The Legality of Groupon?

Groupon has really taken off in Canada.  I think mainly because many popular restaurants have been available as Groupons and that has driven alot of adoption.   One of my favourite restaurants, Utopia Cafe sold almost 1500 Groupons during their promotion.  Today’s Groupon is for the very popular Table 17 Restaurant

If you’re not familar with the concept basically a Groupon is presented for a limited time period, usually 24 hours and a certain number of people have to buy the Groupon for the deal the activate.  In most cases the Groupon offers a 50% discount when you purchase immediately.  Most Groupon’s don’t have alot of restrictions on when they can be used but do have an expiry date.  Groupon also encourages additional Groupons to be purchased as Gifts.  This presents an interesting legal aspect, especially in Ontario, where Gift Cards and Certificates are regulated.

In 2007,  the Consumer Protection Act was amended to ban expiry dates and most fees on gift cards purchased after that date to ensure consumers get their full value, regardless of when they use them. The enhanced consumer protection measures now in force include:

  1. Prohibiting expiry dates on gift cards and certificates
  2. Restricting fees charged for gift cards to a) customizing a gift card, or b) replacing a lost or stolen gift card;
  3. Requiring the clear and prominent disclosure of any terms and conditions relating to a gift card (e.g., any limits to redeeming a card).

Should this protection apply to Groupons?  Are they a gift card or certificate?

6 thoughts on “The Legality of Groupon?”

  1. I don’t know that they’d be classified as giftcards, I think they’d be coupons, similar to those coupon books that people sell.

  2. One place here (SF, Cali has same law) said they’d honor it for the price I paid after the expiration. I wonder if most do that, in case you bring up this law, but they just don’t advertise it?

  3. Interesting Article.

    I think they should be able to expire and the time given (usually a year) is pretty fair. Its not really a gift card since you need to spend the entire thing at once, there is no credit given back or balance due.

    Its more of a pay now now, eat/use later type thing. If a restaurant has a special on some food, they dont have to offer it every day. The only difference is that you are paying for the deal ahead of time.

    PS I run DealPage.ca if you want to see all group deals on one page!

  4. Groupons are absolutely not a gift certificate. They are a promotion and should have an expiry if we don’t want our small businesses to go out of business. I think consumers need to be realistic. If they get a 50% off deal, the restaurant or shop only makes on average half this. So businesses take a big hit and most lose money with the hope that these people will return again. Gift cards are good for the equal value of something, it is like cash effectively. Businesses sometimes go from month to month and not knowing or being able to budget would be awful.

  5. Colin
    Groupons can fall into both categories of having an expiry date or no expiry date. If the card has a denominational value, like cash it can not legally have an expiry date. If the card is for a specific service, like a massage or manicure, then it has to have an expiry date. This expiry date was put into place to protect small businesses if they needed to raise their prices.

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