The owner of online retailer Dick Smith has received a warning from the Commerce Commission for “likely misleading consumers” when its website automatically signed up customers to a $149 membership subscription.
The company, however, takes issue with the commission’s view, saying it had already begun changing “the customer experience” prior to the consumer watchdog being involved.
The investigation into Kogan Australia Pty Limited was launched last year after allegations of misleading conduct from customers, who said they were unknowingly given a 14-day free trial of the FIRST membership.
This trial led to an ongoing payment obligation of $149 annually, or $14.99 monthly, once the trial period had finished.
Between 3 July and 19 September 2023, the website used a pre-selected tick box to add the trial to shopping carts unless customers had already 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.”
The commission received 182 complaints from customers about the membership programme.
After the issue was raised, Dick Smith stopped using pre-selected fields on their website for FIRST subscriptions and now uses a method where customers must choose to sign up.
It provided a refund to those who requested one.
In a statement today, the commission issued a warning to Dick Smith and said about the scheme: “Consumers are focused on their intended purchase when shopping online and should not have to watch out for being automatically signed up to a subscription through a pre-selected tick box.”
“Businesses have an obligation under the Fair Trading Act to not mislead consumers, including online shoppers,” Commerce Commission competition, fair trading, and credit general manager Vanessa Horne said.
“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 to a subscription.”
“To avoid automatically subscribing, a customer would have to first recognise the tick box had been selected, which meant they were signed up, and then actively de-select the option.”
She said the commission encouraged consumers to keep a look out for “sneaky subscriptions” while online shopping.
“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 being misleading about online purchases or subscriptions, please let the commission know on our website.”
Dick Smith’s owner responds: ‘We don’t agree with the commission’
A Kogan spokeswoman said in a statement that the company did “not accept the views” of the Commerce Commission about the programme.
“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,” the spokeswoman said.
“The Commerce Commission letter (dated October 22, 2024) refers to a webstore checkout process that was in place for a limited time, over a year ago; the customer experience in question had already begun to change prior to the commission beginning its process and had been changed prior to the commission’s findings.”
The spokeswoman added: “Our FIRST programme 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.”
