[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]



 
                  SPAMMING: THE E-MAIL YOU WANT TO CAN

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 3, 1999

                               __________

                           Serial No. 106-84

                               __________

            Printed for the use of the Committee on Commerce


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 61-040CC                    WASHINGTON : 1999
------------------------------------------------------------------------------
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                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

   Subcommittee on Telecommunications, Trade, and Consumer Protection

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,              EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio                BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California          ANNA G. ESHOO, California
NATHAN DEAL, Georgia                 ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma              ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JAMES E. ROGAN, California           RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois               THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico           GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Brown, John M., President, iHighway.net Incorporated.........    30
    Cerasale, Jerry, Senior Vice President, Direct Marketing 
      Association................................................    49
    Everett-Church, Ray, Chief Privacy Officer and Vice President 
      for Public Privacy, AllAdvantage.com.......................    53
    Green, Hon. Gene, a Representative in Congress from the State 
      of Texas...................................................     6
    Harrington, Eileen, Associate Director of Marketing 
      Practices, Bureau of Consumer Protection, Federal Trade 
      Commission.................................................    22
    Kennedy, Charles H., Morrison & Forester LLP.................    43
    Miller, Hon. Gary G., a Representative in Congress from the 
      State of California........................................     8
    Raul, Alan Charles, Sidley & Austin..........................    34
    Russina, Michael, Senior Director, Systems Operations, SBC 
      Communications Incorporated................................    40
    Wilson, Hon. Heather, a Representative in Congress from the 
      State of New Mexico........................................    13

                                 (iii)


                  SPAMMING: THE E-MAIL YOU WANT TO CAN

                              ----------                              


                      WEDNESDAY, NOVEMBER 3, 1999

              House of Representatives,    
                         Committee on Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Oxley, Stearns, 
Gillmor, Cox, Largent, Rogan, Shimkus, Wilson, Ehrlich, Markey, 
Eshoo, Luther, Green, and McCarthy.
    Staff present: Linda Bloss-Baum, majority counsel; Mike 
O'Rielly, majority professional staff; Cliff Riccio, 
legislative clerk; and Andrew W. Levin, minority counsel.
    Mr. Tauzin. The subcommittee will come to order. Good 
morning.
    The Chair will recognize himself for an opening statement.
    The Internet offers us new and exciting ways to communicate 
with others across the globe with unprecedented speed and 
certainty. But just as we experienced in our non-cyberspace 
everyday lives, the digital world has also inundated us with 
communications that sometimes we do not want to receive. The 
problem of unsolicited e-mail, commonly known as spam, is 
becoming more prevalent as the technology which allows for 
massive distribution of digital material increases.
    America Online, the largest online service provider, 
estimates that one-third of the e-mail messages coming into its 
network from the Internet are spam. That is between 10 million 
and 24 million spam e-mails per day just on AOL alone. 
Consumers not only find the practice of spamming annoying and 
inconvenient, they also find it expensive. More often than not, 
the receiver must pay for e-mail advertisements. This is akin 
to receiving junk mail with postage due or having a 
telemarketer call your cell phone and you find out your cell 
phone bills have gone up.
    These financial costs are only aggravated by the time and 
energy it takes for consumers to determine which e-mail is 
spam, and which is not before deleting the spam. Oftentimes 
this leads to accidentally discarding personal and solicited 
messages in the process of trying to filter out the unwanted 
spam. Furthermore, ISPs must, as well, spend money and time to 
try to filter spam--that is, buy more sophisticated computers, 
hire additional staff to keep the spamming problem under 
control. The unsolicited e-mails also cause quite a burden on 
the ISP's network and technical capabilities. I am glad we have 
representatives from several ISPs with us this morning to 
discuss the profound effect that spam has had on their 
businesses.
    Several States have enacted anti-spam laws such as 
California, thanks to my colleague, Mr. Miller, who is here 
today. We now have several pieces of Federal legislation 
pending before the committee which would allow for national 
guidelines on the issue of spamming. Our own colleagues from 
the subcommittee, Mrs. Heather Wilson and Mr. Green, have both 
also filed bills and are joined this morning by Mr. Miller. And 
Chris Smith, who was supposed to be with us, unfortunately is 
required to chair a hearing across the hall and has called me 
to apologize and to express his strong interest in this subject 
matter and his interest, Mr. Miller, Mr. Green, Mrs. Wilson in 
working with the three of you in hopefully crafting a solid 
piece of legislation.
    We look forward to hearing from each of our members this 
morning to discuss their legislative proposals to help us put a 
stop to the practice of spamming that has become so prevalent 
in the digital world. I do want to say at the outset, however, 
that we must be careful in legislating in this area. Any 
legislation must be carefully crafted in order to be hard on 
spam without interfering with legitimate practices of 
businesses using e-mail to build stronger relationships with 
existing customers.
    The information age depends upon free-flowing--constantly 
free-flowing and efficient systems of information. For example, 
when someone visits a website and indicates interest in 
receiving further information or updates, any e-mail that 
business then sends to the individual is not technically spam 
because it has been actually solicited. And, obviously, we have 
to take into account those legitimate needs of both consumers 
and businesses in communicating with each other.
    Again, I want to thank our witnesses for taking the time to 
educate us today about this exciting issue regarding the 
digital economy. It is one of many hearings our committee has 
held on electronic commerce and each time we come away better 
educated and hopefully better informed in terms of how to make 
decent policy in this critical area.
    I will now ask if any of the members have opening 
statements.
    The gentleman from Florida, Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman, for holding this 
hearing.
    I think I know most about this hearing. I had the 
opportunity to hear my colleague, Mrs. Wilson, on I guess C-
SPAN radio or something when I was coming in. All the questions 
around the country were coming in, and I think she sort of 
explained it and talked about it, but I thought I would mention 
some of the statistics here.
    I think a lot of us have been on the Internet, and we see 
these sort of commercial e-mails. And they appear to be 
legitimate commercial, unsolicited e-mails, and they talk about 
how you can make $50,000 in less than 90 days or you can eat as 
much as you want and you can lose 10 pounds a week and it is 
guaranteed. Of course, you double click on this and then 
something else is selling you different products.
    Most of these e-mails are too good to be true. Then of 
course it goes from there all the way down, as Mrs. Wilson said 
on the radio this morning, into lots of different other sites.
    I am also a co-sponsor of H.R. 3888, the Telecommunication 
Competition and Consumer Protection Act of 1998, which 
addressed the issue of junk mail, but I want to congratulate 
our colleagues for what they are doing here. H.R. 3113, the 
Unsolicited Electronic Mail Act of 1999 introduced by Mrs. 
Wilson and my good colleague, Mr. Green, is an extremely 
positive step in attempting to tackle the problem of spamming, 
and so I look forward to hearing their testimony.
    Thank you, Mr. Chairman.
    Mr. Tauzin. The Chair thanks the gentleman.
    The Chair now yields to the ranking minority member of the 
committee, Mr. Markey of Massachusetts.
    Mr. Markey. Thank you, Mr. Chairman.
    I want to commend you for calling this hearing today on 
spamming issues and welcome our colleagues to our committee 
today. We look forward to their expert testimony.
    There is no question that unsolicited commercial e-mails 
are a problem for millions of consumers and for the industry. 
In particular, large bulk spamming is clogging computer 
networks and is a burden to local telecommunications networks 
as well as a terrible nuisance to the computer users who 
receive them.
    The issue of spamming is, in fact, a particularly thorny 
issue to address because there are multiple players involved in 
resolving these problems in the telecommunications industry, 
the Federal Government as well as at the State level.
    Part of the wonder of the net is its wide-open, chaotic 
nature. It allows individuals to freely communicate with others 
and to upset the established order. And although this speech 
will sometimes call consternation in some quarters, I think we 
all recognize that regulating speech is a very touchy subject. 
It is my hope that as we proceed with any legislation that we 
carefully fine tune the definition of what is covered and which 
parties ought to be held responsible and when and for what.
    This year we have had a number of public policy issues 
arise relating to the Internet that have prompted legislative 
solutions--from alcohol sales online, cyberporn, filtering 
requirements in schools for pornography, online privacy, 
gambling online. And earlier this week the House passed a 
cybersquatting bill to regulate some of the terms and 
conditions of digital domain name registrations.
    With respect to spamming, we are again asking that we deal 
with an issue that the constituents are concerned with to solve 
a problem particularly to the Internet and that is a great 
nuisance to many of them. And we have as guideposts certain 
precedents in how Congress has previously addressed junk fax 
problems, telemarketing rules. We have indeed in this committee 
over the last 10 years dealt with and passed laws dealing with 
each one of those areas.
    My hope is that we can come up with a solution for dealing 
with spamming that preserves the best of what the Internet 
offers to consumers and to our economy. Again, when we proceed 
with further regulation of the Internet, I believe that this 
subcommittee must be careful to protect the first amendment 
rights of individuals on the net.
    Again, I want to commend you, Mr. Chairman, for this 
hearing this morning, and I want to commend in particular our 
committee colleagues, Mrs. Wilson and Mr. Green, as well as Mr. 
Miller and Mr. Smith, for their efforts in bringing this issue 
forward and for pressing us to act.
    Thank you, Mr. Chairman.
    Mr. Tauzin. The Chair thanks the gentleman.
    Are there further requests for opening statements?
    [Additional statements submitted for the record follow:]
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you, Mr. Chairman.
    For years this Committee has reviewed the regulation of unwanted 
solicitations to consumers. Whether they come in the form of junk mail, 
door to door salespeople, unwanted telemarketers, or--a form that is 
becoming increasingly prevalent--e-mail, these messages can annoy 
consumers and invade their personal privacy.
    This morning, we focus on this new medium for delivering these 
unwanted messages, e-mail. The Internet is one of the most powerful 
mediums for the exchange of ideas that we have ever known. E-mail 
offers an affordable way for people to reach one another with rapid 
speed and reliable delivery.
    For obvious commercial reasons, marketers have teamed to take 
advantage of this new capability to reach folks. Businesses now 
commonly engage in a practice known as ``spamming'' which is sending 
unsolicited e-mail to multiple online users at one time.
    ``Spamming,'' has a profound effect on consumers, Internet services 
providers and the Internet as a whole. Consumers must spend time and 
often money to sift through the many messages to determine which are 
unsolicited. Many consumers are also concerned about their personal 
privacy, claiming that the spammers are intruding into their homes, 
uninvited, through the e-mail system.
    Internet service providers--or ISPs--also encounter many problems 
related to spamming. The excessive number of e-mails tie up network 
bandwidth and monopolize staff resources. ISPs also worry that their 
customers will blame the ISP for the unwanted e-mails thus harming 
their reputation and possible market share. I am sure that the 
liability of ISPs in these matters will be discussed fully this 
morning.
    I am perhaps most concerned, however, about the indirect effect 
that spamming may have on Internet commerce as a whole. Studies have 
shown that this is one of the main problems leading consumers to 
distrust doing business online.
    E-Commerce will be the driving force of the American economy in the 
next millennium. I have worked hard with the Commerce Committee this 
year to develop initiatives to help foster the growth and use of e-
commerce. But without consumer confidence in the medium, E-commerce 
will never reach its full potential.
    We need to ensure that consumers' concerns, are addressed in order 
to encourage the growth of e-commerce. At the same time, we must find a 
proper balance between businesses and online customers.
    I look forward to learning more about the four bills that have 
recently been introduced in the House to address spam e-mail burdens. I 
am not yet convinced that legislation is needed in this area, but I do 
think that this morning's discussion is a good start. I remain 
interested, as I've consistently stated, in finding an industry-
developed mechanism to reduce any burden on consumers for receiving 
unwanted e-mails. I am hopeful that this will be addressed in this 
morning's testimony.
    I thank today's witnesses in advance for their thoughtful testimony 
and I thank Mr. Tauzin for holding this hearing this morning.
                                 ______
                                 
   Prepared Statement of Hon. Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts
    Mr. Chairman, I want to commend you for calling this hearing today 
on spamming issues.
    There's no question that unsolicited commercial e-mails are a 
problem for millions of consumers and for industry. In particular 
large, bulk spamming is clogging computer networks and is a burden to 
local telecommunications networks as well as a terrible nuisance to the 
computer users who receive them.
    The issue of spamming is, in fact, a particularly thorny issue to 
address because there are multiple players involved in resolving these 
problems in the telecommunications industry, the Federal government, 
and at the State level as well.
    Part of the wonder of the Net is its wide open, chaotic nature. It 
allows individuals to freely communicate with others and to upset the 
established order. And although this speech will sometimes cause 
consternation in some quarters, I think we all recognize that 
regulating speech is a very touchy subject. It is my hope that as we 
proceed with any legislation that we carefully fine tune the definition 
of what is covered and which parties are to be held responsible and 
when.
    This year we have had a number of public policy issues arise 
relating to the Internet that have prompted legislative solutions--from 
alcohol sales online, cyber-porn and filtering requirements in schools, 
online privacy, gambling online--and earlier this week the House passed 
a so-called ``cybersquatting'' bill to regulate some of the terms and 
conditions of domain name registrations. With respect to ``spamming,'' 
we are again asked by our constituents to solve a problem particular to 
the Internet that is a great nuisance for many of them and we have as 
guideposts certain precedents in how Congress previously addressed junk 
fax problems or telemarketing rules.
    My hope is that we can come up with a solution for dealing with 
spamming that preserves the best of what the Internet offers to 
consumers and our economy. And again, when we proceed with further 
regulation of the Internet, I believe that this Subcommittee must be 
careful to protect the First Amendment rights of individuals on the 
Net. Again, I want to commend Chairman Tauzin for this hearing this 
morning and I want to commend in particular our Committee colleagues 
Ms. Wilson and Mr. Green, as well as Mr. Miller and Mr. Smith, for 
their efforts in this area and I look forward to continuing our efforts 
as we proceed on this subject sometime next year. Thank you.
                                 ______
                                 
Prepared Statement of Hon. Anna G. Eshoo, a Representative in Congress 
                      from the State of California
    Thank you Mr. Chairman for calling this hearing.
    I look forward to learning from my colleagues about the intricacies 
of their respective legislative approaches to dealing with the issue of 
``spam'' e-mails.
    As everyone in this room knows, the Internet is changing everything 
. . . from the way we are communicating with each other to the way 
commerce is taking place, the Internet has revolutionized the way 
Americans are interacting.
    This revolution is necessitating the constant review of our laws 
and regulations to ensure they apply to this new medium.
    This committee and Congress, I believe, has done a commendable job 
in avoiding overly burdensome regulation of the Internet, with the 
exception of the Communications Decency Act in the 1996 
Telecommunications Act.
    The burden is again on us with regard to the various legislative 
proposals that address the issue of spamming. Spamming exploits the 
core strength of the Internet--the system's openness.
    America Online (AOL) has reported that spam represents over one-
third of the 45 million e-mail messages it handles each day. And spam 
is not only annoying, its cost are borne by consumers, not marketers.
    Consumers are charged higher fees by Internet service providers 
that must invest resources to upgrade equipment to manage the high 
volume of e-mail, deal with customer complaints, and mount legal 
challenges to junk e-mailers.
    I look forward to hearing my colleagues proposals for dealing with 
this increasing problem and to the testimony of our witnesses and I 
yield back the balance of my time.

    Mr. Tauzin. The Chair is pleased to welcome our first 
panel, and I want to remind the members we have two panels 
today. We normally try to do everything in a single panel, but, 
because we have our own colleagues here today, we of course 
welcome them as a separate panel.
    But the separate panel will consist of representatives of 
the Bureau of Consumer Protection; iHighway.net Incorporated; 
Sidley & Austin, here in Washington, DC; SBC Communications; 
Morrison & Forester; Direct Marketing Association; as well as 
Alladvantage.com. So we will learn a lot from the industry with 
reference to the comments and suggestions we hear from our 
colleagues this morning. So stick around.
    First, let me introduce our first panel. Of course, they 
are well known to all of us here on this side of the aisle, but 
Mr. Green, Mr. Miller, Mrs. Wilson, we want to thank you for 
the efforts you have already made in drafting and pursuing 
legislation.
    We will begin with the Honorable Mr. Green from Texas with 
your statement. Again, all written statements are part of our 
record by unanimous consent. Without objection. And you are 
recognized to make your presentation, Mr. Green.

STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM 
                       THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. It is interesting to be 
on this side of the dias this morning. And I will submit my 
written statement and briefly say how I got involved in it.
    Before I get started, I want to thank the witness here 
today from SBC, Michael Russina, who will be testifying in a 
few minutes. He is a Senior Director of Systems Operations of 
Southwestern Bell Communications where he originated SBC's 
Internet service company, although he did spend time with 
Microsoft as a systems engineer.
    My first experience with spam was about 3 years ago. I had 
a town hall meeting which I do and all of us do in our 
districts, and it was a typical January day in Houston. It was 
30 degrees and raining, and so I actually had three people show 
up at a town hall meeting at 9 on a Saturday morning.
    One of those three constituents came in, a young man, and 
had said I don't care what you do--we talked about budget and 
everything else--he said, I want something done with spam. At 
that time, not being totally Internet friendly, I joked about I 
like it with A-1 steak sauce.
    But he brought it to my attention and realizing what it is 
and I did just what the chairman and our ranking member said, 
well, unsolicited e-mails--we have laws against unsolicited 
junk mail, we have laws against unsolicited telephone calls, 
and even on the State levels we have regulated unsolicited 
faxes. And so to draft legislation on that. And so that is why 
originally I introduced H.R. 1910 that would talk about the 
fraud and the e-mail user protection act and introduced that 
earlier this spring.
    Since that time, my colleague, Mrs. Wilson, and I have 
worked together to come up with our bill, H.R. 3113, which goes 
to basically what Mr. Chairman and Mr. Markey, our ranking 
member, said that it tries to do within the market is to be as 
least invasive as we can and to benefit from what the Internet 
is providing us. One, to let the ISPs have some control of 
their systems to where they can regulate spam. Let the 
individual be able to say, no, I do not want to receive spam. 
But also to continue the growth in Internet and the 
telecommunications.
    Again, Mr. Chairman, what you mentioned, spam could be a 
business tool, and we want to continue it as a business tool 
without the lose 30 pounds in 5 minutes or something like that. 
And I think we can deal with that, with my colleagues on H.R. 
3113, because, again, it was drafted to be the least invasive 
and really a first step.
    Now, I hope our committee would look at dealing with the 
fraud that we have, and our colleague from Florida mentioned 
it. But that is not in H.R. 3113.
    But, again, to empower the individual, to empower the 
ISPs--and one of the best parts I think of our bill is, having 
owned businesses in the past and helped manage them, if I was 
an ISP owner and someone was using my network that I had an 
interest in for their profit, I would like to have them to pay 
a portion out of their profit. And that is just a business 
transaction. So our bill also allows the ISP to earn some type 
of revenue to work with someone who is using their network for 
that type of purpose.
    Again, that would--we don't want to limit it. In fact, we 
want it to grow. And I wouldn't be a member of the Telecom 
Committee if I didn't appreciate the growth we have in 
technology and literally the next generation that we are 
seeing. But we also need to provide some guidelines that our 
constituents want us to do for unsolicited e-mails.
    With that, Mr. Chairman, thank you.
    [The prepared statement of Hon. Gene Green follows:]
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    I would like to take a moment and thank Mr. Michael Russina from 
SBC for coming to DC and testifying about spam before the Subcommittee. 
Mr. Russina is the Senior Director, Systems Operation at SBC, where he 
originated SBC's Internet Service Company, he helped establish the 
necessary infrastructure to provide SBC customers with internet access, 
email, and personal web pages. Before that he worked for Microsoft as a 
systems engineer. He is a 1989 graduate of Southwest Missouri State.
    Spam is an unsolicited commercial email which advertises many 
products including: health cures, get rich quick schemes, chain 
letters, or can prompt a person to a pornographic website. Spam is 
deceptive and annoying. It displaces normal email and shifts all cost 
to the recipient. As email becomes more prevalent, complaints about 
spam will continue to rise. Spam affects everybody. For example, a few 
weeks ago the House of Representatives's email system was slowed to a 
crawl because of an unsolicited mass email about a diet pill. Spam 
floods an ISP's network and slows down their communications. Consumers 
unfairly bear the cost of the advertisement, with no recourse but to 
accept and then delete the message. Also, it increases cost to 
consumers by forcing ISPs to spend time, money, and staff on addressing 
this increased and unwanted traffic. In this digital age, spam is the 
one problem of the internet that we should address on a nation-wide 
basis.
    This problem was brought to my attention a few years ago. In town 
hall meetings, letters, and emails constituents say spam is quickly 
becoming a priority. I recently received an email from a constituent. 
In her message she said, ``I know there is a verbal trend to get away 
from `big government,' but I, myself, think there must be an agency 
somewhere that has the people or budget enough to answer complaints to 
the extent of tracking, fining, and shutting down people who just don't 
get the message that other people do not appreciate their 
solicitations. While I don't scream, holler or throw violent fits when 
I receive spam, I absolutely do not appreciate getting mail from sex 
sites or Viagra, nor am I interested in buying anything over the 
internet that I have not personally sought out on my own.''
    Recently, a survey of 1,200 internet users conducted on the behalf 
of the Coalition Against Unsolicited Commercial Email found that an 
average person receives 24.11 messages a day, of which they consider 
39% to be spam. Also, of the 1,200 person surveyed, over 76% believe 
that spam should be regulated by the government. Another 70% said they 
dislike receiving email from companies they do not do business with, 
and 81% object to receiving email from companies they have not heard 
of. In addition 86.5% dislike email promoting pornography, and 95.5% 
object to companies that use false addresses to avoid responses.
    Why do we need to address the issue of fraud in terms of spam and 
the internet? Informal estimates are that over half of unsolicited 
commercial email contains fraudulent content. Most spam misrepresents 
or hides who and from where these messages originate. False email and 
domain addresses are an enormous source of the problem. This fraudulent 
information can cause mass systems overload by mis-routing replies, and 
it can hurt the reputation of individuals and ISPs that are portrayed 
as the spammer. The most important reason to stop fraudulent spam is to 
make sure that spam does not affect consumer's confidence in electronic 
commerce.
    Finding ``a fix'' for spam is not an easy task. I believe that 
there are multiple ways to stop spam, such as fighting fraud and 
allowing ISPs to enforce their own spam policies. Many of the bad 
actors associated with spam use fraud to mask their true identity. They 
want to make sure that the recipient never realizes who is sending 
these messages. Spammers, by hiding their identity force individuals to 
open and delete unwanted messages placing the financial burden on the 
receiver.
    I address fraud in H.R. 1910, the Email User Protection Act. My 
bill prohibits the use of false email addresses and routing 
information, it makes it illegal to use or create software primarily 
designed to spam, and it makes it illegal to takeover another person's 
email account to send out spam. A few states have addressed email 
fraud. For example, both Washington and Virginia have passed anti-spam 
laws that addresses fraud. Washington's anti-spam is fairly simple. It 
prohibits: 1) the use of a third party's internet domain name without 
their permission; 2) misrepresented information in identifying the 
point of origin or the transmission path; and 3) messages that contain 
false or misleading information in the subject line. Combating fraud is 
just one part of an overall spam solution. Because of the nature of the 
problem there is more then one solution. That is why I have joined with 
my colleague Rep. Heather Wilson in introducing H.R. 3113.
    H.R. 3113, the Unsolicited Electronic Mail Act allows both Internet 
Service Providers and email users to say that they do not want the 
financial and time burden of deleting spam. The most empowering 
provision of this legislation gives a person, who is on a network that 
accepts spam, the right to opt-out of that network's spam policy, 
retain their email address and post an individual sign saying they do 
no want spam in their in-box. This legislation gives individuals and 
ISPs complete control over what messages they receive. This bill's 
efforts coupled with my spam legislation introduced earlier this year, 
are good starting points in fixing this problem.
    I am proud to be working with my colleagues from across the aisle 
and in committee on this issue.

    Mr. Tauzin. Thank you very much, Mr. Green.
    Now I am pleased to welcome the honorable Gary Miller of 
California, who has a separate, distinct proposal; and we would 
love to hear from you, Gary.

