Direct Marketing - Your Obligations Under the Law

Does your business market itself by communicating directly with potential customers via mail, email, SMS or telemarketing? If the answer to this question is yes, your business will need to comply with legal obligations imposed under either the Spam Act 2003 (Cth), the Privacy Act 1988 (Cth) or the Do Not Call Register Act 2006 (Cth).

Spam Act

In 2003 the Federal Government introduced the Spam Act to reduce the proliferation of unsolicited electronic marketing material. The Australian Communications and Media Authority ("ACMA") have the power under this act to bring court proceedings against any businesses that have breached their obligations. In 2006 the ACMA exercised this power against the Perth based company Clarity1 and its director Wayne Mansfield. These proceedings resulted in the company receiving a record fine of $4.5 million. In addition, the director received a personal fine of $1 million. Now, more than ever, it is fundamentally important that businesses understand and comply with their obligations under the Spam Act.

The key features of the Spam Act are as follows:

• The Spam Act regulates the sending of messages by email, SMS or similar electronic mediums which have the purpose of marketing any commercial opportunity
• A business cannot send an unsolicited commercial electronic message to a potential customer
• A business may only send a commercial electronic message to a potential customer if they have their consent (either express or implied)
• All commercial electronic messages must include information about the business that authorised the sending of the message
• All commercial electronic messages must include an option to unsubscribe
• A business cannot use address-harvesting software to generate customer contact details

Implied consent to send a commercial electronic message will be present where there is a reasonable expectation on behalf of the potential customer that they may receive messages sent by the business. According to the ACMA, examples where implied consent is likely present include:

• Where an existing customer provides their electronic address on the general understanding that it would be used for direct marketing purposes
• Where an existing customer has completed an online warranty or product registration form
• Where a potential customer has conspicuously published their electronic address, and the direct marketing relates to their published function or role
• Where a potential customer has provided a business card which contains their electronic address, and the direct marketing relates to their published function or role

Privacy Act

The Privacy Act was introduced to protect the personal information of individuals. Personal information includes information from which the identity of an individual can reasonably be ascertained, and can include information about an individual's home address, email address or telephone number.

The Privacy Act establishes the National Privacy Principles ("NPPs"). The NPPs must be followed by all businesses with an annual turnover above $3 million (and certain other businesses). The NPP's impose the following requirements on businesses in relation to direct marketing:

- A business must disclose the purposes for which personal information is collected, including any direct marketing purpose

- A business may only use personal information for direct marketing purpose without consent where:

• The personal information is not sensitive information
• It is impractical for the business to seek the individual's consent to the direct marketing communication
• The individual has not made a request not to receive direct marketing communications

- A direct marketing communication must include:

• Notice that the individual may express a wish not to receive any further direct marketing communications
• Notice which sets out the businesses address, telephone number and any relevant electronic addresses

- The business can not charge the individual to give effect to a request not to receive the direct marketing communication

Do Not Call Register Act

The Do Not Call Register Act ("DNCR Act") was introduced in response to growing concerns about the level of unsolicited telemarketing phone calls. The DNCR Act has been fully operational since May 2007, and over 2.3 million Australians have voluntarily registered so far.

The key features of the DNCR Act are as follows:

• The DNCR Act establishes the Do Not Call Register (DNCR)
• A business cannot make unsolicited telemarketing phone calls to numbers which are included on the DNCR. A telemarketing phone call is a phone call that has the purpose of marketing a commercial opportunity
• A business may make telemarketing phone calls to numbers which are included on the DNCR, provided that the business has the express or implied consent of the potential customer
• Implied consent to receive a telemarketing call will be present where there is a clear and reasonable expectation that a call will be received
• If a business enters into a contract with a third party for it to provide telemarketing services on behalf of the business, the business must ensure that the contract contains a provision under which the third party agrees to comply with the DNCR Act
• Government, religious, charitable, educational and political organisations do not need to comply with the DNCR Act
• Civil penalties are payable by businesses who breach their obligations under the DNCR Act

In October 2008 the ACMA made the telecommunications company Dodo pay a record penalty of $147,400 after an offshore company made telemarketing phone calls on Dodo's behalf to numbers registered on the DNCR. Once again, this illustrates the importance of having your direct marketing affairs in order.

In summary:

• The Spam Act regulates direct marketing in the form of commercial electronic messages
• The Privacy Act regulates the use of any personal information for direct marketing purpose (including traditional mail and telephone conversations)
• The DNCR Act regulates telemarketing phone calls made to individuals who have registered to have their number placed on the DNCR

It is important for businesses to understand their obligations under these overlapping regimes. The intensity with which the regulators are now pursuing penalties against businesses who fail to comply with their obligations under these laws, combined with the potential magnitude of the penalties, should be reason enough for businesses to review their internal direct marketing practices.

Mason Sier Turnbull also offer franchise legal advice for franchisees and franchisors.