Groupon Changes Daily Deal Economics

NEW YORK (Trefis) -- Groupon(GRPN) recently restated its fourth-quarter 2011 earnings, which resulted in lower revenue and net profit because of an increase in Groupon's refund reserve accrual. This was due to a shift in the company's deal mix which now includes higher priced deals which generally have higher refund. Since the refund rates are generally much higher for such deals, Groupon had to increase its refund reserves, and this led to a decline in reported sales and an increase in operating expenses.

It has already been hit with an SEC probe and a shareholder lawsuit following the restatement. However, that won't be the first lawsuit it will have to deal with. It is already fighting a series of lawsuits related to illegal coupon expiration dates for its coupons.

Check out our complete analysis of Groupon.

The lawsuits in question accused Groupon of violating federal and state consumer protection laws, which requires gift cards and coupons to have an expiration date more than 5 years from the date of purchase. They covered the daily deal coupons that Groupon offers, which expire in around 24 hours and other deals which expire in a month. The lawsuit also accused Groupon of imposing onerous conditions like no cash refunds and coupon use only for single transactions only.

Groupon has settled the lawsuit for $8.5 million. It is allowing consumers who received Groupon vouchers between November 2008 and December 2011 to redeem their expired vouchers or recover from the $8.5 million fund.