Discount website Groupon must ensure its deals are "accurate, honest and transparent", after the trading watchdog uncovered "widespread" breaches of consumer protection rules.
MyCityDeal, which trades as Groupon, has been given a three-month deadline to implement signed undertakings to change some of its practices.
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The Office of Fair Trading (OFT) has been investigating Groupon since July 2011 due to consumer complaints and a referral by the Advertising Standards Authority (ASA), which highlighted "serious concerns" about the company's ability to stick to advertising codes.
Groupon uses "collective buying power" to offer discounted deals for customers by promising firms a minimum number of customers taking up the offer. But the company acknowledged that its own procedures have not always kept up with its rapid rise and said it would "willingly" put the changes in place.
UK managing director Roy Blanga said: "As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth.
"We have independently made many improvements since early 2011 and have worked transparently and constructively with the OFT to identify areas that require further changes. We take their concerns very seriously and will be willingly implementing the recommended changes."
The ASA previously upheld a string of complaints about Groupon's advertising and has voiced concerns about Groupon's failure to conduct promotions fairly and provide evidence that offers are available, as well as concerns over exaggerations of savings claims.
Groupon was warned last year by the ASA "not to advertise sales promotions if they could not demonstrate they were genuine" after receiving complaints about the company's online banner promotions.
Complainants challenged whether one advertisement claiming "All you can eat in London for £3" and another showing a bouquet of roses with a "from £8" price tag attached were genuine after being unable to find the deals when they followed the link to the website.
In December 2011 the ASA ordered the banning of a Groupon advert after finding it referred to prescription-only Botox treatments.
The OFT said its own investigation found "widespread examples of Groupon's practices which, in the OFT's view, breached consumer protection regulations". The watchdog has told Groupon to inform it of complaints it receives and said it would consider applying for court enforcement orders if evidence is found that the undertakings have been breached.
Groupon has agreed to ensure that reference prices, which compare the original price against a sale price, are "accurate, honest and transparent" in future.
It must also also carry out an honest and realistic assessment of a merchant's ability to provide goods and services in the quantity or timeframe suggested.
Products should display clearly, prominently and on the same screen or before purchase all the limitations which apply to any deal and "reasonable steps" should be taken to ensure that health or beauty product claims are backed up.
The OFT said Groupon must also ensure that terms and conditions are fair and that refund policies comply with the Distance Selling Regulations.
Cavendish Elithorn, senior director in the OFT's goods and consumer group, said: "Collective buying and discount schemes can offer real benefits for both consumers and merchants. The market is growing rapidly, but it's important that consumers benefit from consumer protection law as well as from the discounted offers.
"Groupon has co-operated fully with our investigation and is making changes to its business practices to address our concerns. We will be monitoring the situation closely to ensure that consumers benefit from these improvements."
The OFT said Groupon had engaged "openly and constructively" throughout the investigation.