Everyone loves a discount, but advertisers beware

By Lynne Lewis, Megan Edwards

09-2020

As foreshadowed in our earlier article here,  the Federal Court of Australia has recently brought down its decision in ACCC v Kogan Australia Pty Ltd [2020] FCA 1004 (Judgment).  The Judgment acts as a reminder of the potential pitfalls in advertising sales and savings, and follows from a number of infringement notices that the ACCC has issued, and Court enforceable undertakings it has sought, from retailers in late 2019 and early 2020 in relation to was/now pricing, as discussed in our articles here and here.  

The Judgment

Kogan operates the online store at Kogan.com/au, and offers products for sale to Australian consumers across a wide range of categories, including consumer electronics, appliances, homewares, hardware, toys, tools and alcohol.

In 2018 Kogan ran a "Tax Time" promotion for four days, where it offered a 10% reduction on the advertised price on over 78,000 products.  To get the reduction, consumers were required to enter a promotional code at checkout. Kogan used the following claims in its advertisements: 

  • "Use code TAXTIME to reduce prices by 10% at checkout" 
  • "Use code TAXTIME to reduce prices by 10% at checkout" 
  • "48 hours left!"
  • "Ends midnight"
  • "use code TAXTIME to reduce almost all Kogan.com prices by 10% at checkout.  Shop now [link] T&Cs Apply". 

The evidence showed that the price of 621 of the products advertised during the Tax Time promotion (0.8% of the total products on offer) were increased by Kogan just before the promotion and decreased after the promotion.   It was argued that consumers did not receive a genuine 10% reduction on those products. 

The Court found that Kogan engaged in false, misleading or deceptive conduct in contravention of sections 18 and 29 (1)(i) of the Australian Consumer Law.  The Court found that, when assessed in context, Kogan falsely represented that: 

  • if consumers purchased products during the promotion and used the promotion code, they would receive a 10% discount off the price at which the products were available for sale for a reasonable period before the Tax Time promotion.  The dominant message conveyed by the marketing materials was that a discount was being offered on the prices at which the products had previously been offered or would be offered for sale in the future. 
  • consumers had a limited opportunity, if they purchased products during the promotion and used the promotion code, to receive a 10% discount off the price at which the products would be available for sale for a reasonable period after the Tax Time promotion. 

This matter is back before the Court in November 2020 for a penalty to be set.  

Do's and Don'ts in relation to Savings Representations 

Fundamentally, was/now pricing represents to consumers that they will achieve a saving by purchasing the advertised product during the sale period. To avoid being in contravention of the Australian Consumer Law, this saving representation must not be misleading or deceptive.  

To reduce the risk that was/now pricing representations are misleading:

  • DO ensure that customers have been able to pay the "was" price for a reasonable period immediately before the sale.  The question as to what is a "reasonable" period, is not clear, as the Court in this case was not required to rule on what constitutes a 'reasonable' period of time.  What is a "reasonable" period will vary from case to case and depend on such factors as the type of product, market involved, and historical frequency of price changes. 
  • DO make sure that you keep records that evidence the former price and how long it was in place.  The types of records that should be kept include advertising, screen shots of web pages, and records of sales.  These will be critical if the ACCC comes knocking to seek substantiation for marketing claims. 
  • DON’T use an inflated or outdated original price.  Don't compare the sales price to an original price, or a recommended retail price, that you never offered the product at, or if it was only offered at that original price for a short time or a long time in the past.
  • DON’T represent that a sale is for a short period, and a price reduction is temporary, if the price will be used again or for a longer period.  The ACCC and the Courts take issue with creating a false sense of urgency for consumers to purchase. 

If you have any questions about traversing pricing issues please contact us here at Bird & Bird.