By Jennifer Andrade and Clint Fillipou

Have you ever shopped online, spotted a sweet deal slashing the original price by 50%, and felt the pressure to act fast before the sale ends? It feels like a win saving money while beating the clock. Many customers at Emma Sleep Pty Ltd probably felt that same rush of satisfaction. But what may have felt like a dream bargain quickly becomes a nightmare as the Australian Competition & Consumer Commission’s (“ACCC”) action against the Emma Sleep corporate group has shown how digital advertising tactics can cross the line from mere marketing into false and misleading conduct, and with the rise of these “Dark Patterns” online, those nightmares are only getting darker.

Background

Emma Sleep Pty Ltd is the Australian subsidiary of Emma Sleep GmbH, a German bedroom furniture supplier operating in over 30 countries. In December 2023, the ACCC commenced proceedings in the Federal Court against Emma Sleep GmbH, Emma Sleep Pty Ltd, and Bettzeit Southeast Asia Inc, a Philippines based subsidiary of Emma Sleep GmbH. The ACCC alleged that between 15 June 2020 and 27 March 2023, all group entities were either directly or indirectly involved in making “Savings Representations” and “Limited Time Sale Representations” to Australian consumers that were misleading or deceptive, or outright false. These representations involved advertising 74 products online, typically displaying a strikethrough of a previous price beside a discounted value or percentage, or claiming that the consumer would be saving a certain amount of money.  These representations are relatively common, and can be done via strikethrough visuals, two-price representations like “was/now” pricing, and other such devices.  Some Emma Sleep advertisements were also accompanied by countdown timers, suggesting the sale price was only available for a limited amount of time. See below a screenshot showing these discount claims from Emma Sleep Pty Ltd’s website.

Turns out, customers were in for a rude awakening with Emma Sleep Pty Ltd admitting to making false and misleading representations about their sale prices and the related discounts. In many instances the investigated products had either never been offered at the strikethrough price or the claimed “base” price, or if they had been sold at that base price they had been sold at that price very rarely.  The countdown timers? They would simply reset after reaching zero, keeping the “last chance” offers alive indefinitely. These discounts and deadlines were merely illusory.

The Rise of Dark Patterns

According to ACCC Deputy Chair Catriona Lowe, “Sales and claimed savings can be enticing to consumers so it is important these claims are accurate”. False advertising practices give companies an unfair advantage over competitors who market their goods/services honestly and in accordance with the Australian Consumer Law, which forces them to either engage in the same conduct or fall behind. The primary loser in such a race to the bottom is, of course, consumers. Further, when “everyone is doing it”, compliance gets harder and harder to justify.

These types of misleading advertising tactics in the online space are also referred to as “Dark Patterns”, which are design tactics used by digital platforms and website operators to manipulate consumer behaviour through subtle or aggressive visual cues, aesthetic choices or complicated user flows. Dark Patterns come in many forms and in Emma Sleep Pty Ltd’s case, included the use of “scarcity cues” to create urgency (such as countdown timers), and false “Was X / Now Y” pricing to mislead customers into thinking they were receiving a genuine discount. For more information on “Dark Patterns”, see our article “Dark Patterns: digital deception and a threat to consumer rights, or just “digital marketing”?”.

While Dark Patterns can fall within the scope of the Australian Consumer Law (“ACL”) (as seen in this case where the ACCC took action against Emma Sleep Pty Ltd for breaching ss 18 and 29(1)(i) of the ACL), many subtler forms of these tactics continue to slip under the radar. Recognising this, the ACCC has named promotional conduct by retailers as one of its compliance and enforcement priorities for 2025-26. This focus is timely, as Australian consumers are increasingly vulnerable to unfair practices due to their growing reliance on online retailers to find cost-effective deals amid the ongoing cost of living crisis.

The ACCC has also released its final report of the ‘Digital Platform Services Inquiry’ in June 2025. The report acknowledges that the ACL is currently inadequate to protect Australian consumers in an environment where digital platforms have become “major drivers of productivity growth in our economy”. The report sets out several key recommendations to address this regulatory gap, including:

• • • Introducing an economy-wide prohibition on unfair trading practices to capture conduct considered harmful but falls short of the legal threshold for unconscionable or misleading and deceptive conduct. As discussed below, the Australian Government has already proposed a similar general prohibition which the ACCC has expressed support for in the report.
    • Establishing an external dispute resolution body for digital platforms, allowing users to escalate complaints that cannot be resolved directly with the platform; and
    • Implementing a new digital competition regime to align Australia with leading international jurisdictions (such as the UK as discussed below) and ensure Australia’s consumer laws are fit for the digital age.

