October 10, 2003

Legislative Activity

Date:October 10, 2003

To:AAF Members

From:Jeff Perlman, EVP-government affairs
Clark Rector, SVP-state government affairs

Re:California Spam Law/Federal Proposals

Soon to be ex-Governor Gray Davis recently signed into law the nation's most onerous anti-spam law. The new law will have a devastating effect on legitimate commercial email in the U.S. when it takes effect on January 1, 2004.

The law prohibits a wide range of commercial email and related activities, including:

  • Sending unsolicited commercial email (UCE) advertising without the consent of the recipient and outside a pre-existing business relationship;
  • Failing to provide notice and opt-out options in commercial email advertisements to existing customers;
  • Advertising by email using misleading subject lines;
  • Advertising using another person's domain name;
  • Advertising using falsified header or router information
  • Collecting email addresses for the purpose of sending UCE;
  • Sending commercial email in violation of the rules of the recipient ISP.

The law's prohibitions against unsolicited commercial e-mail sent outside of a pre-existing business relationship and its requirement to honor opt-outs apply very broadly to: (1) any advertiser who advertises through e-mail; (2).any sender of commercial e-mail; (3) any other person who causes the transmission of commercial e-mail; or (4).any e-mail list provider who provides e-mail addresses to which commercial e-mail is sent. E-mail service providers who are only involved in the routine transmission of the advertisement over their networks are exempt from liability.

The law also applies to e-mail sent from California or "to a California e-mail address" a term which is defined very broadly to include e-mail addresses: (1) for which the user receives bills at a mailing address in California; (2) ordinarily accessed from a computer located in California; or (3) furnished to a California resident. There is no requirement that the defendant know or have reason to know that e-mail is being sent to the California email address.

The law includes a private right of action and violations are enforceable by recipients (the plaintiffs' bar), email service providers, and the state Attorney General. The law allows for damages of $1,000 per email sent in violation of the law up to a maximum of $1 million "per incident", plus costs and attorneys' fees. Defendants who have implemented compliance programs to prevent violations may have damages reduced to $100 per message or $100,000 per incident.

The law is very vaguely drafted and leaves many questions unanswered. For example, is an email from an ad club to its members reminding them of an upcoming luncheon an unsolicited commercial advertisement? Does membership in an association or ad club constitute a preexisting business relationship? It is not clear based on the language of the law the answer to those questions. Because the law allows suits to be brought by any individual receiving what he or she believes to be UCE, the probability of actions against legitimate advertisers is overwhelming.

The law is available online at www.leginfo.ca.gov/pub/bill/sen/sb_0151-0200/sb_186_bill_20030924_chaptered.pdf

AAF is working with other interested industry groups to convince Congress to pass an anti-spam law that includes federal preemption. An ideal law would give regulators the tools to go after fraudulent spammers, but still allow legitimate businesses to use email marketing.

We will soon send you talking points and more detailed information. We urge you at that time to contact your Representative and Senators and urge them to support effective spam legislation.

It is important that AAF members assume the law will go into effect on January 1. In order to reduce the risk of litigation we strongly suggest you review the law and take steps to insure you are in compliance. Some precautionary measures might include:

  • Develop and document a compliance program showing that you have implemented procedures reasonably designed to prevent email advertising in violation of the law,
  • For all e-mail advertising that will or may be sent to a California e-mail address, undertake and document measures designed to avoid advertising, transmitting, or supplying e-mail lists for UCE (e.g., e-mail advertisements sent to prospects without their consent) or e-mail advertisements sent with out providing notice and the opportunity to opt out to all recipients,
  • If you advertise through an affiliate or partner, undertake and document steps to verify that your partners are in compliance with the law,
  • If you provide lists of e-mail addresses to others, consider developing before January 1st e-mail lists scrubbed of California residents. Undertake and document steps you have taken to remove California residents from e-mail lists,
  • If you have an e-mail list and intend to send UCE, consider before January 1st either (1) confirming that all e-mail addresses are not California email addresses, or (2) seeking consent to receive e-mail advertisements from you,
  • If you send UCE and receive notice from an ISP or e-mail service provider that your e-mail activity violates their e-mail policies and that this UCE is using their facilities, take steps to cease e-mailing to those systems,

We will keep you informed of any further developments on this important issue. If you have any questions or comments, do not hesitate to call either of us at 1-800-999-2231.