Online Mattress Retailer Fined $9.8 Million Over Misleading Discount Claims

Key Takeaways

• Penalty for Misleading Pricing: The court imposed $9.8 million (AUD 15 million) in penalties on Emma Sleep entities for breaching Australian Consumer Law through false discount claims.
• “Strikethrough” Pricing Misused: 58 out of 74 products were never sold at the higher reference price, while the rest were rarely sold at that level.
• False Sense of Urgency: Countdown timers and “Ending Soon” messaging were used despite ongoing or repeated promotions.
• Deliberate Marketing Strategy: The conduct was found to be intentional, with senior management aware of the risks but failing to act.
• Large-Scale Consumer Impact: Millions of consumers were exposed through websites, social media, email, and SMS campaigns.

Deep Dive

The Federal Court of Australia has ruled that Emma Sleep and Emma Sleep Southeast Asia breached the Australian Consumer Law by promoting products with inflated reference prices and misleading time-limited offers. Each entity was fined $4.9 million (AUD 7.5 million).

At the heart of the case was the company’s use of “strikethrough” pricing across its online store. All 74 products were advertised with a higher price crossed out alongside a discounted price, often paired with bold claims such as “50% OFF” or promises of significant savings.

But those savings were largely illusory. The court found that 58 of the 74 products had never been sold at the higher strikethrough price. The remaining 16 had only rarely been offered at that level without a discount. In effect, the reference prices served more as a marketing device than a genuine benchmark.

The retailer also leaned heavily on urgency tactics. Countdown timers and phrases like “Ending Soon” were used to suggest limited-time offers, even though the timers reset and the same or similar discounts continued. The court found that this created a false sense of urgency that may have pressured consumers into making rushed purchasing decisions.

According to the judgment, the conduct was not accidental. It formed part of a deliberate marketing strategy, with senior management turning a blind eye to whether it complied with legal requirements.

“When marketing their products companies and their executives must ensure they do so honestly, responsibly and in compliance with the law,” said Luke Woodward of the Australian Competition and Consumer Commission.

Woodward added that the company’s approach gave consumers the impression they were securing a bargain, while the repeated use of countdown timers and “ending soon” messaging risked pushing buyers into decisions they might not otherwise have made.

The scale of the campaign was massive. Between June 2020 and March 2023, the company’s website drew more than 4.9 million visits, while its social media advertising generated over 10 million views. Promotional emails were sent to more than 4 million consumers, alongside nearly half a million SMS messages containing the same discount claims.

Nearly every sale during that period featured a savings representation, contributing to more than $87.5 million (AUD 134 million) in revenue and over 243,000 individual products sold.

The court also found that Emma Sleep Southeast Asia Inc engaged in the same conduct, reinforcing the consistency of the strategy across markets.

In addition to the financial penalties, the companies have been ordered to publish corrective notices and implement a compliance program designed to prevent similar conduct in the future.

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