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Kogan (ASX:KGN) pays price for illegal emails

Fined, fine, money

Kogan.com Ltd (ASX: KGN) has paid a $310,800 penalty for sending more than 42 million illegal spam emails.

The Australian Communications and Media Authority (ACMA) on Wednesday announced that Kogan had violated the Spam Act by sending out emails that could not be easily unsubscribed.

The company forced recipients to create a Kogan account and password before the marketing emails were stopped.

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

“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.”

As well as the fine, the online retailer has agreed to a 3-year court-enforceable undertaking with the ACMA to change its systems and train its staff to not breach spam laws.

O’Loughlin said ACMA warned Kogan multiple times about breaches before starting its investigation.

“We acknowledge that Kogan fully cooperated with the ACMA in our investigation and took actions to update their unsubscribe facilities prior to its completion.”

Kogan’s response

The company put up a blog post in response to the ACMA fine, which downplayed the severity of the breach.

“If you received an email from us, to protect your security you needed to login to your Kogan.com account before unsubscribing,” the post reads.

“The additional security step we implemented is very common among leading global technology companies.”

Kogan stated that the payment of the penalty was not an acknowledgement of guilt.

“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.”

Kogan’s 42 million illegal messages massively outnumbers Tyro Payments Ltd (ASX: TYR)’s 150,000 for which it was busted last month. 

In that case, the fintech didn’t even provide an unsubscribe function. Tyro escaped without a financial penalty and agreed to a 2-year court-enforceable undertaking.

Not the first dalliance with the law for Kogan

Kogan now has a history of attracting unwanted attention from authorities.

Just last month, the e-tailer was busted for making false or misleading statements about a end-of-financial-year sale.

The Federal Court found the company jacked up the prices of 621 products immediately prior to a ‘tax time’ sale. Kogan then gave out the code ‘TAXTIME’ for a supposed 10% discount.

“Consumers were not receiving a genuine 10% discount as promised, and this affected high-value products such as Apple MacBooks, cameras and Samsung Galaxy mobile handsets,” said Australian Competition and Consumer Commission chair Rod Sims.

As a slap in the face of customers who thought they secured a bargain, the company then put the standard prices back down after the promotion.

Kogan was penalised $350,000 for that offence. At the time of writing, the Kogan share price is trading down 1,5% at $20.63

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Returns as of 15th February 2021

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Tyro Payments. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Tony Yoo