Red-faced directors at group-buying site Groupola admit they misled thousands of customers by offering to sell them cheap iPhones when they only had eight in stock.
A media campaign promoting the phones led to 15,000 people signing up to the site thinking they could buy an iPhone 4 for the advertised price of £99 instead of the retail price of £499.
During the promotion, a sale progress bar indicated over half of the iPhones were still available with a caption highlighting ‘202 bought’. At the time, the company claimed ‘over 5 million’ users attempted to visit the website during the sale.
The campaign backfired when a team from the consumer champion The Office of Fair Trading (OFT) looked in to the sale and found the company was making false claims about the offer.
The investigation revealed a Groupola employee was commenting about the sale online by posing as a genuine customer.
Following the OFT investigation, the company and a director have signed undertakings that prevent them from:
- Offering products for sale when there is a disproportionately inadequate supply of 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.
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.”
Bait pricing – having only a small proportion of stock available at the advertised offer price – is one of the practices the OFT has prioritised for enforcement action under the Consumer Protection from Unfair Trading Regulations.
