Gaopeng, Groupon’s (NASDAQ:GRPN) official China JV with Tencent, has not been working out well. Recently, problems like personnel issues and a shrinking market share have been eclipsed entirely by a fake-watch-selling scandal. It all started a month ago when the company offered Tissot watches for just a quarter of their usual price as a daily deal. Hundreds of customers partook and then discovered that the watches were fakes, shipped with convincing (but also counterfeit) certificates of authenticity.
That was bad enough, but customers pursuing legal action have kept the scandal in the news. China’s Ministry of Industry and Commerce has gotten involved and, in a series of different checks, has invariably found the watches Gaopeng was offering (via one of its vendors) were indeed fake. Most concerning for Gaopeng is that yesterday, Shanghai police reported they were already investigating the case and that they would be looking into Gaopeng’s criminal culpability if the company is indeed found to have been involved in the selling of counterfeit products.
Since the Ministry of Industry and Commerce has already announced the watches sold to consumers that it has inspected were fake, it’s highly unlikely that a police investigation would find Gaopeng to be innocent. But it’s not clear yet exactly what the company’s punishment might be.
Meanwhile, Gaopeng is attempting to place band-aids on the wound by calling customers who bought the watches and offering to up the amount of compensation money they are eligible for, according to at least one watch buyer. Remarkably, though, the compensation they’re offering is still pretty terrible — if customers send back the watches, they’ll refund double the full purchase price.
It’s the second time they’ve upped their compensation offer since the scandal first broke, but at this point it’s hard to imagine the damage isn’t already done. With consumer trust in group buy sites flagging as finacial issues force them to close offices, a full month of news about Gaopeng’s untrustworthy products — and now a possible criminal investigation — things are definitely not going well for Groupon’s poorly-executed excursion in China.
[Via Sina Tech]