I bought the first Loopt U-Deal in late June with Virgin America: $35 for $100 worth of airfare on the carrier. The expiration period was relatively soon after I bought the voucher (July 31). However I was on my no-tech vacation and neglected to purchase a ticket by the deadline — merde. 
When I returned on August 1 I still tried to buy a plane ticket using the code and was unsuccessful. I requested a refund of the face value of the deal ($35) from Loopt but I didn’t get any response.
So I’m SOL, right? As a practical matter probably so. However, as Ben Edelman points out, there are numerous regulations that potentially affect daily deals. The law simply hasn’t caught up yet with the growth of the market. (Edelman has even created a letter writing template so that individuals can try and resolve problems with merchants.)
There are perhaps 15 or more lawsuits that are currently pending against daily deal purveyors. They all involve, in one way or another, the question of whether a daily deal qualifies as a “gift card” or “gift certificate.” If courts find that deals are gift cards/certificates there are a wide array of rules and consumer protections that apply. And these laws vary from state to state. For example, subject to certain exceptions, gift cards don’t expire in California. In Alabama it’s three years before they can expire.
Accordingly there could be some fairly significant restrictions imposed on daily deals that could dramatically impact their usage by merchants, depending on the outcome of the various lawsuits. Alternatively legal rulings could compel the industry to evolve in new directions.
These lawsuits and gift card rules are often neglected in the discussion of daily deals and their outlook. Indeed, I didn’t write at all about these issues in my recent report: Digital Deals: Birth of a New Global-Local Market.
Update: Virgin saw my automated tweet of this post on Twitter and reached out to me. They’ve now “fixed” my voucher code so that I can redeem the face value of the deal ($35). Thanks Virgin.
August 9th, 2011 at 5:22 pm
A related issue is that in some states, Groupon and/or the merchant is responsible for the FULL value of the Groupon, not what was paid.
So imagine:
$100 Groupon
$50 paid by consumer
$25 to Groupon
$25 to merchant
The consumer could come back 5 years later and demand $100 worth of goods/services.
Groupon’s revised S-1 basically says that after the “expiration” date, you get back the money that you paid.
See my analysis on Bloomberg TV: http://www.bloomberg.com/video/73684604/
August 9th, 2011 at 5:24 pm
Agree it could become a major liability for merchants, depending on the outcome of the litigation. Are deals “coupons” or are they “gift certificates”?
August 9th, 2011 at 5:43 pm
If you read the Groupon S-1 they seem to be trying to claim half-and-half. The portion that you paid is a gift certificate, the difference is promotional value.
Even at paid value, they are selling to merchants on the basis of a limited-term liability. Some merchants use to build an initial book of business (new to market) and don’t want a perpetual or even 2 year liability.
Plus, SMBs have a habit of going out of business. When that happens, consumers go back to Groupon for their money back.
August 10th, 2011 at 5:12 am
Yes, it will be complicated if the vouchers turn out to be gift certificates. And it may be more complicated if some jurisdictions say yes and others say no. Then it will probably need to go to appellate courts or ultimately even the Supreme Court — although that’s unlikely.
August 11th, 2011 at 8:55 am
Isn’t this why Google tried so hard to make the Nortel deal go through? They were sick and tired of law suits and therefore wanted to increase their patent portfolio dramatically.
August 11th, 2011 at 1:32 pm
Yes, although I’m not sure of the full range of patents (very broad) in that portfolio. Google wanted to use it defensively.
However this is not the same thing. While there are IP-related suits pending in the deals industry this is consumer regulation and consumer-facing laws. Different animal.
August 17th, 2011 at 7:10 pm
Recently, while redeeming a vendor-sponsored coupon BEFORE its expiration date at Pier One, I was informed at checkout that in California, coupons never expire. I quickly dug thru my bag and found an older Pier One coupon and got that applied to my purchase. Got me thinking about this very topic.