STATEMENT OF HON. GARY G. MILLER, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Miller. Good morning, Mr. Chairman, members of the 
subcommittee.
    I would like to thank Chairman Tauzin for calling this 
hearing today. We have discussed it over months. I appreciate 
your giving all of us the opportunity to discuss this issue. 
And I want to commend my colleagues for being involved in the 
issue of spam which is a growing problem.
    For those who are unaware, the use of the term spam is not 
meant to inject Hormel into the program. It was taken from a 
Monty Python skit years ago, and that is how it grew into how 
the word is used today.
    When a spammer sends an e-mail message to a million people, 
it is carried by a number of other systems on its way to its 
destination. The carriers in between must bear the burden of 
transporting the bulk of advertising for the spammer, thus 
forcing third parties to bear the load of unsolicited 
advertising.
    The number of spams arriving in people's mailboxes each 
week is growing. A recent study done by the Gardner Group shows 
that 90 percent of all Internet users receive spam at least 
weekly or biweekly. In effect, spam levies a tax on Internet 
consumers because it causes ISPs to spend money and time to 
filter spam, obtain additional bandwidth, buy more 
sophisticated computers and hire additional staff to keep the 
spam problem under control. Those costs are passed on to 
Internet consumers.
    The reason the current spam situation is so serious is 
because millions of people only suffer a small amount of 
damage, making it impractical for Internet users to go to court 
and recover the modest amount of money that is taken from them 
in the spamming process. Moreover, most Internet users think 
spam is merely an annoyance and do not understand the cost and 
time associated with it is passed on to them in users' fees.
    Spammers are profiting from this phenomenon. They know if 
they steal only a tiny bit from millions of people, they will 
make a substantial profit and few, if any, will bother to hold 
them accountable.
    The problem of spam was brought to my attention over 2 
years ago while I was a member of the California State assembly 
when a constituent of mine, Nick Anis, had his business shut 
down for over 3 days because his computer system was inundated 
with spam. After looking into the issue, I decided that 
legislation was needed to help people like Nick. However, I 
wanted to make sure the solution restored common-sense 
incentives and involved the government as little as possible.
    I came up with seven guiding principles to help formulate 
the bill which eventually became law in California. I would 
like to go over the seven principles.
    No. 1, anti-spam legislation cannot legitimize spam. 
Currently, Internet service providers, ISPs, can sue spammers 
for trespass. However, it is very expensive and time-consuming 
to bring these suits. Even the courts have recognized that 
property rights of ISPs exist. My bill clarifies existing 
property rights and quantifies damages. Anything that allows 
someone a free spam before making it illegal or in any other 
way allows spam, would be taking away the existing private 
property rights of ISPs. We do not want to take a step 
backwards.
    No. 2, anti-spam regulation cannot regulate the Internet. 
We do not want this committee to ever have to do a deregulation 
of the Internet bill. The Internet is an ever-changing medium, 
relatively free of government regulation. That is why it works 
so well, is growing so quickly, and why Internet companies are 
driving our economy. We need to jealously guard the freedom of 
the Internet and keep the government out of it.
    No. 3, anti-spam legislation has to protect free speech and 
not be thrown out by the courts. The courts have outlined very 
specific levels of protection of free speech from political, 
religious, commercial to obscene. These standards are already 
in case law. The courts have ruled that laws can be passed to 
curb commercial speech that transfers costs on to recipients. 
Outside of correcting cost shifting in commercial speech, any 
law that regulates specific speech content not ruled to be 
obscene by the Miller test--that is not the Gary Miller test; 
that is Miller versus California, 1973--would probably fail to 
pass a judicial challenge.
    No. 4, anti-spam legislation cannot create a new cost or 
tax on the Internet. Most plans to stop spam would end up 
costing Internet service providers or government money.
    No. 5, anti-spam legislation should guard the privacy of 
individuals. Information is a powerful tool for law-abiding 
citizens and for those who break the law. Any solution to spam 
cannot put personal information, including e-mail addresses, in 
the public domain which would put privacy at risk.
    No. 6, anti-spam legislation cannot hurt Internet service 
providers. The Internet is a completely new communication tool. 
Unlike faxes or phones, which are person-to-person 
communication devices, e-mail is routed through numerous 
private computers and Internet service providers before they 
reach their destination. As a result, any legislative solution 
to spam must not hamstring the numerous Internet service 
providers that make up the Internet. Anything that would force 
ISPs to be a party to numerous lawsuits or force them to keep 
special regulated lists would hurt the entire Internet system, 
and the solution that harms ISPs is worse than the problem we 
currently face.
    And, seven, anti-spam legislation has to work. Any solution 
has to be usable for those who have the ability and the desire 
to stop spam.
    Using these principles, I came up with the Can Spam Act of 
1999. Like the California State law, H.R. 2162 gives ISPs the 
power to put the authority of law behind their anti-spamming 
policies. Under this bill, if an ISP chooses to have a 
published policy prohibiting spam and a spammer sends out 
unsolicited commercial e-mail on the network that violates that 
policy, the ISP would have a civil right of action against the 
spammer for 50 dollars per message, up to $25,000 per day, thus 
eliminating the incentive to spam against an ISP's will.
    In addition, H.R. 2162 would make illegal the act of 
hijacking another person's domain name for the purpose of 
sending out spam. H.R. 2162 is grounded in the recognition that 
mail servers are the private property of the businesses, 
schools, and service providers who own and operate them. The 
bill codifies the rights of ISPs to control the use of their 
property and to be free from intrusion and damages from third 
parties.
    In conclusion, H.R. 2162 allows ISPs to set and enforce 
their own anti-spamming policies based on the needs and the 
desires of their customers. It counts in a marketplace 
solution, encouraging advertisers to strike a bargain with ISPs 
for mail delivery before flooding their system with unwanted 
mail. Should advertisers ignore the warning or fail to 
negotiate a deal, ISPs can bring legal action to recover 
damages to the system and to their customers.
    The Can Spam Act will give ISPs an effective tool to stop 
unsolicited commercial e-mail. Currently, the financial 
incentive to send free mass e-mail advertising is causing spam 
to grow exponentially. The Can Spam Act ends that incentive by 
forcing spammers to pay for breaking ISPs' anti-spamming 
policies.
    I would like to present to the FTC a disc by 
Chooseyourmail.com which has 1 million spam messages that were 
just collected in recent months.
    Mr. Chairman and members, thank you for your time.
    Mr. Tauzin. Thank you very much, Mr. Miller.
    Can Spam is the name of your bill. I want you to know I 
resisted the temptation in introducing you in saying that it 
was Miller time.
    Mr. Miller. Spam is one of the most popular foods in Hawaii 
and Japan, so I am well received there.
    Mr. Tauzin. You will have to explain the Monty Python 
reference.
    [The prepared statement of Hon. Gary G. Miller follows:]
Prepared Statement of Hon. Gary G. Miller, a Representative in Congress 
                      from the State of California
    Good morning, Mr. Chairman and members of the Subcommittee. I would 
like to thank Chairman Tauzin for calling this hearing this morning. I 
would also like to thank my colleagues, as well as all of the witnesses 
here today, for joining in the fight against spam. I appreciate this 
opportunity to appear before the Subcommittee to testify on behalf of 
my legislation, H.R. 2162, ``The Can Spam Act of 1999.''
                         the problem with spam
    When a spammer sends an email message to a million people, it is 
carried by a number of other systems on the way to its destination. The 
carriers in between must bear the burden of transporting the bulk 
advertisements for the spammer, thus forcing third parties to bear the 
load of unsolicited advertising. The number of spams arriving in 
people's mail boxes each week is growing. A recent study done by the 
Gartner Group shows that 90% of Internet users receive spam at least on 
a weekly basis.
    In effect, spam levies a tax on all Internet consumers because it 
causes ISPs to spend money and time to filter spam, obtain additional 
bandwidth, buy more sophisticated computers and hire additional staff 
to keep the spamming problem under control. These costs are passed on 
to Internet consumers.
    The reason the current spam situation is so serious is because 
millions of people only suffer a small amount of damage, making it 
impractical for Internet users to go to court and recover the modest 
amount of money that is taken from them in the spamming process. 
Moreover, most Internet users think that spam is merely an annoyance 
and do not understand that it costs them in time and user-fees.
    Spammers are profiting from this phenomena. They know that if they 
steal only a tiny bit from millions of people, they will make a 
substantial profit, and few, if any, will bother to hold them 
accountable.
                              the catalyst
    The problem of spam was brought to my attention two years ago while 
I was a member of the California State Assembly, when a constituent of 
mine, Nick Anis, had to shut down his business for three days because 
he was inundated with spam. After looking into the issue, I decided 
that legislation was needed to help people like Nick. However, I wanted 
to make sure that the solution restored common sense incentives, and 
involved the government as little as possible. I came up with 7 guiding 
principles to help formulate the bill which eventually became law in 
California last year:
                          guiding principles:
1. Anti-Spam Legislation Cannot Legitimize Spam
    Currently Internet Service Providers (ISPs) can sue spammers for 
trespass. However, it is very expensive and time consuming to bring 
these suits, even though the courts have recognized the property rights 
of ISPs. My bill clarifies existing private property rights and 
quantifies damages. Anything that allows someone a free spam before 
making it illegal, or in any other way allows spam, would be taking 
away existing private property rights of ISPs that we are trying to 
clarify. We do not want to take a step backward.
2. Anti-Spam Legislation Cannot Regulate the Internet
    We do not want this committee to ever have to do a deregulation of 
the Internet bill. The Internet is an ever changing medium, relatively 
free of government regulation. That is why it works so well, is growing 
so quickly, and that is why Internet companies are driving our economy. 
We need to jealously guard the freedom of the Internet, and keep the 
government out of it.
3. Anti-Spam Legislation Has to Protect Free Speech, and Not Be Thrown 
        Out By the Courts
    The courts have outlined very specific levels of protection of 
speech from political, religious, commercial to obscene. These 
standards are already in case law. The courts have ruled that laws can 
be passed to curb commercial speech that transfers costs onto the 
recipient. Outside of correcting cost-shifting in commercial speech, 
any law that regulates specific speech content not ruled to be obscene 
by the ``Miller test'' would probably fail to pass a judicial 
challenge.
4. Anti-Spam Legislation Cannot Create a New Cost or Tax on the 
        Internet
    Most plans to stop spam would end up costing Internet Service 
Providers or the Government money.
5. Anti-Spam Legislation should Guard the Privacy of the Individual
    Information is a powerful tool for law abiding citizens and for 
those who break the law. Any solution to spam cannot put personal 
information, including email addresses, in the public domain, which 
would put privacy at risk.
6. Anti-Spam Legislation Cannot Hurt Internet Service Providers
    The Internet is a completely new communication tool. Unlike faxes 
or phones, which are person to person communication devices, email is 
routed through numerous private computers and Internet Service 
Providers before they reach their destination. As a result, any 
legislative solution to spam must not hamstring the numerous Internet 
Service Providers that make up the Internet. Anything that would force 
ISPs to be a party to numerous lawsuits, or would force them to keep 
special regulated lists would hurt the entire Internet system. A 
solution that harms ISPs is worse than the problem.
7. Anti-Spam Legislation Has to Work
    Any solution has to be usable for those who have the ability and 
the desire to stop spam.
                h.r. 2162, ``the can spam act of 1999''
    Using these principles, I came up with the ``Can Spam Act of 1999'' 
(H.R. 2162)
    Like the California state law, H.R. 2162 gives ISPs the power to 
put the authority of law behind their anti-spamming policies. Under the 
bill, if an ISP chooses to have a published policy prohibiting spam, 
and a spammer sends out unsolicited commercial email on their network 
in violation of that policy, the ISP would have a civil right of action 
against the spammer for $50 per message, up to $25,000 per day, thus 
eliminating the incentive to spam against an ISP's will. In addition, 
H.R. 2162 would make the act of hijacking another person's domain name 
for the purpose of sending out spam.
    H.R. 2162 is grounded in the recognition that mail servers are the 
private property of those businesses, schools, and service providers 
who own and operate them. The bill codifies the right of ISPs to 
control the use of their property and to be free from intrusion and 
damage from third parties.
                               conclusion
    H.R. 2162 allows ISPs to set and enforce their own anti-spam 
policies, based on the needs and desires of their customers. It counts 
on a marketplace solution, encouraging advertisers to strike a bargain 
with ISPs for mail delivery before flooding their system with unwanted 
mail. Should advertisers ignore the warnings or fail to negotiate a 
deal, ISPs can bring legal action to recover damages to their systems 
and their customers.
    The Can Spam Act will give ISPs an effective tool to stop 
unsolicited commercial email. Currently, the financial incentives to 
send free mass email advertisements is causing spam to grow 
exponentially. The Can Spam Act ends this incentive by forcing spammers 
to pay for breaking an ISPs' anti-spamming policy.
    Thank you again, Mr. Chairman and members for the opportunity to 
appear before you today. I look forward to answering any questions you 
may have.

    Mr. Tauzin. Finally, and certainly not least, our own 
Heather Wilson of New Mexico for your testimony.

STATEMENT OF HON. HEATHER WILSON, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF NEW MEXICO

    Mrs. Wilson. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify today.
    I didn't know it was the Monty Python skit. I figured it 
was called spam because everybody has some and nobody likes it.
    Rather than--I appreciate the opportunity to put my 
testimony in the record, and rather than talk in detail about 
the problem, because I think our second panel will give us 
ample firsthand information about that, what I would really 
like to talk about a little bit is the approach we try to take 
in H.R. 3113 to address this problem.
    I began to look at this problem about a year ago, shortly 
after I was elected to Congress when I started to get spammed 
with pornographic e-mail at home. The first one had a very 
innocuous subject line that said something like, what the 
Federal Government doesn't want you to know; and I assumed that 
it was some constituent informing me about fraud, waste and 
abuse in the Federal Government. And when I clicked on that 
link to find out what this was all about, I found myself in a 
pornographic website. This went on for several months, and I 
began to talk to Internet service providers as well as other 
people who were having the same problem and began to learn more 
about it and read more about it.
    My greatest concern--I learned subsequently about cost 
shifting and those kinds of things, but it is not only adults 
that have e-mail addresses. It is children as well. And these 
innocuous subject lines which can say, the latest games you 
want to play, can attract a child to click on that website, and 
they find themselves somewhere where you don't want your child 
to be. So I felt as though we needed to do something about this 
to give power to consumers to not receive things that they did 
not want to have in their own homes.
    Early on, looking at what had been introduced, and talking 
to Mr. Green particularly about his bill, H.R. 1910, and while 
we initially looked at merging the bills, what we decided to do 
was two separate ones. And I am also a co-sponsor of his H.R. 
1910, which includes many of the fraud provisions and Internet 
fraud provisions which I think we do also need to deal with.
    But H.R. 3113 is very targeted. It does not deal with 
fraud. It does not deal with the problem of restricting data 
that can be collected on the Internet from consumers or deal 
with criminal sanctions. It is narrowly crafted to deal with 
the problem of unsolicited commercial e-mail and unsolicited 
pandering e-mail.
    We spent quite a bit of time thinking about and reading 
about the constitutional protection of free speech, because we 
knew that we had to identify very narrowly a substantial 
government interest and narrowly draw how the law was going to 
attack that. Sometimes when something is annoying and bothering 
you, you know you just want to stop it. You just want to stop 
it. But just because something is offensive or you disagree 
with it doesn't mean that you have a right to tell somebody 
else to stop doing it. But there is a right of privacy, and 
there is a right of Internet service providers to be 
compensated for their work that they do as computer providers.
    I also was conscious of the need to continue to promote 
commerce on the Internet and that it is a wonderful new medium 
for people to buy things. And I have said elsewhere that 
sometimes I get catalogues because, like all of us here, I fly 
a lot on American Airlines, and I suspect that they--all those 
American Airlines Advantage members probably get the same 
catalogues I do for travel clothing that I have never heard of 
before. And I don't really mind that, but I would like to have 
the option not to receive that on e-mail just as I have the 
option not to receive it on regular mail.
    Finally, there is the right of privacy. Everyone has the 
right to say what they want to say within some fairly broad 
parameters in this country, but they don't have the right to 
force us to listen. We have a right to privacy in our own homes 
and a right to decide to turn away that which we don't wish to 
hear.
    H.R. 3113 does a couple of things. It clearly states what 
the government interest is and does not ban unsolicited 
commercial e-mail. It puts the power in the hands of consumers 
to opt out, to send a reply e-mail that says, take me off your 
list, or to put their name on a national opt-out list that 
commercial electronic mail providers or direct mail folks using 
e-mail have to scrub their lists.
    It prevents cost shifting to the Internet service providers 
by giving them the right to publish a privacy policy or a 
commercial e-mail policy and enforce it and say that you can't 
send commercial e-mail without compensating me for my company's 
time and effort. It requires a viable return address and that 
companies honor opt-out addresses, and it allows parents to 
protect their minor children, particularly, with provisions on 
pandering or pornographic mail.
    We use exactly the law that exists for regular mail with 
respect to pandering and pornographic mail, and that has 
already withstood constitutional scrutiny in a Supreme Court 
case.
    Mr. Chairman, I think I will suspend there so that we can 
have as much time as possible with questions and with the 
second panel.
    [The prepared statement of Hon. Heather Wilson follows:]
Prepared Statement of Hon. Heather Wilson, a Representative in Congress 
                      from the State of New Mexico
        ``If this prohibition operates to impede the flow of even valid 
        ideas, the answer is that no one has a right to press even 
        `good' ideas on an unwilling recipient. That we are, often 
        `captives' outside the sanctuary of the home and subject to 
        objectionable speech and other sound does not mean we must be 
        captives everywhere. The asserted right of a mailer, we repeat, 
        stops at the outer boundary of every person's domain.''
                                       Chief Justice Berger
               Rowan v. Post Office Department, 397 U.S. 728 (1970)
The Problem
    Unsolicited electronic-mail (Spam) is the ``junk'' e-mail that is 
the digital version of the material that shows up in your mail box at 
home. Unlike sweepstakes entries and advertisements for department 
stores, however, consumers have no right or means to stop it, it costs 
the spammer almost nothing to send it, the source and subject of the 
mail is often disguised, and a large portion of Spam is pornographic in 
nature.
    Most pornographic Spam contains a luring or innocuous subject line, 
and a link in the text of the e-mail that takes you to a pornographic 
web site. I have included some examples for the record. Children who 
unknowingly click on a link in an e-mail in their home e-mail box are 
often presented with ``teaser'' images and text that many parents would 
find unsuitable for their viewing.
    Spammers are also getting more clever as the technology advances 
and creating ``sticky'' web sites that do not let you leave easily. For 
example, there are sites that have ``back'' keys that Internet users 
recognize as a way to ``undo'' or walk away from the entrance to a 
pornographic site. Instead, trying to exit takes you deeper and deeper 
into the site itself.
    The sheer volume of Spam has led to several nationally-publicized 
lawsuits between major Internet Service Providers (ISPs) and bulk e-
mailers. Many recipients of Spam are forced to wade through the daily 
barrage of ``junk e-mail'' to find the e-mail they want to read.
    Spam is particularly troublesome for parents who want their 
children to have access to the advantages of the Internet while 
protecting them from its seamier side.
    The practice of bulk distribution of Spam places burdens on the 
recipient, who must filter out the good from the bad; on the ISPs, who 
lose bandwidth capacity to serve their customers because the pipes are 
clogged with Spam; on parents, who are seeking to protect their 
children; and on people, who just don't want to find offensive stuff in 
their in-boxes.
    When something is particularly annoying or offensive, our natural 
reaction is to prohibit it.
    But there are other public interests here.
    We enjoy in this country a constitutionally protected right of free 
speech--including commercial speech. All of us spend a lot of time on 
this committee marveling at and stewarding this new phenomenon called 
electronic commerce that is transforming how we buy products, get 
information and communicate with each other.
H.R. 3113
    H.R. 3113 attempts to set out a clear statement of public policy 
and a substantial government interest in regulation of Spam and to 
provide a targeted remedy specifically related to that governmental 
interest.
    H.R. 3113 does not ban Spam. It gives the power to the recipient to 
opt out of receiving it. The bill recognizes that Americans have a 
right to stand on the electronic town square on a soap box and speak, 
but no American can be forced to listen if they don't want to. This is 
particularly true when that ``speech'' invades the ``castle'' of one's 
home.
    H.R. 3113 requires all senders of Spam to include a viable return 
address which can be used by a recipient to remove his or her e-mail 
address from the transmitters distribution list. Use of the ``Reply to 
Sender'' e-mail address to ``harvest'' or collect viable e-mail 
addresses--a common practice today--is prohibited.
    H.R. 3113 requires Spammers to honor requests not to receive 
commercial e-mail. If a family does not want to receive Spam from a 
particular sender, the sender must honor that request. If the request 
is not honored, the family can either sue the violator to recover the 
actual cost of the violation or for $500 per violation, whichever is 
greater.
    H.R. 3113 gives ISPs the right to establish privacy policies and 
the right to decline to carry commercial electronic e-mail without 
compensation. They, too, can recover actual costs or $500 per 
violation, whichever is greater.
    If an individual, family, or IS does not want to sue a violator, 
they can turn to the FCC to enforce their decision.
    Allowing ISPs to set and enforce their own policies will result in 
a market niche: spam-free ISPs. Individuals who never want to receive 
Spam will be drawn to such ISPs. However, in the event that an IS 
allows a third-party to send Spam to its customers, and the subscriber 
still never wants to receive Spain, H.R. 3113 also creates a global 
opt-out list to which e-mail users may add their name and e-mail 
address. If, after 30 days on the list, a bulk e-mailer sends Spam to 
any recipient who's e-mail is included in the opt-out list, the FCC can 
order the bulk e-mailer to stop all future transmissions. In effect, 
bulk e-mailers are required to clean their distribution lists--at their 
own cost--every thirty days.
    This mechanism is similar to the law for postal direct marketers.
Constitutionality
    We considered the problem of constitutionality very carefully as we 
crafted this bill. The most important case that establishes the 
standard by which restriction of commercial speech will be judged, 
Central Hudson Gas & Electric Corporation v. Public Service Commission 
of NY, was decided in 1980. There is a three part test:

There must be a substantial governmental interest at stake
The restrictions imposed must directly advance that governmental 
        interest
The regulation must be narrowly drawn
    We spent a great deal of time in H.R. 3113 crafting the findings 
and statement of policy to make it clear to any court considering this 
law in the future what the governmental interest is and why it is 
substantial.
    The restrictions in the bill are narrowly drawn only to advance 
those governmental interests.
    In addition to commercial e-mail, H.R. 3113 also addresses 
pandering e-mail. This section of the bill is drawn directly from 
existing statutes on junk mail that have already withstood judicial 
scrutiny
    In Rowan v. Post Office Department, Justice Berger, commenting on 
the First Amendment considerations of the postal statute, stated: ``If 
this prohibition operates to impede the flow of even valid ideas, the 
answer is that no one has a right to press even `good' ideas on an 
unwilling recipient. That we are often `captives' outside the sanctuary 
of the home and subject to objectionable speech and other sound does 
not mean we must be captives everywhere. The asserted right of a 
mailer, we repeat, stops at the outer boundary of every person's 
domain.''
    The Supreme Court of the United States has traditionally respected 
the right of a household to bar, by order or notice, solicitors, 
hawkers, and peddlers, from his property.
    In his decision, Chief Justice Berger stated, ``To hold less would 
tend to license a form of trespass and would make hardly more sense 
than to say that a radio or television viewer may not twist the dial to 
cut off an offensive or boring communication and thus bar its entering 
his home. Nothing in the Constitution compels us to listen to or view 
any unwanted communication, whatever its merit; we see no basis for 
according the printed word or pictures a different or more preferred 
status because they are sent by mail. The ancient concept that `a man's 
home is his castle' into which `not even the king may enter' has lost 
none of its vitality, and none of the recognized exceptions includes 
any right to communicate offensively with another.''
    Several proposals before Congress in recent years have attempted to 
ban all Spam. I believe this approach may be unconstitutional because 
it would ban unsolicited mail that people do not mind receiving--or 
even want to receive--as well as commercial speech that is unwanted. In 
this way, the complete ban is probably too broad to pass constitutional 
muster.
    Others have pointed to the junk fax law as a model for banning 
spam. The federal government enacted legislation that outlaws all 
unsolicited commercial faxes because the cost of transmitting a ``junk 
fax'' is borne almost entirely by the recipient. The government acted 
to prevent the bulk fax industry from shifting the burden of the 
advertising onto the recipient.
    Spam is different.
    The ``cost'' of Spam for the recipient is not as tangible as that 
of unsolicited commercial faxes. Instead of toner and paper, the cost 
is time spent online downloading and sorting unwanted e-mail. There is 
no doubt that the government should help protect Americans from this 
burden, but an outright ban of Spam would probably fail the Central 
Hudson test.
    Instead, H.R. 3113 provides a ``more limited restriction'' on 
speech by removing the government from the equation as much as 
possible, leaving the decision as to the prohibition of Spam solely in 
the hands of the private citizen. As Chief Justice Berger wrote in 
Rowan, ``In effect, Congress has erected a wall--or more accurately 
permits a citizen to erect a wall--that no advertiser may penetrate 
without his acquiescence. The continuing operative effect of a mailing 
ban once imposed presents no constitutional obstacles; the citizen 
cannot be put to the burden of determining on repeated occasions 
whether the offending mailer has altered its material so as to make it 
acceptable. Nor should the householder have to risk that offensive 
material come into the hands of his children before it can be 
stopped.''
Promoting Commerce
    All of us want to see commerce flourish on the Internet. The 
technology and the marketing strategies are evolving daily in this new 
medium. H.R. 3113 specifically recognizes that, just like the 
advertisements in your mailbox or the new catalogues that get sent to 
you that you didn't ask for, the Internet can be an important mechanism 
through which businesses advertise and attract customers. This is yet 
another reason to craft a targeted piece of legislation that addresses 
a problem without overreacting to it.
Conclusion
    H.R. 3113 allows individuals, families, and ISPs to identify 
specific transmitters they do not want to receive Spam from or to 
prohibit all Spam.
    H.R. 3113 intentionally leaves all decisions about content and 
regulation to the individual e-mail user and ISP. The government will 
merely play the role of a backstop in the event that individual e-mail 
users are unable to protect the privacy of their e-mail boxes.
    I look forward to hearing the testimony of the witnesses who have 
joined us here today and working on meaningful legislation that serves 
the public interest.

