Online retailer Kogan Australia Pty Ltd has been taken to the Federal Court by the Australian Competition and Consumer Commission (ACCC), with the watchdog alleging the company made false or misleading representations about discounts.
According to the ACCC, Kogan ran an online promotion where consumers could obtain a 10% discount on most of its products through the use of a discount code between 27 and 30 June 2018.
The ACCC alleges the promotion was in breach of the Australian Consumer Law as Kogan upped its prices ahead of the sale.
"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 said. "In fact, Kogan had inflated product prices which we say created a false impression of the effective discount."
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, the ACCC claims, prices increased by at least 10%.
The watchdog said Kogan published the promotion on its website and via text messages and emails to customers. The ACCC said in its Concise Statement [PDF] the email was sent to approximately 25.7 million consumers.
"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," the ACCC said in a statement.
However, according to the ACCC, 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," Court added.
"At the outset, Kogan.com wishes to make clear that it strongly denies the allegations and will defend the proceedings," Kogan said in a statement. "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 also said its marketing collateral in connection with the promotion was carefully considered and was drafted specifically to avoid the claims 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," it added.
The ACCC is seeking penalties, injunctions, declarations, corrective notices, and costs from Kogan.
The "TAXTIME" promotion was held ahead of the end of the 2017-18 financial year.
Kogan was fined AU$32,400 in 2016 for allegedly using false or misleading representations in a Father's Day promotion. At the time, the ACCC ruled the online retailer intentionally increased its prices before offering customers a discount.
The ACCC said it had reasonable grounds to believe the online retailer increased the prices of products before or during the promotion, essentially resulting in a 9% discount rather than the 20% discount that was advertised.
"It is simply unacceptable for businesses to raise prices before applying a discount in order to give consumers the misleading impression that they are obtaining a larger percentage discount than is actually the case," ACCC acting chair Michael Schaper said at the time.
For the half year ended 31 December 2018, Kogan reported AU$7.4 million in after-tax profit -- down from the AU$8.3 million reported during the same period a year prior.
Updated 23 May 2018 at 1.15pm AEST: Added comments from Kogan.
- Kogan.com in a 'brilliant position' for NBN: Ruslan Kogan
- Hand in all pies sees Kogan.com profit AU$7m in H1
- Trivago hauled to court by ACCC for allegedly misleading customers
- Consumer guarantee rights for electrical goods is a key priority: ACCC
- ACCC goes after Google, Facebook in the name of fake news and data transparency
- Fitbit misled consumers with ACCC claiming another scalp