The Office of Fair Trading (OFT) said Groupon had three months to implement the changes, which include making sure that prices were accurate and transparent and the offers realistic.

"Collective buying and discount schemes can offer real benefits for both consumers and merchants," Cavendish Elithorn, a senior director in the OFT's Goods and Consumer group, said.

"The market is growing rapidly, but it's important that consumers benefit from consumer protection law as well as from the discounted offers.

"Groupon has cooperated fully with our investigation and is making changes to its business practices to address our concerns. We will be monitoring the situation closely to ensure that consumers benefit from these improvements."

Groupon UK, which offers deals on products from hotel stays to meals out, is a unit of the U.S.-based Groupon Inc which floated in New York last year.

It said it had worked closely with the OFT to identify areas of weakness and would willingly implement the recommended changes.

"As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth," UK Managing Director Roy Blanga said in a statement.

"We have independently made many improvements since early 2011 and have worked transparently and constructively with the OFT to identify areas that require further changes."

(Reporting by Kate Holton; Editing by Mark Potter)

• A Permanent Economic Emergency