Federal Court rules Kogan sale promotion was misleading

A court has found a sale by online retailer Kogan was misleading after it increased the price of products just before the offer started.

Online retailer Kogan has been bitten by the consumer watchdog for raising the price of hundreds of products before offering shoppers “discounts” during a tax time sale in 2018.

The Australian Competition and Consumer Commission took Kogan to the Federal Court in May last year over advertisements for the 2018 sale.

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Kogan was accused of raising prices before offering the discount. Picture: ACCC

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The court has now found the advertisements conveyed false or misleading representations because Kogan had increased the prices of more than 600 of its products immediately before the sale.

It then emailed more than 10 million consumers and sent an SMS to 930,000 advertising the sale, which was also promoted on its website.

As the “sale” neared its end, Kogan also included time-sensitive messages like “48 hours left!” and “Ends midnight tonight” to put pressure on consumers.

The ACCC said in most cases Kogan raised prices before the sale by at least 10 per cent, more than the discount shoppers got by entering the code “TAXTIME” at checkout.

Shortly after the “sale” ended Kogan reduced the prices on the products, many of them back to their pre-promotion prices.

In a statement, the ACCC said: “The Federal Court has found online retailer Kogan Australia Pty Ltd (Kogan) breached the Australian Consumer Law by making false and misleading representations about a tax time sales promotion, in proceedings brought by the ACCC.”

Rod Sims, who chairs the ACCC, said, “We brought this case because we were concerned that the advertised price reductions were not genuine savings.

“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.

“All businesses must ensure that their advertisements do not mislead consumers about the nature of a promotion, and that any promised savings are genuine.”

Kogan founder Ruslan Kogan started the company in 2006.

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A later hearing will determine what penalty Kogan could face.

In a statement released to the Australian Stock Exchange, Kogan said the promotion was not intended to mislead any shoppers.

“The profit derived by the Company from the promotion was immaterial and the ruling will not have any adverse impact on the Company’s promotional activities, as the Company updated its promotional activities in 2018,” it said.

“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 company said.

The company has been contacted for further comment.

The Kogan team celebrates listing on the stock exchange, which now makes them subject to much heftier fines. Picture: Renee Nowytarger / The Australian

In 2009, Kogan promised to make changes after misleading advertisements implied its products had been discounted by using price comparisons featuring more expensive starting prices that the products had never been sold for.

In 2016, the company was fined $32,400 over three products in a Father’s Day promotion.

When it started the action, the ACCC said it would be seeking penalties, injunctions, declarations, corrective notices and costs from Kogan.

Each infringement of the Australian consumer law can cost a non-listed corporation $13,320.

But publicly listed corporations like Kogan can be fined more.