Date: Dec 18, 2003

On December 16, 2003, President Bush signed the first federal anti-spam law, Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003. Also known as "CAN-SPAM," the law establishes a preemptive federal framework of administrative, civil, and criminal tools to combat unsolicited commercial e-mail (spam). Spam is defined as any e-mail message where the primary purpose is the commercial advertisement or promotion of a commercial product or service. This broad definition will likely exclude newsletters containing advertisements. While the law was obviously intended to primarily protect consumers, the law does not include a specific exclusion for business to business communications or for non-profits. CAN-SPAM requires e-mailers to obtain "affirmative consent," defined as express consent, either in response to a clear and conspicuous request or at the recipient's own initiative. "Transactional and relationship messages" are not considered spam. This category of communications includes order confirmations, warranty and product recall information, account balance information, etc. The Federal Trade Commission (FTC) will be required to both provide further guidance on when the primary purpose of an e-mail message is commercial, and the types of messages that fall in the transaction/relationship category. Note that the measure does not include an explicit exemption for communications to those with whom the e-mail marketer has a prior established business relationship. The law takes effect on January 1, 2004. Importantly for national marketers, CAN-SPAM preempts all existing state spam laws, now numbering about 35, including the California law due to take effect January 1 that authorized private suits and required direct consent from each advertiser. The California law would have posed significant problems for many businesses, and potentially would have barred newsletters containing ads absent "direct consent" from "each advertiser." The law does not preempt state or federal laws governing false advertising, other criminal statutes, and the like. Commercial e-mail messages must include a clear and conspicuous notice that the message is an advertisement (unless the recipient has given prior affirmative consent); a clear and conspicuous notice on opt-out options, with a functioning e-mail address or other Internet-based mechanism to facilitate opt-out; and must include a valid postal address. Effective January 1, e-mailers must honor opt-out requests within 10 days. The law requires the FTC to develop several studies and reports, including: 1) a feasibility study for a do-not-spam list within six months (the FTC has said a "do-not-spam" list would be unworkable and potentially dangerous); 2) options for establishing incentives, like a bounty hunter system, for those reporting spam within 9 months; 3) a plan for requiring commercial electronic e-mail to be identifiable from the subject line (e.g., using labels like "ADV" and "ADV-ADLT") within 18 months; and 4) a report on the effectiveness in 24 months. Moreover, the Federal Communications Commission (FCC) is required to promulgate rules addressing mobile phone spam within 270 days. Both civil and criminal penalties may be assessed for violations. Repeat spamming and false headers are felonies. The FTC and State Attorneys General are entitled to enforce the law. ISPs are also authorized to enforce, but there is no private right of action for consumers. Actual or statutory damages, up to a maximum of $2 million, may be recovered, along with attorneys fees. Damages may be reduced where defendants can demonstrate that they had established and implemented commercially reasonable practices and procedures to prevent violations. Treble damages may be awarded in certain instances. Suffice it to say that businesses, including trade associations, will need to implement procedures to make sure that their electronic communications to business customers and consumers alike comport with the new requirements. For more information about this topic please contact Sheila A. Millar at 202/434-4143, Millar@khlaw.com or Vanessa R. Hamilton at 202/434-4111, Hamilton@khlaw.com.