Even the best fiction writer probably couldn’t script this if they tried but a tumultuous year where everything that could go wrong, did – has finally ended for online books retailer Booktopia (ASX: BKG) which has culminated in a $6 million fine for breaches in consumer protection laws.
The $6m fine from the Australian Competition and Consumer Commission (ACCC) brings an end to a saga that began in 2020 before the regulator instituted Federal Court proceedings against Booktopia for making false or misleading representations to consumers about their rights to refunds.
The case centred around the terms and conditions on Booktopia’s website which stipulated that customers would only be entitled to a refund for faulty, damaged or incorrect product if they notified Booktopia within 2 days of their delivery arriving. Ultimately, 19 consumers who were rejected refunds by Booktopia were referenced by the ACCC as customers that should have been given refunds under the consumer guarantee rights in the Australian Consumer Law.
“Consumers are not limited to a two-day period in which to notify a seller of problems with the product they have purchased,” commented ACCC Chairman, Rod Sims when proceedings against Booktopia first commenced.
“We allege that Booktopia misled consumers about their rights to refunds or other remedies, and did not allow them to make use of their consumer guarantee rights,”
With the average price of a book on Booktopia being $28.27, 19 books refunded would have cost Booktopia $537.13 in revenue.
Instead, they’ll be paying off a $6 million fine over the next five years.
Outside of the incredible cost that those T&Cs have cost Booktopia, it’s been a difficult year for their overall business which despite still being the largest online book retailer in Australia, has not been immune to struggles across the eCommerce sector.
For the year ended 30 June 2022 (FY22), Booktopia has reported $240.8 million in revenue which was a 7.5% increase on the previous year but with a 54.5% decline in underlying EBITDA to $6.2m, down from last year’s $13.6m.
The Company attributed its fall in earnings to increased labour expenses to fulfil orders throughout the pandemic as well as $1.7m in legal and consulting expenses linked to potential acquisitions that Booktopia looked at, but didn’t proceed with.
Those fees could potentially balloon out further too, with founder and former CEO Tony Nash currently campaigning to have the Board of Booktopia removed, the same Board which stood Nash down from all in-office activities last month. It came after Nash stood down as CEO in May 2022 following the Company’s poor performance and the ongoing ACCC case.
In addition to those expenses, Booktopia has also written off $2.1 million as an impairment from their investment in Welbeck ANZ and the decision not to take on its distribution services, conceding it is a portion of their investment that will not be recoverable. This was part of a $3m investment Booktopia made to acquire 25% of Welbeck Publishing Group’s standalone Australian subsidiary.
At the end of the day, it all culminated in a $15.1 million net loss after tax for Booktopia but with the ACCC case finally settled, a new chapter may finally be starting for the book retailer which will move into its new fulfilment centre in FY23 under new leadership.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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