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Are Groupon and Living Social Engaged in Illegal Fee-Splitting?

As most of you are, I’m subscribed to Groupon, LivingSocial and a few other flash sales or daily deal sites. One recent offer from Groupon got me thinking.

Many states have laws for professions that don’t allow any third parties to be involved in transactions with customers, clients or patients.  Depending on the state, the law may cover doctors, dentists, lawyers, real estate agents, or other professionals.

That means no kickbacks, or fee sharing.

Hey, I am no lawyer and of course can’t provide a legal opinion, but my layperson’s opinion is that Groupon may be in violation of
New York Public Health – § 4501 – Medical Referral Service Businesses Prohibited

as is any medical practitioner advertising on Groupon since Groupon takes the money from the customer and keeps some of it.

Spot checks of Groupon, LivingSocial and some other group buying sites seems to indicate that this practice is prevalent with dentists, chiropractors and dermatologists in particular.

Wonder if I’m completely off-base here or if indeed there is a problem that’s slipped under the radar.

Originally, I became aware of the laws because my wife is a psychologist, and I was wondering if she could offer a Groupon-type deal.  Plus, I’m an investor in and had an interest in this type of arrangement from the offer-network as well.

Kevin Lee, Co-Founder & Executive Chairman is an acknowledged search engine marketing expert. Kevin's weekly column for JupiterMedia's ClickZ is read by thousands as are his regular quotes in the news media including the Wall Street Journal, Business Week, the New York Times, CNET, USA Today, and the San Jose Mercury News. Dozens of industry conferences invite Kevin to share his knowledge and expertise. His opinion is also valued by industry analysts and the investment community. When speaking at conferences his mission is to teach the best practices in search engine marketing. Kevin received an MBA from the Yale School of Management in 1992.

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