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Week Ending July 1, 2005
S 714 A bill to amend section 227 of the Communications Act of 1934 (47 U.S.C. 227) relating to the prohibition on junk fax transmissions.
BRIEF
This bill succeeded during the 108th Congress but never made it to the President’s desk.
Once again it would become illegal to send from a telephone fax machine, computer or other device to another fax machine an unsolicited advertisement to a person who has requested from the sender not to receive the fax.
If the sender has an established relationship with the recipient of the fax and the sender conspicuously makes notice on the fax’s first page that the recipient can request no further unsolicited advertisements and can notify the sender via a domestic phone of fax number that is not pay-per-call of their wish, then sending the fax is OK.
But it isn’t all up to the sender. The recipients requesting no more faxes must identify their fax number, make the request to the telephone or fax number of the sender and may not have expressed invitation or permission to send the fax in the first place.
Professional tax-exempt trade associations can send unsolicited advertisements to their members if it furthers association purposes.
Sponsor: Senator Gordon H. Smith (R-OR)
Vote: Passed Senate by Unanimous Consent (June 23, 2005)
Cost to the taxpayers: No discernible cost.
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MORE INFORMATION
Congress first addressed the legality of faxing unsolicited advertisements to residential telephone subscribers in the Telephone Consumer Protection Act of 1991 (TCPA). 1
[Footnote] The law, which is still in effect, generally prohibits anyone from faxing unsolicited advertisements without `prior express invitation or permission' from the recipient. The statute contains no other exceptions for junk faxes, and does not authorize the FCC to create any additional exceptions.
[Footnote 1: P.L. 102-243; 47 U.S.C. 227.]
In October 1992, the FCC released its original order interpreting the TCPA and establishing the rules implementing the junk fax prohibition. In response to comments by Mr. Fax and National Faxlist urging the Commission not to ban unsolicited faxes, the FCC in its order noted in a footnote (which remains unpublished in the Code of Federal Regulations) that the TCPA did not give it `discretion to create exemptions from or limit the effects of the prohibition.' 2
[Footnote] The footnote continued to say, `We note, however, that facsimile transmission from persons or entities who have an established business relationship with the recipient can be deemed to be invited or permitted by the recipient.' 3
[Footnote] On this basis, many commercial entities considered an `established business relationship' or `EBR' to be a permissible exemption from the general prohibition of sending unsolicited faxes. Additionally, from 1992 through July 2003, the FCC enforced the TCPA junk fax provisions under this original interpretation.
[Footnote 2: See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CC Docket No. 92-90, Report and Order, 7 FCC Rcd 8752 (rel. 1992) (hereinafter, `1992 TCPA Order'), at 8779, para. 54, n. 87.]
[Footnote 3: Id.]
The Commission continued to assess the effectiveness of the TCPA's provisions over the course of the decade and, in September, 2002, sought public comment on a number of issues, including whether the FCC should refine or adopt new rules related to `unsolicited facsimile advertisements.' The FCC explained its purpose for initiating this formal review proceeding as follows: `In the last ten years, telemarketing practices have changed significantly. New technologies have emerged that allow telemarketers to target potential customers better and that make marketing using telephones and facsimile machines more cost-effective. At the same time, the new telemarketing techniques have increased public concern about the impact on consumer privacy.' 4
[Footnote]
[Footnote 4: FCC Press Release, September 12, 2002 (http://hraunfoss.fcc.gov/edocsXpublic/attachmatch/DOC-226183A1.doc).]
On March 11, 2003, the Do-Not-Call Act was signed into law. In addition to authorizing the Federal Trade Commission (FTC) to implement a national registry, it also required the FCC to issue a final rule in its ongoing TCPA proceeding within 180 days. Additionally, it required the FCC to consult and coordinate with the FTC to `maximize consistency' with the rules promulgated by the FTC. 5
[Footnote]
[Footnote 5: See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC Rcd 14014 (2003) (hereinafter, `July 2003 TCPA Order').]
On July 3, 2003, the FCC issued its report and order establishing the Do-Not-Call registry and updating the provisions of the TCPA, including the junk fax provisions. After reviewing the record regarding the use and enforcement of junk faxes as well as the legislative history of the TCPA, the Commission reversed its prior conclusion that the presence of an EBR between a fax sender and recipient establishes the requisite consent necessary to permit businesses to send commercial faxes to their customers, effectively eliminating the EBR exception to the general prohibition on unsolicited fax advertisements. 6
[Footnote] Instead, the FCC concluded that a recipient's express invitation or permission must be obtained in writing, include the recipient's signature, contain a clear indication that he or she consents to receiving such faxed advertisements, and provide the fax number to which faxes are permitted to be sent. 7
[Footnote]
[Footnote 6: Id.]
