Groupon-Style Lawsuit Hits LivingSocial

The No. 2 daily deal site on the Web, LivingSocial, has been hit with a class-action lawsuit similar to one recently filed against its much larger competitor, Groupon.

The suit, filed in U.S. District Court in Seattle, charges that LivingSocial is violating consumer protection laws by selling gift certificates with short expiration dates, knowing full well that many consumers won't use them in time.

Like Groupon, LivingSocial sells discounted gift cars for local businesses, so that a consumer might pay $20 for a $40 restaurant meal, or $40 for an $80 spa visit.

The suits revolve around state and federal consumer protection laws that restrict and, in some cases, prohibit expiration dates on gift certificates. Federal law requires gift certificates to be valid for at least five years.

"LivingSocial just doesn't do enough to make sure that consumers are aware of what their rights are, and they're not doing enough to communicate with their merchants," attorney Christopher Carney said, according to the Seattle Post-Intelligencer.

The plaintiffs in both the Groupon and LivingSocial suits are arguing that the daily deal sites are selling gift certificates at a discount and that laws governing gift certificates apply to them regardless of whatever expiration date may appear on the certificates.

In addition, the LivingSocial suit argues that there is no cash-back provision on the certificates, which would be a violation of Washington state consumer laws under certain circumstances.

Not really

Both Groupon and LivingSocial are expected to argue that the certificates consumers buy on their sites are not actually gift certificates, but rather are vouchers that give the consumer the right to buy a gift certificate at a discount and that the business issuing the certificate – the Silver Diner, for example – is responsible for meeting legal requirements covering gift certificates.

Also, both sites try to address the issue in their terms of service, by saying that the expiration dates and other restrictions printed on the vouchers may be superseded by local and federal laws and that the merchant is “obligated to honor the voucher in compliance with law.”

But attorneys involved in the suit say that such legal mumbo-jumbo is doing consumers a disservice. They say that most consumers as well as merchants think the expiration dates are valid. Dropping a disclaimer in the fine print isn't enough, these attorneys argue.

The LivingSocial class action seeks to include all Washington residents who weren't able to claim the full value of their gift certificates. Consumers anywhere in the United States could joint the suit if their gift certificates expired before the five-year limit set by federal law.