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May 21, 2004 06:00am
Can you Spam Under the CAN-SPAM Act?
Source: Weston, Garrou & DeWitt
by: Lawrence G. Walters, Esq. & Heather R. Schwarz, Esq.

After years of trying to pass uniform spam regulations without success, the United States Congress finally passed the Controlling the Assault of Non-Solicited Pornography and Marketing Act ("CAN-SPAM"), which requires email marketers, amongst other things, to accurately identify themselves and to provide an email opt-out. This article will briefly summarize the important features of the CAN-SPAM Act and examine the future of email marketing.

Federal CAN-SPAM Act

Effective January 1, 2004, all unsolicited emailed transmissions, commonly known as "spam," must comply with the CAN-SPAM Act. The CAN-SPAM Act does not completely ban unsolicited email, but imposes a list of requirements, including special requirements for adult-oriented spam. The requirements include, but are not limited to, prohibitions on deceptive messages, forged header information, false email sender accounts, and deceptive subject headings. The Act also requires what the FTC calls the "electronic plain brown paper wrapper" requirement that unsolicited emails contain a functioning return address that works for 30 days after the email transmission, that spammers refrain from transmitting unsolicited emails after users opt-out, that spam email contain the sender's valid physical address, that the email states it is a solicitation or an advertisement, and that certain sexually oriented email contains a "Sexually-Explicit" label.

Most importantly for the adult Internet industry, is the FTC's recently adopted controversial regulation requiring adult oriented spam emails to contain a label on the subject line and in the body designating the correspondence as "Sexually-Explicit," to ensure that it is easily identifiable by filters. Sexually explicit language may not appear in the subject line and nothing except specified information can be included in the body of the emails, however, hyperlinks or other devices providing access to materials is permitted.

Constitutional scholars are dubious as to whether such forced labeling could survive a First Amendment challenge. The Center for Democracy and Technology says that the labeling may amount to 'forced speech' which has been deemed unconstitutional in some instances. Moreover, the required label is, in some ways, illogical. On the one hand, the FTC requires that adult oriented emails be labeled "Sexually-Explicit" while at the same time, any sexually explicit content is prohibited. In light of the substantial reliance by the adult industry on email marketing, legal challenges to the Act are a virtual certainty.

The practical effects of these new regulations on the industry have yet to be seen, given the newness of the legislation. Only a few violators have been prosecuted thus far. In late April 2004, federal authorities charged four individuals in Detroit with violating the Act by fraudulently promoting weight loss products. They were charged with hiding their identities in hundreds of thousands of emails, and using relay computers to deliver their messages. According to the physician consulted by investigators, the ingredients in the product did not work. The case is still pending, and therefore no judgments have been obtained under the CAN-SPAM Act yet.

Webmasters should take note of the fact that they may be liable for the illegal actions of their affiliate promoters, under the Act, if the affiliates had proper authorization from the webmasters to send mass emails on their behalf. This is by far the most controversial and far-reaching prohibition of the new legislation. Webmasters must now exercise more oversight over their affiliates' promotional activities. At the very least, all webmasters should now adopt a contractual "Spam Policy" governing any email promotion, which complies with the new legislation. Such documentation could assist in demonstrating that the webmaster did not consent to any illegal spam promotions by affiliates; perhaps assisting in the defense of any charges brought under the Act.

Penalties

The CAN-SPAM Act imposes various penalties on businesses that do not comply with its provisions. Statutory damages can range from $250 up to $2 million per violation, with aggravated damages in the amount of three times statutory damages. Reduction of damages may be allowed under mitigating circumstances, and reasonable attorney's fees are available to offset the costs of prosecution. Under the Act, primary enforcement authority was delegated to the FTC, although state's attorneys general can also initiate enforcement actions. Although no general private right of action is allowed, certain Internet access providers that have been damaged by violations of the Act can seek damages and reasonable attorney's fees. However, enforcement of the Act may pose practical difficulties since spammers may be located offshore and email addresses may not always be easily traced.

Lawsuits

In an unusual joint effort, some of the United States' largest Internet Service Providers are teaming up to file lawsuits in California, Georgia, Virginia and Washington state against hundreds of people who have been accused of violating the CAN-SPAM Act by sending millions of unwanted emails. Much like what the Recording Industry Association of America did to combat song swapping, Microsoft, America Online, Earthlink and Yahoo! are targeting mostly anonymous "John Doe" defendants who sent out unsolicited emails. They are seeking injunctions to stop spammers and force them to pay damages. The Internet Service Providers plan on working together to initiate future lawsuits.

Future of Spam?

Since its adoption in January of this year, the Act has yet to meaningfully reduce the amount of spam being sent to users' inboxes. Since much spam originates from overseas, outside the jurisdiction of the United States, the Act will not immediately impact foreign email promoters. According to Brightmail, a spam filtering company, the volume of spam has actually grown continuously since the Act took effect, with spam taking up as much as 60 percent of emails in January, up from the 58 percent in December. Additionally, a survey conducted by the Pew Internet & American Life Project in February, 2004, revealed that 29 percent of people using email have reduced their email use due to the spam in their inboxes. The survey also showed that spam is not shrinking, but rather it is a growing problem.

The public has made it clear that it is fed up with spam, and it wants the government to do something about it. The CAN-SPAM Act is here to stay and all webmasters and advertisers who disseminate bulk email must comply and develop a legal strategy to avoid the Act's stiff penalties and potential injunctions. By implementing a "Spam Policy," paying attention to the provisions of the Act, and speaking with a lawyer, you can minimize your legal risks as enforcement actions under the CAN-SPAM Act become more common.

Lawrence G. Walters, Esquire is a partner with the law firm of Weston, Garrou & DeWitt, with offices in Orlando, Los Angeles and San Diego. Mr. Walters represents clients involved in all aspects of adult media. The firm handles First Amendment cases nationwide, and has been involved in much of the significant Free Speech litigation before the United States Supreme Court over the last 40 years. All statements made in the above article are matters of opinion only, and should not be considered legal advice. Please consult your own attorney on specific legal matters. You can reach Lawrence Walters at Larry@LawrenceWalters.com, FirstAmendment.com or AOL Screen Name: "Webattorney."

Lawrence G. Walters, Esq. & Heather R. Schwarz, Esq.
Weston, Garrou & DeWitt
FirstAmendment.com

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