(Updates with planned public offering in seventh and eighth paragraphs.)
July 14 (Bloomberg) -- Groupon Inc.’s practice of selling group-discount coupons with expiration dates is being reviewed by Connecticut Attorney General George Jepsen for possible state law violations.
“It appears that what Groupon Inc. sells or offers may fall within the definition of a gift certificate under Connecticut law,” Jepsen said in a press statement issued today. “Connecticut law prohibits gift certificates from being sold or issued subject to an expiration date.”
Jepsen, in a July 12 letter, asked Groupon Chief Executive Officer Andrew Mason how his company’s certificates are bought and redeemed, how many have been sold in the state, which retailers have accepted them and the typical terms of those agreements.
The attorney general also asked about expiration dates. The Chicago-based company has until Aug. 5 to reply.
Groupon delivers daily discounts on hotels, restaurants and other goods and services to 83.1 million subscribers. The daily deal market pioneered by Groupon may generate $3.9 billion in U.S. sales in 2015, up from $873 million in 2010, according to the research firm BIA/Kelsey in Chantilly, Virginia.
Founded by Mason in 2008, the company last month announced plans to raise $750 million in an initial public offering. Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group AG are leading the IPO, according to a June 2 filing.
Groupon has asked six more banks to help underwrite the sale, including Barclays Plc and JPMorgan Chase & Co., said two people last month who have knowledge of the situation and declined to be identified because that information isn’t public.
Julie Mossler, a spokeswoman for the company, didn’t immediately reply to two voice-mail and two e-mail messages seeking comment.
Consumers have filed at least 12 federal court lawsuits challenging Groupon’s business practices. Cases, including those originally brought in California, Massachusetts, Washington, Alabama and Illinois, have been consolidated for pre-trial proceedings before U.S. District Judge Dana Sabraw in San Diego.
Connecticut law defines a gift certificate as a promise made by the issuer that, in exchange for a thing of value, goods or services will be provided up to the value of the certificate, according to Jepsen’s letter to Mason.
Connecticut law bars the sale of gift certificates that are subject to expiration dates, according to the letter.
The multidistrict case is In re Groupon Inc. Marketing and Sales Practices Litigation, MDL 2238, U.S. District Court, Southern District of California (San Diego).
--With assistance from Douglas MacMillan and Ari Levy in San Francisco. Editors: Mary Romano, Glenn Holdcraft
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