If you read the four-part Commentary about the credit card Industry last year, you already know the ugly truth about the extent to which VISA and MasterCard control the entire commercial Universe. You undoubtedly are in any event painfully aware of the chargeback squeeze and how the credit card industry is generally dumping on the adult videotext industry. Following is more potential misery.
First, some background. Historically, Congress has thought that requiring a credit card is a good way to establish that someone is an adult. This goes back to long before this magazine existed and before most of its readers were in business. It actually is an interesting story and history lesson about how erotica always quickly embraces new technology.
Most of the readers of this magazine forget that there weren't always computers - nor photocopy machines, fax machines or, as relevant here, telephone answering machines.
During the late 1970s, when then-called "sophisticate magazines" - Hustler, Velvet, High Society and the like - were flourishing, the automatic telephone answering machine was introduced into the market. It may be difficult to imagine this, but the norm before then was that, if you called somebody that wasn't home, the phone just rang and rang and rang.
In February of 1983, one of the "sophisticate" magazines - armed with the technology allowing answering machines to answer many telephone calls at once - set up a deal where people could call in to a New York telephone number and listen to a sexy, prerecorded audio tape. Then, they worked a deal with the phone company to get a two-cent tip for each phone call placed to the number from the phone company, either the local company (these were "976" local toll calls) or the long-distance carrier. The publisher advertised the sexy phone number in its magazines, just to see what would happen. A little speculative, perhaps - what's two cents?
Well, by May of 1983, they were getting 800,000 calls a day, 180,000,000 calls in the ensuing year - that's one hundred eighty million! At 2 cents per call, that adds up to $3,600,000 a year, in case you don't have a calculator handy, just to listen to an audio tape.
The phone companies, however, received a good deal more than two cents for each call, and the bills went to the callers. It wasn't long before people were receiving stratospheric telephone bills resulting from their children listening to sexy messages all night, and that made the news, as you might expect. Politicians, also wanting to make the news, responded. "Dial-a-Porn," people called this industry, which did and still does call itself "audiotext."
Congress' efforts to regulate the dial-a-porn industry was, in retrospect, something of a jurisprudential Keystone Cops, perhaps the low point of which was when they went out to Utah and filed a 23-count indictment in Salt Lake City on April 25, 1985, charging the service provider, two of its officers, and one employee, as well as legendary adult-film actress Samantha Fox, with various federal obscenity crimes. The whole case, United States v. Carlin Communications, Inc., 815 F.2d 1367 (10th Cir. 1987), was thrown out by both the federal trial-court judge in Salt Lake City and the Court of Appeals. Meanwhile, the dial-a-porn industry flourished, fueled by the launch of "900 numbers," and upgraded by the live-chat business model.
The crushing blow to the audiotext business was launched on December 1, 1987, when Senator Jesse Helms introduced the so-called "Helms Amendment." If you are as unaware as most Webmasters about the history of adult material vs. government, Jesse Helms is a very old, Religious-Right, anti-sex senator from North Carolina who also was at the bottom of the 1984 obscenity-RICO law (this column, last month) and other mischief. His anti-erotica campaign perhaps has served to disguise his impassioned support for the tobacco industry, which adds up to a rather skewed sense of morality.
In any event, the Helms Amendment, after much litigation, finally drove a spike through the heart of the adult audiotext industry because it prohibited billing for dial-a-porn through the phone company - no more 900 calls. Parenthetically, people admittedly are still doing this, although either by offshore phone companies or some other ruse. But the Helms Amendment ended the love-hate relationship between phone companies and dial-a-porn.
Generally, the Helms Amendment prohibited allowing a minor access to dial-a-porn. The statute did, however, create safe-harbor defenses, one of which was payment by credit card. This now likely is beginning to sound familiar, and that is no coincidence, as you will see. Ultimately, the courts upheld that.
Now, why a credit card? Believe it or not, this has to do with the Vietnam War, something else with which most readers have strikingly less direct familiarity than does the author.