[Footnote 7: Id.]
Reviewing the record, the FCC found that a majority of consumer advocates disagreed with the Commission's prior interpretation that an EBR constituted prior express permission, and they urged the Commission to eliminate the EBR exemption. In describing the record they had examined since 2002, the FCC stated that consumers felt `besieged' by unsolicited faxes' and that `advertisers continue to send faxes despite [their] asking to be removed from senders' fax lists.' The FCC also said consumers indicated they bore the burden of not only paying for the cost of paper and toner, but also the opportunity costs of `time spent reading and disposing of faxes, the time the machine is printing an advertisement and is not operational for other purposes, and the intrusiveness of faxes transmitted at inconvenient times, including in the middle of the night.' 8
[Footnote]
[Footnote 8: Id. at para. 186.]
Conversely, the FCC found that the majority of industry commenters on the issue not only supported the Commission's prior interpretation permitting reliance on an EBR, but also urged the Commission to amend its rules implementing the TCPA to expressly provide for the EBR exemption. Industry comments maintained that `faxing is a cost-effective way to reach customers' particularly for small businesses for whom faxing is a cheaper way to advertise.' They also warned that eliminating an EBR would `interfere with ongoing business relationships, raise business costs, and limit the flow of valuable information to consumers. 9
[Footnote]
[Footnote 9: Id.]
In addition to weighing consumer and industry comments, the FCC's order analyzed the legislative history of the TCPA. The Commission stated that Congress's primary purpose in passing the Act was to protect the public from bearing the costs of unwanted advertising, and the FCC maintained that `certain practices were treated differently because they impose costs on consumers.' 10
[Footnote] The FCC cited other examples where the TCPA prohibits advertising calls without prior express consent, such as calls to wireless phones and other numbers where the called party is charged, viewing that cost-shifting onto consumers as identical in nature with respect to fax advertising where consumers must pay for paper and toner. It also pointed out that, unlike telemarketing, Congress provided no mechanism for opting out of unwanted faxes, arguing that to create such a system would `require the recipient to possibly bear the cost of the initial facsimile and inappropriately place the burden on the recipient to contact the sender and request inclusion on a `do-not-fax' list.' 11
[Footnote] For these reasons, the FCC concluded that Congress had made the determination that entities desiring to fax unsolicited advertisements must obtain express permission from the recipient before they do so.
[Footnote 10: Id. at para. 190.]
[Footnote 11: Id.]
With respect to the other new requirements imposed by the FCC for obtaining prior permission (e.g., written consent, signature, etc.), the Commission justified them on the basis that they believed `the interest in protecting those who would otherwise be forced to bear the burdens of unwanted faxes outweighs the interests of companies that wish to advertise via fax.' 12
[Footnote]
[Footnote 12: Id. at para. 191.]
Following the FCC's release of the amended TCPA rules, numerous petitions for reconsideration were filed with the Commission requesting that the FCC maintain its earlier interpretation of the junk fax rules. Those businesses, associations, and other organizations that had relied on the prior interpretation for over a decade argued that to now require prior, written permission for every fax sent out to an existing customer or client was an overly burdensome regulation that would be expensive to implement and was ultimately unnecessary to protect consumers. Many companies also argued that it would be impossible to change their practices overnight and obtain the necessary consents by August 25th (30 days after the appearance of rules in the Federal Register) in order to comply with the rule's effective date, leaving them with only the option to immediately litigate.
Finally, many industry petitioners challenged the FCC's fundamental premise that the new rules were better for consumers, contending instead that the revised interpretation would have significant, unintended consequences that harmed consumers. For example, restaurants pointed out that they would not be able to fax a menu to a customer who called and requested one unless the caller provided them with a written consent (presumably by fax) or had one on file. Additionally, realtors explained that, in their business, potential home buyers often call and request faxes when passing by homes for sale. They argued that the FCC's new requirement for a written signature would effectively prevent realtors from faxing potential new home buyers the listing information they requested when they made such calls, adding unnecessary hurdles and delays even when consumers clearly wanted to receive the faxes as quickly as possible.
