Is Groupon a Daily Deal Bully?

Former Groupon employees who are being sued by the company allege in a lawsuit that the daily deal company is being a bully about them going to a competitor.

Image: Valeriy Lebedev/Shutterstock

Time passes fast in the daily deal business. It was just a bit more than a year ago that Google offered $6 billion for Groupon, hoping to get its hands around a startup in a new industry for which revenues seemed limitless.

Then, Groupon leader Andrew Mason and his venture investors surprised many observers by turning down the offer, and the two companies did their own thing. Google started its own daily deal business, Google Offers, publishing the same sort of deals for restaurants, spas, and merchandise that Groupon does. Meanwhile, Groupon—which had to revise its accounting and fess up in a Securities and Exchange Commission filing that it had yet to turn a profit—launched its initial public offering with a valuation of $12.7 billion on day one with plans to keep growing its business.

End of battle? Not quite. Groupon filed a lawsuit against a couple of ex-employees who defected to Google, accusing them of taking trade secrets. And now those employees have filed a countersuit in Cook County Circuit Court, claiming in documents filed last Wednesday that the Groupon lawsuit is “sham litigation” designed to keep employees from joining competitors and that Groupon is being "abusive" and engaging in illegal behavior.

The suit seeks compensatory damages and at least $50,000 in punitive damages, as well as attorney’s fees.

“These are young people doing nothing more than seeking to advance their careers,” Steven Molo, a New York-based attorney at Molo Lamken LLP who represents the defendants, told Crain’s Chicago. “They're not doing it at Groupon's expense. Groupon has overreached.”

According to the filing, Groupon has subpoenaed Google, demanding confidential info on Google Offers, including pricing and incentives.

While Google is not named specifically as a defendant in the suit, it’s clear that the suit is about more than just one company’s dispute with ex-employees: It's about who is going to stay in control of a daily deal business that is projected to bring in $4.2 billion by 2015. It may also help reveal whether it’s true—as Groupon critics say—that the daily deal pioneer can’t fend off the competition in the space.

Both companies declined to comment in the press.