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Kogan Coughs Up $310k Spam Fine

Online retailer Kogan.com has paid a $310,800 fine for breaching the Spam Act, just a month after being slapped with a $350,000 penalty by the ACCC.

An investigation by the Australian Communications and Media Authority (ACMA) found that, over a one-week period in 2019, Kogan sent more than 42 million marketing emails to consumers that would not permit them to unsubscribe unless they logged into a Kogan account and set a password.

The Spam Act requires businesses to include functional unsubscribe facilities in commercial emails, and according to ACMA Chair Nerida O’Loughlin, the authority fielded complaints from customers frustrated with the retailer’s email practices.

“Businesses must comply with the unsubscribe requirements in the spam rules. This investigation makes clear that businesses can’t force customers to set a password and login to unsubscribe from receiving commercial messages.

“The ACMA sent Kogan multiple compliance alerts before commencing this investigation. These notifications are designed to alert businesses of potential non-compliance with the Spam Act,” she said.

Ruslan Kogan, founder of Kogan.com.

In a blog post, Kogan denied any wrongdoing, saying that the payment was made to avoid the “cost and uncertainty” of litigation and that customers were required to log in to unsubscribe for the purposes of account security.

“This was to ensure that only an authorised account holder could make changes that impacted their account. The additional security step we implemented is very common among leading global technology companies.

“The vast majority of people (almost all!) who wanted to unsubscribe had no issues doing so — we processed many unsubscribe requests during that time, with those changes occurring instantly.

“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,” the company said.

Kogan cooperated with the ACMA’s investigation throughout the process, and has accepted a three-year court-enforceable undertaking across all trading names – including the Kogan and Dick Smith brands – to hire an independent consultant to review its systems, processes, and procedures, and put all recommendations from the review into practice.

It will also be required to train all employees responsible for sending marketing messages, and to regularly report back to ACMA on its responses to consumer complaints. O’Loughlin says businesses should pay attention to ACMA alerts or face investigation.

“This substantial infringement notice and a comprehensive three-year court-enforceable undertaking sends a message to Kogan and other businesses that the ACMA will take strong action for breaches of the spam rules,” she said.

This is the second time in two months that Kogan has paid out hundreds of thousands of dollars in fines – it was hit with $350,000 in December by the ACCC for a misleading “Tax Time” promotion in 2018, which saw the retailer mark up prices on a range of items by at least 10 per cent before turning around and “discounting” them with a promo code; it was fined $32,400 for similar conduct in a 2016 Father’s Day sale.

Founder Ruslan Kogan and CFO David Shafer were controversially and narrowly granted $110 million in bonus shares at the company’s AGM in November last year.

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