Kogan pinged $310,000 over spam email

Ruslan Kogan’s company Kogan.com has once again fallen afoul of a regulator over its treatment of shoppers.

Ruslan Kogan of Kogan.com. Picture: Hollie Adams

Online shopping and tech entrepreneur Ruslan Kogan’s company Kogan.com has once again fallen afoul of a regulator over its treatment of shoppers, this time being fined $310,000 by the Australian Communications and Media Authority for making it difficult for shoppers to unsubscribe to promotional emails.

The canny online operator, whose sales have rocketed during the COVID-19 pandemic to send its market capitalisation through the $2bn level, also accepted a three-year court enforceable undertaking to hire an independent consultant to review and suggest improvements to its systems.

ACMA claims Kogan.com sent 42 million emails to customers, which they could not easily unsubscribe from, and despite numerous alerts sent by the regulator no action was taken.

The regulator then conducted an investigation that resulted in a fine.

Mr Kogan apologised, but at the same time did not acknowledge any wrongdoing.

The fine, handed down by ACMA and covered by the Spam Act, was not divulged to the Australian Securities Exchange because it was deemed by Kogan.com as not being material.

However, in an email and tweet to customers, Mr Kogan explained the regulatory slap.

“We wanted to let you know that we have agreed to pay an infringement notice following ACMA taking a look at how our email marketing system functioned over a one-week period in 2019,” the letter from Mr Kogan began.

“The amount is not material to the business so it won’t be on the company’s ASX page but we think this is an important issue that we take very seriously, and we wanted to share the details with you.”

However, ACMA has taken a tougher view of the indiscretion by Kogan.com, saying in a press release that its investigation found Kogan.com sent more than 42 million marketing emails to consumers from which they could not easily unsubscribe.

ACMA said it found Kogan’s conduct breached the Spam Act, which requires commercial electronic messages to contain a functional unsubscribe facility.

“Kogan’s breaches have affected millions of consumers,” ACMA chairman Nerida O’Loughlin said.

“The ACMA received complaints from a number of recipients of Kogan’s email expressing their frustration and concern with Kogan’s 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.”

ACMA has accepted a three-year court-enforceable undertaking from Kogan.com, requiring it to appoint an independent consultant to review its systems, processes and procedures, and to implement any recommendations from the review.

The undertaking covers Kogan Australia and is applicable to all of the company’s trading names, including the Kogan and Dick Smith brands. The undertaking also requires Kogan to train staff responsible for sending marketing messages and to regularly report to the ACMA on actions taken in relation to consumer complaints.

In his message to customers, Mr Kogan explained that to protect its customers’ security they needed to log into their Kogan.com account before unsubscribing to emails.

“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.” However, ACMA took a dim view of the system set up by Kogan.com and issued an infringement notice of $310,000.

This compares to Kogan.com’s market capitalisation of $2.2bn.

It is not the first time Kogan.com haas had run-ins with industry regulators.

In July shares in Kogan.com fell almost 10 per cent after the Federal Court ruled that the retailer breached consumer law over a special “tax time” promotion that actually raised prices by about 10 per cent before offering a discount to shoppers.

In more than 10 million targeted emails and almost 1 million text messages to its customer base, Kogan.com was found to have conveyed false or misleading representations around the size of the product discounts offered in the promotion in June 2018.

Consumers were not receiving a genuine 10 per cent discount as promised, and this affected high-value products such as Apple MacBooks, cameras and Samsung Galaxy mobile handsets.

In December Kogan.com was fined $350,000 for the infringement.

But Kogan.com isn’t the first retailer to be hit with a fine by ACMA over emails.

Last year Woolworths paid a million-dollar infringement notice and agreed to a court-enforceable undertaking with ACMA over significant breaches of spam laws.

The infringement notice for $1m was the largest issued by the ACMA at the time.

ACMA found more than five million breaches of the Spam Act by Woolworths when it sent marketing emails to consumers after they had unsubscribed from previous messages.

In his message to shoppers on Tuesday, Mr Kogan said very few customers had complained about the online retailer’s promotional emails and unsubscription process. But he apologised for the problem. “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,” Mr Kogan 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.”

Mr Kogan said the company took its obligations under the Spam Act seriously and for a long time had a Spam Act policy available on its website.

“We have been in discussions with the ACMA for some time, and proactively met with them, provided information, and fully co-operated with them to help them do their important work.

“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. This means we have more time and resources to focus on what we’re obsessed with: making the most in-demand products and services more affordable and accessible.”