Not A Pretty Picture: Lessons From Eastman-Kodak's Recent E-Commerce Disaster

Author:Mr Mark Tooke
Profession:Watson Farley & Williams

Electronic commerce can be a minefield for the unprepared - as well-known camera company Eastman-Kodak found out recently.

Kodak's "special deal"

At the start of the year Eastman-Kodak found itself in a real mess when it made a mistake in the pricing of a digital camera advertised on its website.

The company's EasyShare DX3700 digital camera was advertised at £100 on its e-commerce enabled website when in fact the correct price of the camera was £329. Although the camera was only advertised at the lower price for a few hours on December 31st 2001, news of the bargain seems to have spread like wildfire across the internet and several thousand orders are believed to have been made before the mistake was noticed and rectified by Kodak.

Initially Kodak refused to honour orders for the camera that had been made before the pricing mistake was discovered. However, after several weeks and widespread media coverage, and the formation of a number of action groups by disgruntled customers threatening legal action, Kodak belatedly agreed to honour orders for the camera made at the lower price.

The direct financial cost to Kodak of remedying what appears to have been a straightforward clerical error is likely to be considerable. Although Kodak's precise exposure is unclear, as it will not confirm exactly how many people ordered the camera at the lower price, some commentators have estimated Kodak's potential direct losses to be as high as £500,000. The indirect cost of the mistake may have been substantially increased by Kodak's aggressive handling of the situation after it became aware that an error had been made.

Lessons to be learnt for e-traders

Make clear on what basis the offer is made

Kodak initially said that it had not accepted orders made for the camera at £100 and claimed that no contract of sale had been formed with the customer. Kodak argued that placing an order for goods via their website was similar to bringing goods to the till in a shop, a situation where it is settled law that a contract is only formed when the seller subsequently agrees to sell the goods. Consequently, said Kodak, they were entitled to accept or reject orders for the camera made through its website. However, in the circumstances this issue is arguable and to avoid any dispute Kodak should have made clear from the start whether their website presented an offer that was capable of immediate acceptance or whether the contract was formed only upon...

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