The Federal Court has ordered Emma Sleep to pay $15 million in penalties for false or misleading representations under the Australian Consumer Law (ACL). The penalty reflects the ACCC’s continuing enforcement priority on addressing consumer law concerns and their focus on misleading pricing practices. It also coincides with the introduction of a new Government Bill to ban unfair trading practices (UTPs), which will have significant implications on the sales and pricing practices of many consumer facing businesses.
These developments follow our related Mallesons Pulse blog posts on the liability of corporate groups under the ACL in Emma Sleep and the introduction of the UTPs Bill.
Emma Sleep judgment
Price displays
Emma Sleep admitted it made false or misleading representations for 74 products online across a three-year period.
Price displays at Emma Sleep include:
- the purchase price;
- a higher strikethrough price; and
- a percentage discount claim (e.g. “50% off”) or a savings discount claim (e.g. “Save as much as $3,531”)
The Court found the products subject to a percentage discount or a saving discount claim were in fact had not been, or almost never been, offered for sale at the higher price.
Limited time representations
Emma Sleep also admitted that it had made misleading representations that the discount prices were available for a limited time, by using a countdown timer that would reset during sale campaigns, and using phrases such as “Ending Soon” or “Last chance” when the products continued to be advertised at the same or similar discount. The ACCC was particularly concerned about the false sense of urgency which pressured consumers to making a rushed purchase decision.
Scale of representations
The ACCC noted the misleading representations were seen or sent to a significant number of people. During the relevant period, this included:
- over 4.9 million website visits
- over 10 million views on social media
- over 4 million recipients of electronic emails
- almost 500,000 recipients of SMS messages
The Court and the ACCC observed nearly every sale made by Emma Sleep was advertised with a savings representation, leading to over $134 million in revenue, and involving over 243,000 individual products sold.
Emma Sleep’s business practices
Senior executives were involved. There was correspondence indicating staff were aware that the conduct was “legally problematic in AU”. However, they still encouraged the business to be “creative to get around with the legal constraints” and queried “how big is the fine”.[1]
Emma Sleep was warned, twice, by a competitor that its saving representations were contrary to the ACL. It also received 22 customer complaints when customers purchased products on sales that were later advertised for an even lower price or were misled about the extent of the discount.
The ACCC also sent two warnings to Emma Sleep noting customer complaints about its pricing practices. It was only at this latter point that Emma Sleep changed its pricing practices. However, Emma Sleep initially responded to the ACCC’s inquiries that the saving representations were consistent with the ACL as they were offered to new customers when this was not in fact the case. The Court was concerned by the fact that Emma Sleep only changed its advertising in response to warnings from the ACCC – this suggests that Emma Sleep had been waiting to see whether the conduct would attract adverse attention, and not proactively ensuring that its advertising was lawful.
The Court was particularly concerned by the lack of any legal advice that had been sought by Emma Sleep when making the representations or when it first received warnings from its competitor. The Court found Emma Sleep did not have a strong culture of compliance and did not proactively assess whether the representations were consistent with the ACL. These factors gave rise to the inference that the contravention had not occurred inadvertently or through some system error.
Penalty & Injunction
The Court found Emma Sleep engaged in a deliberate marketing strategy in making the misleading claims and senior management had turned a “blind eye” to whether it contravened the ACL.[2] The Court ordered Emma Sleep to publish corrective notices and implement an ACL compliance program.
A three-year injunction was also imposed on Emma Sleep which prevents it from advertising products using strikethrough prices, percentage discount and saving claims on its website and in external advertising if the product has not been offered for sale (or almost never been offered for sale) by Emma Sleep at the strikethrough price. Emma Sleep was also barred from running sales campaigns which feature countdown timers, when the sale is not time limited because the timer resets or the products continue to be advertised for sale at the same or similar discount.
Increasing ACCC scrutiny of sales
Misleading pricing has been a consistent feature of the ACCC’s annual enforcement priorities, covering supermarkets, essential services (such as energy and telecommunications) and the retail sectors. Since late 2024, the ACCC has issued warnings every year to businesses about the risk of misleading sales advertising ahead of, or following, Black Friday and post-Christmas sales.
