Scoopon hit with $1 million fine for misleading businesses and consumers

Online group buying site Scoopon has been hit with a $1 million penalty for making false and misleading representations to businesses and consumers.

The Federal Court ruled Scoopon had contravened Australian Consumer Law when it misled consumers as to the price of goods advertised in its deals and their refund rights.

Scoopon also misled businesses by saying there was no cost or risk involved with running a deal with Scoopon and it told one company that 30% of vouchers sold would not be redeemed.

The court has also ordered Scoopon to pay a portion of the Australian Competition and Consumer Commission’s legal costs, to further develop its existing compliance program and ordered an injunction restraining Scoopon from making similar misleading representations for a two year period.

In response to the findings, Scoopon executive general manager Jon Beros told SmartCompany in a statement Scoopon upholds “the highest standards in the industry”.

“As a pioneer of the Australian group buying sector and founding member of the Australian Group Buying Code of Conduct, our leading position has meant Scoopon is expected to uphold the highest standards in the industry,” he says.

“Following discussions with the ACCC, Scoopon has voluntarily accepted orders which include additional measures to improve compliance. Building on measures we’ve already introduced, Scoopon is re-training our team members, has introduced additional compliance roles and offered to work further with the group buying industry to implement stricter compliance standards.”

Scoopon has been given a community service order to hold an educational seminar on ACL issues for other group buying businesses and members of the Association for Data-driven Marketing and Advertising.

Telsyte senior research manager Sam Yip told SmartCompany because the industry is still developing, the sector has been constantly reforming its processes.

“The industry is still quite young, so many of these things which occurred in the past, aren’t necessarily a reflection of what’s happening today,” he says.

Speaking to SmartCompany when the ACCC launched court action against Scoopon in July, Yip said running deals through group buying sites shouldn’t be seen as a simple marketing solution for businesses.

“There are explicit costs around margins that need to be considered and implicit costs about what it means for a brand and for staff and customers,” he says.

“Often it is a lot more complex than advertised.”

The ACCC launched action against Scoopon after receiving “a significant number of complaints” about the group buying industry since it emerged in Australia in 2010.

ACCC chairman Rod Sims said in a statement it acknowledged Scoopon’s cooperation in the investigations which “enabled a more timely outcome to be reached”.

“The ACCC understands that Scoopon has worked to improve its systems and processes which gave rise to this conduct to meet its obligations under the ACL. However this penalty serves as a warning to other businesses in the industry to improve practices or face action from the ACCC,” he says.

“Online traders must understand their obligations are the same as traditional retailers’ and must not mislead customers or other businesses.”

Sims says the ACCC will take further action in this sector to improve compliance and protect small businesses and consumers.