Groupon was recently sued on account of its display advertising practices. You can read the story here: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=147156&nid=124985.
What it comes down to is that the display ads contain keywords and URLs for products/services that Groupon isn’t really offering or promoting. But, it is using those URLs and keywords to attract attention and gain relevance in AdRank and higher position (or more impressions).
I believe that if Groupon is using a URL, keyword or name of a specific product/place/thing in its advertising and does not directly link to that product or does not offer that product on the day the advertisement is served, then it is indeed improper.
The claim also suggests that by allowing Groupon to bid on those terms, it is driving up the cost of advertising for other vendors. I also agree with this as well.
This may be in fact a result of Groupon’s rapid growth and the fact that perhaps to fuel this growth it has started to employ sub-par staff or agencies not well versed in legal advertising practices. Just because you can do it doesn’t mean it is ethical, legal or proper. And I have seen time and again search marketers, companies and agencies employ unethical and illegal search practices. I am sure Groupon is not immune to these risks and should review its policies with staff on this issue and many others to limit its future liability.