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November 29th, 2012
Gift Rap: Proposed Settlement in LivingSocial Case Offers Guidance to Marketers of Deal Vouchers
LivingSocial's most recent offer is likely its largest to date: a proposed $4.5 million dollar settlement to a set of class action plaintiffs and a nation of class action members. The proposed settlement comes less than three months after a U.S. District Court judge rejected a proposed $8.5 million settlement in a class action lawsuit against Groupon, a popular competitor to LivingSocial.
The LivingSocial lawsuit has allegations similar to the Groupon case, including that LivingSocial and a merchant partner offered vouchers with illegal expiration dates in violation of state and federal gift card laws. These lawsuits serve as a reminder to marketers of "deal vouchers" or other gift card offerings that such deals should comply with these laws and include clear and conspicuous disclosures regarding expiration dates.
LivingSocial deal vouchers typically include two values with two potential expiration dates: a paid value, meaning the customer purchase price for the voucher, and a promotional value, meaning the additional value received by the customer. If approved by the court, the settlement will require LivingSocial, in addition to issuing customer refunds, to make several changes to these popular "pay less, redeem for more" deal vouchers. The following is a summary of the terms of the proposed settlement:
- LivingSocial must pay $4.5M to a settlement escrow account to refund class members who file verified claims for the paid value of unredeemed/expired deal vouchers purchased prior to October 1, 2012, in addition to other fees and expenses. Any remaining balance will be donated to two consumer-focused charities.
- For three years after the settlement, LivingSocial cannot offer, with certain exceptions, deal vouchers with both a paid and promotional value where the paid value expires prior to the period of expiration provided for gift cards and gift certificates under the federal "CARD Act", or the applicable state law where a merchant partner is located, whichever is longer.
- LivingSocial must clearly and conspicuously identify the "paid" and "promotional" values, using those terms specifically, and their associated expiration dates on its website and on deal vouchers.
- LivingSocial must state in its terms and conditions that customers can request a refund of the paid value for any unredeemed deal voucher within seven days of purchase, and must include a webpage or webform customers can use to request a refund for unredeemed vouchers or vouchers where the merchant has gone out of business before the expiration of the promotional period; and
- LivingSocial must also include a hyperlink to its terms and conditions on the check-out page near where customers click to process deal voucher transactions.
LivingSocial has not admitted fault by agreeing to the proposed settlement. A fairness hearing is set for March 7, 2013.
For more information on this proposed settlement or any other advertising or marketing law issues, please contact Terri Seligman at (212) 826 5580 or tseligman@fkks.com, Claudine Wilson at (212) 705 4842 or cwilson@fkks.com, or any other member of the Frankfurt Kurnit Advertising, Marketing and Public Relations Group.
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On October 3, 2022, the Securities and Exchange Commission (SEC) announced that it entered into a $1.26 million settlement with Kim Kardashian over her social media promotion of the EMAX token without disclosing payment she received from token issuer, EthereumMax. The matter provides important lessons for advertisers. Read more.
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“Made in the U.S.A.” Claims Continue to be Scrutinized
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June 4 2018