    Mr. Tauzin. I thank the gentlelady.
    We have about 10 minutes. Let's get a little done before we 
have to run to vote.
    Let me ask you. You all looked at each other's bills. You 
are obviously closely attuned to what each other is proposing 
in the three different bills. Could you summarize for us the 
differences--if there are any real differences in the 
approaches you have taken on any one of the issues you have 
described in this larger issue?
    Gary, you want to start for me?
    Mr. Miller. Well, that is--doing it in a way where we are 
not attacking each other's bill.
    Mr. Tauzin. I would appreciate that. Thank you.
    Mr. Miller. The problem I have with opt-outs, and when I 
presented this bill in California most major Internet service 
providers had opposition to opt-outs, because it opens privacy 
concerns. If we are going to create a national list, that list 
is made to the public. It is not like going down to the post 
office where you put your name on the list, and you say I don't 
want certain information. That is not made public.
    The issue of privacy, people who tend to want opt-outs 
might be enticing certain groups who want that list to approach 
them for other purposes. It might not be considered commercial 
e-mail for the purpose of selling a product, but it could be 
for some other purpose.
    So opt-outs are something I tried not to include because I 
was trying to provide for privacy, and opt-outs--how do you 
deal with a company who has a hundred different computers: 
Company A--computer one, computer two, computer three, computer 
four? You have a security problem all of a sudden when you try 
to include opt-outs for businesses, especially large 
corporations who don't want their domain names released to the 
public.
    So immediately when you start having opt-outs with a 
national list, you have a problem with security. That is not to 
impugn their bill. That is a major debate we had----
    Mr. Tauzin. If I could jump in, one of the differences--you 
don't have opt-outs and you don't have national----
    Mr. Miller. My bill does not inject government at all. My 
bill clarifies a gray issue in the law and turns private 
property rights back to the Internet service providers.
    When they go to court, they have a clear cause of action. 
If they decided to publicly post that they do not accept spam 
without prior authorization, that means a spammer has to go to 
them and either cut a deal to send spam or it is illegal. If 
spammers don't do that, when they go to court, they don't have 
to debate their case. They have a clear, defined cause of 
action when going to court.
    Mr. Tauzin. I am trying to, under the different 
approaches--your approach calls--really counts upon the ISP 
provider themselves to take action to prevent the use of the 
network for spamming purposes.
    Mr. Miller. It is not mandatory.
    Mr. Tauzin. It allows them. What rights under your approach 
does the consumer have to stop e-mail?
    Mr. Miller. I didn't include consumers in the bill 
specifically, but it doesn't preclude consumers from taking a 
spammer to court if they so choose.
    The problem with doing that and the reason I decided not 
to--as you are probably aware, if somebody sues a spammer the 
ISP is going to be named in the suit also. That is just going 
to be a normal course of action. So did I want to come up with 
a regulation that mandated that ISPs are going to be forced 
into court day after day after day for a $50 lawsuit? I didn't 
think that was productive.
    An individual receives one spam. An Internet service 
provider might have 100,000 spams go through the service or a 
million on one hit. Well, there is sizable damage of $25,000 
for those. The problem with notifying the FCC and that you had 
to notify the spammer before you can go against the spammers, 
spammers are very crafty, as you know, and many spamming 
companies change their names every week. So by the time you 
receive a spam, you notify the FCC, they track down the 
spammer, notify them, that spammer has set up a new name or 
business name and they are spamming the same people again under 
a different name.
    Mr. Tauzin. Let me give Mrs. Wilson and Mr. Green a chance 
to tell me why you think your approach, which is different--you 
apparently are empowering the individual to do something. Why 
do you think that approach is better and why does it not run 
into the problem Mr. Miller has pointed out to us?
    Mrs. Wilson. Let me talk about a couple of differences.
    H.R. 3113 does not deal with fraud, which Mr. Green's bill 
does. It also does not set up penalties for harvesting e-mails, 
which is often done, or selling information from people's e-
mails accounts so those issues are not dealt with in H.R. 3113. 
It is narrower in that sense. Not that we don't have to deal 
with those issues, as I have said.
    H.R. 3113 gives rights to consumers and to ISPs. So a 
consumer can opt out, but an ISP can also say I have a privacy 
policy or we don't--we are a spam-free ISP or spam free or 
here's our tariff rate for how much it costs us to carry your 
commercial e-mail. Fairly fundamentally, we don't ban 
commercial e-mail in this bill and recognize that there is 
legitimate commercial electronic mail. The question is, can you 
prohibit the cost shifting and can you give rights also to the 
consumers? So it is a different approach.
    Finally, I would note the front end of the bill which we 
often ignore. The statement of findings and the statement of 
policy we worked very carefully on with respect to judicial 
review.
    Mr. Tauzin. Mr. Markey?
    Mr. Markey. Gary, do you make a distinction between 
commercial and noncommercial?
    Mr. Miller. Yes, it is unsolicited commercial e-mail.
    Mr. Markey. Unsolicited commercial e-mail. So noncommercial 
is not covered.
    Mr. Miller. Is not covered. It doesn't cover political 
speech or anything else.
    Mr. Markey. Do you make that same distinction between 
commercial and noncommercial?
    Mrs. Wilson. I do. I also have a definition of pandering e-
mail.
    Mr. Markey. Do you make a distinction between commercial e-
mail and bulk e-mail solicitations?
    Mrs. Wilson. No.
    Mr. Markey. How would you define unsolicited? For example, 
in the financial services bill that we are voting on today, 
once you have some communication with the financial 
institution, you don't have an ability to opt out at all. They 
can solicit you forever, and you have no right to say, no, I 
don't want to receive any additional communication in any form. 
You are just now on their list. Would you give under your 
legislation the ability to--would you define that as 
unsolicited or solicited? The fact that you had a transaction 
with the site, that you had visited a site, is any subsequent 
communication then considered to be solicited or unsolicited?
    Mr. Green. I would view it as you can visit the site, but 
you have the right then to say, yes, I have visited but, no, I 
do not want to continue receiving it whether it be from a bank 
or whatever. Of course, our legislation is going to be 
different from the financial institution bill.
    Mr. Markey. Gary?
    Mr. Miller. You can spam 5 million people and you will have 
visited 5 million sites, but that does not justify unsolicited 
commercial e-mail. It is very easy to define. It has to be 
bulk. It has to be of a commercial nature and it has not been 
requested by individuals.
    Mrs. Wilson. We define it as any electronic mail message 
that advertises a product for service or profit and for a 
business purpose that is sent to a recipient with whom the 
initiator does not have an existing business relationship. In 
addition to that, if you get an e-mail from somebody whose 
Internet site you visited, you can send a reply. The reply 
address has to be legitimate. Say take me off your list.
    Mr. Markey. If I visit a site, even though we don't 
purchase anything, do I have an existing commercial 
relationship or do I have to have purchased something?
    Mrs. Wilson. It is my view you do not.
    Mr. Markey. You do not have to purchase something. Just the 
fact that you visited it now exempts them from any restrictions 
on subsequent e-mail solicitations?
    Mrs. Wilson. It is my view that is not an existing business 
relationship.
    Mr. Markey. Thank you. I thank you all very much.
    Mr. Shimkus [presiding]. You all want to vote, don't you? 
We will call recess until----
    Mr. Green. Mr. Chairman, I don't know if there are still 
questions for committee members. We might want to go on to the 
second panel so we can have the questions of the experts. We 
can always talk to each other.
    Mr. Shimkus. The desire will be to recess until about 5 
after. We will go to the second panel. You all are dismissed.
    [Brief recess.]
    Mr. Tauzin. Before the Chair introduces our next panel, I 
would like to offer into the record the written testimony of 
Mr. Smith, who, as I pointed out, could not be here because he 
is chairing another hearing, and also--that will be introduced 
without objection. So ordered.
    [The prepared statement of Hon. Christopher H. Smith 
follows:]
 Prepared Statement of Hon. Christopher H. Smith, a Representative in 
                 Congress from the State of New Jersey
    Anyone who uses the Internet knows about unsolicited commercial 
email (UCE). Often called spam, UCE is not only annoying, it is 
expensive. Internet Service Providers (ISPs) have had to constantly 
upgrade their equipment to allow for a higher volume of email, and many 
have invested in filtering and tracking software to prevent unwanted 
mail. Who pays for these costs? Consumers do.
    Spam costs consumers money and time, and it could be dangerous. 
Unwanted email reduces productivity because it takes time to delete, 
and it can damage a computer if someone opens an email that contains a 
damaging virus. Often, users accidentally delete important messages 
while trying to clear out their email in-box. Some email programs 
aren't able to recover messages that have been inadvertently deleted.
    Congress has an obligation to protect Internet users from unwanted 
email that often promotes illegitimate business practices, uninvited 
pornography that can be improperly accessed by children, and other 
unwelcome solicitations. Spam is intrusive and represents a form of 
theft. It shifts the burden of paying for something--advertising in 
this case--from solicitors to consumers.
    To protect consumers, I have introduced an improved version of my 
bill from the previous Congress: H.R. 3024, the Netizens Protection Act 
of 1999. My legislation not only allows ISPs to take strong action 
against spammers, it also gives those adversely affected by spam the 
right to take civil action against the sender. H.R. 3024 makes it 
unlawful to send UCE if the message does not include the physical 
address and email address of the initiator of the transmission. 
Further, senders must provide a way for consumers to electronically opt 
out and be removed from their list. Additionally, H.R. 3024 would make 
it illegal to include information in the email subject line that is 
false or misleading about the content of the message.
    However, unlike other anti-spam bills, the Netizens Protection Act 
directly empowers consumers to take individual action against their 
spammer. My bill would allow someone harassed by UCE to seek up to $500 
for each unsolicited email message, plus the cost of damages. Someone 
could seek treble damages if a spammer sent them additional email after 
being requested to stop. To enhance consumer rights, ISPs would be 
required under H.R. 3024 to make their unsolicited electronic mail 
messaging policies known. This would include any option that providers 
have to allow customers to elect to receive or not receive unsolicited 
email. Therefore, spammers would be forewarned and users could make an 
informed decision about what ISP to use, and whether to block 
unsolicited email. The decision to send or receive spam would be up to 
consumers and the marketplace.
    The Netizens Protection Act would also allow ISPs to seek legal 
remedies if someone violated their policies against UCE, or illegally 
used their equipment to transmit unwanted mail. This happens all too 
often today, and my bill would give ISPs the tools to end it. 
Additionally, my bill would protect ISPs that make good faith efforts 
to stop spam. Lawsuits against ISPs for any harm resulting from their 
failure to prevent the receipt of UCE would be preempted under H.R. 
3024.
    My bill is aimed at the big spammer. It would not go after someone 
who just sent a few messages either inadvertently or even 
intentionally. Language in H.R. 3024 would allow someone to send up to 
50 identical or substantially similar messages to recipients within a 
seven-day period. The legislation would not interfere with, or affect, 
direct email advertising or marketing; it would only block unwanted 
email solicitations. If any previous business relationship existed 
between email senders and email recipients, my legislation would not 
affect their transactions. A purchase at a retail store or from a 
catalogue would establish a business relationship. All avenues of 
legitimate direct marketing would remain.
    Spam can only discourage Internet use, thereby impeding the 
expansion of Internet business and commerce which is expected to top 
$500 billion this year. The Internet and its many communication 
capabilities are here to stay, and more people are using them each day. 
Consumers should not have to relinquish control over their email during 
this rapid expansion. Users should be able to decide who they want to 
correspond with and what messages they want to receive. They should not 
have to invest their time and money for something they do not want, and 
neither should their Internet Service Provider.
    I believe in the First Amendment, and in the traditional right for 
anyone to advertise their products as much and as widely as they can. 
However, I do not believe American consumers should have to pay for 
anyone's advertising. Marketing by email does not have the same costs 
associated with it as other forms of advertising--including the use of 
direct mail to which it has been compared. Direct mail advertising 
includes a predetermined cost for each advertisement. That cost is born 
mostly by advertisers and includes paper, printing, handling, and 
postage. Spammers, however, can send out millions of messages with a 
few clicks of a mouse and keyboard. Unlike direct mailers, spammers' 
marginal costs of sending another 1,000 advertisements are minimal, and 
do not increase in proportion to the number of additional people 
receiving their advertisement. Spammers bear almost no cost and instead 
shift it to consumers, who pay higher ISP rates for extra band width 
and screening software. I believe that the Netizens Protection Act is a 
fair and balanced plan to protect e-commerce, and to empower both ISPs 
and consumers by granting them an appropriate way to fight spam.

    Mr. Tauzin. And also ask unanimous consent to introduce a 
letter I received from the Honorable Ben Gilman regarding this 
bill and other issues related to communications that he asked 
me to introduce into the record. Without objection, introduce 
that letter into the record.
    [The letter follows:]

                      Congress of the United States
                                   House of Representatives
                                                   November 1, 1999
The Honorable W.J. ``Billy'' Tauzin
Chairman, Subcommittee on Telecommunications, Trade and Consumer 
        Protection
Committee on Commerce
U.S. House of Representatives
2183 Rayburn House Office Building
Washington, D.C. 20515

Re: H.R. 1817, Rural Cellular Legislation

    Dear Chairman Tauzin: Thank you for holding a November 3 hearing on 
H.R. 2162, H.R. 3113, and H.R. 1910, three bills to control unsolicited 
commercial E-mail or ``spam.''
    In October 1998, the House of Representatives approved H.R. 3888, 
the Telecommunications Competition and Consumer Protection Act of 1998, 
which unfortunately failed to pass the Senate because of a dispute over 
non-telecommunications issues. Although H.R. 3888 focused on slamming 
(Title I), it also included a Sense-of-Congress relating to spamming 
(Title II), an FCC auction provision (Title III), and a new cellular 
license provision (Title IV.
    Accordingly, Title IV of H.R. 3888, the rural cellular license 
provision, was based on H.R. 2901, a bill introduced in November 1997 
by former Rep. Joe McDade and cosponsored by Rep. Anna Eshoo and former 
Rep. Scott Klug, members of your Subcommittee. In September 1998, the 
Subcommittee held a hearing on H.R. 2901 and heard testimony in support 
of the bill from Phil Verveer, an attorney with Wilkie Farr & 
Gallagher. The full Commerce Committee subsequently approved H.R. 3888, 
with a bipartisan Tauzin-Dingell substitute, approved by voice vote, 
incorporating a modified version of H.R. 2901 (House Report 105-801). 
H.R. 3888, with further modification of the rural cellular license 
provision made by managers' amendment after consultation with the FCC, 
passed the House on suspension by voice vote on October 12 
(Congressional Record H10606-10615).
    Title IV of H.R. 3888, the rural cellular license provision, is the 
basis for H.R. 1817--a bill I introduced in May 1999, with Rep. Eshoo 
and Rep. Carolyn Maloney as cosponsors, now before your Subcommittee.
    As noted at your September 1998 hearing, most rural areas of this 
country have two permanent cellular licensees company to provide 
quality service over their respective service territories. Competition 
between two licensees improves service for businesses, governments, and 
private users and, at the same time, improves response times for 
emergency services.
    Unfortunately, three rural service areas in Pennsylvania, 
Minnesota, and Florida do not enjoy the benefit of this competition. 
The Pennsylvania rural service area has only one cellular operator. The 
Minnesota rural service area and the Florida rural service area each 
have two operators, but one of the operators in each area is operating 
under a temporary license and thus lacks the incentive to optimize 
service. The reason for this lack of competition is that in 1992 the 
FCC disqualified three partnerships that had won the licenses, after 
finding that they had not complied with its application rule under the 
foreign ownership restrictions of the Communications Act of 1934. 
Significantly, the FCC had allowed other similarly situated licensees 
to correct their applications and, moreover, Congress repealed the 
relevant foreign ownership restrictions in the Telecommunications Act 
of 1996.
    H.R. 1817 would direct the FCC to allow the partnerships denied 
licenses to serve the Pennsylvania, Minnesota, and Florida rural 
service areas to resubmit their applications consistent with FCC rules 
and procedures. The partnerships would pay fees to the FCC consistent 
with previous FCC auctions and settlements with other similarly 
situated licensees. To ensure speedy service to cellular customers, the 
FCC would have 90 days from date of enactment to award permanent 
licenses, and if any company failed to comply with FCC requirements the 
FCC would auction the license. The licenses would be subject to a five-
year transfer restriction, and the Minnesota and Florida licenses would 
be subject to accelerated build-out requirements.
    In light of the need to improve cellular service in these three 
rural areas and the Subcommittee's thorough consideration of the 
predecessor legislation in 1998, I respectfully request that the 
Subcommittee expeditiously act on H.R. 1817 as it moves forward with 
spamming, slamming, and other telecommunications legislation this 
Congress.
    With best wishes,
            Sincerely,
                                         Benjamin A. Gilman
                                                 Member of Congress
cc: Honorable Anna Eshoo and Carolyn Maloney

    Mr. Tauzin. Now I am pleased to introduce our second panel 
of witnesses. They will include Eileen Harrington, Associate 
Director of Marketing Practices of the Federal Trade 
Commission; John Brown, President of iHighway.net Incorporated; 
Alan Charles Raul of Sidley & Austin here in Washington; 
Michael Russina of SBC Communications; Charles Kennedy of 
Morrison & Forester in Washington, DC; Jerry Cerasale, a 
frequent visitor of our committee, of Direct Marketing 
Association; and Ray Everett-Church, Vice President for Public 
Privacy of Alladvantage.com of Hayward, California.
    Gentlemen, ladies, thank you so much for being with us and 
for adding to our information base.
    We will begin with Ms. Harrington. Remember, your written 
testimony is a part of our record by unanimous consent. We 
would appreciate a summary and as much of a conversational 
hearing setting as possible.
    Ms. Harrington, thanks again for your keen attention to 
these and other issues as you educate our committee. We welcome 
you and appreciate your testimony.

    STATEMENTS OF EILEEN HARRINGTON, ASSOCIATE DIRECTOR OF 
  MARKETING PRACTICES, BUREAU OF CONSUMER PROTECTION, FEDERAL 
   TRADE COMMISSION; JOHN M. BROWN, PRESIDENT, IHIGHWAY.NET 
   INCORPORATED; ALAN CHARLES RAUL, SIDLEY & AUSTIN; MICHAEL 
       RUSSINA, SENIOR DIRECTOR, SYSTEMS OPERATIONS, SBC 
  COMMUNICATIONS INCORPORATED; CHARLES H. KENNEDY, MORRISON & 
  FORESTER LLP; JERRY CERASALE, SENIOR VICE PRESIDENT, DIRECT 
 MARKETING ASSOCIATION; AND RAY EVERETT-CHURCH, CHIEF PRIVACY 
OFFICER AND VICE PRESIDENT FOR PUBLIC PRIVACY, ALLADVANTAGE.COM

