USD which wasn’t supposed to have an expiration date on them. However, Abercrombie voided the cards a few months later. The chain store pointed out that the expiration date of January 30, 2010, was inside the sleeves of the issued cards.
The store’s decision to void the cards served as a breach of contract against Groupon. The Northern District Court of Illinois sided with Groupon as it didn’t buy Ambercrombie’s argument about consumer-related concerns. The store chain was ordered to honor the gift cards in question and allow the customers to redeem them without fear of an expiration date.
6. Groupon vs. UK’s Office of Fair Trading (approximately $6.5 Million USD)
In 2011, the Office of Fair Trading launched an investigation into Groupon after it broke British advertising regulations forty-eight times in less than one year. It was concluded in March 2012 that Groupon needed to clean itself up and atone for its actions. Groupon was ordered to refund the consumers that fell victim to the breached Advertising Standards Authority regulations.
Between fines and payouts, Groupon was ordered to pay out approximately $6.5 million USD. This was to compensate for the monetary loss among consumers, as well as shareholders, that were involved in this legal mess. Since then, Groupon remains under close watch by various United Kingdom agencies. This is to ensure Groupon doesn’t repeat this mistake again.
5. Groupon vs. Securities and Exchange Commission (over $6.5 Million USD)
According to Law Anchor, Mike Dillard and Groupon settled their lawsuit with the Securities and Exchange Commission as of 2021. Groupon agreed to pay the shareholders over $6.5 million USD despite its refusal to admit to committing fraudulent activity. In the settlement, it was agreed Groupon was to comply with the commission’s stipulations. Since this started out as a fraud case, Groupon needs to be more transparent with its business practices according to law.
4. Debit Card Overdraft Lawsuit ($8 Million USD)
This particular lawsuit was special. Groupon was one of many names mentioned in a debit transaction issue that raised the interest of some eyebrows. The banks were under scrutiny for incorrectly charging overdraft fees. Regardless of what the consumer is using the debit card for, they’re being charged a fee that’s not supposed to happen.
Class action lawsuits that were filed against Bank of America were settled for eight million dollars as of 2022. Wells Fargo was another major bank that was mentioned in the class action lawsuit. There are more banks expected to find their names on the lawsuit list as there are investigations still in progress.
As for Groupon’s involvement, it was on the list as one of the merchants mentioned in the lawsuit. They weren’t being sued, nor were they victims. They were, however, caught in the middle of a giant lawsuit that did reach a settlement with Bank of America. Also found on the list that was involved with the unauthorized overdraft fees included;
- Airline Bookings
- Beauty Salons
- Convenience Stores
- Department Stores (like Macy’s)
- Food Delivery Services
- Gas Stations
- Room Accommodations
- Sporting Goods Stores
- Uber (and other ride services)
- Various Retail Outlets
Everyday purchases made by consumers with debit cards from banks were also under investigation count in the equation. This particular matter was settled by the Bank of America for eight million dollars, according to Top Class Actions. However, as mentioned, the investigation continues as Bank of America and Wells Fargo weren’t the only two committing consumer violations.
3. Zhang vs. Groupon Inc: Groupon Gift Certificate Expiration Violation ($8.5 Million USD)
The $8.5 million USD settlement, according to Reuters, came from a combination of seventeen lawsuits that were filed against Groupon. The Chicago-based company was found guilty by a federal court in San Diego of violating state and federal consumer protection laws.
According to the plaintiffs, Groupon violated the Credit Card Accountability Responsibility and Disclosures Act. This prohibits the sale of gift cards that expire in less than five years. The complaint was about Groupon’s sales tactic to create a sense of urgency among consumers.
This resulted in consumers feeling pressured to buy gift certificates. Doing so made them become subject to the sales conditions that were imposed. This included a ban on cash refunds, as well as using gift certificates as a one-time transaction. Beneficiaries of the settlement involved consumers who did business with Groupon between November 2008 and December 1, 2011.
2. Rahal vs. Groupon Inc. ($13.5 Million USD)
It was agreed by Groupon to pay $13.5 million USD to the misled investors that filed their class action lawsuit against the company in April 2020. Originally, the investors sought a $140 million USD payout as a best-case scenario. This was the amount discussed during the preliminary approval.
The lawsuit began after the investors believed Groupon withheld important information from them. As shareholders, they have the right to know if the company’s sales of physical goods have been suffering. Instead of telling the truth, Groupon misled the plaintiffs.
At the time, Rich Williams was the company CEO. It was he who made a false November 2019 statement about Groupon’s financial situation. In reality, it wasn’t doing nearly as good as he projected and the discerning investors probed further into the matter.
In an attempt to thwart the class action lawsuit, Groupon accused the plaintiffs of improper usage of Instagram photos and usernames. It claimed they were using it for commercial purposes without consent. However, that argument fell on deaf ears as it was established by the court’s decision that Groupon would not win this argument. According to Top Class Actions, this case was filed as Rahal versus Groupon Inc., in the U.S. District Court for the Northern District of Illinois.
1. IBM vs. Groupon ($57 Million USD)
It began when Groupon sued IBM in May 2016 for infringement. This came about after IBM sued Groupon for doing the same thing previously. Come October 2018, Groupon wound up on the losing side of the argument. It was ordered by the courts to pay IBM $57 million USD to cover the infringement and licensing issues of four patents. The patent suit between IBM and Groupon that ended with some conditions. Groupon needed IBM’s permission in order to license any more of its e-commerce patents in the future. Originally, the lawsuit was supposed to be an $83 million USD settlement. This was even lower than the original $167 million USD IBM had asked for in damages.
Groupon’s argument was it believed the four patents involved were too old so it didn’t see an issue using them. IBM is one of the world’s largest technology patent holders with more than 45,000 patents to its name. Groupon learned an expensive lesson, thanks to IBM. Don’t make assumptions and don’t think a giant like IBM isn’t going to notice the smallest detail. IBM has also successfully taken Amazon, Expedia, and Twitter to court. As far as giants in the technology playground go, IBM is one company you don’t toy with.
Despite it All
Oddly enough, even after the fiasco Groupon Inc. that resulted in Rich Williams having to step down as CEO, he is still employed with the company. Whether or not Groupon has truly cleaned up its act to stay out of trouble remains to be seen. Despite Groupon’s turbulence as a company, there are still over fifty million active users. Nowadays, there are very few online coupon issues that plague this company and its associates. However, there are still time limitations placed on the Groupon discounts.
Part of the problem when doing an e-commerce business is how to handle timed discounts effectively. Groupon’s concept is based on selling thousands of items below cost as limited-time offers. The technology to allow timed offer discounts to operate with greater efficiency has improved since the beginning. As a result, Groupon has adapted accordingly. Now lead by a new CEO, Kedar Deshpande, it’s a matter of time to see what he’s able to do. Can he put Groupon’s name back on top as a trusted source for bargains and deals?