This report follows the Australian Government’s consultation paper titled ‘Unfair Trading Practices: Consultation on the Design of Proposed General and Specific Prohibitions’, released in November 2024. In that paper, the Treasury proposed a general prohibition to target conduct that:

• • • “Unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, the economic decision-making or behaviour of a consumer” (the “conduct” element); AND
    • “Causes, or is likely to cause, material detriment (financial or otherwise) to the consumer” (the “detriment” element).

Specific prohibitions have also been proposed to target common unfair practices such as drip pricing and false scarcity cues which would complement the ACL’s existing targeted prohibitions (e.g. bait advertising, referral selling, and pyramid schemes). The alignment between the Australian Government and the ACCC suggests that changes to the regulatory landscape are highly likely, and these changes are expected to provide greater control over Dark Patterns and offer clearer guidance for retailers on what constitutes unacceptable online marketing conduct.

Agencies and brands need to watch this space, as changes in the regulatory mix will have a profound impact on digital advertising practices and sales/promotional tactics.

Emma Sleep and the UK

As mentioned above, other jurisdictions have already recognised the harms of Dark Patterns and taken meaningful steps to address them. The UK has particularly been proactive with the introduction of the Digital Markets, Competition and Consumer Act 2024. This legislation introduced a new “transaction decision” test to assess whether a commercial practice is unfair and significantly strengthens the enforcement powers of the Competition and Markets Authority (CMA) to combat misleading digital advertising. Notably, the CMA can now determine breaches of consumer law without first going through the courts and can impose penalties of up to 10% of a businesses’ global turnover.

Although the Act only came into force in April 2025, the CMA has already been scrutinising businesses for using Dark Patterns. It even commenced proceedings in October 2024 against the Emma Sleep corporate group for misleading consumers through false urgency cues and deceptive discount claims in advertising, concerns that closely align with those raised by the ACCC in Australia. This action followed multiple warnings issued by the CMA, which the Emma Sleep group had only partially addressed. Many are closely watching this case as a court ruling against the Emma Sleep group could establish a valuable precedent, clarifying which urgency and discounting practices breach UK consumer laws and potentially influencing the approach of international regulators.

Liability for Group Entities

The ACCC are scouring every corner of the digital marketplace and no stone goes unturned. As this case shows, there is little point in hiding behind corporate structures, and the ACCC will not hesitate to start action against related entities, including those operating overseas, where appropriate.  In this case, it relied on the derivative liability provisions of the Competition and Consumer Act to group Emma Sleep GmbH and Bettzeit Southeast Asia Inc in its action against Emma Sleep Pty Ltd and hold them liable for the contraventions.

Although Bettzeit denied involvement in the contraventions, the Federal Court found them liable as both the principal contravener (i.e. the impugned representations were made by Bettzeit in its own right) and derivatively liable under s 139B(2)(b)(i) (i.e. Emma Sleep Pty Ltd was acting “at the direction” of a director or employee of Bettzeit within the scope of the apparent authority of that director or employee). This was because the court had found Bettzeit to have been closely involved in the preparation and publication of Emma Sleep Pty Ltd’s advertising and even directed them to make the impugned representations.

By contrast, Emma Sleep GmbH was not found liable for the contraventions by the Federal Court as Emma Sleep Pty Ltd was not acting under the direction of, or as an agent for, any employee or director of the parent company. The court noted that showing a mere “general economic interest” in a subsidiary’s operations is not enough to establish liability.

As such, businesses operating as part of a corporate group, including those outside of Australia, must tread carefully. If a related entity influences misleading conduct by another entity, particularly through shared directors or operational involvement, it risks being held directly or derivatively liable. 

Don’t Sleep on It – Act Now!

The ACCC has sought declarations, penalties, injunctions, and other orders, though the Federal Court is yet to determine the outcome, so we can expect further updates on this. This case serves as a clear reminder that businesses operating and advertising online must be careful and honest when promoting their goods and/or services. Harmful tactics that deprive customers of genuine choice and unfairly disadvantage honest competitors have no place in a fair marketplace. With Australians consumers increasingly alert to manipulative practices, and media outlets ready to name and shame, it has never been more important to obtain thorough legal review to ensure your online promotional materials are safeguarded against reputational and regulatory risk.

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