The Office of Fair Trading said it is investigating Groupon UK after receiving complaints about how the daily-deal company was conducting its business.
The OFT said on Friday it had been investigating Groupon UK, which offers daily deals on products from hotel stays to calendars, in secret since July.
The firm is a unit of U.S. firm Groupon Inc which floated in New York last month.
The OFT's probe became public after Britain's advertising watchdog, the Advertising Standards Authority (ASA), highlighted complaints regarding Groupon UK's failure to conduct promotions fairly, failure to provide evidence that offers are available and exaggeration of savings claims.
The ASA said it had formally investigated and upheld complaints against Groupon UK's advertising on 11 occasions and had informally resolved 37 cases.
The OFT said it was considering whether Groupon is complying with consumer protection legislation, including in relation to certain of its advertising practices, it said.
The opening of this investigation follows complaints the OFT has received in relation to Groupon's trading practices.
Groupon UK was not immediately available for comment.
(Reporting by James Davey; Editing by Adveith Nair)