Kogan fined for breaching spam laws

Kogan fined for breaching spam laws

E-commerce giant Kogan (ASX: KGN) will pay a $310,000 fine for breaches of spam laws following an Australian and Communications and Media Authority (ACMA) investigation into its email marketing practices.

The investigation found Kogan sent more than 42 million marketing emails to customers from which they could not easily unsubscribe.

According to ACMA, the Ruslan Kogan-founded company required consumers to take additional steps, including setting up a password and logging into a Kogan account, before letting them unsubscribe.

ACMA chair Nerida O'Loughlin said the Spam Act requires commercial emails to contain an unsubscribe function.

"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," O'Loughlin said.

"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.

"That said, we acknowledge that Kogan fully cooperated with the ACMA in our investigation and took actions to update their unsubscribe facilities prior to its completion."

In addition to the $310,000 fine, Kogan has agreed to a court-enforceable undertaking requiring it to appoint an independent consultant to review its systems, processes and procedures, and to implement any recommendations from the review.

For Kogan, the penalty represents just 1.1 per cent of its FY20 net profit after tax of $26.8 million.

"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," O'Loughlin said.

Today's penalty is the second in two months for Kogan after the online retailer was hit with a $350,000 fine for making false or misleading representations about a tax time sales promotion in December 2020.

That punishment came after the Federal Court found Kogan mislead customers by advertising for four days that they could use the code 'TAXTIME' to receive a 10 per cent discount on purchases at the checkout.

However, the court found Kogan had increased the prices of 621 products immediately before the promotion started, in most cases by at least 10 per cent.

Kogan then decreased those prices soon after the promotion ended, many back to their pre-promotion prices.

When the Federal Court found Kogan guilty of breaching consumer law back in July 2017 the retailer put $700,000 aside to cover penalties and costs provisions relating to that matter.

Shares in KGN are down 0.84 per cent to $20.78 per share at 12.48pm AEDT.

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