“Sham operation” which sent SMEs fake domain name renewal letters fined $2 million by the ACCC
Monday, June 18, 2018/
A group of domain name companies who scammed Australian small business owners out of a collective $2.3 million have been penalised by the Australian Federal Court and ordered to pay fines of nearly $2 million for breaching Australian Consumer Law.
Domain Corp Pty Ltd and Domain Name Agency Pty Ltd were handed down fines of a combined $1.95 million after the Australian Competition and Consumer Commission (ACCC) took them to court over a series of letters sent out to small businesses’ mailboxes back in 2016.
These letters claimed to be invoices for SMEs to renew their already existing domain names, but instead were registration letters for completely new domain names to the tune of $249 to $275 each. The ACCC found that over 300,000 of these unsolicited notices were sent to businesses, and approximately 10,000 businesses ended up paying the invoices.
Through sending the fake renewal notices, the two domain name companies were found to have made false and misleading representations and engaged in misleading and deceptive conduct.
“The Domain Companies misled businesses into thinking they were renewing payment for the business’ existing domain name, when in fact the business was paying for a new domain name,” ACCC acting chair Delia Rickard said in a statement.
“These sham operations target small businesses, capitalising on a lack of understanding of the domain name system or a busy office environment. We encourage businesses to be vigilant when paying invoices, especially if it is for a domain name registration service.”
At the time of the original scam, which was sent close to Christmas, security experts warned SMEs against rushedly paying invoices at busy times, when letters like these are more likely to “land on the desk of someone who assumes someone has already authorised paying it”, cyber security expert at Sense of Security Michael McKinnon told SmartCompany at the time.
McKinnon also advised SMEs to be regular with their domain name renewals, saying business owners are generally “particularly bad” at managing them, believing the majority of domains are renewed on the same day they expire.
“Small businesses are particularly bad at managing domain name renewal. They’ll come into the office and realise emails are bouncing, and then they’ll renew the domain,” he said at the time.
“Because of this companies can get anxious about the next time they have to renew their domain, so scams like this can be particularly effective.”
The director of both the companies has also been ordered to pay the ACCC costs of $8,000 and has also been barred from managing a corporation for five years.