That winter's day will be Jan. 1, 2004, when spam going to or from California becomes illegal. And this is a law that will be enforced, if upheld by the courts, and there is some doubt about that.
Hardly a day goes by for any of us during which we don't receive a spate of e-mails, from "Linda" with a subject line like "RE: John asked that I send this," cumulatively alerting us to sources of lower mortgage rates, Viagra, mail-order Ph.D.s, penis-enlarging secrets, get-rich-quick schemes, sex toys, mail-order brides, pornography, and a host of other things too numerous to mention, although those seem to dominate the field. California, whose legislature thinks (perhaps correctly) that 40 percent of all e-mail traffic is spam, has taken a second - and this time fatal - shot at spam, and Congress may follow suit shortly.
California started with 1992 legislation requiring that junk faxes display a toll-free number that the recipient could call to stop further faxes.
Cal. Bus. & Prof. Code §17538.4. The statute was amended in 1998 to add e-mail and require either a toll-free number or an e-mail address where the recipient could direct a shut-off notice. It also imposed the requirement that the first characters of a spam subject line be "ADV:" or, in the case of adults-only spam, "ADV: ADLT." Those requirements applied only "when the unsolicited e-mailed documents are delivered to a California resident via an electronic mail service provider's service or equipment located in" California. That, of course, is of little consequence - try to send bulk e-mail without reaching any of the 33 million Californians, or figure out which ones do not use a California service provider (defined as "any business or organization qualified to do business in [California] that provides individuals, corporations, or other entities the ability to send or receive electronic mail through equipment located in [California] and that is an intermediary in sending or receiving electronic mail").
In response to an attempted class action against a spamming company, the company challenged California's anti-spam law, claiming that it violates the "Dormant Commerce Clause" - which essentially is a constitutional principle that prohibits states from enacting regulations that unreasonably discriminate against interstate commerce. The trial court agreed, tossing out the action, but the court of appeal reversed. While California courts have generally disagreed with cases from other jurisdictions holding that states are very limited in their ability to regulate the Internet, the court nonetheless distinguished California's law from the ones disapproved in those cases because its coverage is limited to California residents receiving e-mail through California equipment. The California Supreme Court declined to become involved. Ferguson v. Friendfinders, Inc., 94 Cal.App.4th 1255, 115 Cal.Rptr.2d 258 (1st Dist. 2002), review denied (April 10, 2002). Later, the California Supreme Court rejected the theory that spam was an invasion of a property right ("trespass to chattels"), scotching one theory used to attack spam by unwilling recipients. Intel Corp. v. Hamidi, 30 Cal.4th 1342, 1 Cal.Rptr.3d 32, 71 P.3d 296 (2003).
Against that background, California has outdone itself, replacing existing spam restrictions with an outright prohibition, and one containing very sharp teeth. Cal. Bus. & Prof. Code §17529, et. seq. And the legislature made extensive findings in support of what it did, obviously in anticipation of a constitutional challenge, including that spam is "an increasing drain on corporate budgets," that spam will cost $10 billion this year in lost productivity and additional computer resources ($1.2 billion in California alone), that spam absorbs "valuable [computer] storage space" and bandwidth, that spam filters have been ineffective and, perhaps most significantly, that the "true beneficiaries of spam are the advertisers."
The new law prohibits spam that is sent from or to a California e-mail address. So, that just means that spammers will go offshore and send their spam to California, right? Wrong! The law also prohibits "advertising in" spam sent from or to a California e-mail address. So much for that loophole.
The two exceptions are direct consent and a preexisting or ongoing business relationship. And it is worth spelling these out because they will be subject to much interpretation.
"'Direct consent' means that the recipient has expressly consented to receive e-mail advertisements from the advertiser, either in response to a clear and conspicuous request for the consent or at the recipient's own initiative."
What is a "clear and conspicuous request" re-mains to be seen. However, fine-print "terms and conditions" clearly will not suffice.
"'Preexisting or current business relationship,' as used in connection with the sending of a commercial e-mail advertisement, means that the recipient has made an inquiry and has provided his or her e-mail address, or has made an application, purchase, or transaction, with or without consideration, regarding products or services offered by the advertiser."
The other exception is profoundly more complex:
"Commercial e-mail advertisements sent pursuant to the exemption provided for a preexisting or current business relationship shall provide the recipient of the commercial e-mail advertisement with the ability to 'opt-out' from receiving further commercial e-mail advertisements by calling a toll-free telephone number or by sending an 'unsubscribe' e-mail to the advertiser offering the products or services in the commercial e-mail advertisement. This opt-out provision does not apply to recipients who are receiving free e-mail service with regard to commercial e-mail advertisements sent by the provider of the e-mail service."
This seems about as clear as mud, but given what's at stake, courts will certainly soon have many opportunities to wrestle with it.
