Domain name scammers penalised by Federal Court over $2.3m scam

The Federal Court recently penalised two related companies, Domain Corp Pty Ltd and Domain Name Agency Pty Ltd, for scamming Australian consumers and small business owners out of a total of $2.3 million.

Over 300,000 unsolicited renewal notices sent

Between November 2015 and April 2017, the Australian Competition and Consumer Commission (ACCC) received numerous complaints about the two companies which sent more than 300,000 unsolicited notices to businesses requesting renewal of domain names. The cost ranged from $249 to $275.

Misleading and deceptive conduct

While the notices appeared to be renewal notices for existing domain names, they were actually notices to register new domain names. Many businesses unknowingly signed up for new domain names that the business may not have wanted. The Court said the fine print disclaimer in the notices was not obvious to the reader. The Court found that the companies had engaged in misleading and deceptive conduct and ordered them to pay combined penalties of $1.95 million. The size of the penalties reflected the significant scale of the scam.

Disqualification and restraining orders

The sole director of the companies was found to have knowingly participated in the misleading conduct and the Court disqualified him from managing a corporation for five years and ordered him to pay $8,000 in costs. The director and the two companies were restrained for three years from sending notices to businesses about the registration of “substantially similar” domain names unless they clearly stated, “This notice does not relate to the registration of your current domain name. This is not a bill. You are not required to pay any money”.

Scams of SMEs on the increase

The ACCC says nearly $4.7 million was paid to scammers by Australian businesses in 2017, a 23% increase from 2016. Small businesses are particularly targeted by scams, accounting for more than 50 per cent of ACCC complaints.

Vigilance needed

Businesses should be careful when paying domain registration invoices and should check that the notice applies to a renewal of their actual domain name, particularly where a renewal notice is received for a “.com” or “.net.au” domain name.

 

Disclaimer

This article was written by Margaret Miller, partner at Bell Legal Group. It is general in nature, is not legal advice and must not be relied on as such. If you need assistance relating to the topics discussed, please contact Margaret to obtain advice specific to your circumstances. Call 07 5597 3366 or send an email to mmiller@belllegal.com.au