Group Buying Deals So Hot They Can Burn

Many legal issues arise for advertisers when deciding to promote or sell their services and goods on group buying websites.

As the name suggests, group buying involves buyers making a commitment to buy a service or product at substantially discounted rates, and the purchase is not finalised until a certain level of sales is achieved. Group buying sites offer advertisers a guaranteed amount of profit and exposure to a sizeable and new audience.

But things can go wrong and unfortunately this has occured. There are numerous examples of advertisers who have been caught unawares and unprepared for the unexpected demand after a promotion on a group buying site.

Advertisers may then run afoul of Australian consumer laws, and group buying sites – due to their profile – may also be caught in the web.

If you’re contemplating offering your services via a group buying website:

  • do your research on how the sector works, whether your product can be sold on a group buying website, and what your competitors are doing;
  • do the maths for the best and worst case scenarios;
  • be aware of your obligations under the Australian consumer laws, such as the guarantee that services are supplied within;
  • a reasonable time frame;
  • shop around for the most suitable group buying site;
  • be prepared to negotiate better terms with the group buying site if, for example, the site targets your niche; and
  • find out whether you will have control over the promotional material because, in the event of any misleading or deceptive conduct or passing-off claims, you may be held responsible.

Much of the same applies to group buying sites, which also need to:

  • be aware of a new code of conduct, which some of the larger sites have signed up to, confirming their commitments to consumers, and other legal obligations such as spam and privacy laws;
  • have a policy to deal with advertisers who fail to deliver;
  • make sure your brand is protected and that you are indemnified against third party claims;
  • have a marketing strategy and think about how to get your best advertisers coming back; and
  • train staff on areas of potential liability.
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