Daily discount voucher company Groupon has been found to be breaking UK consumer rules and has been given three months to change and improve its practices.

An investigation by the Office of Fair Trading (OFT) found "widespread examples" of Groupon's practices which in the OFT's view breached consumer protection regulations.

Announcing the findings of its investigation today (16 March) the OFT said it has specific concerns over practices involving reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants. The OFT has now set a July deadline for Groupon to undertake changes in its practices to comply with UK law.

The OFT has demanded that: • Reference prices (adverts that compare an original reference price against a sale price), including savings, are accurate, honest and transparent. • Groupon carries out an accurate, honest and realistic assessment of a merchant's ability to provide goods or services in the quantity or time frame suggested.

• Products display clearly, prominently and on the same screen or before purchase all the limitations which apply to any deal. • Groupon takes reasonable steps to ensure that health or beauty product claims are supported by adequate substantiation.

• Terms and conditions are fair. • Groupon applies refunds policies and cancellation rights in accordance with the Distance Selling Regulations.

In a statement, the OFT added that it will monitor complaint numbers closely and has required Groupon to inform the OFT of any complaints it receives on each of these practices. OFT didn't rule out legal action against Groupon if the company fails to follow its instructions.

A statement said: "Should evidence emerge of a breach of any of these undertakings, the OFT will consider appropriate measures, including applying to court for enforcement orders." Groupon responded to the news with a lengthy statement on the company blog, admitting the breaches and apologising to customers who had "experienced the negative side effects" of the company's growth.

"We believe that the only way to build a company that lasts is to provide the best customer experience in the world, and it pains us when we fall short," it said. The statement also lists each point of concern highlighted by the OFT and how Groupon plans to rectify the issues. The OFT investigation was launched in July 2011 following complaints from consumers. In December 2011 Groupon was also referred to the OFT. by the Advertising Standards Authority following its finding of multiple breaches of UK advertising codes.

For more about group discount deals and their impact on the leisure industry, see Spa Business Issue 4 2011, p.24 Image: Juan Camilo Bernal/shutterstock.com