Advertising for end of financial year discounts by online retailer Kogan Australia Pty Ltd (Kogan) was false and misleading, in breach of Australian Consumer Law, the Federal Court has found.
Consumer watchdog the ACCC, launched legal action against Kogan in May last year over the advertising campaign, which ran online between June 27-30, 2018, which offered a 10% discount if buyers used c the code ‘TAXTIME’.
The ACCC previously took enforcement action against other related Kogan entities in 2016 and in 2009 for allegedly engaging in pricing conduct which raised similar concerns.
The 2018 promotion was sent to more than 10 million consumers via email, and on SMS to more than 930,000 people.
The ACCC alleged that Kogan increased prices on 621 products, in most cases by at least 10%, just before it offered a 10% discount in June 2018.
The prices then dropped by 10% or more again on July 2 after the sale ended, the ACCC alleged in court documents.
The Court found that the advertisements conveyed false or misleading representations because Kogan had increased the prices of more than 600 of its products immediately before the promotion. In most cases the prices of these products had been increased by at least 10 per cent. Kogan had also reduced the prices of these products shortly after the promotion ended, many back to their pre-promotion prices.
ACCC Chair Rod Sims said they launched the legal action over concerns that the savings were not genuine.
“Many consumers who took up the offer on one or more of the 600 or so products in many cases actually paid the same as, or more than, what they would have paid immediately before and after the promotion,” he said.
A further hearing on the penalty will be held at a later date. The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective notices and costs after winning the case.
In a statement to the ASX, Kogan.com Ltd (ASX: KGN) said “profit derived by the Company from the promotion was immaterial” and it will not have an adverse impact on Kogan.com’s promotional activities since it changed them in 2018.
“The promotion was not intended to mislead any shoppers, and was implemented in order to allow customers access to lower prices than the prices that applied without the coupon or promotion,” the statement said.
“The Company is currently reviewing the ruling of the Federal Court and may provide a further update once its review is complete.”
Kogan.com shares are down more than 6% in morning trade on Friday to around $16.74 just after noon.
Daily startup news and insights, delivered to your inbox.