Online retail giant Kogan has been fined over $300,000 for repeated violations of Australian spam laws after it sent over 42 million marketing emails from which consumers were unable to easily unsubscribe.
The three-year court-enforceable undertaking, under which Kogan will pay a fine of $310,800, comes after an investigation by the Australian Communications and Media Authority (ACMA) confirmed that the company had violated terms of the Spam Act that mandate the inclusion of an option to unsubscribe from marketing emails.
Kogan required recipients of its marketing emails to set up an account and password on its site before they could unsubscribe from its emails – a requirement that, the company argued in an open letter to its customers, was imposed “to protect your security… to ensure that only an authorised account holder could make changes that impacted their account.”
The “vast majority of people who wanted to unsubscribe had no issues doing so,” the company said. “A small number of customers were however unhappy having to enter or reset their password, in order to unsubscribe, and for the inconvenience we caused we are sorry.”
ACMA chair Nerida O’Loughlin argued that the practice directly contravened the Spam Act’s provisions.
“Kogan’s breaches have affected millions of consumers,” she said in announcing the penalty, citing numerous reports of “frustration and concern” from past recipients of its emails and noting that ACMA had warned Kogan several times before commencing its investigation.
Section 18 of the Act requires marketers to include a “functional unsubscribe facility”, including embedding a “clear and conspicuous” link into emails that allows recipients to unsubscribe from further communications for at least 30 days after the message is sent.
Kogan, which also manages the Dick Smith brand, had assisted ACMA with its investigations and brought its unsubscribe practices into line with the legislation over the course of the investigation.
Not the first time
The fast-growing retailer – which last year saw revenues explode as locked-down consumers rushed to online shopping – said the new fine is “not material to the business”, which increased revenue by 13.5 per cent and net profit by 55.9 per cent during fiscal 2020.
The company has repeatedly bumped heads with regulators over its marketing practices, with the company copping a $350,000 penalty from the ACCC in early December for deceptive pricing practices related to a 2018 tax-time campaign.
In 2016, the company was fined $32,400 by the ACCC after making “false or misleading representations” about the advertised prices of three computer monitors.
Back in 2009, the company also accepted an undertaking to correct deceptive marketing practices that, it acknowledged, were likely to contravene the Trade Practices Act.
The ACCC’s success regarding the 2018 campaign marked an important milestone in enforcement of anti-consumer pricing regulations, an analysis by Norton Rose Fulbright partner Andrew Riordan noted, pointing out that the successful prosecution was the first time the regulator had “successfully pursued a Court proceeding in this space.”
“As the ‘human’ element is further removed from pricing changes on websites in favour of automation,” Riordan noted, “online retailers will need to be careful about ensuring their pricing strategy and methods do not result in misleading consumers about savings, whether intentional or not.”
ACMA has issued over $2.1m in infringement notices to Australian businesses for spam-related violations over the past 18 months, including nine court-enforceable undertakings and ten formal warnings.
Repeat offenders, ACMA notes, can face penalties of up to $1.11m per day.