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Press releases 2011 -

OFT takes action against group buying website for misleading iPhone sale

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30/11    10 March 2011

The OFT has taken enforcement action against Markco Media, the company behind group buying website Groupola, after it heavily promoted a sale of Apple iPhone 4s when it only had eight handsets available.

The OFT's investigation found that Markco Media used 'bait pricing' to promote a sale of iPhone 4s at £99 (normal retail price was £499) to entice consumers to join Groupola and sign up to receive daily email alerts from the company. Following extensive promotion of the iPhone sale, including via a press release, a national newspaper interview and marketing on Facebook and Twitter, almost 15,000 people signed-up and registered with Groupola for the sale.

The sale took place shortly after the much anticipated launch of the iPhone 4 when many people were keen to obtain one. People were not informed that there were only eight handsets available and so almost everybody attempting to buy an iPhone 4 at £99 was left disappointed, after incurring time and effort providing personal details to sign up to Groupola.

During the promotion, a sale progress bar at one point indicated over half of the iPhone 4s were still available and above this was a caption stating '202 bought'. At the time, the company itself claimed that 'over 5 million' users attempted to visit the website during the sale.

The OFT was also concerned about misleading comments made by one Groupola employee on the company's Facebook page at the time of the sale. The employee represented himself as an ordinary consumer and made positive comments about the company.

As a result of the OFT investigation, the company and its director have signed undertakings that prevent them from:

  • offering for sale products in circumstances where there is a disproportionately inadequate supply of those products when compared with the scale of advertising and marketing
  • making statements (including comments on social networking and blogging websites) without clearly and prominently disclosing when the author is an employee or has another relevant relationship with the company.

As part of its recent Advertising of Prices Market Study, the OFT completed a detailed study into the behavioural biases of consumers. Bait pricing - having only a small proportion of stock available at the advertised offer price - is one of the practices the OFT identified as having the greatest potential to cause harm and one which it has prioritised for enforcement action under the Consumer Protection from Unfair Trading Regulations.

Heather Clayton, Senior Director of the OFT's Consumer Group, said:

'Competitive markets, and economic growth, need fair and transparent promotional activity with consumers able to shop around and trust advertising of prices - this case demonstrates that, where necessary, we will take enforcement action.

'It is never acceptable for traders to pretend to be independent consumers. It is increasingly the case that people make purchasing decisions based on online peer recommendations and the OFT will continue to prioritise cases that protect the integrity of online consumer reviews and comments.'

NOTES

  1. Groupola is a group buying website, which is free to join and typically features a special offer or daily discount that is only activated once a set number of people agree to buy the product or service. It relies on the size and participation of its membership to secure discounts and special offers from businesses.
  2. See the case closure summary in respect of this investigation.
  3. The undertakings provided relate to alleged breaches of the Consumer Protection from Unfair Trading Regulations 2008.
  4. Under the Enterprise Act 2002 if these undertakings are breached the OFT can apply to the courts for an injunction, which, if disobeyed, could result in proceedings for contempt of court.
  5. Whilst the Director believes that his personal actions complied with the law, he has agreed to sign the undertakings in light of the OFT's investigation.
  6. The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) contain a general prohibition against unfair commercial practices and, in particular, prohibitions against misleading actions, misleading omissions and aggressive commercial practices. The Regulations are enforceable through the civil and criminal courts. 
  7. See information relating to the OFT's Advertising of prices market study.



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