    Ms. Harrington. Thank you, Mr. Chairman. It is a privilege 
to be here again before your subcommittee. I am here this 
morning to present the FTC's testimony on the subject of 
unsolicited commercial e-mail.
    As you know, the FTC is the Federal Government's principal 
consumer protection agency, and while bulk UCE burdens Internet 
service providers and frustrates our customers, our main 
concern with unsolicited commercial e-mail is its use by 
deceptive and fraudulent marketers. While not all UCE is 
deceptive or fraudulent, it certainly is true that UCE has 
become the fraud artist's calling card on the Internet.
    I want to focus this morning on three approaches that we 
have taken to protecting consumers from deceptive UCE: first, 
tough law enforcement; second, aggressive consumer education; 
and, third, the encouragement of marketplace innovations that 
empower consumers to keep unwanted UCE out of their electronic 
mailboxes.
    First, the importance of law enforcement. The FTC has 
responded to the proliferation of deceptive or fraudulent UCE 
with tough law enforcement action. The Commission brought its 
first enforcement action against deception on the Internet in 
1994--which is like a century ago in Internet years--and, not 
surprisingly, that case involved deceptive spam. Since that 
time, the Commission has brought over 100 additional law 
enforcement actions to halt online deception and fraud and, as 
importantly, to establish clear principles for non-deceptive 
marketing on the Internet. Seventeen enforcement actions 
targeted schemes that used deceptive spam as an integral part 
of their operation.
    Let me give you a good example of the kind of scheme that 
we are attacking through law enforcement.
    Last May, we filed a case, FTC versus Benoit. In the Benoit 
case, the defendants sent UCE to thousands and thousands of 
consumers. It arrived with a subject line that said that the 
message was concerning your order. The spam told recipients 
that their order had been received, it was being processed, and 
that their credit cards would be billed for charges ranging 
from $250 to $899. Of course, the consumers who received this 
spam had ordered nothing. They had no relationship whatsoever 
with the sender.
    The spam told recipients to call a specified telephone 
number in the 767 area code if they had any questions about 
their order. Because the defendants used a deceptive header and 
other information, consumers who tried to reach them by hitting 
reply simply got an error message back. So calling on the phone 
was the only way that they had to reach the sender.
    Now, when consumers called this telephone number, they 
learned a lot that the spam didn't tell them. The spam didn't 
tell them, for example, that the call to this phone number went 
to a foreign country, Dominica, in the West Indies, that the 
call would be billed at an expensive international rate, and 
that it would connect callers to a sexually explicit chat line.
    We learned about this scheme from an irate grandfather in 
North Carolina whose preadolescent grandson received this spam. 
We have a special Internet fraud rapid response team of 
investigators and lawyers at the FTC. They jumped right on 
this, and within weeks we were in court obtaining a temporary 
restraining order that froze money in the telephone billing and 
collection system that was marked for these defendants. We also 
obtained, ultimately, very strict injunctions that will 
prohibit these defendants from doing anything remotely similar 
to this in the future.
    We target our modest enforcement and education resources at 
the FTC by using a very rich array of data--consumer complaint 
data that we collect around the clock each and every day. The 
FTC's Consumer Response Center receives thousands of complaints 
from consumers every week who use our online complaint form, 
call our toll-free consumer help line, or send us their 
complaints by fax or regular mail.
    We also encourage consumers to send us examples of the spam 
that they receive and to send it to our special electronic spam 
mailbox, UCE, at FTC.gov. We have received over 2 million 
pieces of spam from consumers this way, and we receive an 
additional 3 to 4,000 pieces from consumers every day. Of 
course, Mr. Miller has now given us another million, so this is 
a red letter day. The spam that is sent to us at UCE at FTC.gov 
is stored in a special spam data base which we can search for 
the prior 6 months' worth of content.
    On the public education front--if I may take just another 
minute, Mr. Chairman. I see my light is on--but we think that 
public education is also extremely important, and we have 
launched three aggressive education campaigns to warn consumers 
about deceptive UCE. To increase our reach we have asked for 
and received help from ISPs and other online businesses to 
reach as many consumers as we can with our fraud prevention 
messages. One of our campaigns was this FTC dirty dozen which 
we developed by searching our spam data base. These are the 12 
most likely spam scams to arrive in your mailbox.
    Now, the good news is that we think that this education is 
actually having an effect. Unlike in the case of telemarketing 
fraud where we know that millions of consumers have been 
defrauded of billions of dollars because of these deceptive 
telephone pitches, what we find is that very few consumers are 
actually taking the bait on these deceptive e-mails. When we 
have looked through our spam data base and called the consumers 
who sent us the spam, we have learned that they didn't bite, 
and we have a hard time finding others who have bitten. So 
while we see these ``lose weight while you sleep'' and ``earn 
zillions of dollars in your spare time'' messages, we have a 
hard time finding people who have parted with their money. Of 
course, the exception to that rule is the cases we have 
brought.
    Last, we are great proponents at the Commission of 
encouraging marketplace solutions that empower consumers to 
control the content coming into their boxes, and you are going 
to hear about some of those from Mr. Cerasale and others. So we 
think that the solution to the spam problem, the deceptive spam 
problem, is found in tough and targeted law enforcement, 
aggressive education, and the encouragement of marketplace 
solutions that empower consumers to keep this kind of material 
from arriving in their inbox.
    I would be happy to take your questions, Mr. Chairman.
    [The prepared statement of Eileen Harrington follows:]
    Prepared Statement of Eileen Harrington, Associate Director of 
   Marketing Practices, Bureau of Consumer Protection, Federal Trade 
                               Commission
    Mr. Chairman, I am Eileen Harrington of the Federal Trade 
Commission's Bureau of Consumer Protection. The Federal Trade 
Commission is pleased to provide testimony today on the subject of 
unsolicited commercial email, the consumer protection issues raised by 
its widespread use, and the Federal Trade Commission's program to 
combat deceptive and fraudulent unsolicited commercial email.\1\
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    \1\ The views expressed in this statement represent the views of 
the Commission. My responses to any questions you may have are my own.
---------------------------------------------------------------------------
                     i. introduction and background
A. FTC Law Enforcement Authority
    As the federal government's principal consumer protection agency, 
the FTC's mission is to promote the efficient functioning of the 
marketplace by taking action against unfair or deceptive acts or 
practices, and increasing consumer choice by promoting vigorous 
competition. To fulfill this mission, the Commission enforces the 
Federal Trade Commission Act, which prohibits unfair methods of 
competition and unfair or deceptive acts or practices in or affecting 
commerce.\2\ The Commission's responsibilities are far-reaching. With 
certain exceptions, this statute provides the Commission with broad law 
enforcement authority over virtually every sector of our economy.\3\ 
Commerce on the Internet, including unsolicited commercial electronic 
mail, falls within the scope of this statutory mandate.
---------------------------------------------------------------------------
    \2\ 15 U.S.C. Sec. 45(a). The Commission also has responsibilities 
under approximately 40 additional statutes, e.g., the Fair Credit 
Reporting Act, 15 U.S.C. Sec. 1681 et seq., which establishes important 
privacy protections for consumers' sensitive financial information; the 
Truth in Lending Act, 15 U.S.C. Sec. Sec. 1601 et. seq., which mandates 
disclosures of credit terms; and the Fair Credit Billing Act, 15 U.S.C. 
Sec. Sec. 1666 et. seq., which provides for the correction of billing 
errors on credit accounts. The Commission also enforces approximately 
30 rules governing specific industries and practices, e.g., the Used 
Car Rule, 16 C.F.R. Part 455, which requires used car dealers to 
disclose warranty terms via a window sticker; the Franchise Rule, 16 
C.F.R. Part 436, which requires the provision of information to 
prospective franchisees; and the Telemarketing Sales Rule, 16 C.F.R. 
Part 310, which defines and prohibits deceptive telemarketing practices 
and other abusive telemarketing practices.
    \3\ Certain entities, such as banks, savings and loan associations, 
and common carriers, as well as the business of insurance are wholly or 
partially exempt from Commission jurisdiction. See Section 5(a)(2) of 
the FTC Act, 15 U.S.C. Sec. 45(a)(2) and the McCarran-Ferguson Act, 15 
U.S.C. Sec. 1012(b).
---------------------------------------------------------------------------
B. Concerns about Unsolicited Commercial Email
    Unsolicited commercial email--``UCE,'' or ``spam,'' in the online 
vernacular--is any commercial electronic mail message sent, often in 
bulk, to a consumer without the consumer's prior request or consent. 
The staff of the Commission has amassed a database containing over 2 
million pieces of UCE. Analysis of this UCE database shows that well-
known manufacturers and sellers of consumer goods and services seldom 
send UCE. Rather, merchants of this type use solicited email to give 
consumers information that they have requested about available 
products, services, and sales. For example, consumers may agree in 
advance to receive information about newly-published books on subjects 
of interest, online catalogues for products or services frequently 
purchased, or weekly emails about discounted airfares.
    These examples of bulk commercial email sent at the consumer's 
request demonstrate the value of consumer sovereignty to the growth of 
Internet commerce. Giving consumers the ability to choose the 
information they receive over the Internet--known in the industry now 
as ``permission-based'' marketing--seems likely to create more 
confidence in its content and in the sender. Conversely, when 
unsolicited information arrives in consumers' electronic mailboxes, the 
consumers who have contacted the Commission have been far less likely 
to engage in commerce with the sender.
    Not all UCE is fraudulent, but fraud operators--often among the 
first to exploit any technological innovation--have seized on the 
Internet's capacity to reach literally millions of consumers quickly 
and at a low cost through UCE. In fact, UCE has become the fraud 
artist's calling card on the Internet. Much of the spam in the 
Commission's database contains false information about the sender, 
misleading subject lines, and extravagant earnings or performance 
claims about goods and services. These types of claims are the stock in 
trade of fraudulent schemes.
    While bulk UCE burdens Internet service providers and frustrates 
their customers, the FTC's main concern with UCE is its widespread use 
to disseminate false and misleading claims about products and services 
offered for sale on the Internet. The Commission believes the 
proliferation of deceptive bulk UCE on the Internet poses a threat to 
consumer confidence in online commerce and thus views the problem of 
deception as a significant issue in the debate over UCE. Today, 
Congress, law enforcement and regulatory authorities, industry leaders 
and consumers are faced with important decisions about the roles of 
self-regulation, consumer education, law enforcement, and government 
regulation in dealing with UCE and its impact on the development of 
electronic commerce on the Internet.
  ii. the federal trade commission's approach to fraud on the internet
A. Law Enforcement
    Deceptive UCE is part of the larger problem of deceptive sales and 
marketing practices on the Internet. In 1994, the Commission filed its 
first enforcement action against deception on the Internet, making it 
the first federal enforcement agency to take such an action.\4\ Since 
that time, the Commission has brought over 100 law enforcement actions 
to halt online deception and fraud. The pace of our Internet law 
enforcement has been increasing, in step with the growth of commerce--
and fraud--on the Internet; over half of the FTC's Internet-related 
actions have been filed since the beginning of this year.
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    \4\ FTC v. Corzine, CIV-S-94-1446 (E.D. Cal. filed Sept. 12, 1994).
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    The Commission brings to the Internet a long history of promoting 
competition and protecting consumers in other once-new marketing media. 
These past innovations have included television advertising, direct 
mail marketing, 900-number sales, and telemarketing. The development of 
each of these advances in the market was marked by early struggles 
between legitimate merchants and fraud artists as each sought to 
capitalize on the efficiencies and potential profits of the new way of 
doing business. In each instance, the Commission used its statutory 
authority under Section 5 of the FTC Act to bring tough law enforcement 
actions to halt specific deceptive or unfair practices, and establish 
principles for non-deceptive marketing.\5\ In some instances, most 
notably national advertising, industry took an aggressive and strong 
self-regulatory stance that resulted in dramatic improvements in 
advertising and marketing practices.\6\ In other instances, at the 
direction of Congress or on its own initiative, the Commission has 
issued trade regulation rules to establish a bright line between 
legitimate and deceptive conduct.\7\
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    \5\ Section 5 of the FTC Act, 15 U.S.C. Sec. 45, authorizes the 
Commission to prohibit unfair or deceptive acts or practices in 
commerce. The Commission may initiate administrative litigation, which 
may culminate in the issuance of a cease and desist order. It can also 
enforce Section 5 and other laws within its mandate by filing actions 
in United States District Courts under Section 13(b) of the FTC Act, 15 
U.S.C. 53(b), seeking injunctions and other equitable relief. Section 
18 of the FTC Act, 15 U.S.C. Sec. 57a, authorizes the Commission to 
promulgate trade regulation rules to prohibit deceptive or unfair 
practices that are prevalent in specific industries.
    \6\ For example, the National Advertising Division of the Council 
of Better Business Bureaus, Inc., operates the advertising industry's 
self-regulatory mechanism.
    \7\ For example, the Rule Concerning Cooling-Off Period for Sales 
Made at Homes or at Certain Other Locations (the ``Cooling-off Rule''), 
16 C.F.R. Part 429; the Mail or Telephone Order Merchandise Rule, 16 
C.F.R. Part 435; the Trade Regulation Rule Pursuant to the Telephone 
Disclosure and Dispute Resolution Act of 1992 (``The 900-Number 
Rule''), 16 C.F.R. Part 308; and the Telemarketing Sales Rule Pursuant 
to the Telemarketing and Consumer Fraud and Abuse Prevention Act, 16 
C.F.R. Part 310.
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B. Monitoring and Studying Industry Practices
    The Federal Trade Commission closely monitors the development of 
commerce on the Internet. Through a series of hearings and public 
workshops, the Commission has heard the views of a wide range of 
stakeholders and issued reports on the broad challenges posed by the 
rapid growth of the Internet and electronic commerce. In the fall of 
1995, the Commission held four days of hearings to explore the effect 
of new technologies on consumers in the global marketplace. Those 
hearings produced a staff report, Anticipating the 21st Century: 
Consumer Protection Policy in the New High-Tech, Global Marketplace.\8\ 
The report warned of the potential for the Internet to become the 
newest haven for deception and fraud.
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    \8\ May 1996.
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    iii. the commission's approach to unsolicited commercial e-mail
A. Monitoring the Problem
    In June 1997, at a workshop addressing issues of privacy on the 
Internet, the Commission heard discussion of three distinct UCE 
problems: (1) deception in UCE content; (2) economic and technological 
burdens on the Internet and delivery networks caused by the large 
volume of UCE being sent; and (3) costs and frustrations imposed on 
consumers by their receipt of large amounts of UCE.
    The Commission's immediate concern has been with deceptive UCE. The 
FTC asked industry and advocacy groups that participated in the privacy 
workshop to focus on the economic and technological burdens caused by 
UCE and report their recommendations back to the Commission. Under the 
leadership of the Center for Democracy in Technology, these groups 
spent a year studying the problem and identifying possible solutions, 
and in July 1998 issued their ``Report to the Federal Trade Commission 
of the Ad-Hoc Working Group on Unsolicited Commercial E-Mail'' \9\ 
(``Ad-Hoc Report''). The Ad-Hoc Report recommended the pursuit of 
technologies and public policies that would give more control to 
consumers over the UCE they received. Specifically, the report:
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    \9\ The Ad-Hoc Report is available at www.cdt.org/spam.

 urged marketers to give consumers a choice to ``opt in'' or 
        ``opt out'' of receiving a UCE solicitation; and
 urged law enforcement to continue to attack fraudulent UCE 
        solicitations, including those with deceptive ``header'' 
        information.\10\
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    \10\ ``Header'' information, at minimum, includes the names, 
addresses, or descriptions found in the ``TO:'', ``FROM:'', and 
``SUBJECT:'' lines of an email. It also includes the technical 
description of the route an email traveled over the Internet between 
the sender and receiver.
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    On another front, the FTC set up a special electronic mailbox 
reserved for UCE in order to assess, first hand, emerging trends and 
developments in UCE. With the assistance of Internet service providers, 
privacy advocates, and other law enforcers, staff publicized the 
Commission's UCE mailbox, ``[email protected],'' and invited consumers to 
forward their UCE to it. The UCE mailbox has received more than 
2,010,000 forwarded messages to date, including 3,000 to 4,000 new 
pieces of UCE every day. Staff enters each UCE message into the 
database; UCE received and entered in the database within the preceding 
6 months is searchable. Periodically, staff analyzes the data, 
identifies trends, and uses its findings to target law enforcement and 
consumer and business education efforts.
B. Aggressive Law Enforcement
    The Commission has responded to fraudulent UCE with a vigorous law 
enforcement program. To date, the FTC has brought 17 actions, most of 
them in federal district court, against schemes that employed spam as 
an integral part of their operation. For example, in May of this year 
the Commission filed FTC v. Benoit, et al.\11\ This scheme used the 
ruse of a spam notification about charges purportedly to be billed to 
consumers' credit card accounts to lure the consumers into calling an 
expensive international telephone number.\12\ The initial spam message 
purported to inform consumers that their ``orders had been received and 
processed'' and that their credit card accounts would be billed for 
charges ranging from $250 to $899. In fact, the consumers had not 
ordered anything. The spam advised recipients to call a specified 
telephone number in area code 767 with any questions about the 
``order'' or to speak to a ``representative.'' Many consumers were 
unaware that area code 767 is in a foreign country--Dominica, West 
Indies--because it was unnecessary to dial 011 or any country code to 
make the calls.
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    \11\ No. 3:99 CV 181 (W.D.N.C. filed May 11, 1999). This case was 
originally filed under the caption FTC v. One or More Unknown Parties 
Deceiving Consumers into Calling an International Audiotext Service 
Accessed Though Telephone Number (767) 445-1775. Through expedited 
discovery, the FTC learned the identities of the perpetrators of the 
alleged scam by following the money trail connected to the telephone 
number. Accordingly, the FTC amended its complaint to specify the 
defendants' names.
    \12\ A similar scheme that used spam was targeted in FTC v. Lubell, 
et al., No. 3-96-CV-80200 (S.D. Ia. 1996). In that case, the spam urged 
consumers to call an expensive international number to hear a message 
that purportedly would inform them about discount airline tickets and 
how to enter a sweepstakes.
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    Consumers who called to prevent charges to their credit cards, 
expecting to speak to a ``representative'' about the erroneous 
``order,'' were allegedly connected to an adult entertainment 
``audiotext'' service. Later, these consumers received charges on their 
monthly telephone bills for the international long-distance call to 
Dominica, West Indies. The defendants shared in the revenue received by 
a foreign telephone company for the costly international calls. The 
defendants hid their tracks by using forged headers in the spam they 
used to make initial contact with consumers.
    The Commission's complaint alleged that the defendants induced 
consumers to incur charges for a costly international audiotext 
entertainment service by falsely representing that consumers had placed 
a merchandise order that would be charged on their credit cards, and 
that consumers who called a specified telephone number--actually the 
number for the audiotext entertainment service--would receive answers 
to any questions about the order.
    The Commission, on October 26, 1999, approved a stipulated final 
order resolving the charges in the complaint and the settlement is now 
awaiting approval by the Court. Under the terms of the settlement, the 
defendants will be enjoined permanently from misrepresenting any 
material fact in the course of advertising, promoting, offering, or 
selling of any good or service. More specifically, the settlement will 
prohibit the defendants from sending or causing to be sent any email 
(including unsolicited commercial email) that misrepresents the 
identity of the sender of the email or the subject of the e-mail. The 
Order thus prohibits the defendants from falsifying information in the 
``from'' and ``subject'' lines of e-mails, as well as in the text of 
the message.
    Another recent case, this time targeting an alleged pyramid scheme 
that centered on spam, is FTC v. Martinelli.\13\ The defendants in that 
case ran DP Marketing, a Connecticut-based alleged pyramid scheme, 
elaborately disguised as a work-at-home opportunity. The scheme 
solicited new recruits through ``spam'' and through newspaper 
classified ads across the country. The spam contained messages such as: 
``National Marketing Company seeks individuals to handle office duties 
from home. This is a full or part-time position with a salary of 
$13.50/hr. The position consists of processing applications for credit, 
loans or employment, as well as online consumer service.''
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    \13\ No. 399 CV 1272 (CFD) (D. Conn. filed July 7, 1999). Other 
alleged pyramid schemes that thrived on spam have been targets of FTC 
enforcement action., e.g., FTC v. Nia Cano, No. 97-7947-IH-(AJWx) (C.D. 
Cal. filed Oct. 29, 1997); Kalvin P. Schmidt, Docket No. C-3 834 (final 
consent Nov. 16, 1998).
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    Consumers responded by visiting DP Marketing's Web site or by 
calling the company. In either case, the defendants informed the 
consumers that the $13.50 per hour jobs were for processing orders for 
DP Marketing from the comfort of their own homes. The defendants 
further told consumers that no experience was necessary, and that for a 
``registration fee'' ranging from $9.95 to $28.72 they would be sent 
everything they would need to get started, including telephone scripts, 
product sheets, time sheets and an ID number. What the consumers 
actually got was a kit instructing them first to place advertisements 
identical to the ones they had responded to, and then to read the same 
script to people who responded to their ads. Instead of $13.50 per 
hour, the money consumers could earn was based on the number of new 
victims they recruited.
    The FTC charged that the defendants misrepresented to consumers 
that DP Marketing offers jobs at a specified salary; failed to disclose 
the material fact that they were offering a pyramid work-at-home 
scheme; and provided the ``means and instrumentalities'' to others to 
commit unlawful and deceptive acts. On September 23, 1999, the court 
granted the Commission's motion to approve a stipulated preliminary 
injunction prohibiting the defendants from continuing this scheme.
    The Commission has also brought a number of cases against credit 
repair scams that used spam as an integral aspect of their 
deception.\14\ In a particularly pernicious variation on this scheme, 
consumers are urged to create a new credit identity in order to fix 
their credit. Using spam messages such as ``BRAND NEW CREDIT FILE IN 30 
DAYS,'' these scammers induce consumers to purchase instructions about 
how consumers can obtain federally-issued, nine-digit employee 
identification numbers or taxpayer identification numbers, substitute 
them for social security numbers, and use them illegally to build new 
credit profiles that will allow them to get credit they may be denied 
based on their real credit histories. In fact, using a false 
identification number to apply for credit is a felony--a point these 
scammers omit from their solicitations. The Commission, either on its 
own or through the Department of Justice, filed cases against seven 
operations that used this type of deceptive spam.\15\
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    \14\ FTC v. Consumer Credit Advocates, No. 96 Civ. 1990 (S.D.N. Y. 
filed Mar. 19, 1996); FTC v. Dixie Cooley, d/b/a DWC, No. CIV-98-0373-
PHX-RGS (D. Ariz. filed March 4,1998).
    \15\ FTC v. Cliff Cross and d/b/a Build-It-Fast, Civ. No. M099CA018 
(W.D. Tex. filed Feb. 1, 1999); FTC v. Ralph Lewis Mitchell, Jr., No. 
CV 99-984 TJH (BQRX) (C.D. Cal. filed Jan. 29, 1999); FTC v. Frank 
Muniz, No. 4:99-CV-34 D. Fla. filed Feb. 1, 1999); U.S. v. A. James 
Black, No. 99-113 (M.D. Fla. filed Feb. 2, 1999); FTC v. James Fite, d/
b/a Internet Publications, No. CV 99-04706JSL (BQRX) (C.D. Cal. filed 
April 30,1999); U.S. v. David Story d/b/a Network Publications, 3-
99CV0968-L (N.D. Tex. filed April 29, 1999); and FTC v. West Coast 
Publications, LLC., CV 99-04705GHK (RZx) (C.D. Cal. filed April 30, 
1999),
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    Other types of deceptive schemes that use UCE have also been 
targets of FTC enforcement action, such as allegedly deceptive business 
opportunities \16\ and deceptive weight loss schemes.\17\ As these 
cases illustrate, the Commission's focus has been on deceptive UCE.
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    \16\ FTC v. Internet Business Broadcasting, Inc., et al., No. WMN-
98-495 (D. Md. filed Feb. 19, 1998); United States v. PVI, Inc., No. 
98-6935 (S.D. Fla. filed Sept. 1, 1998).
    \17\ TrendMark International, Inc., Docket No. C-3 829 (final 
consent Oct. 6, 1998)
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C. Comprehensive Consumer and Business Education
    The Commission has published three consumer publications related to 
UCE. Trouble @ the In-Box identifies some of the scams showing up in 
electronic in-boxes. It offers tips and suggestions for assessing 
whether an opportunity is legitimate or fraudulent, and steers 
consumers to additional resource materials that can help them determine 
the validity of a promotion or money making venture. To date, nearly 
62,000 copies of the brochure have been distributed, and it has been 
accessed on the FTC's web site nearly 19,000 times.
    How to Be Web Ready is a reader's bookmark that offers consumers 
tips for safe Internet browsing. It provides guidance for consumers on 
how to safeguard personal information, question unsolicited product or 
performance claims, exercise caution when giving their email address, 
guard the security of financial transactions, and protect themselves 
from programs and files that could destroy their hard drives. A number 
of corporations and organizations have provided a link from their web 
site to the tips on the FTC's web site, including Circuit City, Borders 
Group Inc., Netcom, Micron, and Compaq. More than 52,000 copies of the 
bookmark have been distributed, and it has been accessed more than 
15,000 times on the FTC's web site.
    In July 1998, the FTC launched a public education campaign called 
``Spam's Dirty Dozen: 12 Scams Most Likely to Arrive Via Bulk Email'' 
to publicize the most prevalent UCE scams. The list of scams was culled 
from a sampling of more than 250,000 spam messages that consumers had 
forwarded to the FTC's mailbox at The consumer alert identified the 
following twelve types of deceptive solicitations and described how 
each operate: business opportunities schemes; bulk email programs; 
chain letters; work-at-home schemes; health and diet scams; effortless 
income; free goods; investment opportunities; cable descrambler kits; 
guaranteed loans or credit, on easy terms; credit repair; and vacation 
prize promotions. Nearly 10,000 copies of this consumer alert have been 
distributed, and it has been accessed more than 35,000 times on the 
FTC's web site.
D. Considering the Future In Light of Past Experience
    In the past year, Commission staff has investigated spamming and 
the extent to which consumers fall victim to misleading offers. Where 
staff's investigations revealed significant economic harm to recipients 
who responded to deceptive UCE, the Commission has taken enforcement 
action. While neither the Commission's UCE database nor staff's 
interviews with consumers constitute a representative sample of all UCE 
and UCE recipients, it is notable that, in the Commission's experience 
to date, a small percentage of consumers have actually lost money 
responding to deceptive UCE. However, a deceptive spammer can still 
make a profit even though very few recipients respond because the cost 
of sending bulk volume UCE is so low--far lower than traditional mail 
delivery. Whether consumers respond to deceptive UCE by either becoming 
victims or ``flaming'' senders (i.e., sending angry return emails), 
forwarding their UCE to the FTC, or automatically deleting all of their 
UCE, the Commission is concerned that the proliferation of deceptive 
UCE poses a threat to consumers' confidence in the Internet as a medium 
for personal electronic commerce.
    As government, industry, and consumer interests examine 
legislative, self-regulatory, and law enforcement options at this 
important turning point, it is useful to be mindful of lessons learned 
in the past. Earlier in this decade, the advent of the first and still 
the most universal interactive technology, 900 number, telephone-based 
``pay-per-call'' technology, held great promise. Unfortunately, 
unscrupulous marketers quickly became the technology's most notorious 
users. Tens of thousands of consumers wound up with charges on their 
telephone bills for calls to 900 numbers that they thought were free. 
Others were billed for expensive calls made by their children without 
parental knowledge or consent.
    The FTC and state attorneys general brought dozens of enforcement 
actions to halt these schemes and warned legitimate 900 number vendors 
that industry practices needed to improve dramatically. Unfortunately, 
industry did too little to halt the widespread deception, and Congress 
enacted the Telephone Disclosure and Dispute Resolution Act of 1992, 
directing the FTC and FCC to regulate 900 number commerce by issuing 
rules under the Administrative Procedure Act. The regulations have 
forced all 900 number vendors into a standard practice of full 
disclosure of cost and other material terms, and have virtually 
eliminated the problem of deceptive 900 number advertising. All of this 
came at a considerable cost, however, because consumers lost confidence 
in pay-per-call commerce and stayed away from it in droves. Only now, 
some six years after federal regulations took effect, has there been 
growth in pay-per-call services as a means of electronic commerce.
    The Commission has steadfastly called for self-regulation as the 
most desirable approach to Internet policy. The Commission generally 
believes that economic issues related to the development and growth of 
electronic commerce should be left to industry, consumers, and the 
marketplace to resolve. For problems involving deception and fraud, 
however, the Commission is committed to law enforcement as a necessary 
response. Should the Congress enact legislation granting the Commission 
new authority to combat deceptive UCE, the Commission will act 
carefully but swiftly to use it.

