Kogan remains under ACCC’s watchlist
The owner of online retail giant, Kogan.com, was warned not to label his firm’s end-of-financial sale a “discount” to avoid landing into legal problems. The Australian Competition and Consumer Commission (ACCC) has kickstarted its case against Kogan.com over misleading offers, which is expected to have subsequent significant ramifications for e-commerce players.
During the hearing, correspondence between members of Kogan’s marketing team was read aloud where team members came to a consensus that they will not label the promotion as a “discount”. Specifically, at one point in time, founder Ruslan Kogan was corrected after he wrote “discount” in an e-mail. Thus, Kogan.com has been accused by the competition watchdog of falsifying a sense of urgency by incorporating advertisements such as “Ends midnight tonight!” and “48 hours left!”.
Regulator barrister, Penny Neskovcin, was of the view that a typical consumer would have comprehended these messages to imply that prices to be reduced were equal to that of prices before the promotion. However, that was not what the firm has done. Instead, Kogan.com was accused of marking up prices by an average of 12 per cent on more than 600 products before advertising an end-of-financial-year promotion code for 10 per cent of back in 2018.
Yet, when the firm’s chief operating and financial officer, David Shafer was called in to be a witness for the case, he did not regard the action to be surprising. Instead, Mr Shafer viewed it to be reasonable given that the firm was overseeing many other promotions concurrently. Kogan, who has a market capitalisation of $375 million, has therefore denied the allegations while asserting that price fluctuations were not rare in the e-commerce industry.
Nevertheless, this isn’t the first time the firm has found itself to be in such a position. Kogan was previously fined $32,400 in 2017 over a Father’s Day promotion and was demanded to edit advertisements in 2009 after the ACCC raised issues over the way the firm displayed price comparisons. The ACCC has since launched legal action in 2019, claiming that the advertising was misleading.
Presently, the firm has been grappling with the outbreak of the coronavirus which originated in China. It warned that the virus could hinder growth in 2020 should factory closures persist, and travel restrictions continue to disrupt its supplies from China. More notably, Kogan is particularly susceptible to the virus as it locates majority of its private label products and third-party brands from China.
Over the course of the past twelve months, Kogan has since introduced Kogan Energy, Kogan Super and Kogan credit cards. Additionally, its results for the half-year ending December 31, 2019, the firm reported revenue of $219.5 million – a 5.3 per cent drop from the previous year, which the firm attributed to a successful launch of Kogan Marketplace. This is because, within Kogan Marketplace, only sellers’ fees are counted towards revenue. Meanwhile, Kogan.com declared an interim dividend of 7.5 cents a share, relative to the 6.1 cents a share compared to the previous period.
By Caroline Wong
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