Earlier this month, the ACCC announced that it is investigating a broad range of retailers, including bedding, homewares, sports and leisure, and clothing and accessories, for misleading representations as part of its Black Friday Sale sweep from last year. The ACCC has warned that retailers must not mislead consumers about the true duration of a sale and the extent of discounts. In particular, the ACCC is concerned by sale tactics which create a false sense of urgency (which is echoed in the proposed UTP reforms discussed below). Examples of the conduct investigated include:
- misleading time representations (such as ‘3 days only’) and countdown timers when sales actually extended beyond the time indicated
- misleading ‘was’/’now’ or strikethrough pricing representations
- ‘Up to X% off’, where the ‘up to’ text is not prominently displayed, or where few or very few products are on sale at X% off
- headline claims (such as ‘sitewide’ or ‘storewide’ sales) alongside significantly less prominent disclaimers about exclusions to the sale, which can be misleading if inadequately disclosed
Ban on unfair trading practices
The Emma Sleep judgment coincides with the Treasury’s Competition and Consumer Amendment (Unfair Trading Practices) Bill 2026 (Cth) (the Bill) which was introduced in Parliament earlier this month. If passed, the new UTP laws will commence on 1 July 2027.
The Bill introduces a new general prohibition on businesses engaging in UTPs if:[3]
- the conduct does or is likely to:
- manipulate the consumer; and/or
- unreasonably distort the environment in which the consumer makes, or is likely to make, a decision; and
- causes or is likely to cause detriment (whether financial or otherwise) to the consumer.
Manipulation is behaviour that exploits common biases which result in a change of behaviour, decision, action that is against a consumer’s best interest. It is behaviour that goes beyond what is reasonable and is not intended to capture legitimate, generally accepted market practices. Unreasonable distortion is where a consumer makes an economic decision about proceeding with a transaction when they otherwise would have been unlikely to do so.
The prohibition applies to both online and offline conduct, with a focus on dark patterns which pressure consumers into unintended actions for the benefit of the supplier. Examples singled out in the Explanatory Memorandum include countdown timers (such as the one in Emma Sleep) or low stock notifications which create an artificial sense of urgency or scarcity. While there are legitimate applications of certain dark patterns such as scarcity indicators, a combination of dark patterns that are used to pressure consumers and create a false sense of urgency may increase the likelihood of a contravention.
The Bill also includes a ‘grey’ list of examples that may contravene the general prohibition. In relation to sales and pricing, this includes:
- a failure to disclose material information, or disclosure of material information in a complex or unclear way to consumers; and
- creating an environment which places consumers under unreasonable pressure in relation to, or obstructs the consumer from, making or fulfilling a consumer’s decision.
There are also changes which relate to drip pricing and the display of transaction based charges – which we discuss in more detail in our separate blog post on the introduction of the UTPs Bill.
Key takeaways for businesses
Businesses face increasing ACCC scrutiny of their pricing and sales representations. Businesses will need to be mindful that their conduct can be potentially caught by the existing prohibitions against misleading or deceptive conduct and the new prohibitions of UTPs under the ACL.
Care should be taken in relation to mechanisms that may create a false sense of urgency for, or are against the best interests of, consumers. Examples include countdown timers, scarcity indicators, pre-selected defaults or confirm shaming (where consumers are ‘guilt-tripped’ or made to feel bad about making decisions).
In our experience, proactive management of pricing and sales representations is important. The Court’s findings in Emma Sleep are a reminder that a strong culture of compliance requires businesses to assess ACL risk before the publication of pricing and sales representations to consumers.
[1] ACCC v Emma Sleep GmbH (Penalty) [2026] FCA 493 at [75].
[2] At [101].
[3] Competition and Consumer Amendment (Unfair Trading Practices) Bill 2026 (Cth), Sch 1.
Image Credit: Bed Testing Area inside Mandaue Foam Showroom / Wikipedia Commons / CC3.0 / Remixed to B&W and resized
