The Commerce Commission has issued a warning to Kogan Australia Pty Limited, commonly known as Dick Smith, for likely misleading consumers, as their website automatically signed customers up for a $149 membership subscription.
Commerce Commission Competition, Fair Trading, and Credit General Manager Vanessa Horne said consumers have been focused on their intended purchase when shopping online and should not have to worry about being automatically signed up for a subscription through a pre-selected tick box.
“Businesses have an obligation under the Fair Trading Act to not mislead consumers, including online shoppers. The pre-selection of the “FIRST” membership was not obvious on Dick Smith’s website, which meant it was unclear to consumers that they were signing up for a subscription,” said Horne.
“To avoid automatically subscribing, a customer would have first to recognise the selected tick box, which meant they were signed up, and then actively de-select the option.
The Commission has encouraged consumers to look out for sneaky online subscriptions.
“As we head into the holiday shopping season, it’s important to take a moment to check exactly what’s in your cart before purchasing. If you think a business is misleading about online purchases or subscriptions, please inform the Commission on our website.”
The Commission investigated allegations of misleading conduct under the Fair Trading Act following complaints from consumers that they were unknowingly supplied a 14-day free trial of the FIRST membership, which led to an ongoing payment obligation to pay $149 (annually) or $14.99 (monthly) once their trial period had ended.
From the 3rd of July to the 19th of September 2023, Dick Smith’s website used a pre-selected tick box to add a FIRST trial to all eligible consumers’ shopping carts unless consumers proactively opted out.
Most of the Commission’s complainants did not realise they had signed up to the FIRST trial during their purchase until they received a $149 charge from Dick Smith after the completion of the 14-day trial.
After the Commission raised the issue, Dick Smith stopped using pre-selected fields on their website for the subscription service and now uses a sign-up method that requires consumers to actively sign-up for the FIRST subscription if they choose.
Dick Smith also provided impacted consumers with a refund when they requested it.
"The Commerce Commission letter (dated 22nd October 2024) refers to a web store checkout process that was in place for a limited time, over a year ago; the customer experience in question had already begun to change before the Commission beginning its process and had been changed prior to the Commission's findings," said Kogan spokeswoman.
"We are continually evolving our digital storefront, regularly testing different designs and making improvements based on data and customer feedback. As always, any changes we make are customer-focused to improve the shopping experience and deliver value to our customers."
She added that the FIRST program has proven hugely popular since launching in July 2023, with thousands of New Zealanders enjoying exclusive member benefits including discounted prices across thousands of products, free shipping and FIRST Rewards credit on all eligible purchases.
The Commission believes this conduct was likely in breach of the Fair Trading Act, and after the investigation, has issued a warning letter to Dick Smith. Ultimately, only the court can determine if a breach has occurred.
Kogan does not accept the views outlined by the Commerce Commission, but remains committed to ongoing improvement to the shopping experience and delivering great value to our loyal customers.
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