FTC and FCC Seek Comments on Implementing the CAN-SPAM Act of 2003

Two Rulemakings May Affect Marketing Techniques

On March 11, 2004, both the FTC and the FCC released notices of proposed rulemaking (“NPRM”) seeking comment on how to implement certain aspects of the CAN-SPAM Act of 2003. Because these proceedings could impact how businesses communicate with and market to their customers, clients may want to file comments in one or both of these proceedings. In the FTC’s rulemaking proceeding, comments regarding the proposed “Do Not E-mail” Registry are due by March 31, 2004, and by April 12, 2004, for all other aspects of the rulemaking. The FCC’s rulemaking proceeding seeks comment on both CAN-SPAM issues and certain Do-Not-Call issues under the Telephone Consumer Protection Act (“TCPA”). Comments on CAN-SPAM issues will be due within 30 days after the FCC’s NPRM is published in the Federal Register, and within 15 days following publication for comments concerning the TCPA.

I. FTC request for comment on implementing the CAN-SPAM Act

Our Update dated Dec. 2, 2003, provides detailed information on the terms of the CAN-SPAM Act of 2003. In general, the Act imposes a series of new requirements on the use of commercial email, and directs the FTC to adopt certain necessary implementing regulations. The FTC’s NPRM seeks comment on several aspects of the proposed implementing regulations, including the criteria to be used to determine whether email is commercial in nature, and consequently, subject to the CAN-SPAM Act. The FTC also is seeking comment on several topics on which it must report back to Congress, including the implementation of a National “Do Not Email” Registry, and labeling requirements for commercial emails.

In the NPRM, the FTC seeks comment on whether it should expand the definition of “transactional or relationship” messages, which are exempt from most of the requirements of the CAN-SPAM Act. The Act currently classifies five broad categories as “transactional or relationship” messages, including: 1) facilitating a commercial transaction; 2) providing warranty information; 3) providing account information; 4) providing information related to an employment relationship or related benefit plan; and 5) the delivery of goods or services and related updates or upgrades entitled to the recipient. Businesses who communicate with their customers through email may want this definition expanded to include, among other things, emails containing information regarding products or services related to a customer’s current transaction but not necessarily a part of the contractual agreement.

The FTC also seeks comment on how to handle emails that contain both a “transactional and relationship” element and a “commercial” element (for example, an email containing an account balance that also includes an advertisement for another product). If it is considered a commercial email, the email must comply with all of the requirements of the Act. If a customer then opts out of future commercial emails, future emails to that customer must include only the “transactional and relationship” element. However, if these types of emails are classified as “transactional or relationship,” the business is not required to provide an opt-out option and can continue to attach advertisements and offers to its account statements and similar emails.

The FTC is also seeking comment on whether the 10 business day time period for processing opt-out requests should be expanded. Under the Act, a business has 10 days to remove a recipient from its current email list once an email opt-out request is received. This is a short time period compared with the proposed 30-day time period for removal of telephone numbers under the national Do-Not-Call Registry.

Finally, an area of interest to Internet service providers is the bounty system for individual and business “tipsters” that provide information leading to a successful enforcement action under the Act. The Act requires the FTC to establish a system that rewards those who identify spammers or provide information leading to the collection of a civil penalty. The reward is to be not less than 20 percent of the total civil penalty collected for violations of the Act. The FTC specifically seeks comment on how such a reward system would affect the behavior of ISPs including the type of information ISPs would provide, and whether an ISP would be more likely to participate in the reward system or proceed with its own right of action under the Act.

II. FCC seeks comment on how to eliminate wireless spam and proposes revisions to its Do-Not-Call regulations

The CAN-SPAM Act requires the FCC to adopt rules to protect consumers from unwanted mobile spam messages. Specifically, the CAN-SPAM Act requires that the FCC adopt rules to prohibit the transmission of mobile email messages unless the recipient provides express prior authorization. To implement this directive, the FCC seeks comment on a variety of issues. First, the FCC seeks comment on what constitutes mobile spam, known under the Act as a “mobile service commercial message,” abbreviated as “MSCM”. The NPRM requests comment on the FCC’s interpretation that the Act’s mobile spam provisions only apply to messages transmitted to email addresses associated with a CMRS subscriber’s wireless devices (such as a cell phone, Blackberry, PDA, etc.).

The FCC also seeks comment on whether the specific transmission technique used in delivering a MSCM is relevant in determining if the FCC’s new rules will apply. For example, the FCC asks whether messages sent from a mobile device to another mobile device without traversing the Internet (e.g., 202-555-1212) should be included in their rules, or only messages that are sent through the Internet as an electronic mail message (e.g., 2025551212@carrier.com) and then converted to a SMS message associated with a telephone number. Additionally, the FCC is examining ways for senders of email to determine if a recipient’s address is associated with a wireless device. The FCC also is seeking comment on the feasibility of both a limited “Do Not Email” Registry for wireless email addresses, and a list of all wireless email domain names without unique user names that senders could consult.

The FCC also seeks comment on ways for senders of mobile commercial email to satisfy the requirements of the CAN-SPAM Act, including among other things, requiring senders of commercial email to include a physical address and opt-out information, and limitations on the amount of text allowed in most messages. Also at issue are the technical options available for a mobile user to indicate that they do not want to receive future MSCMs.

Finally, another important issue is the consideration of an exemption from the express permission requirement for CMRS providers. The Commission has authority to exempt messages from CMRS carriers to their customers, as long as messages that are not already excluded under the “transactional or relationship” exemption include an opt-out provision. In particular, the Commission is seeking examples of messages that would not qualify under the “transactional or relationship definition,” such as changes in terms or features, and account balance information, but nonetheless should be excluded from the Commission’s opt-in and other requirements. An example would be a carrier who may want to provide information relating to new services that are not necessarily related to services currently subscribed to by the customer. In addition, messages relating to a text messaging service where the content is provided by a third party would not currently qualify under the “transactional or relationship” exemption. However, carriers may want to offer these services to their customers without being dependent on the customer first opting in to receive the messages. Therefore, the exemption would have to be broader than messages relating only to a carrier’s own services.

Proposed revisions to the FCC’s TCPA and Do-Not-Call regulations

The FCC’s NPRM also addresses two issues related to its regulations under the TCPA. First, the TCPA prohibits calls made using autodialers or the use of artificial or prerecorded messages to any telephone number where the recipient must pay for the call (such as pagers and mobile phones). Since wireless local number portability was implemented in November 2003, allowing CMRS customers to transfer numbers from wireline carriers to wireless carriers, the FCC asks whether it should adopt a safe harbor to withhold liability if a telemarketer uses an autodialer or places a prerecorded message call to a wireline number that was switched to a wireless phone. Particularly, the Commission seeks comment on what is considered a reasonable amount of time for telemarketers to obtain data on recently ported numbers, and to scrub their call lists of those numbers.

The FCC also seeks comment on whether it should amend its rules requiring telemarketers to scrub their call lists every 90 days. Pursuant to a recently enacted statute, the FTC is required to amend its Do-Not-Call rules to require telemarketers to obtain the telephone numbers on the Do-Not-Call list every 30 days. Consequently, the FCC asks whether it should amend its rules to be consistent with the FTC’s rules.

Since the proposed rules may impact various areas of your business, please feel free to forward this update to any departments that may be affected. If you would like to discuss the potential consequences of these rulemakings or submit comments, please contact us.