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Groupon Requires Companies to Honor Gift Certificates for Five Years

Thinking of trying Groupon? Settlement terms of a lawsuit clarify that all merchants must accept a coupon for as much as five years.

Associated Press

Groupon founder and chief executive Andrew Mason


Social buying site Groupon has reached a settlement on a class-action lawsuit filed in March.

The company had no comment about the financial details of the settlement, but they are revising their terms of service to spell out that you, the merchant, must honor any coupon for the period of time required by the state in which it was purchased. (If you don't, Groupon will offer a refund to the customer for the amount that he or she paid for it.) Groupon says this has always been its policy, but now it's more explicit.

Chicago resident Daniel Keeler sued Groupon in March, accusing the site – which was reportedly valued at $1 billion earlier this month – of violating an Illinois law that forbids companies from selling gift certificates that expire within five years.  Groupon "systematically deceives its customers," Keeler alleged in court papers, because expiration dates are imposed after a customer already has bought the coupons. (Read the Groupon lawsuit here.)

"Groupon demonstrated to us they are committed to their customers," Bill Gray, Keeler's attorney, said in a statement. "It's a win-win for both the consumer and Groupon." If a company doesn't honor its Groupons for five years, the site will offer a refund.

Groupon – which Monday launched in Tucson, its 50th city – posted a comment about the settlement on their blog. The company initially responded to the lawsuit with a characteristic bit of humor: It filed a class-action suit against itself, posting a form on its blog for customers to fill out their name and how they were systematically deceived.

"As a company with one of the most irrationally liberal customer satisfaction policies on the planet — we refund anyone that feels like Groupon let them down for any reason —we're baffled by this whole thing," Andrew Mason, the site's founder and chief executive, said in a statement in March. "In fact, we've decided that the best way to respond is by organizing our own class action. If there actually are customers out there who feel like we've let them down, we want to get them their money as quickly as possible."

In the blog post, Mason wrote: 'We are so not the type of company that needs to be sued to bend over backwards for our customers. We didn't need to be sued to have an open-refund policy. We didn't need to be sued to print our phone number on Groupons. ... I don't know if it's some kind of weird complex, but the idea that there's even one customer out there that is less than thrilled with Groupon horrifies me.

He added: "So while we obviously think this lawsuit is ridiculous, it's an opportunity for us to reinforce the fact that there is nothing more important to us than making sure [users] love us.'

Groupon also confirmed details about its latest round of funding on Monday, about which speculation began mounting last week. The site announced it had closed a $135 million round of funding. Its lead investor: Digital Sky Technologies of Russia, which also holds a stake in Facebook.

Last updated: Apr 20, 2010


Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.

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