In December 2003, Congress enacted the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the “CAN-SPAM Act” of 2003, which became effective Jan. 1, 2004. As part of the law, Congress authorized the Federal Trade Commission to promulgate regulations to be used in clarifying and enforcing the law. The FTC conducted the requisite “notice and comment” period and promulgated regulations as instructed by Congress.
In 2005, a new CAN-SPAM surfaced: Combating the Assault of New Suits Persecuting Adult-content Makers.
As most of you know, “spamming” is the term applied to the process of sending a single email solicitation for the sale of goods or services to a significant number of email recipients. Typically, the email address of the sender is disguised as some innocuous party (e.g., [email protected], much to the chagrin of Friendly Ice Cream in Massachusetts, which owns the friendly.com domain and doesn’t like people forging email that appears to originate from its domain), and the subject line of the message is nondescript (e.g., “Reply to your message!”). Once the recipient opens the message, one or more graphic images are displayed, and the reader is invited to “click through” to an adult website. In most cases, the spammer doesn’t have an email account at the address in the “From:” line of the message. By taking advantage of the manner in which email server software works, the spammer frequently is able to forge the sender’s address in the offensive email.
While arguably not receiving any high-profile visibility for being the U.S. Attorney General’s regulations that sought to promulgate and clarify enforcement of 18 U.S.C. § 2257, CAN-SPAM enforcement has had a more dramatic impact on producers of online adult entertainment. In settling claims made against them by the FTC, adult content producers have paid more that $1.3 million to the government in the past year. The CAN-SPAM Act and the regulations authorize civil penalties of only up to $250 per email message. However, in a bit of creative legal trickery, the FTC is attempting to apply the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, as amended, and as implemented by 16 C.F.R. § 1.98(d) (1997), to set liability at $11,000 per message. The commission does this by arguing that the language in CAN-SPAM that authorizes the penalization of violators as if violating the CAN-SPAM Act were an unfair or deceptive practice that is proscribed by the FTC Act somehow gives the FTC the authority to completely ignore Congress’ unambiguous recitation of penalties for violations.
But not all producers are settling the claims made against them. In fact, at least three are currently defending civil lawsuits filed by the government against them because they refused to pay pre-litigation settlement demands leveled by the FTC. These producers’ reasons for refusing to settle the claims are sound and courageous. But before we discuss the reasons for their refusals, we need to examine what the FTC is alleging and the shaky legal foundations for those claims.
In essence, the FTC contends that producers have vicarious strict liability for the transmission of spam emails by affiliates. Now what the heck does that mean?
Strict liability is the legal term used for liability that arises from a wrongful act, regardless of the intent of the actor. For example, if an automobile manufacturer produces a car with a defect that ultimately causes it to crash, the manufacturer can be held liable for all subsequent injuries because automobiles are expected to reach the consumer in a condition that is not unreasonably dangerous.
Vicarious liability is liability for wrongful acts committed by another person that is imposed upon you solely as a result of your relationship with that other person. For example, an employer is liable for injuries caused by an employee when the employee causes harm to another person while acting within the scope of his or her employment.
Combining the two theories of liability, the FTC is attempting to hold producers liable for spamming by affiliates.
In a rather novel application of the law, the FTC now contends that content producers are liable for CAN-SPAM violations, even if there is no employer-employee relationship between the producer and the affiliate and the producer had no knowledge of the spamming activities by the affiliate. But, as we all know, affiliates are like whispers in the wind: If they don’t want to be found, they won’t be. Therefore, because the FTC can’t locate the real offenders of the CAN-SPAM Act, it instead punishes the producers who can be located more easily.
By way of example, suppose you own and operate a hot dog stand in New York City called “Bob’s Bodacious Burgers.” Further, suppose that you put up a sign that reads: “I’ll pay $1 to anyone who tells someone to buy my burgers.” Along comes Eric Entrepreneur, who tells you he can send a lot of business your way. You say, “OK. Your number is 42. But, don’t break any laws or the deal is off.” Eric then goes down to Kinky’s Kopys and prints up 1,000 flyers that read: “Eat at Bob’s Bodacious Burgers… Tell ’em No. 42 sent you!” Eric proceeds to fold them all up like paper airplanes and, whistling the theme from “Man of La Mancha,” drives down neighborhood streets and delivers the advertisements to people’s doorsteps.
