Ruslan Kogan (Kogan)
Electronics retailer Kogan has been fined $350,000 for holding a ‘sale’ that saw hundreds of items cost the same as, or more than, their original price.
The 2018 tax time 10 per cent off ‘sale’ was found to have contravened Australian Consumer Law when it quickly raised product prices ahead of an impending sale, only to drop them afterwards.
As a result, the Australian Competition and Consumer Commission (ACCC) launched proceedings in Federal Court against Kogan, winning the case in July.
However, Justice Jennifer Davise declined to impose the $2 million penalty sought by the ACCC, calling it “excessive” and instead handed it the lesser $350,000 fine, plus costs.
“Kogan did not deliberately intend to engage in the contravening conduct and the material does not indicate a culture of non-compliance or disregard of the law. In such circumstances the need for a penalty to achieve specific deterrence is less significant,” she said in her judgement.
The offending sale took place between 27 to 30 June 2018 and saw some product prices quickly raised by the retailer beforehand, and then dropped afterwards.
The sale, which offered a 10 per cent discount with the use of the code TAXTIME, was sent out to over 10 million consumers via email and 930,000 via SMS messages.
Email advertisements used phrases such as “48 hours left!” and “Ends midnight tonight!” in the attempt to attract consumers.
However, the court found that the advertisements conveyed false or misleading representations as the online retailer increased the prices of over 600 products immediately before the promotion — in most cases by at least 10 per cent.
“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,” ACCC Chair Rod Sims said.
“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.”
In its mitigation to the court, Kogan argued it had received a “substantial” amount of adverse publicity in connection with the proceeding.
During the case, Kogan submitted that its parent company’s share price dropped by 6.4 per cent and 4.6 per cent following a number of newspaper reports in 2019. However, according to the judgement, the assertion was unsupported by any evidence.
In an earlier statement following the original ruling in July, Kogan told shareholders it had "not intended to mislead any shoppers" and the profit derived by the retailer from the promotion was "immaterial".
"[The promotion] was implemented in order to allow customers access to lower prices than the prices that applied without the coupon or promotion," Kogan stated.
"The ruling will not have any adverse impact on the company’s promotional activities, as the company updated its promotional activities in 2018."
