Kogan ‘misled shoppers’ in promo

Shares in online marketplace Kogan.com fell almost 10pc as the company faces a potentially substantial financial penalty.

Ruslan Kogan, pictured, founder and CEO of Kogan. The company said it was reviewing the court ruling. Picture: Hollie Adams

Shares in online marketplace Kogan.com fell almost 10 per cent on Friday and the company is up for a substantial financial penalty, possibly in the millions of dollars, after the Federal Court ruled that the retailer breached consumer law over a special “tax time” promotion that actually raised prices by about 10 per cent before offering a discount to shoppers.

In more than 10 million targeted emails and almost 1 million text messages to its customer base, Kogan was found to have conveyed false or misleading representations around the size of the product discounts offered in the promotion in June 2018.

Kogan ran the online promotion from June 27 to 30, telling consumers they could use the code ‘TAXTIME’ to reduce prices by 10 per cent at checkout. The promotion was advertised on Kogan’s website, in emails and text messages.

Towards the end of the promotion, Kogan’s email ads included statements like “48 hours left!” and “Ends midnight tonight!” to entice consumers to make a purchase during the sale.

What was not known by shoppers was that many of the products offered in the sale had had their sticker price raised ­before discounts were then ­advertised.

“The court found that the ads conveyed false or misleading representations because Kogan had increased the prices of more than 600 of its products immediately before the promotion,” the Australian Competition & Consumer Commission said in a statement following the court’s decision that went against Kogan.

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.

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

“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.”

In May last year, the ACCC launched legal proceedings, alleging Kogan made false or misleading representations about the price reduction promotion. It is not the first time the regulator has castigated Kogan. It took enforcement action against other related Kogan entities in 2016 and in 2009 for allegedly engaging in pricing conduct that raised similar concerns.

Kogan shares fell almost 10 per cent in wake of the ruling before closing down 4.6 per cent at $17.02. The stock is however up strongly from its low of just over $4 in March during the initial global sharemarket slump as the coronavirus pandemic emerged.

Kogan said in a statement that the profit derived from the promotion was immaterial and the ruling would not have any adverse effect on its promotional activities.

Kogan said it was reviewing the court ruling. A penalty is yet to be decided.