Legal Requirements for Coupon Language and Disclaimers

What federal or Minnesota laws, if any, govern language on coupons?

There is no required language that a coupon must contain to be meet legal requirements. If a coupon is honest about its representations of material fact and clear and conspicuous about its terms conditions, then it is most likely in compliance with federal and state law.

Nevertheless, it is important to have a good disclaimer. A merchant can prevent most legal liability for his coupons by having a good disclaimer that matches his store’s overall coupon acceptance policy. A consistent, well-rounded coupon policy is important to keep customers happy and to preserve public trust in your store. Writing a comprehensive coupon policy will protect you from extreme couponers who may duplicate the coupons or compile them to take undue advantage of the special offer. Accepting manufacturer’s coupons and competitor’s coupons is optional for retailers, and it’s important to specify whether or not you accept them at your store.
Include a short disclaimer on each coupon that communicates the terms of your store’s coupon policy that are most relevant to that particular coupon, along with any other terms specific to that particular coupon. There is very little legal liability affiliated with issuing coupons, except where there are dishonest and misleading practices.

There may be legal liability where an advertisement requests a specific action be taken, and promises a reward for that action. It is possible for a court to find, under common law contract principles, that a binding contract exists where an advertisement spurs a third party to act on a promise, and the court finds the advertisement was specific enough to form a binding offer. This type of case is very unusual because most advertisements don’t request specific conduct and promise a reward in such a specific, detailed manner.

What are some examples of coupon disclaimers?

The disclaimer that you include on your coupon should be a precise statement of your store’s coupon policy. It should be tailored to fit the role you want coupons to play in your business strategy. Most disclaimers are tailored to address concerns about expiration times, limitations, additional fees, taxes involved, limitations due to hours of operation or hours of redeemability, limitations on geographic scope, prevention of fraudulently copied coupons, statement that it is illegal to sell or transfer the coupon, statement that the coupon has no cash value, limitation on how many times the coupon can be used (to avoid having a single person clean your shelves, and condition on availability.

You should have a comprehensive store policy on coupons which is published on your website. It should include which coupons you do and do not accept, whether coupons are refunded on returned products, reservations of rights to refuse coupons, and other such details. It is easy to find examples of coupon policy, because most stores publish them conspicuously on their websites.

Are there any cases on what coupons must say on them?

In general, the Federal Trade Commission (FTC) requires any special terms affecting the advertised price to be near the advertised price, and clearly and conspicuously printed. For example, if one product is at low cost only if another item is purchased at regular price, then the coupon should clearly and conspicuously disclose that condition. Also, any claims that the item is reduced must be based on a factual reduction from a higher price at which the product was “openly and actively offered for sale, for a reasonably substantial period of time.” The FTC contains many other rules against deceptive pricing. Generally, honesty and good faith will ensure that none of these rules are violated.

Retailers are under no legal obligation to accept coupons. This does not mean that a merchant should issue as many coupons as he likes with no intent to honor them. Coupons are advertisements and subject to Minnesota’s False Statement in Advertising Act, as well as all UCC regulations. A lack of consistency or honesty in advertising your coupons can lead to legal liability if you don’t form a good plan before you start. Non-acceptance of coupons is very rare, because merchants are usually happy to see their customers redeeming their coupons, and their coupon policies are simple and straightforward.

Under Minnesota Statute 325F.67 (False Statement in Advertising Act), it is a misdemeanor make any public advertisement for the sale of goods or services which contains “any material assertion, representation, or statement of fact which is untrue, deceptive, or misleading.” This statute is enforceable only by the attorney general of Minnesota and violations are prosecuted by the county attorneys.
Under the Federal Trade Commission (FTC) Act, advertisers must be truthful and non-deceptive, cannot be unfair and must have evidence to back up their claims. A deceptive advertisement is one which is likely to mislead reasonable consumers on a material fact about the product or service, like it’s price or effectiveness. The FTC prosecutes violations of the FTC Act based on several factors like the scope of the ads, evidence of a pattern of deception, and the amount of injury to consumers.

From a legal perspective, are there different categories for coupons?

From a legal perspective, the most important distinction is that between coupons and gift certificates/cards. If a coupon meets the definition of a gift certificate under the federal Credit Card Accountability Responsibility and Disclosure (CARD) Act, then that law applies to prohibit expiration dates earlier than 5 years from activation date and to generally limit inactivity fees. The general definition of a “gift certificate” is: “a card, code, or other device that: (i) is not reloadable; (ii) is issued on a prepaid basis; (iii) is issued in a specified amount; and (iv) can be used only at a single or affiliated group of merchants.” If the coupon is redeemable for a specific good or service (e.g., “good for one haircut), then the element of a “specified amount” is not met. However, if there is a numerical dollar value (e.g., good for one haircut, a $20 value) or dollar amount to be applied (e.g., $20 towards a haircut), then the instrument would be considered a gift certificate because it lists a specified amount.

If you need to sell your coupons and keep a short-term expiration date, the CARD Act allows for a promotional certificate exclusion. This exception requires the coupon to meet specific structures and disclosures, and will not allow the purchase value of the coupon to expire. With this exception, the purchaser of the coupon will be able to get their value of their money back, (not necessarily in cash) even if they let the coupon expire.
The most common example of the gift certificate vs. coupon controversy is the recent advent of social couponing companies like Groupon and Living Social. The issue has not yet been decided by a federal appellate court, but most social coupon companies have tailored their policies to avoid any violation of the CARD Act.

In order to avoid federal laws on gift certificates, you have to avoid at least one of the four elements in the federal law’s definition of gift certificate. The simplest way to do this is to not sell your coupons. If you want to sell them, then try to avoid the “specified amount” element, and draft your coupons as being redeemable towards specific goods and services with no dollar value attached. Avoiding the other elements of a gift certificate — (i) is not reloadable and (iv) can be used only at a single or affiliated group of merchants — is not a good way to avoid the CARD Act, because reloadable coupons are usually considered gift cards, and it would be very difficult for a store to issue coupons that are not redeemable at only a single or affiliated group of merchants.

Minnesota Statute 325G.53 defines gift certificates in much the same way as tangible records that are sold and contain a value of goods or services promised. According to the MN definition, they may or may not be reloadable. Also, while federal law limits expiration dates, service fees and dormancy fees, MN law bans them entirely. Again, if the coupon is not made for consideration (sold for a price), then this law does not apply.

Written by Lucas Spaeth

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  • Karishma
    December 26, 2012, 8:37 pm

    Thank you for this informative article!!