The Australian Competition and Consumer Commission (ACCC) is taking the legal action over 116 promotions run by the Good Guys between July 2019 and August last year, in which it offered in-store credit or "StoreCash" to people who spent certain amounts with them.
The ACCC claims that the promotions made it appear that all customers had to do was spend the set amount of money, when in reality customers also had to sign up for marketing messages.
The watchdog is also alleging the credit lasted for little more than a week even though it was advertised as either not expiring or having a "reasonable period" before it did.
"We allege that the conditions for consumers to receive a store credit as part of the Good Guys' promotions were not communicated adequately in the Good Guys' marketing materials," ACCC Chair Gina Cass-Gottlieb said.
"We also understand that, for the majority of promotions, the store credit being offered expired within a very short period of time of ten days or less, which many consumers were unaware of.
"We are concerned that as a result of the alleged conduct, consumers may have purchased products from the Good Guys which they might not have done otherwise."
Compounding matters, the ACCC claims there were thousands of customers who did meet the eligibility criteria for the store credit but didn't receive it.
"Even where consumers met the conditions, we allege that the Good Guys did not provide a store credit at all to many eligible consumers," Cass-Gottlieb said.
The Good Guys has more than 100 stores across Australia. It has been owned by JB Hi-Fi since 2016.
In a statement to the stock exchange, JB Hi-Fi said its brand had cooperated with the ACCC.
"The Good Guys takes its compliance with the law very seriously and has a comprehensive compliance program in place," the statement said.
Big names plummet as Australia's most distrusted brands revealed
"The Good Guys has always sought to provide value and benefits to its customers and has worked cooperatively with the ACCC throughout its investigation.
"As this matter is the subject of proceedings in the federal court, JB Hi-Fi is unable to make any further comment."
