Judge OKs Groupon Lawsuit

Deals site accused of bait-and-switch advertising

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As Groupon prepares for its problematic upcoming IPO, there’s more trouble brewing for the daily deals site. According to Reuters, a U.S. judge said yesterday that parts of a lawsuit accusing the site of bait-and-switch advertising can proceed.

The proposed class action suit was brought against Groupon earlier this year by a San Francisco tour operator that accused the site of false advertising. The lawsuit claims that Groupon buys tour-related keywords on Google’s AdWords service, but often doesn’t actually offer tour coupons when customers arrive at Groupon’s site. The practice drives up the price of ad keywords for the tour company and diminishes its prominence in Google searches, says the lawsuit.

Groupon asked a federal judge in Oakland, Calif., to dismiss the lawsuit, but yesterday, U.S. District Judge Phyllis Hamilton ruled that certain allegations against the website can proceed, while others that were dismissed will have the opportunity to be retooled.

“We're very happy we're going to get to go forward with these claims to address what we think is classic bait-and-switch advertising,” said Steven Williams, a lawyer for the plaintiff. “Only now it’s done through Google instead of through the newspaper.”

@adweekemma emma.bazilian@adweek.com Emma Bazilian is Adweek's features editor.