Groupon sues small Singapore merchant for USD 1.6 million, case falls apart

Updated: 21 June

Groupon is currently embroiled in a legal wrangle with Villas International, a small Singapore-based company that brokered between tourist accommodations and group buying companies.

In a series of twists, what began as a SGD 2M (USD 1.6M) lawsuit has become a SGD 290K counterclaim by the merchant against the world’s largest daily deals site.

Founded by Mira Hamza and Feroz Ghulam, Villas earned a small fee from advertising vacation stays on various daily deals sites. While the business model is straightforward, trouble started a year into operations. In September 2011, they began running into cashflow problems and in subsequent months started defaulting in their payments to villas in Indonesia and Thailand.

Customers began pouring their grievances on at least two threads in TripAdvisor about how they would book a flight to Bali after purchasing a deal, only to realize upon arrival at the hotel that there was no room because they didn’t receive any payments from Villas. Calls to the company were often left unanswered. A Facebook page was even created by troubled customers looking to compare notes.

‘Not our fault’

Mira and Feroz says it wasn’t their fault. In an interview with SGE, they blamed the daily deals sites, claiming they were unable to pay clients because the majority of the sites they dealt with had not paid them despite repeated reminders.

This, in addition to salaries for its nine employees, rental costs, and a contract clause with hotels stating that the company must pay them in the event of no-shows, drove the company into unsustainability in a short span of time.

According to Villas’ lawyers, Groupon was contractually obliged to pay the company within seven to ten days from the time of deal redemption.

The delayed payments signaled the beginning of the end for Villas, whose owners estimate that between SGD 500K and SGD 1M has been owed to them by various daily deals sites. The company had listed deals en masse in dozens of daily deals sites without knowing that most of their payments would be withheld.

“Groupon did eventually pay us for three redemptions eight months late, and that was only during the court proceedings. Only one deal went through,” said Mira.

The business was dealt a death blow in April 2012 when 13 Groupon companies filed a claim in the Singapore Supreme Court for  USD 2M in damages due to losses arising from money paid to defendants, customer refunds, relocations of customers to new hotels, and damage to international reputation.

Part of that lawsuit was a Mareva Injunction on Villas. This meant that while the defendants could continue running the business, they could not withdraw cash from the bank account or liquidate their assets.