UK: Groupola under Fire from Consumer Regulator for Engaging in "Bait Advertising"

The company behind daily group offer website Groupola, Markco Media, has been reprimanded by the UK Office of Fair Trading (OFT) for engaging in "bait advertising" in breach of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). "Bait advertising" involves advertising a product without actually having it in stock, or having only a token supply of the product. In July 2010, shortly after the launch of the Apple iPhone 4, Markco Media announced that it would be selling a limited number of SIM free iPhone 4 handsets on the Groupola website for £99 (RRP was £499 at the time of the offer). It did not specify the number of iPhones that were on sale and, in reality, there were only eight handsets available. Despite this, Markco Media heavily advertised the offer via multiple sources, including a press release, an interview in the national press, an email to the website's subscribers and updates to Groupola's Facebook and Twitter pages. In total, 14,651 consumers subscribed to the site to be eligible for the sale and a later press release indicated that over five million consumers had attempted to visit the site during the sale. During the sale, Groupola displayed a progress bar indicating how many handsets had been sold and how many were remaining. At one point the bar indicated that 202 handsets had been sold and that over half were still available. After the sale closed, Markco Media confirmed the high volumes of sales, stating "we can confirm that we had 200 handsets available, and these have now sold out". It later admitted during the OFT's investigation that it had only eight handsets to sell and that the indication that "over 200" iPhones had been sold during the sale was a result of a human or technical error. Another issue which concerned the OFT was that a Groupola employee had presented himself as an ordinary consumer and made positive comments about the company on its Facebook page at the time of the sale. Markco Media confirmed that the comments were posted by a Groupola employee but that he was not at work at the time. As a result of the above actions, the OFT concluded that Markco Media had acted in breach of the CPRs. The CPRs contain a general prohibition against unfair commercial practices and, in particular, prohibitions against misleading actions, misleading omissions and aggressive commercial practices. The OFT considered that Markco Media activities were unfair and mislead consumers, namely by publishing inaccurate information about the quantity of the iPhones available for sale, and engaging in marketing and promotional activities which were significantly disproportionate to the number of iPhones actually available. The OFT has asked Markco Media to sign undertakings to ensure that the infringements are not continued or repeated in future. The undertakings include not offering products for sale in circumstances where there is a disproportionately limited supply when compared with the scale of advertising undertaken, or making statements (including comments on social networking/blogging websites) without clearly disclosing when the author is an employee or has a relationship with the company. The OFT reserves the right under the Enterprise Act 2002 to apply to the courts for an injunction should Markco Media breach its undertakings, which, if disobeyed, could result in proceedings for contempt of court. This action shows that the OFT takes potential breaches of the CPRs seriously; ensure that advertising and marketing campaigns are run so that facts are presented clearly. – Richard Dickinson

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