Daily deal website warned for bait advertising

Being unable to supply advertised daily deal vouchers has today earned a start-up Christchurch-based website a warning about bait advertising from the Commerce Commission.

Bait advertising involves an offer to supply goods or services at a particular price, but with no reasonable grounds for believing a business or trader can supply the goods or services.

The Commission investigated allegations that Qupon Limited failed to honour offers it made to its customers on its daily deal website to supply discounted Z Energy petrol vouchers and The Warehouse gift cards.

In February 2012 Qupon made two offers to the public - an offer of $100 worth of petrol vouchers from Z Energy for $50 and another of $50 worth of The Warehouse gift cards for $25. Both offers were conditional on a minimum number of vouchers being purchased. In both cases, Qupon’s website could not cope with the volume of traffic that resulted from the offers and crashed before the minimum number of vouchers was purchased.

The Commission’s investigation found that even if the minimum number of vouchers had been purchased for each of these deals, it is unlikely that Qupon could have honoured them as they did not have sufficient funds or credit arrangements in place to purchase the vouchers/gift cards from the suppliers.

In March 2012 Qupon made two further offers of petrol vouchers from Z Energy at discounted prices. The first of those resulted in more than 1100 vouchers being purchased. Qupon did not honour that offer as it did not have sufficient funds or credit arrangements in place to purchase the vouchers from the Z Energy. The second offer also failed, as Qupon withdrew the offer before the minimum number of vouchers had been purchased following a cease and desist letter from Z Energy.

The Commerce Commission received four complaints about Qupon from people who had problems with the deals offered, or were anxious about refunds. All four complainants have been refunded and Qupon is refunding all other people who were charged for failed deals. Anyone having problems getting a refund should contact Qupon directly with the account number they used to make their Paypal payment.

“This was a poorly thought out and ill-prepared business operation that put the public’s money at risk and was likely to breach Fair Trading Act provisions about bait advertising,” said Commission Competition branch manager Greg Allan.

“It’s disturbing how easily people can set up attractive and apparently credible websites but have shaky backend operations that make them unwise to deal with. I urge consumers to carefully research offers on daily deal sites, look at the track record of the site, read the fine print and, in the case of vouchers, check with the business the voucher is for that the offer is valid.”

Since last year with a growing number of complaints about daily deal and group buying sites, the Commission has been targeting the websites, talking to them about their compliance programmes, checking how they vet advertising and how they deal with complaints.

Initially the Commission saw a drop off in the number of complaints it received. However, since 1 January this year the Commission has begun five investigations into different daily deal businesses.

“We are concerned about the daily deal and group buying website industry. We’ve made a real effort to educate a new industry but if we see that our advice and education is being ignored or flouted we will look at stronger enforcement action in future against those who breach the law,” Mr Allan said.

Background
Daily deal websites offer goods or services at a discounted price until the pre-specified number of sales is reached or the day ends (whichever comes first).

Group buying websites offer products or services at significantly reduced prices on the condition that a minimum number of buyers buy. This means a certain number of people must sign up for the offer before it becomes available.

Background: The Fair Trading Act

Under the Fair Trading Act
(Section 10) Misleading conduct in relation to goods
• No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.

(Section 13) False or misleading representations
            No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,—
(e) make a false or misleading representation that goods or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or

(Section 19) Bait advertising
(1) No person shall, in trade, advertise for supply at a specified price goods or services which that person—
o (a) does not intend to offer for supply; or
o (b) does not have reasonable grounds for believing can be supplied by that person—
at that price for a period that is, and in quantities that are, reasonable having regard to the nature of the market in which the person carries on business and the nature of the advertisement.

(2) Any person who has advertised goods or services for supply at a specified price shall offer such goods or services for supply at that price for a period that is, and in quantities that are, reasonable having regard to the nature of the market in which the person carries on business and the nature of the advertisement.