Unknown only a few years ago, online daily deal sites such as Groupon and LivingSocial have become a ubiquitous phenomenon, touted as being of considerable benefit to participating merchants. That may be so, but they also carry a risk of legal exposure that merchants would do well to consider and take prudent steps to mitigate. Already, Groupon's program has reportedly become the subject of several investigations by state attorneys general and more than a dozen state and federal class action lawsuits. In some of these class actions, participating merchants have also been sued, so it's not just the promoter's problem.

THE WAY THEY WORK

The online promoter emails its subscribers notice of short-fuse deals that the promoter has solicited from participating merchants. The deals must conform to certain general criteria established by the promoter and, typically, are for a substantial discount on specified goods or services. If interested, the consumer clicks through to the promoter's website, where the terms of the deal are more fully explained. The consumer completes the purchase on the website, and receives an email confirmation of the purchase that is then printed and presented to the merchant in return for the proffered goods or services. Typically, the certificate expires if not used within a designated time.