False ad suit can proceed versus Groupon: attorney

OAKLAND, California Wed Aug 24, 2011 4:14pm EDT

An online coupon sent via email from Groupon is pictured on a laptop screen November 29, 2010 in Los Angeles. REUTERS/Fred Prouser

An online coupon sent via email from Groupon is pictured on a laptop screen November 29, 2010 in Los Angeles.

Credit: Reuters/Fred Prouser

OAKLAND, California (Reuters) - A U.S. judge said parts of a false advertising lawsuit can proceed against online coupon distributor Groupon, according to one attorney who attended a court hearing on Wednesday.

A proposed class action was filed against Groupon earlier this year by a tour operator in San Francisco, accusing Groupon of bait and switch advertising. Groupon allegedly buys tour-related keywords on Google's AdWords service, but often does not actually offer tour coupons when customers arrive at the site, the lawsuit alleges.

The practice drives up the cost of keywords for the tour company while the prominence of its ads in Google searches declines, the lawsuit states.

Groupon is aiming for a mid- to late- September IPO, despite recent market tumult that has shelved some flotations, several people familiar with the company's plans who spoke on condition of anonymity told Reuters.

Groupon asked a federal judge in Oakland, California to dismiss the lawsuit. At a hearing on Wednesday, U.S. District Judge Phyllis Hamilton ruled from the bench that certain allegations against Groupon can proceed, said Steven Williams, an attorney for the plaintiff who was at the hearing.

Other claims against Groupon were dismissed, with a chance for the plaintiffs to refashion their allegations, Williams said.

A Groupon representative declined to comment, citing the ongoing litigation.

"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," Williams said. "Only now its done through Google instead of through the newspaper."

The case in U.S. District Court, Northern District of California, is San Francisco Comprehensive Tours LLC on behalf of itself and all others similarly situated v. Groupon et al., No. 11-cv-1300.

(Reporting by Dan Levine; Editing by Tim Dobbyn)

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