Online retailer fined one day for misleading ‘today only’ offers

A major online retailer owned by The Warehouse Group has been fined $840,000 over promotional claims on its online store that may mislead consumers about the duration of its daily deals and the amount of stock available.

1-Day – which has since merged with another entity and now trades under TheMarket – has promoted its daily deals “for today only”, although they are often rolled over to consecutive days. The online store had also been programmed to gradually reduce the amount of stock shown as available throughout the day, which meant that consumers often did not see accurate information about the stock available or the duration of the sale. offer.

By indicating that the period of the sale offer and the amount of stock were limited, consumers were encouraged to make quick purchasing decisions and may have been deterred from taking their time to make decisions about the purchasing products or shopping around before you buy.

The Commerce Commission’s Fair Trading Managing Director, Vanessa Horne, said scarcity claims were often not based on the actual stock available or the time frame to purchase the respective products from 1-Day.

Ms Horne says the promotion of daily deals and the use of a one-day countdown between 2016 and 2020 gave the impression that goods were available at a price listed for a limited time, and an indicator of stock level gave the impression that stock was running out.

“In fact, often none of these things were true and on many occasions the goods were available for the same price the next day.

“In a physical store, you wouldn’t expect a retailer to say there is one item left when a number of items remain on the shelf or in the warehouse. The same goes for the web – any representation about available stock must be truthful.

At sentencing in the Auckland District Court on September 7, 2022, Judge Winter said the purpose of the defendant’s deceptive sales techniques was to pressure potential buyers into making a snap or quick decision to to buy from the defendant company, at least within the 24 hour period as advertised instead of buying the same products from one of the defendant’s competitors.

“The deceptive conduct was therefore central to the defendant’s business strategy.

“Given the lengthy period over which Defendant’s infringement occurred, the nature of the infringement which involved misrepresentation of two-pronged pressure on limited shopping time and limited availability of stocks as well as the advice and experience of the company, I find that the offending defendant was more than negligent. The accused’s offense was voluntary.

“Defendant’s conduct gave it an unfair advantage in the marketplace over its competitors who did not use such pressure selling techniques and therefore prevented effective competition,” Judge Winter said in the judgement.

Following contact from the Commission, 1-Day discontinued use of the countdown timer and stock indicator. It no longer offers daily deals.

A copy of the judge’s sentencing notes is available in the Case Log on the Commission’s website.

The Commission has published new guidance on its website regarding misleading online sales practices which can be read here.

Background

Following a sweep of online shopping sites in 2019, the Commission wrote to a number of traders to advise them on the potential of sales practices to mislead consumers and breach Fair Trading Act. The Commission began investigating 1-Day after finding that products often reappeared as daily deals and the amount of stock remaining appeared to be the same for different products at the same time of day.

Example of stock level indicator

During its investigation, the Commission obtained information showing that 1-Day had purchased 1,500 Apple Earpods and already had 494 in stock, meaning it had a total of 1,994 units available for sale.

The product was offered for sale every day between November 27 and December 6, 2017 as a Daily Deal. During this time, 1-Day sold 501 units, meaning it still had at least 75% of its inventory left. The inventory level indicator displayed a value between 10% and 19% between 9:00 a.m. and 11:59 a.m. on each date, before being automatically reset to show 100% again at 12:00 p.m. each day.

1-Day admitted that its stock level indicator was pre-programmed to show declining stock levels over the 24-hour period. The stock level indicator displayed a maximum stock level value that decreased throughout the day and was only accurate when the total stock level fell below 10%.

Sample Daily Deal

Apple Earpods w Remote Volume Control & Mic – Genuine was sold as a daily deal for 33 consecutive days and was advertised as a consecutive day on another 65 occasions.

/Public release. This material from the original organization/authors may be ad hoc in nature, edited for clarity, style and length. The views and opinions expressed are those of the author or authors. See in full here.

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