Groupon has been scolded for promoting an anti-wrinkle product called "Wrinkle Killer Snake Serum" in an advertisement on the site which at least one watchdog agency has said makes misleading or unsubstantiated claims about the product's benefits, the Atlantic reports.
The London-based Advertising Standards Authority (ASA) released the complaint today against Groupon's U.K. sister company MyCityDeals for allegedly making misleading claims about snake oil face serum in an October 2011 promotional deal, which offered customers an 83 percent discount.
According to the complaint, the language the Groupon deal listed four effects of the product, namely: "Temporary freeze-like effects on the face muscles," "Helps reduce the appearance of fine lines and wrinkles," "Helps tackle the signs of aging," and "Leaves the skin looking younger."
Based on these claims, the ASA believes the internet sales promotion violated three separate advertising codes, the foremost being that any objective claims made in an advertisement must be backed by evidence.
In response to the ASA, Groupon said all four claims made in the advertisement referred to sensory or temporary effects and were not meant to taken as "breakthrough" claims.
"Groupon said claims related to 'temporary effects' were generally accepted claims for which evidence was not usually required. They said the claim related to the product's active ingredient," according to the ASA. "They submitted studies related to that ingredient and said, because the studies did not demonstrate any cumulative or long-term effect, they had been careful to use wording that avoided any such implications and related only to short-term effects that were not cumulative."
In their coverage of the ASA's complaint, the Atlantic noted that though Groupon would seem to help the products they advertise by offering discounts, the site often ends up hurting products and small business by over-hyping them.
It's important to note that Groupon itself does not sell products, but rather offers marketing services for other companies, leading to criticism for unintentionally sabotaging these business rather than helping them. When a Groupon sales rep goes to a local coffee shop owner to talk them into using Groupon's service as a way to get more customers, we imagine the pitch sounds very compelling. Rather than spend money on advertising, these businesses can actually make money upfront by agreeing to participate in selling daily deals.
Writing for Techcrunch, Rocky Agrawal interviewed one small business owner who said their partnership with Groupon lost the company $10,000 without helping them gain new customers.
"What was the saddest part of it for me was that this had had happened to a lot of businesses but because no one had ever said anything we all just assumed (and myself included) we just assumed we were bad business people. That we just didn’t know what we were doing. If everyone loves Groupon so much, we must be wrong," the business owner told TechCrunch.
In the meantime, Groupon stock is trading at around $20, far below its post-IPO valuation a few months ago, according to Google Finance.