In light of these additional claims, on August 18, 2003, the Commission stayed until January 1, 2005, the effective date of both the written consent requirements as well as its July 2003 determination that an EBR would no longer be sufficient to show that an individual or business has given express permission to receive unsolicited fax advertisements. The stay has been extended through June 30, 2005. At the time, the FCC justified it adoption of the stay because `the public interest would best be served by allowing senders of such advertisements additional time to obtain such express permission before the new rules become effective.' The order also noted that this extension would give the FCC itself more time to fully consider any more petitions for reconsideration on these or related issues, and that the FCC reserved the right to further extend the effective date if necessary. 13
[Footnote]
[Footnote 13: See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, Order on Reconsideration, FCC 03-208 (rel. Aug. 18, 2003) (hereinafter, `August 2003 Order on Reconsideration').]
In the July 2003 TCPA Order, the FCC had also modified its definition of an EBR in the context of telephone solicitations to limit the duration that a telemarketer could rely on the exception to a maximum of 18 months following a purchase or transaction, or a maximum of three months following an inquiry or application (commonly referred to as the `18/3' time limits). Prior to that ruling, no limitation had been placed on the duration of the EBR as it applied to either telephone or fax solicitations, but the FCC concluded that establishing time limits was `necessary to minimize confusion and frustration for consumers who receive calls from companies they have not contacted or patronized for many years.' Because there was `little consensus' among industry players who had offered various lengths of time, the FCC sought a duration that `strikes an appropriate balance between industry practices and consumer privacy interests,' settling on the 18/3 time frame. Acknowledging that these time limits created burdens on industry (especially small businesses) to monitor the length of their customer relationships, the FCC argued that endorsing a rule consistent with the FTC's own 18/3 time limit would benefit businesses by creating a `uniform standard with which businesses must comply' regardless of which agency's jurisdiction the businesses fell under. 14
[Footnote] This also helped fulfill the FCC's charge from Congress to maximize consistency between the agencies' telemarketing rules.
[Footnote 14: See July 2003 TCPA Order at para. 34.]
Recognizing that the FCC's August 2003 Order on Reconsideration had reinstated an EBR for junk faxes, but potentially limited its duration to the 18/3 rule for telemarketing, the U.S. Chamber of Commerce and others filed a petition for reconsideration one week later on August 25, 2003, requesting, among other things, that the FCC reconsider the new 18/3 rule. 15
[Footnote] In response, the FCC issued an order on October 3, 2003, staying until June 30, 2005, the 18/3 limitations only with respect to their application to unsolicited fax advertisements. Because the modification of the EBR duration in the July 2003 TCPA Order was promulgated in the context of telephone solicitations, the FCC held that there was good cause to stay application of those time limitations to the EBR in the context of junk faxes until it had time to consider the application of the 18/3 time limits in the context of junk faxes. 16
[Footnote] The FCC concluded, however, that nothing in this new order would affect its August 2003 decision to stay the elimination of the EBR exception to the general prohibition against unsolicited faxes until June 30, 2005.
[Footnote 15: See, e.g., Chamber of Commerce of the United States, Petition for Reconsideration of Facsimile Advertisements Rules, filed August 25, 2003; National Association of Chain Drug Stores, Petition for Clarification and Revision, filed August 25, 2003.]
[Footnote 16: See August 2003 Order on Reconsideration.]
In practice, the revised junk fax rules, as ordered by the FCC would have significant consequences. The cost and effort of compliance could place significant burdens on some businesses, particularly those small businesses that rely heavily on the efficiency and effectiveness of fax machines. In particular, organizations such as trade associations and other non-profits that have hundreds of thousands of members, would be saddled with a huge burden to collect signatures from each member just to send an unsolicited fax advertisement.
For instance, the National Association of Wholesaler-Distributors claimed that its member companies expected to pay an average of $22,500 to obtain consent forms and an average of $20,000 for annual compliance. The National Association of Realtors estimated that it would have to collect over 67 million permissions to sustain the roughly 6 million home sales from the previous year. Other economic impacts included the costs of training, making multiple contracts to obtain signatures providing consent, and obtaining permission for each fax machine when the recipients change location.
Finally, over the past 10 years, following enactment of the TCPA and issuance of previous FCC orders implementing and interpreting the rules on junk faxes, many legitimate businesses and associations have appropriately relied on the FCC's interpretation and have sent unsolicited faxes to recipients with whom they have an EBR. During this time, the FCC has acknowledged that businesses faxing under EBRs were in compliance with the FCC's existing junk fax rules. If the revised rules go into effect, the previously legitimate practices will be immediately unlawful, and unsuspecting or uninformed businesses may be subject to unforeseen and costly litigation unrelated to legitimate consumer protection aims.
