Dick Smith warned over alleged misleading subscription charges

Dick Smith has been issued a formal warning by the Commerce Commission for misleading customers after allegations that it charged consumers for annual subscriptions without their knowledge. Photo / Dean Purcell

Dick Smith owner Kogan Australia has been issued a formal warning by the Commerce Commission after allegedly misleading the majority of 241 consumers into signing up for a subscription without them knowing.

According to the allegations, Dick Smith’s online store automatically signed up consumers for a monthly or yearly “First” membership subscription, with a maximum value of $149 a year.

Commerce Commission fair trading manager Vanessa Horne said consumers are focused on what is already in their cart when making a purchase, not added extras.

She said it was not obvious to consumers that it was pre-selected, which was misleading.

“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,” Horne said.

The commission said that from July 3 to September 19 2023, Dick Smith’s website used a pre-selected tick-box to add a First subscription trial to all eligible consumers’ shopping carts, unless consumers proactively opted out.

Complainants to the commission acknowledged they hadn’t realised they had signed up until they received the charge from Dick Smith following the trial’s completion two weeks later.

A Kogan Australia spokesperson said that they did not accept the views outlined by the commission, but remained committed to making ongoing improvements to its shopping experience.

“The Commerce Commission letter 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 prior to the commission beginning its process and had been changed prior to the commission’s findings.”

After the Commerce Commission raised the issue with Dick Smith, the company halted its use of pre-selected fields for the subscription service and has provided impacted customers with a refund when requested.

The commission believed the conduct was likely in breach of the Fair Trading Act, but expressed that only the court could determine if a breach had occurred.

Consumer NZ expressed concern that businesses can breach the Fair Trading Act and get off with only a warning.

“We would like to see greater enforcement powers given to the Commerce Commission and increased penalties so businesses are incentivised to comply with the law,” a spokesperson said.

Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.