Icstis said the Channel 4 programme had shown a "reckless disregard" for viewers after inviting them to enter a competition once the potential winners had already been selected.
Icstis has said that almost 5 million viewers paid £1 each to enter the competition, but nearly half of them that entered between January 29 2007 to February 15 2007 had no chance of winning.
In addition to the fine, Icstis has ordered that all the money be paid back to those viewers affected and has referred the case to Ofcom. The media regulator has the right to impose its own ban if it feels the broadcasting code has been breached.
Icstis chairman, Sir Alistair Graham, said: "Winners were being chosen before the competition closing deadline, whilst millions of additional viewers were still encouraged to phone in and pay to enter competition but were denied the opportunity of fair consideration," he added.
"Such reckless disregard for viewers is unacceptable. In this case, viewers were not only 'paying competition entrants' but also consumers who enjoy a high degree of consumer protection already provided by Icstis."
He added: "Consumer protection should be at the heart of television rather than a broadcasting philosophy of 'the show must go on'. The public should be able to use these services with absolute confidence. Consumers must get a fair deal." [Icstis statement In full]
Responding to the decision, a Channel 4 spokesman said: "As the service provider Eckoh is regulated by ICSTIS and its contract with Channel 4 set out clearly Eckoh’s duty to ensure the competition was run in compliance with ICSTIS’ code of practice and a clear obligation to alert us to any breaches or potential breaches of the code. We engaged Eckoh in good faith as a reputable and experienced service provider and we are very disappointed by their failure to ensure that all calls to the competition were handled properly." [In full]
The competition was suspended on February 16 this year. An investigation into the conduct of 'You Say We Pay' is being carried out on Channel 4’s behalf by specialist media law firm, Wiggin LLP.
"Channel 4 is giving priority to completing its investigation into when and why the problems with You Say We Pay first arose," the spokesman added.