    Mr. Tauzin. Thank you very much, Ms. Harrington.
    The Chair would like to recognize Ms. Heather Wilson who 
will introduce our next witness from Albuquerque. Heather?
    Mrs. Wilson. Thank you, Mr. Chairman.
    It is my pleasure to introduce John Brown, who is the head 
of iHighway.net, who is the founder of--one of the co-founders 
of that country--company, rather. It is an Internet service 
provider. He is looking for a country. It is kind of a virtual 
country. It is an Internet service provider in Albuquerque, New 
Mexico, that he started in the Bay area in 1996, and then he 
got smart and came home to Albuquerque. Its goal is to serve 
rural markets, which we all appreciate in New Mexico. He has 
seven employees, all in Albuquerque, and they focus on business 
customers. It is a real pleasure to have John here; and he is, 
it seems to me, the poster child for the small Internet service 
provider that can be really severely impacted by spam. Thank 
you, John.
    Mr. Tauzin. Thank you very much, Heather.
    We, of course, could have gotten John Brown to be here in 
virtual reality. Instead, we have John Brown's body here today. 
We are pleased to welcome you, Mr. Brown.

                   STATEMENT OF JOHN M. BROWN

    Mr. Brown. Thank you, Mr. Chairman. If I had a dollar for 
every time my body was used, I wouldn't necessarily have to be 
in the ISP business.
    I would also like to thank Congresswoman Wilson for 
inviting me here today and for taking leadership out of our 
State and producing a bill, H.R. 3113, to help work with this.
    As Congresswoman Wilson said, iHighway.net is an Internet 
service provider located in New Mexico. Sometimes it does seem 
like another country out there. And we do provide services for 
local businesses and rural Internet service providers located 
throughout our State.
    I will try to keep my comments brief and just take some 
highlights out of my testimony.
    These are exciting times and times of prosperity, growth, 
and technical advancement. These advancements are 
revolutionizing the way humankind interacts and conducts 
business not only on a local or domestic level but, more 
importantly, on a global level.
    It is important that our local and national leaders 
carefully craft new laws governing these new times. We want to 
make sure that we protect those rights that have allowed our 
country to have a leadership role in this communications 
revolution. I strongly urge that we make sure that our rights 
of our citizens, our netizens are protected, that our rights 
are not eroded also with new laws.
    Conversely, it is also important that we must protect our 
resources from those that misuse them or abuse them. Spam is 
bad. Let's just be blunt about that. It causes computer 
networks to crash, e-mail service to fill up, and netizens to 
pay for the delivery of this unwanted data. We must help to 
provide tools to allow people and businesses to control and 
prevent this unwanted data.
    You will receive information today from several different 
groups on how spam is bad as a general issue. I would like to 
provide the members of this panel with specifics on how spam is 
bad for my business as a person trying to make a living off 
their own street.
    A real-world data point, if you will. Spam impacts the 
bottom line of my company is several ways.
    No. 1, distraction from productive work. Since our business 
is one of service, it is vital that we respond to our customers 
and potential customers quickly. Many of these people choose to 
communicate with us via e-mail. With this in mind, we must open 
and read each and every e-mail we receive. Currently, spam 
represents 8 to 12 percent of the daily new messages we receive 
in our mailboxes. This is time that could be spent in a more 
profitable way.
    No. 2, use of limited resources. All e-mail coming into our 
company--and we are going to exclude our customers' mail 
service at this moment, just our own company--take up 
transmission time, disk space and other system processing 
resources. As our company grows and we receive more e-mail from 
potential customers, those that send spam get to add more 
people within our company to their mailing list as we add more 
employees and so forth. Our service must then be upgraded to 
store more mail, process more incoming mail, et cetera. This 
vicious cycle grows.
    We recently upgraded our internal mail server systems. This 
has cost our company several thousands of dollars. Being in a 
rural market, we have to be very careful with the money that we 
spend on capital improvements.
    Speaking from our customers' perspective for a few moments, 
we process somewhere between 300,000 and 350,000 e-mail 
messages for a majority of our customers every month. It is 
very easy to say that 10 percent of those messages are spam. 
They are messages trying to get a user to go to a pornographic 
site, sell some snake oil or something.
    This takes away from our customers' ability to do their 
job. Those customers call us, complain to us about this 
unwanted e-mail, and basically ask us can you please stop it, I 
don't want to receive this mail again. We have to spend time 
explaining to the customer that we can attempt but not 
completely stop this unwanted mail.
    The third issue is theft of service. Unsolicited commercial 
e-mail steals services and time from our company. In July of 
this year, I did some rough calculations on the cost of UCE or 
unsolicited commercial e-mail. I estimated that unsolicited 
commercial e-mail costs us around $1,300 per month in lost 
time, performance, and additional resources that needed to be 
purchased, money that could have been used to train additional 
people in our State or to pay for a part-time student from the 
local university to work and learn more about Internet 
technology, money that we will never recover but we have so 
spend so that someone else could market their products to our 
customers.
    How do I recoup this cost, that lost business opportunity 
and that loss of productivity? That is a question that we are 
all wrestling with and trying to figure out, and I believe that 
the only way we are going to truly be able to do that is to 
have particular bills put into law to allow us to have those 
tools, as I mentioned earlier. Things that we have to worry 
about is a forging of return addresses and forging of contact 
information.
    If I may key on a couple of last points here. It is 
important that whatever bill is put forth does not inhibit the 
freedom to communicate. These are things that have made our 
country great, allows the recipient to decide if the material 
is objectionable, provides for penalties and recoveries of 
cost, requires accurate e-mail headers and prevents forged 
headers. I believe in an opt-in situation, as opposed to an 
opt-out. Provides a way for service providers to easily 
indicate that they do not accept UCE.
    And also an important thing from listening earlier to the 
first panel, we want to make sure that what we do doesn't 
require an ISP to set up their own legal department to deal 
with the additional lawsuits and the subpoenas and the record 
information that we would have to provide for frivolous cases.
    I thank you for your time on this matter, Mr. Chairman, Ms. 
Wilson.
    [The prepared statement of John M. Brown follows:]
   Prepared Statement of John M. Brown, President, iHighway.net, Inc.
    Thank you Mr. Chairman and members of the Committee. I am very 
grateful to have been asked to speak to you today on behalf myself and 
my company. iHighway.net is an Internet Service Provider located in 
Albuquerque, New Mexico and provides services to local area business 
and rural Internet Service Providers.
    These are exciting times, times of prosperity, growth and technical 
advancement. These advancements are revolutionizing the way human kind 
interacts and conducts business. Not only on a local or domestic level 
but more importantly on a global scale.
    It is very important that our local and national leaders carefully 
craft new laws governing these ``new times''. We want to make sure that 
we protect those rights that have allowed our country to have a 
leadership role in this communications revolution. I strongly urge that 
we make sure the rights of our citizens, our netizens are protected. 
That our rights are not eroded away with new laws.
    It is equally important that we consider the rapid pace at which 
technology is changing the way we interact and conduct business. We do 
not want to be to slow or to fast with new laws. We do not want to be 
to slow in change. This is a challenge for our government.
    As a small business owner it is vitally important that I be able to 
communicate using the Internet with potential customers and vendors. By 
using the Internet for business to business commerce, I am ableto act 
quicker than my competition. I am able to act not only locally, but 
globally.
    Recently we finalized a sale of equipment to the country of 
Mozambique, Africa. This transaction was completely handled via E-mail 
and the Internet. This saved on phone costs, time zone changes and the 
like. Without these tools I would not have been able to transact this 
business.
    Thus, it is the responsibility of government that we do not unduly 
restrict or slowdown these emerging and new technologies but, that we 
make sure new laws help promote economic growth for all.
    However, we must also protect our resources from those that would 
miss use them or try to unfairly gain at the expense or cost of 
another.
    Unsolicited Commercial E-mail does just that. It causes computer 
networks to crash, e-mail servers to fill up and netizens to pay for 
the delivery of this unwanted data. We must help provide tools to allow 
people and businesses to control and prevent this unwanted data.
    SPAM is bad. There is no other way around it. You will receive 
information today from several different groups on how SPAM is bad as a 
general issue. I would like to provide the members with specifics on 
how SPAM is bad for my business and my customers.
    A real world data point if you will.
    SPAM impacts the bottom line of my company in several ways.
    1. Distraction from productive work: Since our business is one of 
service, it is vital that we respond to our customers and potential 
customers quickly. Many of our customers choose to communicate with us 
via E-mail. With this in mind we must open and read each and every E-
mail we receive. Currently SPAM represents around 8 to 12 percent of 
the daily new messages in our mail boxes. This is time that could be 
spent in a more profitable way.
    2. Use of limited resources: All E-mail coming to our company 
(excluding our customers at the moment) take up transmission time, disk 
space and other system processing resources. As our company grows we 
receive more E-mail from our customers. Those that send SPAM get to add 
more people within our company to their mailing lists. Our servers must 
be upgraded to store more mail, process more incoming mail, etc. The 
vicious cycle grows. We recently upgraded our internal (not customer 
mail servers) mail server systems. This cost our company several 
thousands of dollars. Being in a rural market we have to be even more 
careful with the money we spend on upgrades.
    Every month we process somewhere around 300,000 to 350,000 E-mail 
messages for some of our customers. An easy 10 percent of those 
messages are SPAM. They are messages trying to get a user to go to a 
pornographic site, sell some snake oil or something. This takes away 
from our customers ability to there jobs. Those customers call us and 
complain about this unwanted E-mail and ask us to ``Can you please just 
stop it. I don't want to receive that mail again''. We have to spend 
time explaining to the customer that we can attempt, but not completely 
stop the unwanted E-mail.
    3. Theft of service: UCE steals services and time from my company. 
In July of this year I did some rough calculations on the cost of UCE. 
I estimated that UCE cost us around $1,300 per month in lost time, lost 
performance, and additional resources that needed to be purchased. 
Money that could be used to train people in our company or to pay for a 
part time student from the local university. Money that we will never 
recover, but yet we spent so that someone else could market their 
products to our customers.
    How do I recoup that cost . . . that loss of business opportunity . 
. . that loss of productivity????
    The forging of return addresses and other information is done by 
the senders of SPAM to make it more difficult to track them down and 
recover my losses. By being more difficult SPAMMERS know that I will be 
less likely to take action.
    We have built several systems to help filter or block UCE from 
known sources. While this has helped it is not something that will 
scale as the volume of UCE increases. We will have to spend more time 
and money on equipment if we want to add more filtering equipment to 
our network. This is neither technically or economically scaleable.
    As a small business that is completely dependant on the Internet 
for our lively hood we strongly urge Congress to work at protecting our 
netizins from the theft of service and cost shifted forms of 
advertisements or unwanted E-mail.
    Congress should craft a law that allows both people and businesses 
to actively recover the losses they incur because of SPAM. Several key 
points of this law should be:

 Does not inhibit the freedom to communicate
 Allows the recipient to decided if material is objectionable
 Provides for penalties and the recovery of costs
 Requires accurate E-mail headers, prevents forged headers, etc
 Requires Opt-In, instead of an Opt-Out solution
 Provides a way for service providers to easily indicate that 
        they do not accept UCE
    If we do not work to stop this problem soon, E-mail and other forms 
of Internet communications may be reduced in there usefulness.There are 
plenty of references on the Internet that talk in more detail about the 
issue of SPAM. Below are some links to those locations. I would urge 
each of you to visit these sites and to read the collection of good 
information located there.
    The Coalition Against Unsolicited Commercial E-mail http://
www.cauce.org
    The Mail Abuse Prevention System http://maps.vix.com
    Spam Abuse Site http://www.abuse.net
    Thank you for your time. I hope that my brief views from running a 
business that has been negatively impacted by SPAM has been helpful.

    Mr. Tauzin. Thank you very much, Mr. Brown.
    Our next witness will be Mr. Alan Charles Raul of Sidley & 
Austin here in Washington, DC.

                 STATEMENT OF ALAN CHARLES RAUL

    Mr. Raul. Good morning, Mr. Chairman and members of the 
committee. My name is Alan Raul. I am a partner of Sidley & 
Austin in Washington, DC, where I head the CyberLaw practice. I 
am testifying today in a personal capacity, and thank you for 
inviting me here.
    Nearly 3 years ago, the New York Times reported that, 
quote, humanity has never before encountered a form of 
advertising that costs its sender so little. Its targets, in 
fact, pay more. And anyone with an Internet correction and a 
list of e-mail addresses can send millions of letters for 
roughly nothing.
    Since then, the proliferation of domestic e-mail intrusions 
has been a factor contributing even more to one of America's 
new great concerns, personal privacy. And for those of us who 
are carrying wireless e-mail the intrusions are not just 
domestic but in fact much closer to our physical persons.
    A Wall Street Journal/NBC poll reported in September 1999 
that loss of personal privacy was the first or second concern 
of 29 percent of respondents. Others issues like terrorism, 
world war, et cetera, had scores of 23 percent or lower.
    Unlike junk postal mail, the costs of unsolicited bulk 
commercial e-mail, or spam, are borne by ISPs and recipients 
rather than the senders. There should be aggressive government 
enforcement of current laws against fraudulent and deceptive 
advertising and trade practices, and I think Ms. Harrington 
from the FTC demonstrated that the FTC is in fact active on 
that beat.
    The anti-spam legislation being considered by this 
committee has important constitutional implications. There is 
an obvious and compelling need to balance the free speech 
rights of advertisers with the rights of the rest of us to 
govern our own space. However, to the extent that a bill 
clearly identifies the substantial governmental interests 
involved, such as protecting household privacy, privacy of 
children, preventing trespasses against personal property, 
deterring fraud and protecting consumers from bearing the costs 
of the very advertising that is directed at them, it should be 
possible to craft a constitutional bill.
    The legislative process that you are engaged in right now 
must develop clear evidence in support of the need to remedy 
these wrongs and reflect that evidence in the bill's finding 
and purposes.
    In addition, any legislative solution should rely on self-
regulatory market-based measures rather than command-and-
control government dictates. It is not possible to predict how 
new technologies and usage patterns will evolve, so rigid 
directives and bureaucracies should be avoided. The Internet, 
even e-mail in particular, is largely flourishing today as a 
result of enlightened governmental oversight and forbearance. 
So far at least when it comes to governing the Internet, it 
seems that to err is human and to forbear is divine.
    To the maximum extent possible, therefore, Internet users 
and providers should be free to establish their own policies. 
Government must play the crucial role of encouraging the 
development and disclosure of applicable usage policies and 
then holding entities accountable for compliance with those 
policies. The current laws against fraudulent, unfair and 
deceptive practices provide the best framework.
    Spam or unsolicited commercial e-mail is an inescapable 
presence for anyone hooked to the Internet. Along with a few 
tidbits of interesting purchase opportunities or promotion 
comes an enormous burden, and it ties up bandwidth for 
providers and trespasses on their property and intrudes upon 
the e-mail accounts of account holders. As a result, spammers 
shift their advertising costs to the conduits and recipients of 
the advertising instead of bearing it themselves.
    With regard to the legislation before the committee, I 
would support the strong statements of governmental interest 
that Mrs. Wilson spoke about earlier with regard to her bill in 
her findings and purposes section. I would encourage the 
committee to consider the virtues of legislation that provides 
for maximum flexibility, that encourages the development and 
posting of private bulk e-mail policies by the ISPs and other 
providers and looks to market-based solutions and agreements 
between the e-mail providers and the bulk e-mail senders.
    Truthful self-identification of senders is another crucial 
component, I think, to avoid fraud and deception. The ease of 
the individual's ability to remove himself or herself from 
lists they don't want to be on is another important factor and 
relying on traditional government enforcement such as that of 
the FTC against unfair and deceptive practices.
    I would suggest that the committee should seek to avoid 
rigid governmental lists, a proliferation of private rights of 
action and, of course, any content-based restrictions on 
speech.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Alan Charles Raul follows:]
   Prepared Statement of Alan Charles Raul, Partner, Sidley & Austin
    Mr. Chairman and Members of the Committee, my name is Alan Raul. I 
am a partner of Sidley & Austin in Washington, D.C., where I head the 
CyberLaw practice. I am testifying today in a personal capacity.
                              introduction
    Nearly three years ago, the New York Times reported that ``humanity 
has never before encountered a form of advertising that costs its 
senders so little. Its targets, in fact, pay more . . . Anyone with an 
Internet connection and a list of E-mail addresses can send millions of 
letters for, roughly, nothing.'' New York Times, Dec. 22, 1996, sec. 6, 
at 22.
    This proliferation of domestic intrusions runs directly into what 
Americans are most concerned about looking ahead to the coming century. 
In a Wall Street Journal/NBC News poll reported in September, 1999, 
``Loss of personal privacy'' was the first or second concern of 29 
percent of respondents. All other issues, such a terrorism, world war, 
and global warming had scores of 23 percent or less. Wall Street 
Journal, Sept. 16, 1999, at A10.
    Unlike junk postal mail, the costs of unsolicited bulk commercial 
e-mail (``spam'') are borne by ISPs and recipients rather than the 
senders. There should be aggressive government enforcement of current 
laws against fraudulent and deceptive advertising and trade practices.
    The ``anti-spam'' legislation being considered by this Subcommittee 
has important constitutional implications. There is an obvious, and 
compelling, need to balance the free speech rights of advertisers with 
the rights of the rest of us to govern our own space. However, to the 
extent that a bill clearly identifies the substantial governmental 
interests--such as protecting household privacy, preventing trespasses 
against private property, deterring fraud, and protecting consumers 
from bearing the cost of the very advertising directed at them--it may 
be possible to craft a constitutional bill. The legislative process 
must develop clear evidence in support of the need to remedy these 
wrongs, and reflect that evidence in the bill's ``findings'' and 
``purposes.''
    In addition, any legislative solution should rely on self-
regulatory measures as opposed to intrusive or heavy-handed 
governmental dictates. It is not possible to predict how new 
technologies and usage patterns will evolve, so command-and-control 
directives will not be helpful, and additional regulatory structures or 
bureaucracies should be avoided. The Internet--and even e-mail--is 
largely flourishing today as a result of enlightened governmental 
oversight and forbearance. So far, at least, when it comes to governing 
the Internet, it is plain that ``to err is human, and to forbear is 
divine.''
    To the maximum extent possible, therefore, Internet users and 
providers should be free to establish their own policies. Government 
must play the crucial role of encouraging the development and 
disclosure of applicable usage policies, and then holding entities 
accountable for compliance with those policies. The current laws 
against fraudulent, unfair and deceptive practices provide the best 
framework.
                       the problems with ``spam''
    ``Spam'' or unsolicited commercial e-mail (UCE) is an inescapable 
and enlarging presence for any person or household hooked up to the 
Internet. Along with a few tid-bits of interesting purchase 
opportunities or promotions, comes an enormous burden. Vast quantities 
of e-mail that is ``junk'' to just about everybody ties up bandwidth 
and trespasses on the property of Internet Service Providers (ISPs) and 
e-mail account holders. As a result, ``spammers'' shift their 
advertising costs to the conduits and recipients of the advertising, 
instead of bearing it themselves. To add injury to this insult, we 
recipients of spam have our own home and e-mail accounts intruded upon, 
and our privacy disturbed. The best that can be said about it is that 
it is a nuisance. According to the Federal Trade Commission, it can be 
much worse than that: ``Email boxes are filling up with more offers for 
business opportunities than any other kind of unsolicited commercial 
email. That's a problem . . . because many of these offers are scams. 
See FTC Consumer Alert!, ``FTC Names Its Dirty Dozen: 12 Scams Most 
Likely to Arrive Via Bulk Email,'' .
           first amendment and ``commercial speech'' analysis
    Because the ``Anti-Spam'' legislation would curtail the ability of 
e-mail advertisers to ``speak,'' the constitutionality of any pending 
legislation must be carefully considered.
``Reasonable Fit'' with Substantial Governmental Interest.
    In determining whether a statute regulating commercial speech 
violates the First Amendment of the Constitution, courts apply the test 
formulated in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n 
of NY, 447 U.S. 557 (1980). Such a statute is valid if:

--it is supported by a substantial governmental interest.
--directly advances that governmental interest.
--is not more extensive than necessary to serve that interest.
    The final two prongs of this test have since been explained as 
requiring that there be a ``reasonable `fit' between the legislature's 
ends and the means chosen to accomplish those ends.'' Board of Trustees 
of State University of N.Y. v. Fox, 492 U.S. 469, 480 (1989)(emphasis 
added); Cincinnati v. Discovery Network Inc., 507 U.S. 410, 416 (1993).
    The mere existence of some imaginable alternative that might be 
less burdensome on speech does not mean that the restriction is not 
narrowly tailored for purposes of First Amendment analysis.
Mailbox Privacy.
    The Supreme Court has upheld a federal statute under which a person 
could require that a mailer remove the person's name from its mailing 
lists and stop all future mailings to the householder. See Rowan v. 
U.S. Post Office Dep't, 397 U.S. 728, 729- 30 (1970). The statute 
provided a procedure whereby householders could insulate themselves 
from ``pandering advertisements'' directed to them in the mail, ``which 
the addressee in his sole discretion believes to be erotically arousing 
or sexually provocative.'' It was Congress' objective to protect the 
privacy of homes from such material and place the judgment of what 
constitutes and offensive invasion of these interests in the hands of 
the addressee.
    The Supreme Court concluded that:

--``a sufficient measure of individual autonomy must survive to permit 
        every householder to exercise control over unwanted mail.'' 397 
        U.S. at 736.
--``a mailer's right to communicate must stop at the mailbox of an 
        unreceptive addressee.'' 397 U.S. at 736-37.
--``To hold less would tend to licence a form of trespass.'' 397 U.S. 
        at 737.
--``We therefore categorically reject the argument that vendor has a 
        right under the Constitution or otherwise to send unwanted 
        material into the home of another.'' 397 U.S. at 738.
    While the Rowan decision predated the Supreme Court's decisions in 
Central Hudson and Cincinnati v. Discovery Network, 507 U.S. 410 
(1993), the Supreme Court should continue to be receptive to 
congressional efforts to protect domestic privacy and spare individuals 
from unwanted communications at home. Moreover, to the extent the 
homeowner decides what solicitations are offensive, the government is 
not making content-based distinctions that would more clearly run afoul 
of the First Amendment.
Protection for Children.
    To the extent the pending ``anti-spam'' legislation seeks to 
protect the welfare of children, Congress may enjoy additional 
latitude. The Supreme Court has repeatedly recognized ``children 
deserve special solicitude in the First Amendment balance because they 
lack the ability to assess and analyze fully the information presented 
through commercial media.'' Anheuser-Busch, Inc. v. Schmoke, 101 F.3d 
325, 329-30 (4th Cir. 1996)(summarizing the additional restriction 
allowed by the Supreme Court under the Cable Television Consumer 
Protection and Competition Act, the Public Telecommunications Act, and 
with respect to pornography). As the Court recognized long ago, ``[a] 
democratic society rests, for its continuance, upon the healthy, well-
rounded growth of young people into full maturity as citizens.'' Prince 
v. Massachusetts, 321 U.S. 158, 168 (1944).
           telephone consumer protection act; a good analogy
    In 1991, President Bush signed the Telephone Consumer Protection 
Act (TCPA), 47 U.S.C Sec. 227. Congress enacted legislation to restrict 
automated and prerecorded telephone calls as well as unsolicited 
commercial faxes because it found that ``unrestricted telemarketing . . 
. can be an intrusive invasion of privacy.'' The TCPA defined 
``unsolicited advertisement'' as ``any material advertising the 
commercial availability of quality of any property, goods, or services 
which is transmitted to any person without that person's prior express 
invitation or permission.''
    The TCPA provides a potential model for the ``Anti-Spam'' bills 
pending before this Congress. In the TCPA, Congress was concerned about 
invasions of privacy and shifting the burden of advertising costs to 
the consumer. These issues are directly analogous to the concerns over 
unsolicited commercial e-mail.
Congressional Findings.
    In the TCPA, Congress found that:

--``Unrestricted telemarketing . . . can be an intrusive invasion of 
        privacy.''
--``Many consumers are outraged over the proliferation of intrusive, 
        nuisance calls to their homes.''
--``Evidence compiled by the Congress indicates that residential 
        telephone subscribers consider automated or prerecorded 
        telephone calls . . . to be a nuisance and an invasion of 
        privacy.''
--``Individuals' privacy rights . . . and commercial freedoms of speech 
        and trade must be balanced in a way that protects the privacy 
        of individuals and permits legitimate telemarketing 
        practices.''
Legislative Prohibitions on Unsolicited Commercial Communications.
    The TCPA reined in nuisance telemarketing by, among other things, 
making it unlawful ``to initiate any telephone call to any residential 
telephone line using an artificial or prerecorded voice to deliver a 
message without the prior express consent of the called party'' and to 
``use any telephone facsimile machine, computer, or other device to 
send an unsolicited advertisement to a telephone facsimile machine.''
Private Right of Action for Damages and Injunction.
    The TCPA granted any person a private right of action to bring suit 
in state courts to enjoin violations of the Act, and to recover actual 
monetary losses from such violations or to receive $500 in damages for 
each violation, whichever is greater. Courts were authorized to award 
treble damages for willful or knowing violations.
Required Identification.
    The TCPA requires fax messages to identify the name and telephone 
number of the business or other entity sending the message, and the 
date and time of the transmission.
FCC Rules.
    The Federal Communications Commission (FCC) was authorized to 
prescribe applicable rules and exemptions. The TCPA also authorized the 
FCC to require the establishment and operation of a single national 
database of residential telephone subscribers who object to receiving 
telephone solicitations. The Act did not authorize the FCC to exempt 
any recorded telephone messages containing any unsolicited commercial 
advertising.
    The FCC has adopted rules implementing the TCPA. See 47 C.F.R. 
Sec. 64.1200. The FCC has not required the establishment of a national 
database, but does require telephone solicitors to maintain a ``Do Not 
Call'' list of persons who do not wish to receive telephone 
solicitations, together with a written policy for maintaining such 
list. ``Do Not Call'' requests must be honored for 10 years from the 
time the request is made.
TCPA Has Been Held Constitutional.
    The Ninth Circuit has upheld the TCPA's constitutionality in 
Destination Ventures, Ltd. v. FCC, 46 F.3d 54, (9th Cir. 1995), and 
Moser v. FCC, 46 F.3d 970 (9th Cir. 1995), cert. denied, 515 U.S. 1161. 
See also Kenro, Inc. v. Fax Daily, Inc., 962 F. Supp. 1162 (S.D. 
Indiana 1997).
    These decisions found Congress' regulation of commercial speech in 
the TCPA was justified on grounds of protecting the public from 
invasions of privacy and preventing the shift of advertising costs to 
consumers.