Angered by having little blue airplanes cluttering their yards, a number of the residents complain to New York’s Finest that someone is breaking the city ordinance against littering. The police go looking for Eric, but can’t find him. So, they come to you and issue you 103 littering infraction notices, claiming that you are liable for Eric’s antics simply because you agreed to pay him a buck for each person he sent your way. This type of liability is absolute rubbish—and so are the FTC’s claims.
But it’s not just the fines sought by the FTC that are so egregious. As an intractable component of settlement, the FTC is demanding that producers shoulder the task that Congress placed upon the FTC and other agencies. In CAN-SPAM, Congress unequivocally states that the FTC and other agencies shall be responsible for enforcing the Act and, in certain instances, state agencies also may enforce the Act. However, the FTC is demanding that settling producers absorb the costs associated with monitoring the activities of affiliates and, presumably, report offending affiliates to the FTC for persecution—er, prosecution. That’s hardly a strong incentive for affiliates to send traffic to those producers by any means, permitted or otherwise. In order to avoid future liability, many producers have now completely banned email solicitation, even when CAN-SPAM allows it.
Outraged by the FTC’s intractable demands, the litigating producers are challenging the commission’s claims and attacking the scope of its rules dissemination. These folks are taking strong stands by validly asserting that they are not and cannot be held liable for the actions of third parties over whom the producers have no control and whose actions were committed without the producers’ knowledge. Of note, at least two of the producers have a history of categorically terminating affiliates who spam when the producers get knowledge of that activity.
Although it is the FTC’s apparent goal to completely wipe out email solicitation of adult entertainment, CAN-SPAM actually allows this type of solicitation. By following a few simple rules, affiliates and producers alike may generate and send thousands (indeed, millions) of such messages. In such cases, all CAN-SPAM requires emailers to do is the following:
(1)The sender, receiver, and routing information – including the originating domain name and email address – must be accurate and identify the person who initiated the email.
(2) You must provide a return email address or another Internet-based response mechanism that allows a recipient to ask you not to send future email messages to that email address, and you must honor the requests.
(3) You may create a “menu” of choices to allow a recipient to opt out of certain types of messages, but you must include the option to end any commercial messages from the sender. Any opt-out mechanism you offer must be able to process opt-out requests for at least 30 days after you send your commercial email. When you receive an opt-out request, the law gives you 10 business days to stop sending email to the requestor’s email address. You cannot help another entity send email to that address or have another entity send email on your behalf to that address.
(4) Finally, it’s illegal for you to sell or transfer the email addresses of people who choose not to receive your email, even in the form of a mailing list, unless you transfer the addresses so another entity can comply with the law.
(5) Your message must contain clear and conspicuous notice that the message is an advertisement or solicitation and that the recipient can opt out of receiving more commercial email from you. It also must include your valid physical postal address. If the message contains sexually explicit content, the first 19 characters of the subject line must contain the phrase “SEXUALLY-EXPLICIT: ” (notice the space following the colon). The initially viewable area of the message must also contain the phrase “SEXUALLY-EXPLICIT: .” Moreover, if the intended recipient has consented to receive emails containing sexually explicit material, the CAN-SPAM Act only requires two things: the inclusion of a clear and conspicuous opt-out notice to decline future messages and the inclusion of a valid physical postal address of the sender.
It remains to be seen whether any or all of the litigating producers ultimately settle with the FTC. An estimated 95 percent of all lawsuits filed in federal courts are resolved without going to trial. Settling disputes is a good thing. Litigation is expensive to the parties and to the public (which pays the real costs of conducting open court proceedings—estimated at an average of $36,000 per day). Just as the Free Speech Coalition is fighting (and winning in some areas) for your rights by challenging the scope of 2257 and the Federal Rules promulgated by the U.S. Attorney General, the producers litigating with the FTC are fighting for your rights by challenging the scope of CAN-SPAM and the Federal Rules promulgated by the FTC. If you know any of these producers, shake their hands and thank them when you see them. They are fighting a fight against claims by the government that have already proved to have significant financial impact on the adult entertainment industry and could have substantial impact on you and your ability to promote your business.
Rob Apgood spent twenty-five years in software engineering and development, founding three successful software companies. After suffering a mid-life crisis that seriously affected his judgment, he relinquished his pocket-protector, acquired a license to practice law and, when not out riding on his Harley, can be found most days crossing swords with government prosecutors.
