The Federal Court found Domain Name Corp and Domain Name Agency (which also traded as Domain Name Register) guilty of breaching Australian Consumer Law over their sending of some 300,000 unsolicited notices to businesses between November 2015 and at least April 2017.
These notices looked like renewal notices for existing names; however, they were actually for the registration of a new domain name.
Australian firms shelled out around $2.3 million as a result of paying the dodgy notices, at a cost of between $249 and $275 each.
That suggests that in the vicinity of 8,000 to 9,000 businesses fell victim to the deception.
According to the court, such notices amounted to false and deceptive conduct, and ordered the businesses to pay combined penalties totalling $1.95 million.
The owner of both businesses, Steven Bell (also known as Steven Jon Oehlers) was found to have knowingly been involved in the deception. As such, he was banned from managing companies for years and ordered to personally pay $8,000 towards the ACCC’s costs in prosecuting the case.
“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,” said ACCC acting chair Delia Rickard.
“These sham operations target small businesses, capitalising on a lack of understanding of the domain name system or a busy office environment.
The ACCC launched legal action against the two firms back in August last year. At the time, it noted that fake invoices were duping consumers and businesses out of substantial sums, with 14,500 reported cases in 2016 delivering losses of $650,000.
An ACCC spokesperson told My Business that both companies are now in the process of being deregistered, and that the legal proceedings were aimed at preventing similar conduct in future by all three parties.
However, the spokesperson added that “there are no court orders regarding repayment of money to affected businesses”, meaning it is unclear whether businesses will receive a refund on any money paid.
Ms Rickard urged all businesses to double check that any renewal notice is for their proper domain name, and not a similar variation.
“We encourage businesses to be vigilant when paying invoices, especially if it is for a domain name registration service,” she said.