Legal Insights

Consumers led up the garden path: Bloomex fined
$1 million for deceptive marketing practices

By Shaun Temby, and Grace Carroll

• 29 April 2024 • 5 min read
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Online floral and gift retailer, Bloomex Pty Ltd, has recently been fined $1 million following an Australian Competition and Consumer Commission investigation that found that it had engaged in misleading and deceptive conduct by publishing misleading product ratings, advertising false discounts, and failing to disclose product surcharges adequately.

Introduction

In the competitive online floral and gift market, consumers are spoilt for choice, with retailers competing to attract customers facing increasing cost of living pressures. The Federal Court’s recent judgement against Bloomex is a reminder to retailers that using misleading and deceptive conduct to attract customers is not without risk. In March this year, the Federal Court ordered online floral and gift retailer, Bloomex Pty Ltd (Bloomex), to pay $1 million in penalties after the retailer admitted to engaging in false and misleading marketing practices on their website.

Background

In December 2022, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Bloomex in the Federal Court, alleging that Bloomex had made numerous misleading representations on its website. The Court categorised the conduct into discount representations (Discount Representations), star rating representations (Star Rating Representations), and total price representations (Total Price Representations).

Shortly after the commencement of proceedings, Bloomex admitted to the above conduct. The parties submitted Joint Proposed Orders on all matters other than penalty—the ACCC seeking $1,500,000 and Bloomex arguing for a lower penalty of $350,000. Ultimately, the Court settled on a penalty of $1 million, slightly above the difference between the parties' respective positions.

The Conduct

Discount Representations

Between February 2019 and November 2022, Bloomex represented that certain products were heavily discounted through the use of a 'strikethrough price'. In reality, these products had never been sold by Bloomex at the strikethrough price. This meant that for Bloomex’s 730 advertised products, the majority were advertised as ‘for sale’ or discounted and were accompanied by a higher ‘strikethrough’ price. Further, between February 2019 and March 2023, 70 products were advertised on the website as ‘50% off’ or ‘half off’. When customers clicked on a specific product, they were directed to a webpage that displayed the product, the strikethrough price, and the ‘Bloomex price’, accompanied by a “You Save” statement.

Despite the savings advertised, the Court conceded with the ACCC, finding that the savings were not genuine. The Court found that Bloomex’s conduct could lead customers to falsely believe they were receiving a bargain and increased value for money. Such misrepresentations may have played a key role in a customer’s decision to shop with Bloomex, subsequently amounting to misleading and deceptive conduct.

Star Rating Representations

Between February 2019 and March 2023, Bloomex displayed approximately 730 products for sale with a ‘star rating’ , which had been static since January 2015. The star ratings were associated with a statement that the rating was based on customer reviews. The ACCC submitted that these ratings were actually an aggregate of reviews for products bought in Australia and overseas and included ratings from people who had never purchased the relevant products.

The Federal Court accepted the ACCC’s allegations that the Star Rating Representations were deceptive. The Star Rating Representations were found to be an accumulated score, based on data from Bloomex’s international counterparts in Canada, the United States, and New Zealand. They were based on visits to these websites rather than the specific product (and country) with which the rating was linked.

Total Price Representations

Bloomex engaged in ‘drip pricing’ and failed to adequately represent the total price that the customer was required to pay, as customers were subject to ‘inflation’ surcharges that were not disclosed at any point before checkout. From August 2022 to March 2023, customers were shown a purchase price at checkout that differed from the price displayed earlier in the buying journey and before checkout. Bloomex rationalised this increase as an ‘inflation’ surcharge ranging from $1.95 to $4.95 (per product), depending on the customer’s delivery date and postcode. Bloomex received over $300,000 from applying the surcharge to over 90,000 orders made on its website. These surcharges were not disclosed to the customer on any of Bloomex’s web pages before the ‘checkout’ webpage. The Court found this to be misleading as consumers were enticed into these purchases because of the misrepresentation regarding price. Bloomex’s conduct attracted consumers to a transaction that they might not have otherwise found appealing, obtaining an advantage over competitors.

What does this mean for retail businesses?

Honesty and integrity in trade and commerce are pillars of Australian Consumer Law. This case starkly reminds businesses of these pillars, requiring them to assess their current business practices to ensure that they don’t cross the line from effective marketing to misleading and deceptive advertising practices.

Some key takeaways:

  1. Discount representations: also known as ‘was/now’ marketing, are not a new technique to the Australian consumer landscape. However, businesses that choose to engage in a comparative pricing marketing scheme must ensure that these prices are based on authentic and accurate comparisons formulated from genuine previous prices that have been offered to customers for a reasonable period before the advertised reduction.
  2. Reviews and ratings: must be complete (in the sense that they aren't cherry-picked), accurate, current, and based on relevant data specific to the products or services with which they are associated. Ratings and reviews form an important part of consumer behaviour and purchases and, as such, need to correlate to the relevant product or service directly.
  3. Drip pricing: Consumers are entitled to know upfront the total cost of acquiring a particular good or service. Businesses cannot use lower or partial prices to lure customers into their stores or the buying process online. Businesses must ensure that their advertising displays the total purchase price of the product, including any extra surcharges at the earliest possible opportunity.


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By Shaun Temby, and Grace Carroll

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