Kogan Prepares for Legal Battle
Premier online retailer, Kogan.com, is presumed to defend allegations relating to misleading its consumers in regards to publicised discounts and prices. Serial entrepreneur, Ruslan Kogan will face the Australian Competition and Consumer Commission (ACCC) in the Melbourne Federal Court today to answer allegations pertaining to the misleading representations by offering fake discounts to consumers in a tax-time promotion last June.
The market reaction to the court case has been subdued, with share price plummeting coming off the back of a 28 week high, the ASX closed with the share losing 14.5% to 5.22 since the inception of the ACCC. Kogan, through which denies all allegations, is yet to file its defence. However the retailer has weighed in on the matter in an advertisement for a 48-hour tax-time promotion at the end of May. Many suggest that ACCC’s investigation into the Kogan tax-time promotion was buoyed by consumer complaints, prompting the independent body to look into price volatility and discrepancies.
From the outset and reiterated by a Kogan Media Release suggested that the proceedings commenced by the ACCC tend to ignore the critical facts and matters. In what the ACCC seemingly neglects, and what Kogan views as highly admissible, the assessment of the overall apprehension of the promotion shows little regard from consumers who are familiar with online retailing and how a discount code functions.
Reportedly, Kogan’s marketing collateral in relation to the promotion was carefully considered and was drafted with the intent to avoid confusion that was alleged by the ACCC. The Media Release goes on to claim that all customers would be made aware of the pre-discounted price they would pay for the product and the price reduction that would incur as a result of using the discount code.
Additionally, Kogan.com publicised that the company cooperated in full with the ACCC throughout the entirety of its investigation and further explained the aforementioned facts. It goes without saying that Kogan.com is ‘disappointed with the ACCC that the ACCC has nevertheless decided to issue proceedings against kogan.com – a highly procompetitive company that benefits its consumers.’
The media release concludes with a statement claiming that the company did not gain any material financial benefits as a result of the promotion and maintains that Kogan.com will not facilitate any adverse change to its ongoing promotional activities as a result of this matter.
Insofar, Kogan maintains that the ACCC’s case, through the establishment of precedence, may have ramifications for other online retailers who have the tendency to change prices regularly in response to consumer demands, competitor price, currency movements, shifts in supplier prices and inventory levels given that the ACCC enforces site-wide interrogations. Although, other several other online retailers have abandoned the concerns levied against their own integrity, noting that the guidelines that surround false and misleading advertisement are transparent.
In an article issued by the Australian Financial Review after having interviewed a Chief Executive, wanting to remain unnamed claimed that He/she does not believe that the ACCCs perusal of the misleading representations “has ramifications for all online retailers.” Reportedly, “there are very clear policies in place as to price movements, price establishment and when and how you can call out discounts. A key to this is that discounts are genuine,” he said. Suggestive of the fact that most products had to be sold within a certain price for what is considered a ‘reasonable time,’ usually around a fortnight, he said, for retailers to claim products were being offered at a discount. “The case brought forward by the ACCC does not change the status quo or make a new precedent in any way,” the CEO said. “All it does is require online retailers to meet the guidelines provided by the ACCC.”
Weighing in on the subject matter was competition layer, Patrick Gay, a partner at Herbet Smith Freehils, noted that the sales have to be bona fide, regardless of the whether seller uses the pricing scheme. That said, The ACCC allegation included range of 621 products and their respective prices from June 24 to July 2nd in 2018. The allegation distinguished the following: it recognised that between the dates of June 13 and June 26, prices remained unchanged; the consistency of prices after July 2nd; the incremental rise in price between June 24 and June 26 – ranging from 3% to 23%; and the reduction in price from June 20 to July 2 – spanning between 4% and 21%.
Looking forward, with the court proceedings taking place today, should the courts work in favour of the ACCC, it will be interesting to see how the market reacts to a company that was once highly sought after. However, in the case of a loss in the Melbourne Federal Court, intuitively it should put an end to Kogan’s upward trend.
By Jordan Nikopoulos
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