April 2 (Reuters) - Groupon Inc, which runs the world's
largest online coupon site, has agreed to an $8.5 million
settlement of nationwide litigation alleging the expiration
dates on its coupons are illegal.
The settlement resolves 17 lawsuits that had been combined
in a federal court in San Diego and which accused the
Chicago-based company and retailers it works with of violating
federal and state consumer protection laws.
News of the settlement surfaced after Groupon unexpectedly
revised on Friday its results for the fourth quarter, its first
as a public company, and said it had a "material weakness" in
its internal controls because of a failure to set aside enough
money for customer refunds.
Groupon shares closed down $3.10, or 16.9 percent, at $15.28
on the Nasdaq on Monday.
In the lawsuits, the plaintiffs said Groupon violated laws
such as the federal Credit Card Accountability Responsibility
and Disclosure Act, which prohibits the sale of gift cards that
expire in fewer than five years.
The plaintiffs said Groupon "effectively creates a sense of
urgency" among consumers to buy its vouchers by offering "daily
deals" for a short amount of time, usually 24 hours.
"Consumers therefore feel pressured and are rushed into
buying the gift certificates and unwittingly become subject to
the onerous sales conditions imposed," including a ban on cash
refunds and a requirement that gift certificates be used in a
single transaction, court papers show.
Groupon denied liability in agreeing to settle, according to
the settlement papers. Spokeswoman Julie Mossler said the
company does not discuss pending litigation.
John Stoia, a lawyer at Robbins Geller Rudman & Dowd
representing the plaintiffs, did not immediately respond to a
request for comment.
The settlement requires approval by U.S. District Judge Dana
Sabraw in San Diego.
It covers consumers who received Groupon vouchers between
November 2008 and Dec. 1, 2011. These people may redeem the
vouchers past the expiration dates, or recover from the $8.5
million settlement fund.
The company also agreed over the next three years not to
sell more than 10 percent of its daily deals with expiration
dates of fewer than 30 days.
Groupon went public last November in one of the most highly
anticipated initial public offerings of an Internet company.
However, some analysts and investors criticized its
accounting and Groupon changed how it reports results under
pressure from regulators. The company's rivals include
Amazon.com Inc and LivingSocial.
The case is In re: Groupon Marketing and Sales Practices
Litigation, U.S. District Court for the Southern District of
California, No. 11-md-02238.
For Groupon: Anthony Lehman of DLA Piper and Bradley
Meissner of Fenwick & West.
(Reporting By Jonathan Stempel)
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