--``There was significant evidence before Congress of consumer concerns 
        about telephone solicitation in general and about automated 
        calls in particular. . . .  We conclude that Congress 
        accurately identified automated telemarketing calls as a threat 
        to privacy.'' 46 F.3d at 974.
--``That some companies prefer the cost and efficiency of automated 
        telemarketing does not prevent Congress from restricting the 
        practice.'' Id. at 975.
--``[U]nsolicited commercial fax solicitations are responsible for the 
        bulk of advertising cost shifting. Thus, banning them is a 
        reasonable means to achieve Congress's goal of reducing cost 
        shifting.'' 46 F.3d at 56.
    The TCPA's jurisdictional provisions, which are largely repeated in 
H.R. 3113, have been challenged on numerous occasions. To avoid 
uncertainty, Congress could find that federal legislation regarding 
``spam'' is necessary because Internet operations are inherently 
interstate. See, e.g., ErieNet, Inc. v. Velocity Net, Inc., 156 F.3d 
513, 515 (3rd Cir. 1998); Nicholson v. Hooters, 136 F.3d 1287, 1287-88 
(11th Cir.1998), modified, 140 F.3d 898 (11th Cir.1998); Chair King, 
Inc. v. Houston Cellular Corp., 131 F.3d 507, 509 (5th Cir.1997).
    Moreover, Congress may wish to address the Tenth Amendment issues 
inherent in assigning enforcement of a federal cause of action to the 
State courts. Cf. International Science & Tech. Inst., Inc. v. Inacom 
Communications, Inc., 106 F.3d 1146 (4th Cir.1997) (holding that the 
TCPA's provision of exclusive state court jurisdiction did not 
impermissibly commandeer state courts in violation of Tenth Amendment).
               key provisions of the ``anti-spam'' bills
    H.R. 2162, the ``Can Spam Act,'' is essentially based on a 
``property rights'' model. Persons are prohibited from using--i.e., 
trespassing against--the equipment of an electronic service provider in 
violation of the provider's posted e-mail policies.
    The bill would authorize federal and state courts to issue 
injunctions and award damages for such unauthorized uses of a 
provider's equipment. Only injured electronic service providers would 
have private right of action to enforce the bill's civil provisions. 
The bill's restrictions apply only to ``commercial electronic mail,'' 
which is defined as e-mails ``the principal purpose of which is to 
promote, directly or indirectly, the sale or other distribution of 
goods or services to the recipient.'' Other than the commercial nature 
of the message, no other content restriction is implicated by the bill.
    The bill would also criminalize the use of another person's 
Internet domain name in connection with sending e-mail messages. 
Fraudulent ``headers'' would thus be banned. This provision is 
analogous to the TCPA's requirement that telephone solicitations 
identify the person or entity making the solicitation.
    H.R. 3113, the ``Unsolicited Electronic Mail Act of 1999,'' is 
considerably more complex and ``regulatory'' in nature. The bill sets 
forth numerous ``findings'' that effectively document the substantial 
governmental interest in regulating unsolicited e-mails, and 
articulates the fine line that Congress must follow: ``In legislating 
against certain abuses on the Internet, Congress should be very careful 
to avoid infringing in any way upon constitutionally protected rights, 
including the rights of assembly, free speech, and privacy.''
    The bill would require a federal agency (the FCC in the October 20 
version of the bill) to maintain a list of individuals who do not wish 
to receive unsolicited commercial e-mail or unsolicited ``pandering'' 
e-mail, or both. No person would be allowed to transmit such 
unsolicited e-mails to any individual whose name has been on the list 
for more than 30 days. The federal agency would be empowered to issue 
an order directing the initiator of unsolicited e-mails to refrain from 
sending further messages.
    These provisions are analogous to the design of the postal statute 
upheld by the Supreme Court in the Rowan decision discussed above. 
However, H.R. 3113 would depend on the existence of an unwieldy 
bureaucracy and on potentially problematic exchanges of lists between 
the federal agency and private parties. Inevitably, H.R. 3113's 
``pandering'' provisions would involve the federal government in making 
content-based judgments in tension with the First Amendment.
    It is worth noting that the FCC has declined to exercise its 
authority under the TCPA to establish its own ``Do Not Call'' list.
    H.R. 3113 would also prohibit the transmission of unsolicited e-
mails unless such messages contain a reply electronic mail address to 
which the recipient may send a reply indicating a desire not to receive 
any further messages.
    H.R. 3113 authorizes a private right of action by any injured party 
in state court. The federal agency and injured parties would be 
authorized to enforce the official cease and desist orders in court.
    H.R. 3113 also contains certain provisions based on a ``property 
rights'' model. ISPs are authorized to develop usage policies and to 
decline to transmit unsolicited e-mails to subscribers without 
compensation from the senders. This principle is sound, but it is not 
clear why a new federal law would be required to establish the 
proposition. Reliance on a federal agency to enforce these provisions 
would be a departure from the current philosophy that looks to self-
regulation first for governing Internet activities.
    H.R. 1910, the ``E-Mail User Protection Act,'' proscribes a number 
of activities such as initiating unsolicited e-mails with false sender 
names, return addresses or headers; failure to comply with the request 
of recipient not to receive any further unsolicited messages; use or 
distribution of software designed to create false Internet domain, 
header, or originating e-mail information, etc.
    The bill essentially deems these activities to be unfair or 
deceptive trade practices, and the FTC is given authority to enforce 
violations under its existing statutory authority.
    Criminal sanctions are provided for intentional misappropriations 
of the name or e-mail address of another person, of for intentionally 
transmitting unsolicited e-mail to an individual who has specifically 
communicated to the violator that individual's desire not to receive 
such e-mail.
    The bill also create a private cause of action for injured ISPs and 
e-mail recipients.
                     common law ``spam'' litigation
    The scale of the spam invasion into the homes of citizens and the 
servers of ISPs has already generated significant litigation 
opportunities as ISPs attempt to adapt the common law to their current 
security and privacy needs.
    America On Line has led the pack in this regard, aggressively 
pursing spammers under a variety of legal theories. See, e.g., America 
Online v. Greatdeals, No. 99-62-A (E.D. Va. 1999). Although the 
business practices of spammers have on numerous occasions subjected 
them to fraud, deceptive trade practice, or intellectual property-
rights liability, suits against legitimate but unsolicited materials 
have relied upon traditional theories of trespass and trespass to 
chattels.
    In Cyber Promotions, Inc. v. American Online, 948 F. Supp. 436 
(E.D. PA 1996)(receiving a transfer of, and consolidating, AOL's E.D. 
Virginia complaint against Cyber Promotions as counterclaims in the 
E.D. PA action), an ISP was sued for interfering with the delivery of 
spam e-mails. The court granted AOL's motion for summary judgment 
holding that bulk transmissions of commercial e-mail are not 
constitutionally protected activity. The court rejected the argument 
that AOL's e-mail service constituted a ``public function'' or ``state 
action'' of any kind.

    Mr. Tauzin. Thank you very much, Mr. Raul.
    Next will be Mr. Michael Russina, Senior Director of 
Systems Operations at SBC Communications in San Antonio, Texas.
    Mr. Green, would you do the honors of introducing our 
guest?
    Mr. Green. Thank you, Mr. Chairman.
    I would like to thank Michael Russina from SBC on very 
short notice for being able to be here when our other witness 
from Texas couldn't be.
    Mr. Russina is the Senior Director of Systems Operations at 
SBC where he originated SBC's Internet service company and 
helped establish the necessary infrastructure to provide SBC 
customers with Internet access, e-mail, and personal web pages. 
Before that, he was with Microsoft as an systems engineer. He 
is a graduate of Southwest Missouri State, and I will provide 
the committee with his bio. But, Mr. Chairman, he came back to 
Texas as quick as he could from both Microsoft and Southwestern 
Missouri.
    Mr. Tauzin. I just wanted to welcome you, and I wanted 
everyone to know that you came on very short notice, and we 
deeply appreciate your attending the committee hearing today.

                  STATEMENT OF MICHAEL RUSSINA

    Mr. Russina. Thank you.
    Mr. Chairman and members the committee, my name is Michael 
Russina. I am Director of Systems Operations of SBC Internet 
Services. SBC Internet Services is a subsidiary of SBC 
Communications. SBC Internet Services is a leading provider of 
Internet service in 13 States.
    My function within SBC Internet is to build and maintain 
value-added services that the SBC Internet companies offer for 
our customers. For example, USENET, e-mail, authentication and 
personal web service are under my supervision. This represents 
roughly 200 separate distributed systems.
    I would like to thank you for this opportunity to present 
SBC Internet's comments on the activity commonly referred to as 
spamming or the sending of unsolicited bulk commercial 
electronic mail.
    SBC Internet Services supports State and Federal efforts to 
reduce or stop spamming. The transport and delivery of bulk 
electronic mail saddles Internet service providers such as SBC 
Internet with significant expense. There is also a goodwill 
cost to ISPs as reflected in customer complaints about receipt 
of spam.
    It is relatively cheap and easy for a telemarketer to send 
bulk e-mail. All a telemarketer needs is a dial-up connection 
and a PC. The burden and cost of spamming falls on the ISP and 
the end user. It is a substantial burden for an ISP to process 
and store the vast amount of data generated by bulk mail 
messages. Spamming contributes to many of the access, speed and 
reliability problems of ISPs. Indeed, many large ISPs have 
suffered major system outages as the result of massive junk e-
mail campaigns.
    Today, roughly 35 percent of all the e-mail transmitted 
over SBC Internet systems in our Pacific Bell and Southwestern 
Bell regions is bulk e-mail, and the amount of such traffic is 
consistently increasing.
    SBC Internet has just completed a $1.96 million upgrade on 
its e-mail infrastructure in each of the regions in order to 
handle anticipated electronic messaging traffic to and from its 
subscribers over the next few years. If the volume of 
unsolicited commercial e-mail is not substantially reduced, we 
anticipate it may be necessary to accelerate additional 
infrastructure enhancements at the cost of $686,000 per 
region--35 percent of $1.96 million is how we derive that--or 
$1.37 million per year total hardware cost to SBC Internet over 
those two regions.
    Not reflected in the above costs is the additional costs in 
man hours occasioned by spamming. Our network personnel must 
continually monitor our system for problems when a spam attack 
occurs or our systems go from a normal to a busy state, and our 
personnel must immediately react to determine if there is a 
system problem or just a spam attack. Once it is verified that 
it is a spam attack, they must work to ensure that the large 
volume of messages does not bring the system down.
    In California and Texas, SBC Internet operates under a zero 
tolerance policy for unsolicited bulk e-mail or spam. 
Therefore, if our network personnel determine that it is a spam 
attack, then the company must expend man hours to track the 
source and stop the spam.
    Furthermore, many man hours are also expended on responding 
to customer e-mail and telephone complaints about receipt of 
spam. Our policy department handlings around 1,000 messages a 
day. Of those that turn out to be actionable complaints, over 
80 percent relate to an unsolicited bulk e-mail, whether the 
complaints are from our own customers complaining about 
receiving it or from outside receivers complaining about our 
customers sending it. The policy department devotes most of its 
time, therefore, to this problem. The cost is measured not only 
in dollars for the labor expended to handle these complaints 
but also in the loss of goodwill with our customers, an 
immeasurable expense.
    Fraud and spam only detract from the Internet user's 
experience with e-mail, and as a company which seeks to be a 
high-tech leader we want to make sure our customers always feel 
comfortable using e-mail to communicate. Unless the growth of 
unsolicited commercial e-mail is stopped, it could eventually 
destroy the usefulness and effectiveness of e-mail as a 
communication tool.
    SBC Internet supports legislative efforts that will help 
put an end to e-mail abuse. To the extent that Congressman 
Miller's bill, H.R. 2162, will lessen the flow of spamming by 
prohibiting telemarketers from sending unsolicited commercial 
e-mail over the system of an ISP in violation of that ISP's 
policy, SBC Communication supports the legislation.
    We also support the efforts of Congressman Green in his 
legislation, H.R. 1910, to end the fraudulent practices of many 
telemarketers which are an enormous source of the spam problem. 
False addresses and domains can cause mass system overloads and 
can damage the reputation of individuals and ISPs that are 
falsely portrayed as the spammer.
    Thank you again for letting me testify today. I hope we can 
work together to find a solution to this growing problem.
    [The prepared statement of Michael Russina follows:]
 Prepared Statement of Michael Russina, Director, Systems Operations, 
                         SBC Internet Services
    Mr. Chairman and Members of the Committee. My name is Michael 
Russina. I am Director of Systems Operations at SBC Internet Services.
    SBC Internet Services is a subsidiary of SBC Communications, Inc. 
SBC Internet Services is a leading provider of Internet access in 13 
states under the brand names of Pacific Bell Internet operating in 
California, Nevada Bell Internet, Southwestern Bell Internet operating 
in Texas, Missouri, Kansas, Arkansas, and Oklahoma, and SNET Internet 
in Connecticut. We have recently acquired Ameritech and its subsidiary 
ISP--Ameritech Interactive Media Services, which was rated by PC World 
Magazine as the best regional ISP in the Nation. SBC Communications has 
committed itself to providing high-speed Digital Subscriber Line (DSL) 
technology to more than 80 percent of its customers by the end of 2002. 
Under this broadband initiative, SBC's local network will be 
transformed into a next-generation, packet-switched advanced broadband 
network.
    My function within SBC Internet is to build and maintain the value-
added services that the SBC Internet Companies offer for our customers. 
For example, USENET, e-mail, authentication, and personal web servers 
are all under my supervision. This represents roughly 200 separate, 
distributed systems.
    I would like to thank you for this opportunity to present SBC 
Internet's comments on the activity commonly referred to as 
``spamming'' or the sending of unsolicited bulk commercial electronic 
mail.
    SBC Internet Services supports state and federal efforts to reduce 
or stop spamming. The transport and delivery of bulk electronic mail 
saddles Internet service providers (ISPs), such as SBC Internet, with 
significant expense. There is also a ``goodwill'' cost to ISPs as 
reflected in customer complaints about receipt of spam.
    It is relatively cheap and easy for a telemarketer to send bulk e-
mail. All a telemarketer needs is a dial-up connection and a PC. The 
burden and cost of spamming falls on the ISP and the end user. It is a 
substantial burden for an ISP to process and store the vast amount of 
data generated by bulk mail messages. Spamming contributes to many of 
the access, speed, and reliability problems of ISPs. Indeed, many large 
ISPs have suffered major system outages as the result of massive junk 
e-mail campaigns.
    Today, roughly 35 percent of the all e-mail transmitted over SBC 
Internet's systems in our Pacific Bell and Southwestern Bell regions is 
bulk e-mail. And the amount of such traffic is constantly increasing. 
SBC Internet has just completed a $1.96 million upgrade of its e-mail 
infrastructure in each of these regions in order to handle anticipated 
electronic messaging traffic to and from its subscribers over the next 
few years. If the volume of unsolicited commercial e-mail is not 
substantially reduced, we estimate that it may be necessary to 
accelerate additional infrastructure enhancements at the cost of 
$686,000 per region (35 percent of $1.96 million) or $1,372,000 per 
year total hardware cost to SBC Internet for those two regions.
    Not reflected in the above cost is the additional costs in man 
hours occasioned by spamming. Our network personnel must continually 
monitor our systems for problems. When a spam attack occurs our systems 
go from a normal state to a busy state, and our personnel must 
immediately react to determine if there is a system problem or just a 
spam attack. Once it is verified as a spam attack, they must work to 
ensure that the large volume of messages does not bring the system 
down.
    In California and Texas, SBC Internet operates under a zero 
tolerance policy for unsolicited bulk e-mail or spam. Therefore if our 
network personnel determine it is a spam attack, than the company must 
expend man-hours to track its source and stop the spam.
    Furthermore, many man-hours are also expended on responding to 
customer e-mail and telephone complaints about receipt of spam. Our 
policy department handles around 1000 messages a day. Of those that 
turn out to be actionable complaints, over 80% relate to unsolicited 
bulk e-mail (whether the complaints are from our own customers 
complaining about receiving it, or from outside users complaining about 
our customers sending it). The policy department devotes most of its 
time, therefore, to this problem. The cost here is measured not only in 
dollars for the labor expended to handle these complaints, but also in 
loss of goodwill with our customers--an unmeasurable expense.
    Fraud and/or spam only detract from the Internet user's experience 
with e-mail, and as a company which seeks to be a high-tech leader, we 
want to make sure our customers always feel comfortable using e-mail to 
communicate. Unless the growth of unsolicited commercial e-mail is 
stopped, it could eventually destroy the usefulness and effectiveness 
of e-mail as a communication tool.
    SBC Internet supports legislative efforts that will help put an end 
to e-mail abuse. To the extent that Congressman Miller's bill, H.R. 
2162, will lessen the flow of spamming by prohibiting telemarketers 
from sending unsolicited commercial e-mail over the system of an ISP in 
violation of that ISP's policies, SBC Communications supports the 
legislation.
    We also support the efforts of Congressman Green, in his 
legislation, H.R. 1910, to end the fraudulent practices of many 
telemarketers--an enormous source of the spam problem. False addresses 
and domains can cause mass system overloads and can damage the 
reputation of individuals and ISPs that are falsely portrayed as the 
spammer.
    Thank you again for letting me testify today. I hope we can work 
together to find a solution to this growing problem.

    Mr. Tauzin. Thank you very much, Mr. Russina.
    Next will be Mr. Charles Kennedy, Morrison & Forester here 
in Washington, DC.

