Grays slammed with $165,000 penalty for Spam Act breaches

Grays, the parent company of the GraysOnline auction network, has been hit with a record-breaking $165,000 infringement notice by the communications regulator for breaching the Spam Act.

The penalty is the largest of its kind for an out-of-court fine for breaching the act since it was legislated 10 years ago.

An investigation by the Australian Communications and Media Authority revealed a decision by Grays to treat an email campaign introducing its GraysEscape website as not promotional was incorrect.

The decision led Grays to send messages without an opt-out facility to more than 700,000 people, including to more than 300,000 people who had previously unsubscribed.

The Spam Act requires that all marketing emails are sent with the consent of the recipient and include an option for recipients to opt-out of receiving further marketing messages.

ACMA investigations manager for unsolicited communications Julia Cornwell-McKean told SmartCompany the watchdog’s role is to “protect Australian inboxes”.

“The company made a very poor decision and sent the email without an opt-out facility,” she says.

The ACMA sent thousands of letters a year informing them of breaches of the Spam Act, but largely Cornwell-McKean says compliance with these notices is generally high.

“We sent more than 7000 informal warnings to businesses last financial year, but of those warnings we don’t hear again from those businesses in two-thirds of the cases,” she says.

“But businesses need to be aware if they don’t play ball, we will investigate and we will come after them.”

SmartCompany contacted Grays for comment, but received no response prior to publication.

Cornwell-McKean says breaching the Spam Act can cause reputational damage to businesses because of negative word of mouth.

“Getting pinned for breaching the Spam Act isn’t as bad for businesses as the damage done to their reputation by sending messages to people who don’t want them,” she says.

“It’s one of the biggest complaints we receive. It makes consumers angry and while it can be unintentional because a business has failed to keep their computer systems up to date, you also get cases such as this where a business has simply made a poor decision.”

The ACMA is nearing its 100^th investigation of Spam Act breaches in the 10 years it has been operating and expects penalties will continue to increase.

“The penalty unit actually increased last December and now for sending more than 50 messages without consent the penalty is $170,000 per contravention for companies,” she says.

The $170,000 fine is able to be handed down by the courts. If an infringement notice is issued by the ACMA, the penalty is $8500 per contravention.

The largest penalty ever handed down by the courts was $24.5 million, imposed on Scott Gregory Phillips and four others who established fake online dating profiles to obtain mobile numbers of genuine users.

When the user gave Phillips their mobile number they received a text message asking them to join an SMS chat portal which cost them $5 to send a message. The scheme was known as Safedivert.

This year the ACMA has also investigated Cellarmaster Wines and Groupon for breaches of the act.

In May, Cellarmaster Wines paid an infringement notice of $110,000 for sending marketing messages as part of its email promotions without an opt-out facility.