Once upon a time, the age of "majority" was blurred, since it was a matter of state law. During the mid-1960s, however, when the federal government began sending its youth to slaughter in Vietnam, the age of majority for some things - voting in particular - was 21. But growing American sentiment was probably best reflected in Barry McGuire's song, Eve of Destruction, saying, "You're old enough to kill/but not for votin'/You don't believe in war/but what's that gun you're totin'?" In response to that sentiment, states almost universally set the age of majority at 18, and we added the 26th Amendment to our Constitution, granting 18-year-olds the right to vote in all governmental elections of any kind. In the following decade, Congress backed off on that a bit, telling states that they had to raise the drinking age to 21 - too many cars driven by drunk teenagers were crashing into things.
That is all relevant here because "minors" are limited in their ability to enter into contracts. Generally, minors cannot enter into contracts at all. The laws of the various states do not all have the same slant on this but, in California (where one-ninth of our country's population lives) for example, any contract with a minor concerning personal property not in his or her immediate possession or concerning real estate is void, even if the minor tricks someone with counterfeit identification. The most significant exception is found in contracts for "necessaries," into which minors can enter.
Issuance of a credit card is a contract. In fact, so is a bank account; send your kid down to the bank to open an account and expect a response that the account must be held jointly with an adult. If you doubt that it is a contract when the bank issues you a credit card, look at the "terms and conditions" associated with your new card when it arrives in the mail.
So, the idea behind the "safe harbor" in the Helms Amendment was that only adults can have credit cards, at least without parental approval, and therefore using a credit card as a gatekeeper was reasonable. And, even so, someone under 18 who has a telephone and a credit card has the latter only by virtue of parental consent - a telephone probably is a "necessary" these days.
Now, the part that you know is that the credit card philosophy from the Helms Amendment was embraced in CDA and, now, COPA. Adult verification service companies like Adult Check thrived on that, supplying an easy-to-acquire "gatekeeper" that gives Webmasters a level of comfort that they are not furnishing their adult product to minors or running afoul of the law - that is, in case COPA eventually is upheld.
The wild card in all of this, however, comes with campaigns aggressively marketing credit cards to minors. The result? According to Visa USA (remember that albatross from the four-part credit-card series?), in the process of canceling a merchant account of an adult verification system, it explained, "there are numerous minors that hold Visa cards in their own right and that the authorization process does not provide a means to determine a person's age. This being the case, it is not possible to determine whether a card number is being used by a minor. Since a card can not be used to determine age, we have concluded that the concept of Age Verification is not accurate, is misleading, and may create a false sense of security. For these reasons, Visa has determined that permitting an Age Verification process is not in the best interests of Visa Members."
Visa's premiere scam to suck teenagers into credit-card addiction is "Visa Buxx." This is marketed all over the place. According to Visa, this new product is, "a parent-controlled, re-loadable payment card designed to help parents provide spending money for teens and to help teach teens practical money skills. The card comes armed with a range of parental controls including pre-determined spending values, online transaction monitoring and a parent-administered financial skills assessment test."
This arguably circumvents the problem of void contracts with minors because the parents are kept in the loop. But it does give the minor a Visa card - right there in her purse. Have a ball at the mall!
The first question they ask the teenager on the electronic application is date of birth. Name comes later. Don't you know that the bank will send out a "get your own Visa" birthday card at Year 18?
And do you think the credit card industry has political clout? You bet! By the time this piece hits the streets, Congress likely will have enacted, and President Bush will have kept his promise to sign, the wholesale reform of personal bankruptcy laws, preventing consumers from discharging credit card loans that they never should have been given in the first place. This is the same basic legislation that the bank-controlled Republican Congress passed - but President Clinton vetoed - last year.
Cut up your Visa card!
Clyde DeWitt is a partner in the Los Angeles, California law firm of Weston, Garrou & DeWitt. He can be reached through AVN Online's offices, at his office at 12121 Wilshire Boulevard, Suite 900 Los Angeles, CA 90025 or over the Internet at [email protected]. Readers are considered a valuable source of court decisions, legal gossip, and information from around the country, all of which is received with interest. Books, pro and con, are encouraged to be submitted for review, but they will not be returned. This column does not constitute legal advice but, rather, serves to inform readers of legal news, developments in cases, and editorial comment about legal developments and trends. Readers who believe anything reported in this column might impact them should contact their personal attorneys.