                 STATEMENT OF CHARLES H. KENNEDY

    Mr. Kennedy. Thank you, Mr. Chairman.
    I teach Internet law and computer law at the Catholic 
University of America here in the District, and I understand 
that is why I am here today, to talk about law.
    When I teach spam, by the way, to my students----
    Mr. Tauzin. Is that Catholic law or regular law?
    Mr. Kennedy. I am not qualified to teach Catholic law. It 
is the regular stuff.
    When I teach spam, by the way, I always teach the Monty 
Python sketch that was discussed in the first panel. That 
sketch, to complete the record, is set in a seaside resort in 
the north of England. Everything on the menu has Spam in it. So 
the waitress, who is one of the Monty Python guys in a dress, 
not a pretty sight, recites the menu and says Spam over and 
over and over. And at some point a Viking longboat beaches 
itself outside. A bunch of Vikings come in, and they start 
chanting ``Spam'', pounding on the table until there is a 
crescendo of the word ``Spam.'' a comparison with unsolicited 
commercial e-mail should be obvious.
    Mr. Tauzin. Are you going to suggest this as a way to mete 
out an appropriate punishment for the spammers?
    Mr. Kennedy. Whatever the Vikings did.
    I will turn my attention, Mr. Chairman, to the pending 
bills.
    My written testimony, which I will not repeat, is in two 
sections.
    First, the restrictions on commercial e-mail. As the 
subcommittee probably knows, restrictions on commercial speech 
are subject to a more lenient standard of review. I see no 
reason why an anti-spam statute directed to commercial e-mail 
should not survive judicial review under the first amendment. I 
put a few pointers in my testimony as to how that might more 
successfully be accomplished.
    I would draw the subcommittee's attention more 
particularly, though, to those provisions in the pending bills 
that appear to reach noncommercial e-mail. H.R. 3113, as Mrs. 
Wilson said, has a restriction on pandering e-mail, and it 
appears to make the definition of pandering within the 
discretion of the recipient, and it appears, as presently 
drafted, to cause the initiator of the e-mail to decide at his 
or her peril as to whether the recipient will regard it as 
pandering. Now that section is based on a postal statute that 
was upheld by a Supreme Court decision in 1970; and, as my 
written testimony suggests, with little tweaking it should be 
just fine.
    H.R. 3024 talks about both commercial and noncommercial e-
mail and requires both to have accurate address elements. Now 
if a commercial spammer uses an incorrect address element it is 
usually for purposes of evading anti-spam filtering by an ISP, 
and it might also be a trademark violation or an unfair trade 
practice within the jurisdiction of the FTC.
    But individuals often conceal their identity to avoid 
embarrassment or retribution, and there is in constitutional 
law a right to speak anonymously, so I would have some concern 
about extending that prohibition to noncommercial speech.
    In general, Mr. Chairman, I think that restriction of these 
bills to commercial unsolicited e-mail would achieve 
predominantly the purpose of this legislation and would not 
cause to you get involved in a higher standard of scrutiny if 
the statute is challenged on first amendment grounds.
    In conclusion, as an Internet user, I welcome what the 
subcommittee is doing, and I hope your efforts do result in 
legislation in this Congress. Thank you.
    [The prepared statement of Charles H. Kennedy follows:]
   Prepared Statement of Charles H. Kennedy, Morrison & Forester LLP
    I appreciate the Committee's invitation to offer my views on 
legislative solutions to the problem of unsolicited commercial email 
(``UCE''). The purpose of my testimony is to describe briefly the 
constitutional framework within which the courts will entertain 
challenges to such legislation. With that framework in mind, it should 
be possible to draft a statute that will withstand judicial review and 
accomplish the Congress's purpose of regulating practices that deceive, 
annoy and burden Internet users and service providers.
    My views on this subject were developed in the course of teaching 
Computer Law and New Technologies and the Law at The Catholic 
University of America. I also am Of Counsel to Morrison & Foerster LLP, 
but the opinions expressed in this testimony are mine and not 
necessarily those of any client of Morrison & Foerster.
    As I explain in more detail below, any statute that limits UCE will 
have stronger prospects upon judicial review if it is confined to 
commercial bulk, unsolicited email and is supported by specific 
legislative findings that articulate a substantial governmental 
interest and demonstrate the Congress's careful consideration of both 
the costs and benefits of the statute's restrictions on speech. In this 
connection, the most plausible basis for anti-UCE legislation is 
avoidance of cost-shifting, followed by preservation of the societal 
benefits of the Internet and protection of Internet users' privacy. As 
I also point out below, anti-UCE statutes that specify forbidden 
content, regulate non-commercial email or prohibit concealment of the 
identity of senders of non-commercial messages will invite closer 
scrutiny by reviewing courts.
        i. the pending bills as regulations of commercial speech
    From a constitutional point of view, the most important fact about 
H.R. 3113, H.R. 2162 and H.R. 1910 is that they apply primarily to 
commercial email. (I leave aside, for the moment, H.R. 3024 and the 
restrictions proposed by H.R. 3113 for pandering email, which I address 
separately below.) Because of this limitation, any claim that a statute 
based upon one of these bills violates the First Amendment will be 
assessed under the law of commercial speech. The Supreme Court has made 
it clear that restrictions on commercial speech will be upheld more 
readily--that is, will be scrutinized somewhat more leniently--than 
content-based restrictions on lawful, non-commercial speech.\1\
---------------------------------------------------------------------------
    \1\ See Central Hudson Gas & Electric Corp. v. Public Service 
Commission of New York, 447 U.S. 557 564 (1980) (``Central Hudson:).
---------------------------------------------------------------------------
    Specifically, any court that hears a First Amendment challenge to 
an anti-UCE statute will ask four questions. First, does the statute 
regulate lawful, non-misleading speech? Second, has the Government 
asserted a substantial interest that the legislation is intended to 
serve? Third, does the statute directly advance the Government's 
asserted interest? And fourth, are the statute's restrictions no more 
extensive than necessary to serve the Government's asserted interest? 
\2\
---------------------------------------------------------------------------
    \2\ Central Hudson, supra, 447 U.S. at 566.
---------------------------------------------------------------------------
    Although this standard is less exacting than the ``strict 
scrutiny'' standard that the Supreme Court applies to most restrictions 
on the content of lawful non-commercial speech, the commercial speech, 
standard is much less than a free pass for legislators, as numerous 
decisions rejecting restrictions on commercial speech show.\3\ 
Accordingly, any anti-UCE statute should be drafted with each of the 
four elements of the commercial speech standard clearly in mind.\4\ I'd 
like to address each of those elements in turn and apply those elements 
specifically to the provisions of H.R. 3113, H.R. 2162 and H.R. 1910.
---------------------------------------------------------------------------
    \3\ See 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996); 
City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993); 
Linmark Associates, Inc. v. Citizens' Consumer Council, Inc. 431 U.S. 
85 (1977); Virginia State Board of Pharmacy v. Virginia Citizens' 
Consumer Council, Inc., 425 U.S. 748 (1976).
    \4\ Some have suggested that Internet regulation should be subject 
to a separate, media-specific level of scrutiny such as the one the 
courts have acknowledged for the broadcast medium. No court has adopted 
this suggestion, however, and we should assume that the usual standard 
of review for restrictions on commercial speech will apply.
---------------------------------------------------------------------------
A. Does The Statute Regulate Lawful, Nonmisleading Speech?
    So long as the commercial speech that an anti-UCE statute addresses 
involves lawful activity and is not deceptive, that speech is protected 
under the First Amendment and the statute must meet all four elements 
of the commercial speech test. Accordingly, the first step in assessing 
the pending bills is to determine whether, and to what extent, they 
regulate lawful and nonmisleading speech.
    H.R. 3113, 2162 and 1910 all contain some provisions that are 
fairly read as regulating lawful, non-misleading speech. Specifically, 
each bill limits the ability of advertisers to send unsolicited, 
commercial email regardless of whether the content of those messages is 
unlawful or deceptive. Because they will sweep lawful, truthful speech 
within their restrictions, these provisions of the three bills must 
satisfy all four elements of the commercial speech test.
    Two of the bills also prohibit practices that mislead the 
recipients of email messages as to the origin of those messages. 
Specifically, H.R. 2162 prohibits the unauthorized use of the domain 
name of another in connection with an email message where such misuse 
causes harm to a computer, computer system or network; and H.R. 1910 
makes it unlawful to send UCE that contains a false, fictitious or 
misappropriated sender name, return address, or contact person name and 
telephone number. To the extent the practices prohibited in these 
sections of H.R. 2162 and 1910 are misleading and potentially 
fraudulent, they appear not to be protected as commercial speech under 
the First Amendment. Accordingly, a reviewing court should uphold these 
provisions without reviewing them under the last three elements of the 
commercial speech standard.
B. Does The Statute Assert A Substantial Governmental Interest?
    In order to pass constitutional muster, an anti-UCE statute should 
articulate a substantial, plausible governmental interest that the 
restrictions contained in the statute are designed to promote. Although 
a reviewing court will give some deference to the Congress's judgment 
that an asserted interest is substantial, drafters of commercial speech 
legislation should be prepared for close judicial scrutiny on this 
point and should articulate significant interests that can be backed up 
by factual support if the statute is challenged.\5\
---------------------------------------------------------------------------
    \5\ In Posadas de Puerto Rico Associates v. Tourism Company of 
Puerto Rico, 521 U.S. 844 (1997) (``Posadas''), Chief Justice 
Rehnquist's opinion for the majority stated that the courts should 
defer to the governmental body's reasons for finding that its asserted 
interest is substantial. 478 U.S. 328 (1986). In a later decision, 
however, the Court stated that the Government must justify a 
restriction on commercial speech by demonstrating that ``the harms it 
recites are real.'' Edenfield v. Fane, 507 U.S. 761 (1993).
---------------------------------------------------------------------------
    Opponents of unsolicited commercial email have identified a number 
of adverse effects from UCE that might be proper objects of 
congressional concern. The broadest of these effects is the possible, 
overall harm that UCE can cause to the societal value of the Internet. 
As courts have recognized, the Internet is a uniquely open and 
democratic forum that offers unprecedented opportunities for 
communication by persons who do not happen to own newspapers, 
magazines, cable companies or broadcast stations.\6\ Central to the 
value of the Internet are the low cost and convenience with which 
access to, and communication by means of, this medium can be achieved. 
Anything that raises the cost or difficulty of using the Internet 
without a corresponding social benefit is, arguably, an impediment to 
the widest public enjoyment of this medium.
---------------------------------------------------------------------------
    \6\ American Civil Liberties Union v. Reno, 521 U.S. 844 (1997).
---------------------------------------------------------------------------
    Although no court has had occasion to review this rationale as a 
basis for regulation of UCE, a U.S. district court in Ohio has accepted 
the claim that UCE reduces the value of Internet services for users and 
access providers. In Cyber Promotions, Inc. v. CompuServe, the court 
found that bombardment by UCE burdened CompuServe's equipment and 
caused so much inconvenience and annoyance to CompuServe's subscribers 
as to reduce the value of CompuServe's entire network.\7\ Multiplied by 
the number of access providers and subscribers throughout cyberspace, 
this observation applies with equal force to the Internet generally.
---------------------------------------------------------------------------
    \7\ CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015 
(S.D. Ohio 1997).
---------------------------------------------------------------------------
    A second, plausible concern is that UCE unfairly shifts the cost of 
mass advertising to Internet access providers and their customers, 
rather than the commercial enterprises that cause those costs. 
Avoidance of such cost-shifting was upheld on judicial review when 
asserted as the basis for the so-called Junk Fax Act, in which the 
Congress found that the sending of unsolicited, commercial fax messages 
unfairly shifted the sender's advertising costs to unwilling 
recipients.\8\ In upholding the Junk Fax Act against a First Amendment 
challenge, the Ninth Circuit Court of Appeals endorsed prevention of 
such cost shifting as a substantial governmental interest in commercial 
speech cases.\9\
---------------------------------------------------------------------------
    \8\ 47 U.S.C. Sec. 227.
    \9\ Destination Ventures, Ltd. v. FCC, 46 F.3d 54 (9th Cir. 1995).
---------------------------------------------------------------------------
    A third, plausible concern is protection of the privacy of Internet 
users. Although claims of this kind have some support in the case law, 
it is not certain that this asserted interest will support restrictions 
on UCE. The Supreme Court has rejected the privacy rationale as the 
basis for restrictions on contraception advertisements and utility 
company bill inserts, on the ground that recipients of such mail can 
``avoid further bombardment of their sensibilities simply by averting 
their eyes.'' \10\ The Court has accepted assertions of the interest in 
residential privacy, however, as a basis for upholding Post Office 
regulation of junk mail; \11\ and the Ninth Circuit Court of Appeals 
expressly sustained the State of California's assertion of a 
residential privacy interest in regulating telemarketing practices.\12\ 
Against this somewhat contradictory background, the privacy interest 
certainly is worth asserting as a basis for restrictions on UCE, but 
only in combination with stronger claims such as prevention of cost 
shifting.
---------------------------------------------------------------------------
    \10\ Bolger v. Young Drug Products Corp., 463 U.S. 60, 72 (1983); 
Consolidated Edison Co. v. Public Service Commission, 447 U.S. 530 
(1980).
    \11\ Rowan v. Post Office Department, 397 U.S. 728 (1970); see also 
Frisby v. Schultz, 487 U.S. 474 (1988) (upholding restrictions on 
residential picketing based on interest in residential privacy).
    \12\ Bland v. Fessler, 88 F.3d 729 (9th Cir. 1995).
---------------------------------------------------------------------------
    The Findings/Policy provisions of H.R. 3113 include clear 
statements of all three of the interests I have described. 
Specifically, the second finding emphasizes the interest in assisting 
``global commerce on the Internet to reach its full potential'' by 
regulating activities that ``prevent other users and Internet service 
providers from having a reasonably predictable, efficient, and 
economical online experience.'' The fourth and fifth findings of H. R. 
3113, and the second policy determination recited in that bill, 
emphasize the substantial interest in preventing unfair cost shifting 
to Internet users and service providers. Finally, the ninth finding and 
third policy determination of H.R. 3113 articulate the concern that 
bulk email, which recipients are unable to avoid receiving through 
reasonable means, may ``invade the privacy of recipients.''
    By contrast, H.R. 2126 and H.R. 1910 do not appear to include 
detailed findings and policy determinations. In order to increase the 
likelihood that the second prong of the commercial speech test is met 
upon judicial review, any UCE statute should contain such findings and 
determinations.\13\ The provisions of H.R. 3113 are an appropriate 
model for that language.
---------------------------------------------------------------------------
    \13\ This also appears to be true of H.R. 3024, which is discussed 
further below.
---------------------------------------------------------------------------
C. Does The Statute Directly Advance The Government's Asserted 
        Interest?
    There is some uncertainty as to the strength of the link the 
Government must demonstrate between the asserted governmental interest 
and a challenged statute's tendency to advance that interest. In 
Posadas, the Supreme Court found that a legislature's mere belief that 
the regulation would serve to advance the asserted interest would 
satisfy this prong of the commercial speech standard.\14\ In a 
subsequent decision, however, the Court appeared to retreat from 
Posadas, announcing that a challenged regulation must advance the 
asserted interest in a direct and material way.\15\ According to that 
later decision, ``this burden is not satisfied by mere speculation or 
conjecture; rather, a governmental body seeking to sustain a 
restriction on commercial speech must demonstrate that the harms it 
recites are real and that its restriction will in fact alleviate them 
to a material degree.'' \16\ In drafting a statute regulating UCE, it 
is prudent to assume that the more stringent formulation of the third 
prong will be applied.
---------------------------------------------------------------------------
    \14\ 478 U.S. 328 (1986).
    \15\ Edenfield v. Fane, 507 U.S. 761 (1993); see also United States 
v. Edge Broadcasting Co., 509 U.S. 418 (1993).
    \16\ Edenfield v. Fane, supra, 507 U.S. at 770-771. In United 
States v. Edge Broadcasting, however, the Court appeared to soften this 
requirement somewhat, causing still more confusion as to the stringency 
of the third element of the test.
---------------------------------------------------------------------------
    In applying this third prong of the commercial speech test, the 
Supreme Court has rejected regulations that achieve only a ``paltry'' 
reduction in the problem at which the regulations are aimed. Notably, 
in City of Cincinnati v. Discovery Networks, the Court found that the 
city's goal of reducing blight and making sidewalks safer was only 
trivially advanced by a ban that reached the small number of commercial 
newsracks and left the much larger number of non-commercial newsracks 
operating.\17\ However, satisfaction of the third prong does not 
require that a statute provide a comprehensive or definitive solution 
to the problem it addresses. Notably, the Ninth Circuit Court of 
Appeals, in Destination Ventures, found that a ban on unsolicited 
commercial faxes reasonably advanced Congress's goal of reducing 
advertising cost-shifting, in spite of the fact that the statute did 
not reach all forms of such cost-shifting.\18\ As the Court of Appeals 
pointed out in that case, ``[t]he First Amendment does not require 
Congress to forego addressing the problem at all unless it completely 
eliminates cost shifting.'' \19\
---------------------------------------------------------------------------
    \17\ 507 U.S. 410 (1993).
    \18\ 46 F.3d 54 (1995).
    \19\ Id. at 56.
---------------------------------------------------------------------------
    H.R. 3113, 2162 and 1910 all advance the asserted interests in 
Internet protection, avoidance of cost shifting and protection of 
privacy; but the probable effectiveness of each of the bills is not 
equivalent. Notably, H.R. 3113 and H.R. 1910 both require UCE 
transmitters to honor opt-out requests. H.R. 3113, however, by giving 
end users a global opt-out mechanism that does not have to be exercised 
separately against individual UCE providers, may advance the asserted 
interests in privacy and cost shifting more effectively. Similarly, 
H.R. 2162, which does not provide an opt-out mechanism for end users 
but only prohibits transmission of UCE in violation of an Internet 
service provider's posted policy, is potentially less effective than 
either of the other two statutes. All three statutes, however, will 
have more than a ``paltry'' effect on the asserted problem and are 
likely to satisfy the third prong of the commercial speech test.
D. Are The Statute's Restrictions No More Extensive Than Necessary?
    In Board of Trustees of the State University of New York v. Fox, 
the Supreme Court found that a legislature seeking to regulate 
commercial speech is not required to choose the least restrictive means 
of protecting the articulated governmental interest. It is sufficient 
if the regulation is ``a not necessarily perfect, but reasonable'' fit 
between the asserted interest and the means chosen to advance that 
interest.\20\
---------------------------------------------------------------------------
    \20\ 492 U.S. 469 (1989).
---------------------------------------------------------------------------
    In assessing whether such a ``reasonable fit'' has been achieved, a 
reviewing court will consider whether the legislature has carefully 
calculated ``the costs and benefits associated with the burden on 
speech imposed by its prohibition.'' \21\ Although the outcome of a 
reviewing court application of the fourth prong cannot be predicted 
with confidence, H.R. 3113, 2162 and 1910 all reflect consideration of 
the costs and benefits associated with their prohibitions. Notably, all 
three bills seek to regulate UCE through measures that stop short of 
outright bans on all unsolicited, commercial email messages and leave 
some scope for email-based advertising of a kind that does not reach 
unwilling recipients. As such, the restrictions in these bills are no 
more stringent than needed to prevent transmission of email that 
violates recipients' preferences or the policies of Internet service 
providers. The Government could plausibly argue, on judicial review, 
that lesser restrictions would fail to prevent the harm to the health 
of the Internet, the assaults on privacy and the pervasive cost-
shifting that UCE causes.
---------------------------------------------------------------------------
    \21\ City of Cincinnati v. Discovery Networks, supra, 507 U.S. at 
417.
---------------------------------------------------------------------------
    For a reviewing court, the best evidence that the Congress has 
given full consideration to the costs and benefits of a restriction on 
UCE will be a clear set of legislative findings that articulate these 
costs and benefits and account for the balance the statute strikes 
between them. The findings set out in H.R. 3113 are a useful model for 
this purpose.
   ii. proposed regulation of non-commercial electronic mail messages
    Of the four bills on which I have been asked to testify, two of the 
bills--H.R. 3113 and H.R. 3024--include provisions that go beyond 
regulation of commercial speech. Specifically, H.R. 3113 limits the 
transmission of ``pandering'' email--a category not confined to 
commercial messages; and H.R. 3024 includes restrictions on both 
commercial and non-commercial messages. By extending their reach to 
non-commercial email transmissions, these bills may invite harsher 
scrutiny by reviewing courts than restrictions on commercial email will 
receive. Specifically, if these restrictions are found to be content-
based, they will be reviewed under the rigorous ``strict scrutiny 
standard''--an analysis significantly more exacting than the commercial 
speech test.\22\ Accordingly, the Committee should consider whether a 
statute that regulates only commercial email would serve the 
legislative purpose with less risk of an adverse decision by a 
reviewing court.
---------------------------------------------------------------------------
    \22\ See Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 642 
(1994). If the restrictions are not content-based, they will be 
reviewed under the less exacting or intermediate scrutiny'', standard. 
Id.
---------------------------------------------------------------------------
A. Restrictions on Non-Commercial ``Pandering'' Speech in H.R. 3113
    H.R. 3113 includes a prohibition, apparently based upon a Postal 
Service regulation upheld in a 1970 decision of the Supreme Court,\23\ 
that prohibits the transmission of unsolicited, pandering electronic 
mail to any person whose name appears on a list maintained by the 
Federal Communications Commission (``FCC''); or the transmission of any 
pandering email unless that message contains an email address to which 
a recipient may send a reply asking not to receive further messages. 
The bill's definition of ``unsolicited pandering electronic mail 
message'' is not confined to commercial messages but includes any email 
message ``which the recipient, in his or her sole discretion, believes 
to be arousing or sexually provocative that is sent to a recipient with 
whom the initiator does not have an existing consensual relationship or 
has been sent by the initiator without the express consent of the 
recipient.''
---------------------------------------------------------------------------
    \23\ Rowan v. Post Office Department, supra.
---------------------------------------------------------------------------
    Although I have not considered the implications of this provision 
in depth, it appears to raise troubling constitutional questions. 
First, the provision's reference to ``pandering'' communications makes 
it a content-based restriction subject to strict scrutiny. Second, the 
provision apparently is violated when a person initiates the 
transmission of a pandering message to anyone whose name appears on an 
FCC list of persons who do not wish to receive such messages. That 
list, however, does not identify specific initiators from whom the 
listed persons do not wish to receive transmissions. In other words, 
the provision places on each potential initiator the burden of 
determining whether the listed addressee will find the transmission 
erotically arousing or sexually provocative. Such a restriction may 
violate the protections of both the First and Fifth Amendments, because 
it may chill lawful speech and fail to give persons adequate notice of 
the conduct that will result in liability.
    This provision of H.R. 3113 also appears to differ from the Post 
Office statute on which it is based. The Post Office statute 
established a procedure by which persons could indicate their desire 
not to receive further mailings from particular, identified senders. 
Accordingly, a potential mailer consulting the Post Office list was not 
required to determine, at his peril, whether the mailing he intended to 
send to a listed person would be regarded by the addressee as a 
``pandering'' message within the statute. Instead, the potential mailer 
had an unambiguous duty not to send any further materials to that 
person.
    It is entirely possible that H.R. 3113 is intended to work in the 
same way as the Post Office statute on which it is based. Specifically, 
the drafter may intend to impose liability only upon initiators who 
have received specific notice from the FCC, after receipt of a 
complaint from a recipient, to send no further pandering emails to the 
complainant. The bill mandates such a procedure, and imposition of 
liability on that basis would appear to be constitutional under Rowan 
v. Post Office Department. It is not clear to this reader, however, 
that the statute does not create liability for the simple act of 
sending a first, pandering email to a person who has not obtained an 
FCC order.
    In any event, it is likely that most unsolicited email of an erotic 
nature advertises pornographic materials and therefore can be 
classified as commercial. Accordingly, H.R. 3113 may prove more robust 
on judicial review, and still will substantially address the problem of 
unsolicited erotic email, if the references to pandering messages are 
removed.
B. Restrictions on Non-commercial Speech in H.R. 3024
    H.R. 3024, like the provisions of H.R. 3113 just discussed, extends 
its reach to both commercial and non-commercial email. That bill also 
requires any initiator of unsolicited, bulk electronic mail messages to 
provide an accurate electronic return address and a method by which the 
recipient can request not to receive further messages.
    H.R. 3024 raises an issue that is presented, to some extent, by all 
anti-UCE legislation that requires covered communications to contain 
accurate return addresses. To the extent an emailer misappropriates the 
domain name of another, uses false header information to avoid 
compliance with Internet service providers' anti-UCE policies, or 
conceals his or her identify for similarly deceptive purposes, that 
conduct may readily be found to be outside the protection of the First 
Amendment. In many cases of non-commercial email, however--and even in 
some cases of commercial email-the transmitter may use return address 
information that does not violate trademark, constitute an unfair trade 
practice or have as its purpose the evasion of an anti-UCE policy, but 
that conceals the identity of the sender simply to avoid retaliation or 
embarrassment. Drafters of anti-UCE legislation should consider whether 
these restrictions infringe upon the First Amendment right of anonymous 
communication, and whether those restrictions will survive review under 
the strict scrutiny, intermediate scrutiny or commercial speech 
standard of review, as appropriate.\24\
---------------------------------------------------------------------------
    \24\ See Lamont v. Postmaster General, 381 U.S. 301 (1965); Shelton 
v. Tucker, 364 U.S. 479 (1960); Thomas v. Collins, 323 U.S. 516 (1945). 
The right of anonymity also has been applied in commercial speech and 
Internet contexts. NLRB v. Midland Daily News, 151 F.3d 472 (6th Cir. 
1998); ACLU v. Johnson, 4 F. Supp. 2d 1029 (D.N.M. (1998).
---------------------------------------------------------------------------
    In general, it would seem advisable to draft anti-UCE statutes to 
reach only commercial, mass, unsolicited email, so that prohibitions on 
the use of false header information are more likely to impinge upon 
abusive, rather than constitutionally permitted, concealments of the 
sender's identity.

    Mr. Tauzin. Thank you very much, Mr. Kennedy.
    Next will be Mr. Jerry Cerasale, Senior Vice President, 
Direct Marketing Association. Jerry?