The revised rules are currently set to go into effect on July 1, 2005, following the expiration of the FCC's currently self-imposed, and extended stay. Because the Commission may choose not to reverse its new rule removing the EBR exception from the general ban on sending unsolicited facsimile advertisements, S. 714, the `Junk Fax Prevention Act of 2005' specifically creates a statutory exception from the general prohibition on sending unsolicited advertisements if the fax is sent based on an EBR and certain conditions are met. This legislation is designed to permit legitimate businesses to do business with their established customers and other persons with whom they have an established relationship without the burden of collecting prior written permission to send these recipients commercial faxes. Nonetheless, in reinstating the EBR exception, the Committee determined it was necessary to provide recipients with the ability to stop future unwanted faxes sent pursuant to such relationships. The Committee therefore also added the requirement that every unsolicited facsimile advertisement contain an opt-out notice that gives the recipient the ability to stop future unwanted fax solicitations and that senders of such faxes provide recipients with a cost-free mechanism to stop future unsolicited faxes.
S. 714, the `Junk Fax Prevention Act of 2005,' reestablishes an `established business relationship' exception to allow entities to send commercial faxes to their customers and members without first receiving written permission, and establishes new opt-out safeguards to provide additional protections for fax recipients.
Section 1. Short title
Section 1 would set forth the short title of the bill as the `Junk Fax Prevention Act of 2005.'
Section 2. Prohibition on fax transmissions containing unsolicited advertisements
Section 2(a) would amend section 227(b)(1)(C) of the Communications Act of 1934 (the `1934 Act') by creating an existing business relationship exception to the general prohibition against sending unsolicited commercial advertisements to fax machines. This section would also require the sender of the fax to include an opt-out notice to the recipient as further required in section 2(c) below. Additionally, in the event a recipient chooses to opt out of receiving future unsolicited advertisements, this section would make it unlawful for a sender to fax any additional unsolicited advertisements to such a recipient.
Section 2(b) defines the term `established business relationship' by incorporating the definition of `established business relationship' in 47 C.F.R. 64.1200 as those regulations were in effect on January 1, 2003. Members should note that by defining this term by reference back to an earlier definition of `established business relationship,' this provision would specifically exclude the 18/3 time limits that are in the current definition of `established business relationship' in the C.F.R. (as ordered by the FCC's July 2003 TCPA Order discussed above). Therefore, the effect would be to reinstate the junk fax rules back to the FCC's original interpretation established in 1992, which was in effect until the July 2003 TCPA Order. Additionally, section 2(b) would apply the definition to both residential and commercial entities, and would also allow the Commission to limit the duration of the established business relationship pursuant to section 2(f) below.
Section 2(c) would add a new subparagraph (D) to section 227(b)(2) of the 1934 Act by setting forth the necessary elements of the opt-out notice required by Section 2(a). The bill does not prescribe particular language or methods to be used for opting out, but it would require that the notice: (i) be clearly and conspicuously displayed on the first page of the unsolicited advertisement; (ii) inform the recipient of his or her ability to opt-out of future unsolicited advertisements to any fax machine or machines and that any request must be complied with by the sender in the shortest reasonable time; (iii) explain the proper requirements for a valid opt out, as required in Section 2(d) below; and (iv) include a domestic telephone and fax number that will receive an opt-out request and describe a `cost-free mechanism' for the recipient to send such a request to the sender. In order to minimize the possible financial consequences of this provision, section 2(c) would also give the FCC the authority to exempt certain classes of small business senders from the requirement to provide the additional cost-free mechanism if the FCC determines that the costs to those businesses are unduly burdensome given the revenues generated by that class of small business.
Section 2(c) would also require that the telephone and fax numbers, and the cost-free mechanism, provided to a recipient must permit an individual or business to make an opt-out request at any time. Finally, section 2(c) would require that the opt-out notice complies with the current provisions of Section 227(d) of the 1934 Act, which require that any unsolicited fax being sent contain in the margins at the top or bottom of each page the date and time it is sent, the identification of the sender of the message, and the telephone number of the sending machine.
