What you need to know
- The Federal Court has ruled that Kogan misled consumers and breached Australian consumer law when it conducted its tax time promotion in 2018.
- Kogan offered consumers a 10% discount on checkout if they entered the code "TAXTIME". However, Kogan had increased the price of some of its products shortly prior to the promotion, and then reduced those prices shortly following the promotion.
- The Court found that those price changes meant that consumers did not receive a genuine 10% discount on the affected goods.
What you need to do
- When advertising a sale or discount on your prices, make sure that the discounted prices accurately reflect the value proposition being put to consumers.
- Ensure that you do not temporarily increase the un-discounted prices during the promotion (even for a relatively small number of products), as this would likely erode or offset the discount being offered.
Kogan's promotion
Kogan is an online retailer of a large range of goods, including consumer electronics and home appliances, conducting business in Australia. Between 27 and 30 June 2018, Kogan offered a 10% discount on around 78,000 products, for consumers who entered the code "TAXTIME" at checkout (the Tax Time Promotion).
Kogan advertised the Tax Time Promotion at its website, and in marketing emails and SMS messages to subscribing consumers.
Allegations made by the Australian Competition and Consumer Commission (ACCC)
The ACCC alleged that Kogan made the following representations, which resulted in breaches of the Australian Consumer Law (ACL):
- If consumers used the code "TAXTIME" at checkout, they would receive a 10% discount off the price at which the products had been offered for a reasonable period prior to the Tax Time Promotion; and
- Consumers had a limited opportunity to receive a 10% discount off the price at which the products would be offered for a reasonable period following the Tax Time Promotion.
The ACCC alleged that these representations were misleading and deceptive in relation to around 600 products (the affected products), because Kogan had:
- increased the price of the affected products on 26 June 2018 (in many cases by at least 10%); and
- decreased the price of the affected products on 2 July 2018 (in many cases by at least 10%).
There was no dispute that these price changes had occurred. The ACCC argued that purchasers of the affected products did not receive a genuine discount of 10% because the discount had been eroded by the above price changes. Kogan argued that consumers would not have understood that Kogan was making any comparison to past or future prices of the products, but rather the currently advertised price.
Were the representations made?
The Court found that the alleged representations had been made by Kogan. Justice Davies explained that:
"…the ordinary and reasonable consumer in the relevant class would be likely to have understood that the Tax Time promotion offered a 10% discount at checkout on past prices or future prices for the products to which the coupon code could be applied."
In making this assessment, the Court referred to evidence of consumer complaints to the ACCC about the price increases that had occurred shortly prior to the Tax Time Promotion.
The Court did not consider it necessary to define a "reasonable period" by reference to a specific amount of time. It was sufficient that a consumer who saw Kogan's advertisements would not have understood the “price” to be a price increased by Kogan so as to offset any genuine 10% discount from the Tax Time Promotion.
Were the representations misleading or deceptive?
The Court found that the representations were misleading and deceptive with respect to the affected goods, because the price changes prior to, and following, the Tax Time Promotion meant that consumers did not receive a genuine 10% discount on the affected goods. The Court referred to evidence showing that, aside from the abovementioned price changes, the prices of the affected products remained relatively stable in the two week periods before and after the Tax Time Promotion.
Kogan had adduced evidence that there were reasons (unrelated to the Tax Time Promotion) for increasing, then decreasing, the prices of the products. However, the Court found that Kogan's reasons for changing the prices were not relevant, as they would not impact on whether the fact of the price changes resulted in the representations being misleading or deceptive.
The Court also rejected Kogan's argument that, because the affected products only made up 0.8% of the products subject to the Tax Time Promotion, the ACCC had failed to demonstrate that a "not insignificant number" of consumers had been impacted.
The relief will be determined at a later hearing.
Authors: Will Scott, Senior Associate; and Kellech Smith, Partner.