Parenthetically, the new law also prohibits collecting e-mail addresses for the purpose of spamming. And just in case the outright ban on spamming is thrown out, it also outlaws spam "accompanied by falsified, misrepresented, obscured or forged header information" or a misleading subject line.
This targets the advertisers more than the advertising medium, and that strikes at the heart of the basis for spam. After all, what is the sense in advertising in California if you are not selling a product there? And if you are selling a product from overseas - or even a non-product, like wagering or videotext - you probably are paid with a credit card. And by sending subpoenas to banks, enforcers of this anti-spam law can simply follow the money. Nobody would ever do that because it would be too much work, right? Nope. This is another vigilante law, even worse than California's infamous Unfair Competition Law (accurately dubbed the "Gonzo Law" by one writer), which deputizes any Californian to bring a suit to stop any commercial activity that is illegal, deceptive, or even "unfair," which means just about anything that a court thinks that it means. Cal. Bus. & Prof. Code §17200.
The new law allows the Attorney General or an electronic mail service provider or the recipient of spam to bring an action against any entity that violates this law. That usually will mean against the advertiser, who is going to be easy to find because, after all, there is no point in advertising if it is at all difficult to contact the vendor of the product. And why would anyone want to take the trouble to go to court over receiving a spam or two from someone? How about $1,000 per spam, up to $1 million per incident, along with attorneys fees and costs? And even if the sender "established and implemented, with due care, practices and procedures reasonably designed to effectively prevent" spam, the defendant is still on the hook for $100 per spam, up to $100,000 per incident.
To boot, it also now is illegal to use a California e-mail service provider for spam, or to violate a provider's policies designed to prevent spam, although there is no requirement that providers create such policies. And it gives the service providers the right to recover against spammers any actual monetary losses, plus $50 per spam or $25,000 per day, whichever is more.
Gray Davis - the former Governor of California due to the result of the ludicrous recall election that has caused California to replace Florida as the electoral laughing stock of the nation - sent a message to Congress, begging it not to override this law. That makes an interesting point. While courts are divided over the question of whether states are forbidden by the Dormant Commerce Clause from regulating the Internet, the consensus is that if Congress wants to regulate spam, it can (within the bounds of the First Amendment) and, in so doing, prohibit or limit any state's right to occupy the field, as it has done with the Communications Act, the Copyright Act, and elsewhere. Meanwhile, the vigilantes in California will have a field day.
Recent Congressional activity is telling, and does not bode well for spammers. Recently, a federal court held that the Federal Trade Commission's "do not call" list went beyond Congressional authorization (the FTC cannot promulgate regulations beyond the scope of that which is authorized by statute). U.S. Security v. Federal Trade Commission, ___ F.Supp.2d ___, 2003 WL 22203719 (W.D. Okla., September 23, 2003). Certainly conscious of the tens of millions of voters who signed up for the "do not call" registry almost immediately after it was announced (30 million in roughly a month), Congress in one day enacted legislation to create the authorization that the court found wanting. Spam is no more popular than telemarketing, and Congress has been toying with regulations applying to spam for some time now. But California's recent legislation, coupled with the overwhelming expression of public sentiment embodied in its response to the "do not call" registry, may provide the catalyst for definitive action. Lobbying and money from direct marketing folks may no longer be able to overcome the sea of public sentiment against spam, just like what happened with telemarketing.
To have 50 different sets of regulations for spam would be insane. And the fact of the matter is that any anti-spam legislation that does not have the teeth found in California's new law will be ineffective. People are sufficiently annoyed with spam and greedy that, if spam does not stop, advertisers will be inundated with private lawsuits. Thus, the next legislative chapter of this story surely will take place on the Potomac, not the Pacific.
On the judicial front, however, another federal district court addressing a challenge to the "do not call" list has held that it violates the First Amendment. Mainstream Marketing Services, Inc. v. Federal Trade Commission, ___ F.Supp.2d ___, 2003 WL 22213517 (D. Colo., September 25, 2003).
The basis of the court's finding is that the "do not call" list applies to telemarketers selling products or services, but not to charitable solicitations, which the court found to be equally invasive and equally capable of abusive tactics. California's new anti-spam law regulates any e-mail "message initiated for the purpose of advertising or promoting the lease, sale, rental, gift offer, or other disposition of any property, goods, services, or extension of credit," whatever that means. However, it is doubtful that "other disposition of any property" will be read so expansively as to cover charitable solicitation. Thus, California's new law may suffer the same constitutional infirmities as were found in the "do not call" regulations. But also expect appellate courts and, perhaps, the Supreme Court soon to be tangling with the "do not call" regulations, as well as this new anti-spam law.
We certainly have not heard the last of this.
Clyde DeWitt is a partner in the Los Angeles, Calif.-based, national 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 at [email protected]. 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.
