The Australian Competition and Consumer Commission (ACCC) is taking Kogan to Federal Court for alleged false and/or misleading advertising. The ad in question was a 10% discount promotion which ACCC claims is in breach of the Australian Consumer Law. Here are the details.
As any fule kno, online discounts need to be taken with a massive grain of salt. As we have previously shown, the e-commerce sector has a massive problem when it comes to artificially raising prices just before a big sale. This makes the discount seem much better than what you're actually getting.
Kogan has found itself in the ACCC's cross-hairs for precisely this reason. The ACCC alleges that Kogan increased the prices of more than 600 of its products immediately before a '10% off' TAXTIME promotion. Kogan also ran ads indicating that the deals were only available for a limited time.
“We allege that Kogan’s advertisements were likely to have caused consumers to think they were getting products below their usual prices,” ACCC Commissioner Sarah Court (appropriate surname) said in a statement. "In fact, Kogan had inflated product prices which we say created a false impression of the effective discount.
“Businesses must not make claims to consumers about discounts or sales unless they are offering genuine savings.”
The ACCC is now seeking penalties, injunctions, declarations, corrective notices and costs from Kogan. The maximum penalty for Australian Consumer Law infringements is in excess of $10 million dollars.
If you're an online merchant, either offer genuine discounts to customers or don't run a sale at all - there is no middle ground.
Here's the full statement from the ACCC:
The ACCC has instituted proceedings against Kogan Australia Pty Ltd (Kogan) in the Federal Court alleging that Kogan made false or misleading representations about a 10% discount promotion, in breach of the Australian Consumer Law.
Between 27 and 30 June 2018, Kogan ran an online promotion where consumers could obtain a 10% discount on most of its products by using the discount code “TAXTIME”. The promotion was held ahead of the end of the 2017/18 financial year.
Kogan published this promotion on its website and via text messages and emails to consumers.
The ACCC alleges that Kogan’s advertisements were false or misleading because Kogan increased the prices of more than 600 of its products immediately before the promotion. In most cases prices increased by at least 10%.
“We allege that Kogan’s advertisements were likely to have caused consumers to think they were getting products below their usual prices. In fact, Kogan had inflated product prices which we say created a false impression of the effective discount,” ACCC Commissioner Sarah Court said.
Towards the end of the promotion period, Kogan’s email advertisements used statements such as “48 hours left!” and “Ends midnight tonight!” which the ACCC alleges gave the impression that consumers only had a limited time to purchase at the “discounted” prices.
However, Kogan reduced the prices of the affected products shortly after the promotion ended, many back to their pre-promotion prices.
“Businesses must not make claims to consumers about discounts or sales unless they are offering genuine savings,” Ms Court said.
The ACCC is seeking penalties, injunctions, declarations, corrective notices and costs from Kogan.
Kogan.com is an online retailer which sells a wide variety of goods including consumer electronics, furniture and toys.
Kogan.com Ltd (ASX:KGN) has over 1.4 million active customers.
The ACCC has previously taken enforcement action against other related Kogan entities in 2016 and in 2009 for allegedly engaging in pricing conduct which raised similar concerns.
Update: Kogan has released a statement of its own strongly denying the allegations.
Here's the full statement:
The ACCC has commenced proceedings against Kogan Australia Pty Ltd (Kogan.com), alleging that Kogan.com engaged in misleading conduct in respect of a promotion conducted for four days in June last year.
At the outset, Kogan.com wishes to make clear that it strongly denies the allegations and will defend the proceedings. The proceedings commenced by the ACCC ignore critical facts and matters which are in Kogan.com’s view highly relevant in assessing the overall impression of the promotion by consumers who are intimately familiar with online retailing and how a discount code functions.
Kogan.com’s marketing collateral in connection with the promotion was carefully considered and was drafted specifically to avoid the type of confusion alleged by the ACCC.
Kogan.com at all times made clear that the price reduction applied at the time of checkout. At checkout all customers were made aware of the full price they would pay for the product and the price reduction that would be achieved by using the discount code. There was no confusion caused.
Kogan.com has always put its customers’ interests first and continues to do so. Kogan.com cooperated fully with the ACCC throughout its investigation and explained in detail the above facts and matters. Kogan.com is disappointed that the ACCC has nevertheless decided to issue proceedings against Kogan.com — a highly procompetitive company that benefits consumers.
Our aggressive discounting, quality product range, excellent delivery standards and innovative promotions sets us apart in a highly concentrated market. We will of course continue to ensure that we maintain these excellent standards for the benefit of our valued customers.
Kogan.com is unashamed about its obsession with constantly driving down prices, making the most in-demand products and services more affordable for Australian shoppers. Our track record in being the go-to destination for great value and low prices speaks for itself.
Kogan.com did not gain any material financial benefit as a result of the promotion. Kogan.com does not expect any adverse change to its ongoing promotional activities as a result of this matter.