Online Dealz sold cots, portable cots and baby strollers that did not comply with safety standards and posed numerous risks to children including limb entrapment, suffocation or strangling, the court found. The products were also incorrectly labelled.

About 250 unsafe items were sold online, including on eBay and Gumtree, between August 2014 and March 2015. Advertisements for the household cot misleadingly claimed it was "Certified to Australian Standards" and "Meeting Australian and New Zealand Standards AS/NZS 2172", the court said.

The Australian Competition and Consumer Commission took action against Online Dealz and its sole director, Janet Lucas, over three products: the Multifunctional Luxury Baby Stroller, the 3 in 1 Wooden Sleigh Cot and the 7 in 1 Portacot, also known as the Frank Masons Portable Cot PL5007. Online Dealz began voluntarily recalling the products, which were sourced from China, in December.

Ms Lucas was previously the director of another online retailer, Frank Masons, which sold a cot that failed safety standards. After a recall was announced in July 2014, customers complained to the ACCC that they could not contact Frank Masons for refunds. Ms Lucas registered Online Dealz the following month.

The court ordered Ms Lucas to pay a $20,000 penalty but refused the ACCC's application to disqualify her from managing corporations for five years, saying the financial penalty was enough of a deterrent.

Justice Brigitte Markovic said the products were sold for use by "a vulnerable section of the community".

"While there is no evidence of any damage being suffered, the risk that there might have been was exacerbated by the fact that the failings were not obvious, they were numerous and the users of the products were infants who would not be able to take defensive steps should they find themselves in danger."

ACCC Commissioner Sarah Court said the court's decision showed it was critical that all businesses understood and complied with product safety obligations.

"This is especially important for baby products, where safety hazards may not be readily apparent to parents but can cause serious harm to babies and children," she said. "All traders, including small retailers operating online, must have adequate measures in place to ensure that the products they sell comply with Australian product safety standards."

Consumer advocacy group Choice regularly reviews a range of baby products, including testing whether they meet voluntary and mandatory safety standards.

Erin Turner, head of policy and campaigns at Choice, said people needed to do their homework before shopping. "Check to see if the product is safe before you buy it and don't rely on marketing claims," she said. "When a company claims it's meeting an Australian standard and it doesn't, that's particularly dangerous - it's putting a lot of families at risk."

The executive officer for Kidsafe NSW, Christine Erskine, said if products did not meet safety standards "there can be fatalities and injuries ... terrible consequences".

She advised consumers to visit the Choice and Product Safety Australia websites for information, warnings and news of any recalls.

Fairfax Media is seeking comment from Ms Lucas.