Office of Fair Trading (OFT) closed consumer enforcement case.
Case reference: CRE-E / 26233
Complainant: OFT own-initiative investigation
Investigation against: Markco Media Limited t/a www.Groupola.com
Issue: Bait advertising and unfair commercial practices in relation to an online sale
Relevant instruments: Enterprise Act 2002, Consumer Protection from Unfair Trading Regulations 2008
This investigation was opened by the OFT on its own initiative to investigate the use of suspected use of bait advertising in relation to a sale by Marko Media Limited on the Groupola website. Groupola offers daily discounts for a variety of services, products and activities by using 'Group Buying Power'. In order to receive the discounts and special offers from businesses, Groupola guarantees them a minimum number of customers, if the minimum number of customers is not reached, the deal is cancelled.
As part of the promotional activity for this sale, Markco Media advertised that it would be selling a limited number of SIM free Apple iPhone 4 handsets for £99 (the normal retail price being £499) at 9:30am on Friday 2 July 2010. This advertising included the issue of a press release, an interview in the national press, an email being sent to Groupola's customer base and updates to Groupola's Facebook page and Twitter account. To be eligible to purchase the handset, consumers had to be a subscriber to the Groupola website and sign up to receive daily email alerts from Groupola.
As a result, 14,561 consumers subscribed to be eligible for the sale. According to a press release issued by Markco Media at the time, over '5 million' users attempted to visit the website during the sale.
During the sale, Groupola displayed a progress bar displaying how many handsets had been sold and how many were remaining. At one point during the sale, this progress bar indicated there were over half the amount of iPhone 4s still available. Above this was a caption stating '202 bought'. Soon after the promotion in question concluded Markco Media stated that 'We can confirm that we had 200 handsets available, and these have now sold out.'.
During its investigation the OFT asked Markco Media to confirm how many iPhone4 handsets it had available for purchase for £99 as part of this sale. In response, Markco Media confirmed that a total of eight handsets were available for purchase. Markco Media further stated that the abovementioned incorrect statements that had been made either during or immediately after the sale regarding the number of handsets available for purchase were as a result of human or technical error.
The OFT was also concerned that on the day of the sale a Groupola employee had published unidentified positive comments on the Groupola Facebook page in relation to the sale, including the following:
‘…Lets face it…if they offer you the same deal in a few weeks time, you will be back to try again, regardless of what you think of them now’
‘I say fair play!…and no - I don’t work at groupola’
During its investigation, when the OFT put it to Markco Media that the individual in question was in fact an employee of Groupola, Markco Media did not dispute this. However, the company stated that it was not aware of the existence of the comments until after they appeared on the website and it also said that the employee was not in the office at the time the comments were posted.
As a result of its investigation, the OFT formed the view that Markco Media Limited may have been operating in breach of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). In particular, the OFT identified evidence of commercial practices which, it alleged as against Markco Media Limited:
constituted unfair commercial practices, contrary to Regulation3(3) of the CPRs, contravening the requirements of professional diligence and which materially distorted/was likely to distort the economic behaviour of the average consumer
constituted misleading actions contrary to Regulation 3(4) (a) under the provisions of Regulation 5 of the CPRs, in that it published inaccurate information and was therefore untruthful in relation to a number of matters, including the availability and quantity of the product. As a result, this caused or was likely to cause the average consumer to take a transactional decision that would not have been taken otherwise
constituted unfair commercial practices, contrary to Regulation 3 (4) (d) under the provisions of paragraph 5 of Schedule 1 of the CPRs, in that the advertising, marketing and promotion of the sale was very disproportionate to the actual number of iPhone 4 handsets that it had available for purchase (without suitably disclosing the existence of any reasonable grounds that it may have had for believing that it would not be able to offer for supply the product), and
constituted unfair commercial practices, contrary to Regulation 3 (4) (d) under the provisions of paragraph 22 of Schedule 1 of the CPRs, as, in making comments on the Groupola Facebook page, a Groupola employee falsely represented himself as a consumer without association to Groupola and/or claimed or created the impression that he was not acting for the purposes relating to his trade, business, craft or profession.
As required in this case under the Enterprise Act 2002, the OFT consulted with Markco Media Limited to ensure that the identified infringements are not continued or repeated.
Following this consultation, Markco Media Limited and its director in his personal capacity signed undertakings which require that these parties do not continue or repeat the conduct of concern in this case.*
For example, these parties undertook not to offer for sale products, with associated advertising and marketing, in circumstances where there is a disproportionately inadequate supply of such products when compared with the scale of the advertising and marketing. These parties also undertook not to make statements (including, without limitation, comments on social networking and blogging websites) which falsely represent that the author is an ordinary consumer, without clearly and prominently disclosing the fact of any employment or other relevant relationship.
Having secured these Undertakings, the OFT has now closed its investigation into this matter.
*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.
- Press release, 'OFT takes action against group buying website for misleading iPhone sale', 10 March 2011