SME spammers fined $15.8 million in Federal Court as telco complaints rise 54%

The operators of a text message scam have been charged with $15.8 million in penalties by the Queensland Federal Court for breaching national anti-spam laws.

The Australian Communications and Media Authority has won injunctions and declarations against three individuals behind two operations that offered illegal SMS services.

The scam worked by posting fake personal profiles on dating websites in order to create a database of mobile phone numbers. The individuals would then offer SMS chat services to those mobile numbers in the hope a majority would respond, reaping a huge profit.

ACMA said in a statement it believes consumers were charged up to five dollars per message, and the three men earned a total of approximately $2 million. If users questioned whether the messages were from a real person, the trio said they were real individuals but used a safety method to divert their phone number.

Justice Logan from the Federal Court found the companies, Mobilegate and Winning Bid, led by Simon Owen, Tarek Salcedo and Glenn Maughan, had violated both trading practices and spamming legislation.

Mobilegate was fined $5 million, with Winning Bid also earning a $3.5 million fine. Owen and Salcedo each received fines of $3 million, while Maughan was fined $1.25 million. It was the first incident in which ACMA took action against SMS spammers.

ACMA acting chair Chris Cheah said in a statement the case will continue against the three individuals when a full hearing occurs on 30 November.

“This is a significant outcome for all mobile phone users… The maximum penalties provided for under the Spam Act are very high. The ACMA considers that the substantial penalties imposed by the court in this case show that spam will not be tolerated in Australia.”

“In the ACMA’s view the conduct of these respondents was particularly malicious and deceitful as it deliberately and systematically preyed upon vulnerable people, offering false hope and expectations.”

The decision comes as the office of the telecommunications ombudsman announced last week that industry complaints rose 54% to 230,000 over the past year.

Ombudsman Deirdre O’Donnell said in a statement that billing and payment of telephone and internet services remains high on the list of complaints, but the biggest rise was found in mobile phone users at 79%.

Internet complaints rose by 57%, with landline and mobile premium service complaints rising by 40% and 13% respectively, but O’Donnell indicated the recent crackdown on premium SMS services may have worked.

“Complaints about these services declined significantly in the last quarter of 2009, which may reflect an early acknowledgement by providers of the tighter restrictions imposed by the Australian Communications and Media Authority from 1 July.”

While O’Donnell said 90% of complaints were resolved after a referral to the individual’s or business’s ISP, there are still areas of concern. Telecommunications giant Telstra received the highest number of complaints at 80,983 which related to 174,123 separate issues.

“There is no doubt we have seen in this year, 2009, a decline in the rate of Telstra complaints and a stabilisation,” O’Donnell said at a press conference.

“There is no doubt we have a high level of engagement with Telstra, that they actively seek our assistance and our business intelligence to respond to systems and process issues… But there is also the fact they have a significant increase over the first half of the year.”

Communications minister Stephen Conroy reacted to the report by saying it was “an absolute shocker” and that if changes to customer service aren’t made then legislative reform could be forced on the industry.

”All of the companies in the sector are guilty of treating their customers cavalierly. What we need is to put pressure directly on to the telecommunications companies… if we don’t see a significant improvement in these sorts of reports and the trend starts heading down, we will legislate,” he said while appearing on Network Ten.

”We will sit down with the Telecommunications Industry Ombudsman and work out what we need to do to crack down on the companies who continue to mistreat their consumers.”