Finance Consumer Kogan in trouble: Consumer advocates say $310,800 spam email fine is too small

Kogan in trouble: Consumer advocates say $310,800 spam email fine is too small

Twitter Facebook Reddit Pinterest Email has been slapped with a $310,800 fine for filling millions of consumer inboxes with allegedly unlawful spam mail, but a consumer advocate argues the penalty isn’t enough.

The electronics retailer was handed the penalty on Wednesday after the Australian Communications and Media Authority (ACMA) alleged it sent more than 42 million spam emails in December 2019.

Kogan made it too difficult for customers to unsubscribe from its mailing list, requiring them to sign into its website to adjust their email preferences, in what ACMA chair Nerida O’Loughlin said fell afoul of spam laws.

“The ACMA received complaints from a number of recipients of Kogan’s email expressing their frustration and concern with Kogan’s practices,” Ms O’Loughlin said in a statement.

The fine is the third handed to Kogan for flouting various consumer protection laws over the past five years, and is worth just 0.06 per cent of the $497 million in revenue it made last financial year.

The punishment has spurred calls to bring penalties under the Spam Act into line with recently strengthened multimillion-dollar fines under Australian Consumer Law (ACL).

Consumer advocate Gerard Brody, chief executive of the Consumer Action Law Centre, said Kogan’s latest penalty probably falls short of community expectations.

“The conduct is pretty poor, particularly if it’s repeated, blatant and is being done despite regulator warnings,” he told The New Daily.

ACMA sent Kogan multiple compliance alerts before commencing an investigation last year, but said the company fully co-operated with its probe and has since updated its practices.

“We need to ensure these penalties are enhanced so this kind of thing is no longer just a cost of doing business,” Mr Brody said.

Kogan will now be watched closely to ensure it complies with spam laws over the next three years, but it accepted no wrongdoing in an enforceable undertaking accepted by ACMA earlier this month.

Repeat offender: Kogan racks up $693,200 in fines 

In a statement posted to its website, Kogan said its email practices sought to protect the security of customer accounts and apologised for any “inconvenience” caused.

“While paying this notice does not mean we accept any wrongdoing, we decided to resolve the matter in this way as a matter of expediency, to avoid the cost and uncertainty of litigation,” the company said.

It comes after Kogan paid a $350,000 fine from the Federal Court last December for misleading consumers about a tax-time sale in 2018, following an investigation by the Australian Competition and Consumer Commission (ACCC).

Kogan founder and CEO Ruslan Kogan.

In that case, the court ruled Kogan broke consumer laws by announcing product sales immediately after jacking up prices, effectively giving the impression of a discount without actually offering one.

Four years earlier, the ACCC slapped Kogan with a smaller $32,400 penalty for allegedly breaking consumer laws during a Father’s Day sale.

In total, the $693,200 in penalties since 2016 are worth just 0.1 per cent of Kogan’s revenue last financial year alone.

Are the fines enough? Calls for tougher penalties

In 2018, federal Parliament passed laws that increased the maximum financial penalty for companies breaching Australian Consumer Law (ACL) from $1.1 million to the greater of $10 million, three times the benefit received, or 10 per cent of annual turnover where that could not be determined.

However, Mr Brody said the tougher penalties don’t apply to the full breadth of consumer protections, including the Spam Act, which imposes smaller penalties that increase for repeat offenders, but hover closer to the $440,000 mark.

“Kogan has been prosecuted by the ACCC a number of times, and now again by the ACMA … any sort of consumer protection rules in place must be enforced with adequate penalties,” Mr Brody said.

“Regulators also need to be looking at what’s driving the conduct inside these businesses. Is it the board or the senior executive?

“They should also face some sort of accountability.”

More than $2.1 million in penalties have been handed to businesses for breaking spam and telemarketing laws over the past 18 months, ACMA said.

Under its enforcement undertaking, Kogan will be forced to hire an independent consultant to review its compliance with spam laws and make any recommended changes.

Staff will also undertake compulsory training about sending marketing messages.

Wayne Hawkins, director of inclusion at the Australian Communications Consumer Action Network (ACCAN), said ACMA would likely step up enforcement if Kogan was issued another infringement notice.

“This sends a clear message to Kogan and to other businesses that the ACMA is looking out for consumers and making sure that businesses follow the law,” Mr Hawkins told The New Daily.

Founded in 2006 by entrepreneur Ruslan Kogan, the publicly traded business has grown to become one of the most prominent online retailers in Australia over the past decade, making $44 million in profits over the past two financial years alone.

Since listing on the Australian Stock Exchange (ASX) in 2016, Kogan’s share price has soared 1264 per cent to $20.75, transforming it into a multibillion-dollar company.