Section 2(d) would add a new subparagraph (E) to section 227(b)(1) of the 1934 Act that sets forth what a recipient must do to opt out of future unsolicited advertisements. This subsection would require the FCC to promulgate rules to provide that an opt-out request is valid if it: (1) identifies the telephone number or numbers of the fax machine or machines subject to the request; (2) is made to the telephone or fax number of the sender that is provided under subparagraph (D)(iv) or by any other method as determined by the FCC; and (3) is made by a person who has not subsequently provided express invitation or permission to receive unsolicited advertisements.
Section 2(e) would add a new subparagraph (F) to 227(b)(1) of the 1934 Act that gives the FCC the authority to establish an exemption from the opt-out notice requirements for tax- exempt, nonprofit trade or professional associations if those faxes are in furtherance of the group's tax-exempt purpose.
Section 2(f) adds a new subparagraph (G)(i) to section 227(b)(2) of the 1934 Act that gives the FCC the authority to establish a time limit on the `established business relationship' exemption. As this term is defined in section 2(b), there are no specific time limits on the duration of the `established business relationship' exception because none existed under the TCPA junk fax rules as of January 1, 2003. This subsection would authorize the FCC to create time limits on the duration that the exception would be available following an interaction between a sender and the recipient.
The FCC is prohibited from setting a time limit for the established business relationship for the first 3 months after enactment of this Act. Following this 3-month period, section 2(f) would permit the FCC to create a time limit for the established business relationship exemption after the Commission: (1) determines whether the existence of the established business relationship exception has resulted in a significant number of complaints to the FCC regarding the sending of unsolicited advertisements to telephone facsimile machines; (2) determines whether a significant number of complaints involve unsolicited advertisements that were sent based on an established business relationship that was longer than the FCC believes is consistent with the reasonable expectations of consumers; (3) evaluates the costs to senders of demonstrating the existence of an established business relationship within a specified period of time and the benefits to recipients of establishing a limitation on the established business relationship; and (4) determines whether, for small businesses, the costs would not be unduly burdensome.
Section 2(g) would amend the definition of `unsolicited advertisement' in section 227(a)(4) of the 1934 Act to mean `any material advertising...which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.' The effect of this amendment would be to statutorily prohibit the FCC from promulgating a rule that would require prior express permission to be secured only in writing.
Section 2(h) would require the Commission to issue regulations to implement the amendments made by section 2 no later than 270 days after enactment of S. 714.
Section 3. FCC annual report regarding junk fax enforcement
Section 3 would add a new section (g) to section 227 of the 1934 Act to require the FCC to report annually to the Congress on the enforcement of the junk fax provisions of the TCPA. Specifically, the report would have to include the following: (1) the number of complaints received by the Commission annually alleging a violation of the general ban on sending unsolicited advertisements; (2) the number of citations issued for sending unsolicited advertisements; (3) the number of notices of apparent liability issued for sending unsolicited advertisements; (4) for each such notice (a) the amount of the proposed forfeiture, (b) the person to whom the notice was issued, (c) the length of time between the date on which the complaint was filed and the date the notice was issued, and (d) the status of the proceeding; (5) the number of final orders imposing forfeiture penalties for sending unsolicited advertisements; (6) for each such forfeiture order (a) the amount of the penalty, (b) the person to whom the order was issued, (c) whether the penalty was paid, and (d) the amount paid; and (7) for each case that was referred for recovery (a) the number of days from the date the FCC issues such order to the date of referral, (b) whether an action has been commenced to recover the penalty, and (c) whether the recovery action resulted in any amount collected.
Section 4. GAO study on junk fax enforcement
Section 4(a) would require GAO to conduct a study regarding complaints received by the FCC dealing with unsolicited advertisements that shall determine the following: (1) the mechanisms established by the Commission to receive, investigate and respond to such complaints; (2) the level of enforcement success by the Commission; (3) whether complainants are adequately informed by the Commission regarding their complaints; and (4) whether additional enforcement measures are necessary to protect consumers, including recommendations for additional enforcement measures.
Section 4(b) would require GAO specifically to examine (1) the adequacy of existing statutory enforcement actions available to the Commission; (2) the adequacy of existing statutory enforcement actions and remedies available to consumers; (3) the impact of existing statutory enforcement remedies on senders of facsimiles; (4) whether increasing the amount of financial penalties is warranted to achieve greater deterrent effect; and (5) whether establishing penalties and enforcement actions for repeat violators similar to those established in section 4 of the CAN-SPAM Act of 2003 (15 U.S.C. 7703) would have a greater deterrent effect.
Section 4(c) would require GAO to submit a report to Congress on the results of the study under this section no later than 270 days after enactment of this Act.
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