Imagine this: you’re running late to your favorite cousin Ronny’s birthday party, held at one of the hippest places at the Jersey Shore.  You have no gift for him but plan to stop along the New Jersey Turnpike at some place open all night  to pick up a gift card.  But you soon find that you’re out of luck,  because you’re in New Jersey, and thanks to the state’s restrictive new gift card law, companies such as AmEx, Blackhawk Network, and InComm have pulled their gift cards out of the state.  So what do you do now?  All you have in your pocket is a beat up, expired Groupon voucher that you bought last Thanksgiving.  But wait! It just so happens that the other day Groupon reached an $8.5 million settlement in a multidistrict litigation case, and as part of the settlement, the company agreed to let customers redeem expired vouchers purchased before December 1, 2011.  Problem solved!

If you offer gift cards in New Jersey or Groupons or similar “daily deal” offers, you’ll want to be up to speed on the latest legal developments in this area:

  • A January Third Circuit order lifted a stay on the data collection provision in a 2010 New Jersey gift card law that requires gift card sellers to collect address information, or at a minimum ZIP codes, from gift card purchasers.  Since then, the NJ Department of the Treasury has been working with sellers of gift cards to address how they may comply with the law, which the Treasury Department has thus far held off from enforcing, and at the same time comply with an apparently conflicting requirement in NJ privacy law, which prohibits the collection of such information.  (See our blog on this issue here.)  Amidst this uncertainty, at the end of March, American Express announced that it would no longer sell gift cards in the state, and last week, gift card sellers Blackhawk Network and InComm (who provide “gift card malls”)  announced that they will also withdraw their gift cards from NJ.

While the immediate effect of these announcements is clear, as some retailers (such as groceries and drugstores) will have to scramble to replace their source for the “gift card malls” they maintain at the point of purchase, the long-term effect is less clear.  Will the NJ legislature react to economic pressure by repealing the controversial stored value card law?  Will the Treasury Department find a way to reconcile the apparent contradictions between the stored value card law and the NJ privacy law?  Entities such as NJRMA also continue to challenge the law in court.  Gift card sellers should track these developments closely.

  • Meanwhile, in California, Groupon just announced an $8.5 million settlement in a multidistrict class-action.  Plaintiffs alleged that Groupon illegally expired vouchers in violation of state gift card laws.  Under the terms of the settlement, the company admitted no wrongdoing, but will honor vouchers purchased before December 1, 2011 or provide a refund.  Two advocacy groups will also receive $75,000.  Going forward for the next three years, Groupon has also agreed that no more than 10% of its deals will have expiration dates of 30 days or less, unless the deal is for certain limited categories, such as ticketed events.

Businesses that offer similar “daily deals”, either in conjunction with Groupon, with its competitors or independently, should note that even with the Groupon litigation resolved, the advisability under state gift card laws of imposing an expiration date on daily deal or gift card offers remains in question. While limitations on the number of offers with an expiration date, and clear and conspicuous disclosures of the purchase and promotional value and the expiration date of the promotional value are absolutely required, sellers should think very carefully–and consult with counsel–before imposing an expiration date on a “daily deal” voucher or any other type of gift card.