With many retailers now predominantly relying on online sales promotions to generate market interest, the decision of Australian Competition and Consumer Commission v Kogan Australia Pty Ltd  FCA 1004, serves as a timely reminder to retailers to ensure that any promotional discounts offered to customers are genuine.
From 27 to 30 June 2018, Kogan, a leading online retailer of electronics, ran a "Tax Time Promotion" wherein customers could use the discount code "TAXTIME" at checkout to receive a 10% price reduction (the Promotion).
The Promotion affected over 78,000 products listed on the Kogan website. The associated marketing campaign was rolled out across the Kogan website and through various direct marketing channels such as email and SMS. Relevantly, the Promotion utilised price comparisons to demonstrate the alleged discount for each product as compared to its original recommended retail price. The marketing material also used phrases such as "Use code TAXTIME to reduce prices by 10% at checkout”.
The ACCC alleged that the Promotion was misleading and deceptive pursuant to sections 18 and 29(1)(i) of the Australian Consumer Law (ACL) under the Competition and Consumer Act 2010 (Cth) in relation to 621 products (representing 0.8% of all products subject to the Promotion). Specifically, the ACCC alleged that Kogan raised its prices prior to initiating the Promotion and then decreased the prices once the Promotion ended. This meant that customers paid the same or more for some products under the Promotion, than they would have if they had purchased the product at the price advertised in the 'reasonable period' before or after the Promotion. The ACCC did not specify what constituted a 'reasonable period', noting that this would vary depending on the nature of the product and its pricing history. However, in relation to Kogan, the ACCC referred to the two-week period prior to, and after, the Promotion as a reasonable period for the purposes of their contentions. This was because the ACCC demonstrated that the prices of the products remained generally stable within this period.
Kogan did not deny that it amended the prices of the affected products for the Promotion. Rather, they denied the ACCC's contentions that an ordinary and reasonable consumer would consider the price the subject of the 10% discount to be the price at which the product was available in the 'reasonable period' prior to or after the Promotion. Kogan argued that an ordinary and reasonable consumer would have understood that the 10% discount applied to the price stated on the website. Accordingly, as the discount applied to that price when a consumer used the promotional code, the Promotion had the effect advertised and was not misleading and deceptive.
Issue for the Court
Accordingly, the issue for the Court, was what price the reasonable and ordinary consumer would have understood the Promotional discount to apply to. Namely, whether a reasonable and ordinary consumer would have understood the discount to apply to the current listed price as per Kogan's contentions, or the price the product was, or would be, in the reasonable period before and after the Promotion as the ACCC contended.
The Court held that when the representations were viewed in their context, the ordinary and reasonable consumer would have understood the discount to apply to the price of the goods in the reasonable period before and after the Promotion.
In coming to this conclusion, the Court had regard to the following factors amongst others:
- The fact that Kogan's direct messaging marketing involved a two-price comparison which conveyed that the discount applied to the price the product had been available for sale in the period before and after the Promotion.
- The fact that the Promotion was tax time themed, and that consumers would have reasonably understood that the Promotion was time-specific and that they only had a limited opportunity to obtain the allegedly reduced price.
- That an ordinary and reasonable consumer, whilst expecting some price variability, would not have understood that the price on the website was one which had been increased prior to the Promotion and would therefore offset any 10% discount offered.
On the matter of whether the representations were misleading and deceptive Davies J considered the relevant authorities and noted at :
The ACCC need not prove that consumers in fact relied upon the representations in purchasing the affected products or in deciding to deal with Kogan over its competitors. The relevant question is whether the representations were apt to bring consumers into negotiation with Kogan rather than one of its competitors on the basis of an erroneous belief engendered by Kogan's advertisements…I accept the ACCC's submission that the evidence supports an inference not only that the representations were apt to draw consumers into Kogan's marketing web, but they in fact did so.
A separate hearing will be held on 24 November 2020, to determine the penalties applicable to Kogan following the Federal Court's finding that they engaged in misleading and deceptive conduct.
The decision stands as a reminder to all online retailers, especially those who have a high variability in their prices, to ensure that sales promotions offer a genuine discount off the prices of the goods in the reasonable period before and after the relevant promotion.
Accordingly, and in light of the fact that there is no need to demonstrate intention in any misleading and deceptive conduct claim, retailers should proactively implement risk mitigation strategies to ensure that they do not fall foul of the ACL. Such strategies should include a detailed price analysis/audit of goods prior to advertising a promotional discount.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.