The Kogan.com Ltd (ASX: KGN) share price has come under pressure on Thursday after the ACCC commenced proceedings against it.
In afternoon trade the ecommerce company's shares are down 4% to $6.00.
What has happened?
This morning the ACCC advised that it has instituted proceedings against Kogan in the Federal Court alleging that it made false or misleading representations about a 10% discount promotion, in breach of the Australian Consumer Law.
According to the ACCC release, between June 27 and 30 of last year, Kogan ran an online promotion where consumers could obtain a 10% discount on most of its products by using the discount code "TAXTIME".
The ACCC alleges that Kogan's advertisements were false or misleading because Kogan increased the prices of more than 600 of its products immediately before the promotion. In most cases prices increased by at least 10%.
ACCC Commissioner Sarah Court said: "We allege that Kogan's advertisements were likely to have caused consumers to think they were getting products below their usual prices. In fact, Kogan had inflated product prices which we say created a false impression of the effective discount."
Furthermore, the release explains that towards the end of the promotion period, Kogan's email advertisements used statements such as "48 hours left!" and "Ends midnight tonight!"
The ACCC alleges that this gave the impression that consumers only had a limited time to purchase the products at the discounted prices. However, Kogan reduced the prices of the affected products shortly after the promotion ended, many back to their pre-promotion prices.
Kogan responds.
This afternoon Kogan responded to the allegations, advising that "it strongly denies the allegations and will defend the proceedings."
It added that the "proceedings commenced by the ACCC ignore critical facts and matters which are in Kogan.com's view highly relevant in assessing the overall impression of the promotion by consumers who are intimately familiar with online retailing and how a discount code functions."
The company explained that it has cooperated fully with the ACCC throughout its investigation and is "disappointed that the ACCC has nevertheless decided to issue proceedings against Kogan.com – a highly pro-competitive company that benefits consumers."
Elsewhere in the retail industry, the Super Retail Group Ltd (ASX: SUL) share price has charged higher after being upgraded by a broker and the Reject Shop Ltd (ASX: TRS) share price has crashed lower after downgrading its profit guidance.
