The Federal Court has ordered Kogan Australia Pty Ltd (Kogan) to pay a penalty of $350,000 for making false or misleading representations about a ‘Tax Time’ sales promotion, in breach of the Australian Consumer Law.
In July 2020, the Court found that Kogan had misled consumers by advertising over a period of four days that they could use the code ‘TAXTIME’ to reduce prices by 10 per cent at checkout. Kogan had increased the prices of 621 products, including digital cameras, immediately before the promotion, in most cases by 10 percent or more.
Kogan then decreased those prices soon after the promotion ended, many back to their pre-promotion prices.
Kogan made these statements to consumers in June 2018 on its website, via emails sent to over 10 million consumers, and by SMS messages to over 930,000 consumers.
‘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.’
According to Kogan, none of this was deliberate.
Towards the end of the promotion, Kogan also used statements such as ‘48 hours left!’ and ‘Ends midnight tonight!’ in some emails to consumers, to create a sense of urgency to entice consumers to make a purchase during the tax time promotion period.
In her judgment, Justice Davies said: ‘Kogan’s contravening 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.’
‘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,’ Mr Sims said.
The Court also made declarations and ordered Kogan to pay the ACCC’s costs of the proceedings.
The penalty seems pretty soft given the nature of the deception. The company issued a statement which seemed to confirm it didn’t really see the issue as much of an issue, really.
‘…The profit derived by the Company from the promotion was immaterial, and the prior ruling will not have any impact on the Company’s ongoing promotional activities, which were updated in 2018.’
The Company made a provision of $0.7 million for the potential penalty and costs in its FY20 accounts.
Kogan was also in the news two weeks ago, with a controversial deal offering founders Ruslan Kogan and David Shaffer 6 million shares at an exercise price of $5.29 per share narrowly approved by shareholders at the AGM. Kogan shares currently trade around $18, representing a sweet $100 million windfall for the two given the share price holds.
There are no financial goals attached to the gift – they just have to hang around until 2023, underlining the old Woody Allan gag that 80 percent of life is just showing up!