The Australian Competition and Consumer Commission – ACCC – has said that the Federal Court has ordered Kogan Australia Pty Ltd to pay penalties worth $350,000 after it made “false or misleading representations about a tax time sales promotion, in breach of Australian Consumer Law.”
The ACCC took Kogan to the Federal Court after it alleged that the company was guilty of misleading customers with a discount code that would reduce the price of their cart at the checkout by 10 per cent.
The consumer watchdog says that these false sale promotions abused Consumer Law because Kogan had previously raised the prices of around 621 products to counteract the discount code; effectively offering consumers no discount, despite the claim of a 10% discount.
The ACCC says that “in most cases, the prices of these products had been increased by at least 10 per cent. Kogan then decreased those prices soon after the promotion ended, many back to their pre-promotion prices.”
It’s said that Kogan promoted these particular tax time sales to more than 10 million consumers via email, sent 930,000 SMS messages to its database and listed it on its website from June 10, 2018.
While handing down the verdict, Justice Davies said that “Kogan’s contavening conduct must be viewed as serious, as misrepresentations about discounts offered on products not only harm purchasers acquiring such products on the basis that they are getting a genuine discount but also may impact on consumer confidence in discount promotions when legitimately made – that is, when products are being offered for sale with a genuine discount on price.”
The ACCC’s Chair, Rod Sims has issued a statement saying that “in many cases, consumers who used the promotional code to purchase these products paid the same as, or more than, they would have paid before or after the promotion.”
“Consumers were not receiving a genuine 10 per cent discount as promised, and this affected high-value products such as Apple MacBooks, cameras and Samsung Galaxy mobile handsets,” Sims said.
“This decision sends a strong signal to businesses like Kogan, which regularly conduct online sales promotions, that they must not entice consumers to purchase products with a promise of discounts that are not genuine.”
The ACCC said that Kogan was also using a number of manipulative sales tactics to entice customers and create a sense of urgency for them to purchase. The retailer often contacted its database with messages of “48 hours left!,” and “Ends Midnight Tonight,” to “create a sense of urgency to entice customers to make a purchase during the tax time promotion period,” according to the ACCC.
According to a report from ZDNet, this marks the second fine that Kogan has received for making false claims or misleading customers with false sale promotions. In 2016, the ACCC found that Kogan had used the same tactics of advertising a sale while preemptively raising prices, for which the brand received a $32,400 fine.
That same report states that “shortly after the revelation that Kogan yet again mislead consumers, the online retailer reported that it continued to increase its net profit after tax despite the pandemic. For the 2020 financial year, Kogan amassed AU $26.8 million – a jump of 56% from the previous financial year.”
According to that report, Kogan’s gross sales for the 2020 financial year have increased to $769 million, with revenue up to $498; an increase of 39.3% and 13.5% respectively.
Don’t forget to check our News page for the latest industry-relevant news, how-to guides and ISO-explainers