Groupon lawsuit alleges deception

Groupon, the deal-a-day coupon business that includes many restaurant discounts, has more than 70 million subscribers on its email list. But it also now has multiple lawsuits on its hands, including one in Minnesota, alleging that its business model is deceptive.

MPR reports that the lawsuit hinges on the idea that Groupons aren't coupons, but gift certificates, since they have been paid for in full up front. But the Groupons have expiration dates: In Minnesota, it's illegal to sell a gift certificate with an expiration date.

Groupon tries to get around the law by allowing a refund for the Groupon if the merchant refuses to accept it. But the case's lawyer said that when his client inquired about a refund, both the merchant and Groupon declined. He also says that the refund is irrelevant--the deals are illegal simply because they have expiration dates.

No expiration dates are good for irresponsible consumers, but tough on businesses as they can have the outstanding debts hanging over their heads indefinitely. Groupon, which has until tomorrow to respond to the Minnesota lawsuit, could simply change its expiration date policy, but it might lose clients who already feel skittish about Groupon's effectiveness.

MPR's quote from U of M law professor Prentiss Cox sums up the situation: "I mean, it looks like a new company that really didn't do its homework."

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