It's a practice as old as Methuselah. Raise your price, drop it and make the buyer think they've scored a sweet deal, but the tactic has landed Australian e-commerce giant Kogan.com (ASX: KOG) in hot water.
After proceedings brought by the Australian Competition and Consumer Commission (ACCC), the Federal Court has found Kogan breached consumer law by lifting the prices of more than 600 products before promoting discounts at the end of the 2018 financial year.
The court has found Kogan made false and misleading representations when it advertised that customers could save 10 per cent at the checkout by using the code 'TAXTIME' from from 27 to 30 June 2018.
The promotion was advertised on Kogan's website, in emails it sent to more than 10 million consumers, and in SMS messages to more than 930,000 consumers.
Towards the end of the promotion, Kogan's email advertisements also included statements like '48 hours left!' and 'Ends midnight tonight!' to entice consumers to make a purchase during the sale.
But the court found in most cases the price had already been raised by at least 10 per cent prior to the sale, while many prices were cut again shortly after the promotion ended.
"We brought this case because we were concerned that the advertised price reductions were not genuine savings," ACCC chair Rod Sims said.
"Many consumers who took up the offer on one or more of the 600 or so products in many cases actually paid the same as, or more than, what they would have paid immediately before and after the promotion.
"All businesses must ensure that their advertisements do not mislead consumers about the nature of a promotion, and that any promised savings are genuine."
A hearing on relief, including penalties, will be held at a later date. The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective notices and costs.
In a release today, Kogan said the profit derived from the sale was "immaterial", and the ruling would not have any adverse impact on the company's promotional activities as it had updated them in 2018.
"The promotion was not intended to mislead any shoppers, and was implemented in order to allow customers access to lower prices than the prices that applied without the coupon or promotion," the company said.
"At all times, the Company has been focussed on making the most in-demand products and services more affordable and accessible for all Australians."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Get our daily business news
Sign up to our free email news updates.