Online retail giant Kogan hit with $310,000 fine over promotional emails

Online retail giant Kogan.com has been fined more than $310,000 by the national communications watchdog for sending millions of promotional emails that were difficult for consumers to unsubscribe from.

The Australian Communications and Media Authority (ACMA) said today that Kogan Australia has agreed to a court-enforceable undertaking and paid a $310,800 infringement notice for breaches of Australian spam laws.

The fine comes after ACMA’s investigation found Kogan sent more than 42 million marketing emails to shoppers that were hard to unsubscribe from. Recipients had to create an account before being able to update their subscriber settings, according to ACMA’s statement.

ACMA found Kogan’s emails breached the Spam Act, which requires commercial electronic messages to always contain an option to unsubscribe.

Dr Greg Nyilasy, senior lecturer in marketing at The University of Melbourne, says it is an unexpected example of a larger company using such practices in its marketing campaigns.

“Early-stage companies are more desperate to reach a wider audience, but established brands should know much better. They already have a large consumer base,” Nyilasy tells SmartCompany.

Nyilasy says marketing often involves a trade-off between reaching a large audience and being considerate to that audience.

“And some companies might err on the side of just wanting to get traction, especially small businesses and startups who need to grow their audience to survive,” he says.

As part of ACMA’s court-enforceable undertaking, Kogan will appoint an independent consultant to review its systems, processes and procedures, and to implement any recommendations from the review.

The undertaking covers Kogan Australia Pty Ltd as well as the company’s other trading names including Dick Smith.

We’ve resolved a ACMA notice about a technicality with our unsubscribe function from one week in 2019.We did this so we can focus our time & resources on what we care most about: making the most in-demand products & services more affordable and accessible https://t.co/BTwo5pJZ3Q

— Ruslan Kogan (@ruslankogan) January 19, 2021

Co-founder of Kogan, Ruslan Kogan, responded to the fine on Monday in a statement that he shared on social media. Kogan said the company agreed to pay the fine because it takes its obligations under the Spam Act seriously and confirmed the fine is not material to the business and will therefore not be included on the company’s ASX page.

In its statement, the company said ACMA’s investigation focused on how Kogan’s email marketing system functioned over a one-week period in 2019.

According to Kogan, consumers had to create an account before unsubscribing for security reasons, as this ensured only the intended recipient could unsubscribe from emails.

“The vast majority of people (almost all!) who wanted to unsubscribe had no issues doing so,” Kogan said.

Mia Fileman, brand director at Idiello, told SmartCompany the incident should encourage all small businesses to avoid following the email marketing practices of larger companies.

“Don’t just follow what other people are doing, assuming that they are doing it right because they happen to be a bigger player. As we’ve seen sometimes the biggest companies, are the most underhanded,” Fileman says.

“The inbox is sacred, it’s a privilege not to be abused. Please don’t ruin it for the rest of us.”