Retailer slammed for selling smartphones for less than $2: The dangers of bait advertising

Chinese smartphone giant Xiaomi has come under fire over allegations of bait advertising for a viral marketing campaign that saw it sell smartphones for just £1 ($1.79).

Xiaomi, a $293.5 billion business known for its extravagant flash sales, was trying to entice customers to shop its British launch with the seemingly irresistible deal last week.

But after it emerged each flash sale only stocked two or three phones before a “sold out” sign appeared on its website, customers took to social media to express their rage.

In an ironic twist, the company’s campaign went viral, but for all the wrong reasons.

“As soon as it turned 12, it went sold out straight away. These “crazy deals” should be called fake deals,” one shopper wrote on the company’s Facebook page.

Another said: “It’s a scam. Went live then instantly out of stock. Is lying the best way to introduce your brand to a country?”

Now the BBC reports the UK’s advertising watchdog is considering investigating the deal over allegations it may have engaged in unfair bait advertising.

A Xiaomi spokesperson said in a statement provided to the BBC that it was sorry some fans missed out.

“[This] was our first in the UK and attracted enormous levels of demand, far beyond what we were expecting,” the spokesperson said.

Adding to the controversy, an industrious Twitter user examined the code running Xiaomi’s website, claiming that the site was programmed to show the “out of stock” sign once the timer expired to start the sale.

@XiaomiUK_ Your promotion for the £1 phone was a scam. Looking at the logic and browser requests, there are no calls to check stock limits, you simply swap the text to show ‘out of stock’ once the timer expired. pic.twitter.com/4HxKFENufL

— Phil Williams (@phil_williams81) 9 November 2018

Xiaomi’s UK sales and marketing director Wilkin Lee tweeted the flash sale uses a lottery-style system where a winner is chosen randomly from those that click buy when the sale goes live.

The case is a timely reminder for retailers back in Australia ahead of the Christmas season and other shopping holidays such as Click Frenzy, Black Friday and Cyber Monday.

Flash sales — attractive deals offered to customers for a limited period of time — can land businesses in hot water with the ACCC.

Under Australian consumer law, it is illegal to conduct a sale where goods or services are advertised at a discounted price and are not available in “reasonable quantities and for a reasonable period at that price”.

Traders must state clearly if goods are in short supply or a sale is on for a limited time, while the rules do take into account the context of the market and the goods being sold.

Here’s an example the ACCC provides:

“An electronics retailer runs a campaign advertising 50-inch televisions at a price of $799 for a week-long sale.

“The retailer usually sells about 30 televisions of this type every week. The retailer only stocks two televisions at the advertised price and refuses to take customer orders

“When customers attempt to buy the television at the advertised price, they are told it is out of stock and offered a more expensive unit for $999.

“This is likely to be bait advertising as the retailer does not have a reasonable supply of the advertised television.”

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