Brothers Gabby (left) & Hezi Leibovich, founders of group buying site CatchofTheDay, also own Scoopon. Photo: Josh Robenstone
Scoopon will face the consumer watchdog in the Federal Court later this month to answer allegations that it has misled business affiliates and consumers.
The Australian Competition and Consumer Commission said it had instituted proceedings in the Brisbane Federal Court against the online group buying site, which is one of about 30 operators in the $500 million sector that sells vouchers for discounted goods and services across the food, household, beauty, health and tourism industries.
Consumers spent about $115 million between January and March this year across the various sites which also include Groupon, LivingSocial, Cudo and OurDeal.
But the sector, which had over 80 operators at its peak, has attracted significant criticism from consumers since it emerged in early 2010. Many claim that redemption terms are too tough, businesses disappear or won't honour vouchers, and that the redemption process takes too long.
The ACCC said an investigation into Scoopon, which is one of the more popular and successful sites, resulted in allegations against it that it had misled consumers about their ability to redeem vouchers, their refund rights and the price of goods advertised in relation to the deal prices it spruiked.
As well, Scoopon is said to have encouraged businesses to offer products or services by saying there was no cost involved in running a deal with Scoopon, despite the fact a fee was payable.
It also told businesses that between 20 per cent and 30 per cent of vouchers sold would not be redeemed, and that in some instances, businesses would only need to reserve enough of their services to honour about 80 per cent of the vouchers that would be sold. The ACCC said there was no reasonable basis for that statement to be made to the businesses.
"The ACCC has worked closely with other ACL regulators to address issues and improve practices in the sector to reduce consumer and business detriment," ACCC chairman Rod Sims said.
"Ensuring that the digital revolution delivers competition benefits to consumers and small businesses is a focus for the ACCC.
"Businesses must have reasonable grounds when making representations to consumers and to other businesses. The ACCC is working to ensure that consumers making purchases online are not misled and that online traders take adequate steps to meet their obligations under the Australian Consumer Law," he said.
More to come
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