Group buying sites warned over “big stick” regulation

Local group-buying sites are being warned to clean up their act or face “big stick” government intervention, following a spike in customer complaints over unclear policies, stock shortages and delays.

The Australian Competition and Consumer Commission says the industry is “on the radar”, with the eastern states recording the highest number of complaints.

NSW leads the way with regard to unhappy customers, with almost 200 complaints this year alone. Victoria has recorded more than 160 complaints while Queensland has surpassed 40.

David Bradbury, Parliamentary Secretary to the Federal Treasurer, said the industry is on notice about lifting standards and could face fines of up to $1.1 million.

This also applies to merchants who advertise on group buying sites.

“Businesses who participate in group buying websites are on notice that if they make wild and misleading claims about the products they sell or the services they provide, they risk breaking our consumer protection laws,” Bradbury has said.

State governments have also issued a warning to the industry, saying it could face a crackdown if it fails to regulate itself.

Anthony Roberts, NSW Fair Trading Minister, has told group buying sites to “fix your house up or we’ll come and fix it for you”.

“If people are not prepared to do the right thing, then we will come in and we’ll come in with a heavy hand and a big stick and do it for them,” Roberts said this week.

The news comes less than two weeks after group buying site Living Social found itself in hot water after advertising an attractive deal for Havaianas thongs.

More than 100,000 pairs of the thongs were sold, creating a huge backlog in deliveries and resulting in an angry backlash from customers.

Living Social admitted it would not be able to fulfil all the orders and would offer refunds or credits to customers.

The incident triggered a warning from Roberts, who advised customers to “tread very carefully” with regard to group buying sites.

Earlier this year, market leaders Spreets and Cudo released a framework for a voluntary, industry-specific code of conduct, detailing ethical and best-practice commitments to merchants and members of the sector.

Dean McEvoy, Spreets co-founder and chief executive, says the industry’s success is only as good as the experiences of both merchants and members.

“We have a responsibility to provide merchants and members a level of confidence around their group buying experience. The code of conduct will help deliver this,” he says.

Similarly, Cudo chief executive Billy Tucker says the code of conduct will help ensure the “group buying experience continues to be strategically sound for merchants, and enjoyable and worthwhile for members”.

The two sites have outlined a draft code for industry consideration, including a list of commitments that group buying sites will make to merchants.

The draft is currently being reviewed by the Australian Direct Marketing Association and is expected to be released to the industry in the next two weeks.