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I don't think I would call that a fail.

A fail would entail the company not caring about the product it was selling, letting the purchase go through as originally set up, and then disappeared if it turned out to be defective and any attempts to get a refund were denied.

I think what Groupon did was pretty great. They're paying attention and not just trying to get sellers and then forget about them.

I think it's a failure to make sure that the product that they sold was legit. They are such a powerful site that products should be throughly investigated before they go up.

That said it is nice and neat what they did...

That said it is nice and neat what they did...

then why the flamebait title?

It's a company failure hence "Groupon fail"
If that's a fail, I hope more companies take note.
Flagging for flamebait headline trolling.
What, exactly, do you propose they do, require samples (with full pedigree documentation) before allowing a coupon to go out? Where do you think the line should be drawn between inquiry and trust?
The same thing happen to me on another deal. They didn't research the alcohol laws in the state, and posted a deal that was illegal. They had to change the terms of the deal (or offer a refund) afterward.
Offering a straight-up refund is more than most retailers would give you.
I agree they acted nobly but mistakes like this make you look like an amateur company. Such sites need to do their research!
Not really. Mistakes happen to every company. Handling the tiny number of deals like this that go wrong well makes you look like a great company.

Implying that they are "locking out others," as if somehow they've damaged one of their potential customers by not featuring them, is a stretch.

Having worked with sites like Groupon, I know how much research some of these companies do before they feature products (the loss of business if something goes wrong...)

It's a research fail and a noble recovery by Groupon

I think you'll find that they wouldn't have any choice. You can't just change the deal once you've made it. The only options are to reach another agreement (2-sided!) or give the money back. They'd be breaking too many laws otherwise.