                  STATEMENT OF JERRY CERASALE

    Mr. Cerasale. Thank you very much for putting up with me 
again, and I appreciate the opportunity to be here.
    The Direct Marketing Association is very concerned about 
unsolicited commercial e-mail. Basically, marketing depends 
upon trust; and, right now, unsolicited commercial e-mail does 
not have the consumer trust; and that is a major problem with 
this form of communication.
    We are also very concerned, however, that it is important 
not to simply shut down a form of communication. And we think 
that that is an important matter, and I think our witnesses 
here today have raised that issue, also. We think that 
solutions are very difficult, but we want to sit down and 
continually work with you and your fine committee and your 
staff on looking at these solutions.
    But since I last appeared before you there have been some 
significant changes in the marketplace, I think, some movement 
that I think I would like to raise with you.
    The first is the Direct Marketing Association has finally, 
and I say that with a smile, launched its e-mail preference 
service, which is a service in which individuals will be able 
to put their e-mail address on this list and companies will 
then scrub those addresses from their list on any unsolicited 
commercial e-mail offering that they have.
    That service is now up, and we are getting companies signed 
on. They are required, if they are DMA members, to sign on to 
this. It is part of our privacy promise. It is fashioned after 
our mail preference service and our telephone service.
    Mr. Tauzin. Jerry, tell us how it works--specifically how 
it works for the consumer and the company.
    Mr. Cerasale. It will not work for the customer until 
January 10. We want to make sure that we get everybody's 
systems lined up so it can work.
    It starts this way. We have a web site, E-MPS.org, where 
companies and consumers can go to. Companies can sign up for 
this, and it costs $100 a year. They will--a company, if they 
want to send out an unsolicited commercial e-mail, will send 
their list of addresses to the DMA. We will then scrub that 
against the EMPS list and send back a list that has been 
cleaned for the marketer who then can send out the e-mail 
preference--excuse me, send out the solicitation without 
sending it to someone who has put their name on the list.
    For a consumer, they would go to E-MPS.org and enter in 
their e-mail address, send it to us, and they are on the list.
    The list works for--right now, the list is set up to work 
for a year. We find that the average e-mail address is good for 
about 6 months, with so many people changing it. So we have it 
work for a year.
    But that is the system and how it is going to be set up. We 
are signing up companies now to make sure that their systems 
work with our system. And on January 10 they will be required 
to use this scrub on the list, and individuals can sign up for 
the list.
    That is how it is set up to work. And it is very 
inexpensive. It is free to the consumer and $100 a year to the 
marketer.
    It is part of our privacy promise that they use this. And 
our privacy promise requires that people give notice if they 
distribute information to third parties, give individuals an 
opportunity to opt out from that situation and also provides 
that marketers must honor opt-outs even from their customers 
from receiving any information. And that is required for 
telephone mail and e-mail.
    We also believe that what has happened is that many service 
providers have established contractual arrangements with their 
business customers preventing them from sending bulk 
unsolicited commercial e-mail. And if they get complaints 
finding that, they are shutting down those sites. So that is an 
effort that has begun, and we believe it is becoming more and 
more prevalent on the net.
    Finally, we find that Internet service providers appear to 
have significantly increased their ability to filter bulk 
unsolicited e-mail. We think the shutdown from certain service 
providers are forcing unsolicited e-mail providers going to 
specific ISPs, and it is making it easier to try and shut that 
down.
    Finally, we are very sensitive at the DMA to sending 
fraudulent electronic messages with fraudulent headers. That 
practice is basically used to bypass any filtering operation. 
We believe that, ultimately, it may be a clearly a subject for 
legislation. However, I do emphasize that right now it is our 
belief--and you can ask the person on the far end of the table 
here--that if you do send an e-mail with a fraudulent header 
that you have violated section 5 of the FTC act.
    We do not object to any legislative solution, and it may be 
that we have to come up with a legislative solution. We do 
think that technology and business is changing, and we want to 
make sure that we give some time to see what is happening. And 
as we start with our EMPS service, as we see Internet service 
providers taking greater action against unsolicited bulk e-
mail, that we think that we want to make sure we target and 
have a true rifle shot, as opposed to a shotgun blast.
    I stand ready to work with you, and we appreciate the time.
    [The prepared statement of Jerry Cerasale follows:]
Prepared Statement of Jerry Cerasale on Behalf of The Direct Marketing 
                           Association, Inc.
                            i. introduction
    Good morning, Mr. Chairman, and thank you for the opportunity to 
appear before your Subcommittee as it considers unsolicited commercial 
electronic mail and the House bills that have been proposed to address 
this issue. I am Jerry Cerasale, Senior Vice President of Government 
Affairs for The Direct Marketing Association, Inc. (``The DMA'').
    The DMA is the largest trade association for businesses interested 
in direct, database, and interactive marketing and electronic commerce. 
The DMA represents more than 4,500 companies in the United States and 
54 foreign nations. Founded in 1917, its members include direct 
marketers from 50 different industry segments, as well as the non-
profit sector. Included are catalogers, financial services, book and 
magazine publishers, retail stores, industrial manufacturers, Internet-
based businesses and a host of other segments, as well as the service 
industries that support them. Several major providers of online 
services, such as America Online, Time Warner, and The Walt Disney 
Corporation, are part of our vast membership. The DMA's leadership also 
extends into the Internet and electronic commerce areas through the 
companies that are members of The DMA's Internet Alliance and the 
Association for Interactive Media.
    The DMA member companies have a major stake in the success of 
electronic commerce, and are among those most likely to benefit 
immediately from its growth. The healthy development of electronic 
commerce depends on consumer trust. It is imperative that the e-mail 
communications medium earn that trust.
    There are two main topics I wish to focus on in my testimony today 
that I believe are critical to the examination of unsolicited 
commercial electronic mail (``UCE''). First, I want to discuss The 
DMA's exciting new electronic mail preference service, known as e-MPS, 
which will allow greater control of UCE. Second, I want to describe the 
progress that we believe is being made by industry in combating the 
abuse of UCE.
    The DMA welcomes this congressional inquiry into these important 
matters.
  ii. the e-mps empowers consumers with choice concerning receipt of 
                     unsolicited commercial e-mail
    Mr. Chairman, just last week The DMA's e-mail preference service 
1 was launched at our annual conference in Toronto. The DMA 
is very excited about this new service, which will allow individuals to 
remove their e-mail addresses from Internet marketing lists in a manner 
similar to The DMA's long-standing telephone and mail preference 
services. This ambitious undertaking is aimed at empowering consumers 
to exercise choice regarding receipt of UCE, while creating opportunity 
for the many exciting new benefits of legitimate marketing in the 
interactive economy.
---------------------------------------------------------------------------
    \1\ See attached brochure.
---------------------------------------------------------------------------
    As I mentioned, the e-MPS is based on The DMA's very successful 
Mail Preference Service (``MPS'') and Telephone Preference Service 
(``TPS'') self-regulatory initiatives. Both of these initiatives 
represent The DMA's response to consumers' request for choice in the 
amount of mail and telephone solicitations they receive. In developing 
responsible marketing practices for the Internet age, we have adapted 
this important concept of consumer choice to the Internet medium 
through the development of e-MPS.
    As of January 10, 2000, consumers will be able to register for the 
e-MPS service at a special DMA web site. At no cost to consumers, they 
can use this service to place their e-mail addresses on a list 
indicating that they do not wish to receive UCE. This service affords 
consumers with flexibility to determine the types of solicitations they 
receive. Individuals can opt out of business-to-consumer UCE, business-
to-business UCE, or all UCE.
    The e-MPS, once fully operational, will be part of The DMA's very 
successful ``Privacy Promise to American Consumers'' that became 
effective July 1. The Privacy Promise requires as a condition of 
membership in The DMA, that companies, including online businesses, 
follow a set of privacy protection practices. As part of this promise, 
all DMA members who wish to send UCE are required to remove the e-mail 
addresses of those individuals who have registered with the e-MPS from 
their lists of individuals to whom they send e-mail solicitations. 
Those individuals on the e-MPS list will receive no e-mail from DMA 
members unless they have an already-established online business 
relationship with that company. This service also is available to 
companies that are not members of The DMA so that they too may take 
advantage of this innovative service and respect the choice of those 
who choose not to receive UCE.
iii. industry is making significant advances in combating the abuse of 
            unsolicited commercial electronic mail messages
    The DMA commends the Members on their proposed legislation and the 
Subcommittee for its continued oversight of the development of the 
Internet. The three bills being discussed today all present thoughtful 
approaches to addressing some of the problems posed by abusive use of 
UCE. It is important for our membership and for the successful 
development of this tremendous new medium that responsible marketing 
practices be followed in the sending of unsolicited electronic mail 
messages. Such practices will ultimately provide consumers and business 
with the numerous potential benefits of a robust electronic commerce 
marketplace.
    It is amazing to think that the widespread use of e-mail began with 
the commercial inception of the Internet just a few short years ago. 
Electronic mail has truly become a mainstay of both the personal and 
professional communications of today. The use of electronic mail is 
growing at such a significant pace that the GAO estimates that in the 
coming years the United States Postal Service will lose approximately 
$17 million annually due to the use of e-mail.
    The DMA is encouraged by the significant developments that are 
beginning to effectively combat abuses of electronic mail. These 
developments include the termination of service by e-mail providers to 
individuals that abuse their services, technological developments that 
allow service providers to detect and block bulk UCE, and successful 
legal actions against individuals who have abused electronic mail.
    Providers of electronic mail services have made significant strides 
in reducing the problems associated with UCE by terminating the 
accounts of individuals who abuse the services. In order to be able to 
terminate service, providers are including prohibitions on the sending 
of UCE without their express permission in their terms of service 
agreements. These efforts have drastically reduced the amount of 
abusive UCE that individuals receive.
    There are, of course, situations where ISPs' services are being 
abused by entities that are not bound by the providers' terms of 
service agreements. These situations arise when providers' networks are 
used in the transmission of e-mail by individuals who are not 
subscribers to their services. The DMA is very sensitive to the burdens 
on the facilities of providers associated with this type of abuse. Bulk 
UCE should not be used in a way that results in the interruption of the 
providers' services. As we understand it, however, such abuses are 
being successfully addressed through technological processes that allow 
providers to detect and block such messages. Recent advances in 
technologies have made such detection and blocking very effective.
    In addition to termination of service and technological solutions, 
legal actions have been an important vehicle through which to reduce 
abusive UCE. Service providers have been successful in reducing the 
abusive uses of UCE through a variety of different legal causes of 
action.
    Finally, The DMA is particularly sensitive to the practice of 
sending fraudulent electronic mail messages in which some individuals 
are engaged, and fully supports a prohibition on this practice. This 
practice includes the sending of messages with false or fictitious 
header information. The use of such fraudulent e-mail has no place in a 
healthy and robust Internet. In addition to deceiving consumers, 
fraudulent e-mail diminishes the reputation of the entire medium, 
particularly messages sent from the responsible marketers that make up 
our membership. Ultimately, we believe the sending of fraudulent 
messages is an area in which legislation may be necessary, as it is 
more difficult to prevent fraudulent messages.
    While The DMA does not object to a legislative solution to UCE, we 
believe that current efforts of industry and innovations in technology 
render any immediate legislation unnecessary. Likewise, we believe that 
the e-MPS will empower consumers with robust choice as to whether to 
receive unsolicited electronic mail messages.
                             iv. conclusion
    We thank the representatives who have introduced legislation in 
this area for their thoughtful consideration of such an important 
issue. We also thank the Chairman and the Subcommittee for the 
opportunity to express the views of The DMA. We know that Congress and 
this Subcommittee will continue to monitor this issue closely and we 
look forward to working with you.
    The Direct Marketing Association (``The DMA'') is the largest trade 
association for businesses interested in interactive and database 
marketing, with nearly 4,500 member companies from the United States 
and 53 other nations.
    Founded in 1917, its members include direct marketers from every 
business segment as well as the non-profit and electronic marketing 
sectors. Included are catalogers, Internet retailers and service 
providers, financial services providers, book and magazine publishers, 
book and music clubs, retail stores, industrial manufacturers and a 
host of other vertical segments including the service industries that 
support them.
    The DMA's leadership is continuing to expand its presence in the 
Internet and electronic commerce with its acquisitions of the Internet 
Alliance and the Association for Interactive Media. Members of The DMA 
include L.L. Bean, Time Inc., Dell Computer, Gateway 2000, DoubleClick, 
autobytel.com, BMG Direct, Charles Schwab & Co., Lucent Technologies, 
eBay, Acxiom, AT&T, America Online, IBM, MCI WorldCom, and others.
    According to a DMA-commissioned study conducted by The WEFA Group, 
direct marketing sales in the United States exceeded $1.3 trillion in 
1998. Approximately $759 billion in direct marketing purchases were 
made by consumers and $612 billion were made by businesses.

    Mr. Tauzin. Thank you, Mr. Cerasale.
    Finally, Mr. Ray Everett-Church, Chief Privacy Officer and 
Vice President for Public Privacy of AllAdvantage.com in 
Hayward, California. The Chair is pleased to receive your 
testimony.

                 STATEMENT OF RAY EVERETT-CHURCH

    Mr. Everett-Church. Thank you, Mr. Chairman. And thank you 
to all the members of the committee. I am very grateful to have 
been given this opportunity.
    I am here today representing my firm, AllAdvantage.com, 
which is a world leader in the emerging infomediary industry. 
As of this month, PC Data ranks our web site as the 12th 
largest most trafficked web property on the Internet. That is 
only after 7 months of operation.
    As one of the world's large infomediaries, AllAdvantage.com 
works as an agent for consumers. We provide consumers with the 
means to take control of the way information is gathered about 
their web habits and to benefit from the collection and use of 
their personal information. Because we strictly maintain the 
privacy of personal information that our members share with us, 
we are able to build a relationship of trust with consumers, 
providing them with relevant content, including advertising 
that is individually targeted to their interests and 
preferences.
    To become the world's most trusted infomediary, we depend 
upon not only consumer trust in us but upon consumer trust in 
the entire electronic commerce marketplace, and the issue of 
trust is why AllAdvantage is interested in this issue of 
spamming.
    As one of more than 200 corporate members of the Coalition 
Against Unsolicited Commercial E-mail, a grassroots coalition 
of businesses and consumers concerned with the problems of 
spam, and an association I am very pleased to sit on the board 
of directors for, AllAdvantage takes the issue of spamming very 
seriously. The reason I am here today is to share with you a 
sense of why AllAdvantage sees spam as a threat not only to our 
company but to the future of our industry, and I want to share 
with you some of the lessons I have learned in dealing with 
companies who have been on the receiving end of the flood of 
spam.
    Finally, I would like to present some conclusions I have 
drawn for what we feel is the appropriate role for Congress to 
play in solving this problem.
    Let me be clear about one thing at the outset: AllAdvantage 
is not eager to see burdensome regulations imposed on 
electronic commerce. Our first preference is for technology to 
provide an answer to the abuse that technology has made 
possible. However, as one who has worked for many years on 
technological solutions to the spam problem, I can speak with 
some authority to the fact that technology alone cannot end the 
scourge of spam.
    I worked for many years as a technology consultant and as 
an attorney in private practice for clients consisting 
primarily of Internet startups and Internet service providers. 
On occasions too numerous to count, I received panicked phone 
calls from companies whose businesses were under assault from 
spammers. Sometimes their systems would crash under the weight 
of millions of e-mails, and in other cases they had their 
domain names appropriated by a spammer to deflect complaints or 
absorb undeliverable or bounced e-mail messages that were now 
flooding their server. In still other instances, spammers might 
have even hijacked their mail server to do the actual delivery 
of the flood of e-mail.
    Such problems are not limited to the private sector. As I 
understand, the House of Representatives actually had a problem 
due to an exuberant staffer a couple of weeks ago, so I think 
the issue was brought very close to home.
    When I have been called by folks in the private sector the 
conversation almost follows the same pattern. After confirming 
that they have taken necessary steps to solve any security 
issues that they have and to limit the load of spam into their 
system, we turn to the issue of the state of the law on 
spamming and review their legal options. Inevitably, we would 
each come to the same conclusion, the conclusion that countless 
other victimized businesses had, that pursuing a legal case is 
often not worth the trouble or expense. Even if the chances of 
winning a suit are high, the likelihood of recovery was 
minuscule.
    This fact highlights the double-edged promise of bulk 
unsolicited commercial e-mail. Sending e-mail in bulk costs the 
sender a fraction of the cost of postal mail or making 
telemarketing phone calls, making it an attractive way for an 
individual to play in the big leagues. However, given the 
technology that is a great equalizer, one person can generate 
enough e-mail to take down the systems of a multibillion dollar 
corporation. This means that on a daily basis we are faced with 
situations in which a single person's actions can cause damage 
and business losses far in excess of their ability to be held 
responsible for the trouble they cause.
    When turned into an advertising medium, the skewed 
economics of e-mail turns traditional notions of advertising on 
its head. But in the world of junk e-mail marketing, because it 
costs no more to send the first e-mail than it does to send the 
ten millionth, there are very few incentives to limit their 
activities.
    AllAdvantage believes that consumer distrust of the medium 
is the greatest impediment to the growth of e-commerce, and as 
recent studies have indicated, spam is a tremendous concern to 
consumers. A recent Gartner Group survey indicated that 34 
percent of respondents saw spam as an invasion of their 
privacy, and 63 percent of respondents to an Intelliquest 
survey cited spam as the reason they feared making online 
purchases. As an advocate for our members, we believe that 
consumers' online habits as they are shaped by spam severely 
undermine consumer trust in the medium and are the reason why 
we support legislation that will address this problem.
    I thank the chairman.
    [The prepared statement of Ray Everett-Church follows:]
Prepared Statement of Ray Everett-Church, Chief Privacy Officer & Vice 
             President for Public Policy, AllAdvantage.com
    Thank you Mr. Chairman and members of the Committee. I am very 
grateful to have been invited here today to discuss the issue of 
unsolicited commercial e-mail.
    I am here today representing my firm, AllAdvantage.com, a world 
leader in the emerging Infomediary industry. As one of the world's 
largest Infomediaries, AllAdvantage.com works as an agent for 
consumers. We provide consumers with the means to take control of the 
way information is gathered about their Web habits, and to benefit from 
the collection and use of their personal information. Because we 
strictly maintain the privacy of the personal information they share 
with us, we are able to build a relationship of trust with consumers, 
providing them with relevant content, including advertising, 
individually targeted to their interests and preferences. To become the 
world's most trusted Infomediary; we depend upon not only consumer 
trust in us, but also upon consumer trust in the entire electronic 
commerce marketplace.
    As one of more than 200 corporate members of the Coalition Against 
Unsolicited Email (CAUCE, www.cauce.org), a grassroots coalition of 
businesses and consumers concerned with the problems of spam, and an 
association for which I sit on the Board of Directors, AllAdvantage 
takes the issue of spamming very seriously. The reason I am here today 
is to share with you a sense of why AllAdvantage sees spam as a threat 
to not just our company, but to the future of our industry. I also want 
to discuss with you some of the lessons I have learned in dealing with 
companies who have been on the receiving end of a flood of spam. 
Finally, I wish to present some conclusions I have drawn about the 
appropriate role for the Congress to play in solving this problem.
    Let me be clear about one thing at the outset: AllAdvantage is not 
eager to see burdensome regulations imposed on electronic commerce. Our 
first preference is for technology to provide an answer to an abuse 
that technology has made possible. However, as one who has worked for 
many years on technological solutions to the spam problem, I can speak 
with some authority to the fact that technology alone cannot end the 
scourge of spam.
    I worked for many years as a technology consultant and as an 
attorney in private practice for clients consisting primarily of 
Internet ``startups'' and Internet service providers (ISPs). On 
occasions too numerous to count, I received panicked phone calls from 
companies whose businesses were under assault from spammers. Sometimes 
their systems would crash under the weight of millions of e-mail 
messages to their service's subscribers. In other cases, their domain 
name had been appropriated by a spammer, used to deflect complaints or 
to absorb undeliverable (``bounced'') e-mail, messages that were now 
flooding their server. In still other instances, the spammers might 
even have hijacked their mail server to deliver a flood of mail to 
another site. Recently, the House of Representatives own system crashed 
due to a spammed message from an exuberant staffer.
    Always the conversation would follow the same pattern. After 
confirming that they had taken an array of technical steps to limit the 
load of incoming spam and implemented measures to repair any damage 
done, talk would turn to the question of legal recourse. Explaining to 
them the state of the law on spamming, and reviewing their legal 
options, inevitably they would come to the same conclusion that 
countless other victims had: pursuing a legal case is not worth the 
trouble or expense. Even if the chances of winning a suit were high, 
the likelihood of recovery was miniscule.
    This fact highlights the double-edged promise of bulk unsolicited 
commercial e-mail. Sending e-mail in bulk costs the sender a fraction 
of the cost of sending postal mail or making telemarketing phone calls. 
One person can generate huge volumes of mail with just a few clicks of 
a mouse, blanketing millions in a matter of minutes or hours. However, 
the ability for one individual to generate enough e-mail to take down 
the systems of a multi-million dollar corporation means that on a daily 
basis we are faced with situations in which a single person's actions 
can cause damage and business losses often far in excess of their 
ability to pay for the trouble they cause.
    When turned into an advertising medium, the skewed economics of e-
mail turn traditional notions of advertising on their head. In 
virtually no other advertising medium does the advertiser get to force 
the recipient to bear more costs than they do. At least with 
television, print ads in newspapers, or advertisements in the U.S. 
Postal Service, the sender incurs significant initial costs and is 
forced to target their advertising carefully because each additional ad 
bears in incremental cost.
    But in the world of junk e-mail marketing, it costs no more to send 
the first e-mail than it does to send the ten millionth e-mail. Thus, 
there is every incentive for the marketers to cast their advertisements 
as widely and indiscriminately as possible. There isn't even an 
incentive to remove duplicate addresses from mailing lists. And why 
not? When advertisers pay nothing more for each additional message, any 
time spent on editing a mailing list is time wasted.
    Nobel Prize-winning economist Ronald Coase wrote eloquently about 
the damage done when costs are chronically externalized onto an ever-
widening base. Coase discussed the dangers to the free market when an 
inefficient business--one that cannot bear the costs of its own 
activities--distributes its costs across a greater and greater 
population of victims. What makes this situation so dangerous is that 
when millions of people only suffer a small amount of damage, it 
becomes too costly for the victims to recover their tiny share of the 
overall damages. Such a population will continue to bear those 
unnecessary and detrimental costs unless and until their individual 
damage becomes so great that those costs outweigh the transaction costs 
of fighting back.
    The classic example is pollution: It is much cheaper, in raw terms, 
for a chemical manufacturer to dump its waste into the local river than 
to treat it and dispose of it in a more environmentally sensitive 
manner. By creating such ``externalities,'' as economists call it, the 
creator can maximize their own profit, even if it comes at another's--
or everyone's--expense. Certainly those who are harmed by poisons in a 
river might have a cause of action under civil law to recover their 
actual damages. But for the vast majority of victims, there are 
significant transaction costs involved in bring individual lawsuits. 
For most, those costs will prohibit them from ever seeking redress. As 
a result, the skewed economics in this example give incentive to the 
polluters while making it prohibitive for victims to seek a remedy. 
Hence, governmental intervention became necessary.
    Much is the same when it comes to spam. While some companies have 
successfully sued junk e-mailers for the damage they have caused, very 
few ISPs can afford to fight these kinds of cutting edge cyberlaw 
battles. As a result, the economics favor the abusers and disfavor 
those victimized. Indeed the mailers are counting on the fact that the 
incremental costs foisted upon each individual member of the public at 
large will be ignored, and on the occasions when those costs become 
aggregated in the crash of an ISP, they know that they present too 
small of a target to be worth suing.
    As Coase pointed out, this is a prescription for economic disaster. 
When inefficiencies are allowed to continue, the free market no longer 
functions properly. The ``invisible hands'' that would normally balance 
the market and keep it efficient cannot function when the market is 
carrying dead weight and perpetuating chronic inefficiencies. 
Unchecked, businesses that are (and should be) otherwise unprofitable 
will indefinitely leech off the indirect subsidies they extract from 
the public at large.
    In the context of the Internet, the costs of these externalities 
can be seen every time you have trouble accessing a Web site, whenever 
your e-mail takes 3 hours to travel from one ISP to another, or when 
all your e-mail is lost in a server crash. But the costs do not stop 
there.
    With spam, the number one complaint of most Internet users, we see 
that consumers have deserted many public discussion forums for fear 
that their e-mail addresses will be ``harvested'' and added to junk 
mail lists. Customers are afraid to give their addresses out in 
legitimate commerce for fear of being added to and traded among 
thousands of mailing lists. Legitimate businesses are afraid to use e-
mail to communicate with their existing customers for fear of being 
branded net abusers.
    AllAdvantage believes that consumer distrust of the medium is the 
greatest impediment to the growth of e-commerce--a belief borne out in 
study after study. A recent Gartner Group survey indicated that 34% of 
respondents saw spam as an invasion of their privacy, while 63% of 
respondents to an Intelliquest survey cited spam as the reason they 
feared making online purchases. Because of its impact on consumers' 
online habits, we believe spam is a threat to our business and to the 
entire online industry. As an advocate for our members, we believe that 
by giving individuals and ISPs the legal tools needed to stop spam, and 
by avoiding cumbersome and costly procedures, consumers are better 
served.
    In particular, our hope is to see legislation that recognizes the 
right of individuals and businesses to be free from bearing the costs 
of unwanted advertising. AllAdvantage supports legislation that will 
allow the marketplace to determine the value of unsolicited commercial 
e-mail, with senders clearly able to discern recipients' desires, and 
recipients given recourse if their rights are violated.
    First, we believe that service providers should be permitted to set 
policies based upon the preferences of their customers, up to and 
including the unrestricted right to undertake such technical measures 
as they deem necessary to limit the amount of spam entering their 
systems. Already, dozens of ISPs cater to the wishes of parents and 
religious communities who wish to buy Internet access that filters out 
unwanted and offensive materials. The ability of service providers to 
respond to consumers' desires for such content-based blocking should 
not be hindered.
    Second, we believe that operators of mail servers, be they service 
providers, private businesses, or school, should be permitted to 
publicly post a policy stating whether they accept unsolicited 
commercial e-mail, and if so, under what terms. For those who do not 
wish to accept unsolicited commercial e-mail, the notice should be 
respected and treated under law much like a ``No Trespassing'' sign on 
the border of one's private property. For those organizations that 
agree to accept unsolicited commercial e-mail, such a system could 
enable senders and recipients to negotiate a fair delivery arrangement, 
in effect establishing a marketplace for spam.
    Providing a server-based ``No Trespassing'' sign is already 
possible today, a fact acknowledged in H.R. 2162. The technology is 
already built into virtually every e-mail server in operation today, 
and even as I address this committee, hundreds of e-mail servers around 
the country are already broadcasting their spam preferences to every 
prospective e-mail sender, if they know what to look for. This 
technique, called ``SMTP Banner Notification,'' gives advertisers ample 
opportunity to avoid unintended liability by allowing them to quickly 
and authoritatively assess the publicly posted policies of service 
providers. All that is needed in this regard is for Congress to 
acknowledge that such a notification process is possible and to 
establish the legal weight of the notice transmitted through it.
    Third, and finally, we believe that if a sender of unsolicited 
commercial e-mail fails to heed the wishes of recipients through such 
public notices, the law should permit both individuals and businesses 
harmed by spam to seek recovery by bringing private attorney general 
(qui tam) actions in court. For those individuals or businesses who 
cannot afford to bring such actions to enforce their rights, we would 
like to see them be able to petition the Federal Trade Commission to 
bring an enforcement action on their behalf. This dual approach is 
already contained in H.R. 3113 and we believe it is an excellent 
starting point.
    By carefully assembling pieces of both H.R. 2162 and H.R. 3113, we 
believe it is possible to craft a bill that is stronger than either of 
the bills taken separately. We believe that combining the complementary 
portions of both bills will produce a measured approach that gives 
maximum flexibility to service providers and their customers, while 
also giving responsible marketers ample opportunities to reach 
audiences that will be receptive to their information.
    AllAdvantage, along with a coalition of business and consumer 
groups, has been honored to share with Representatives Wilson and 
Miller new language that we believe draws from the best ideas contained 
in bills H.R. 2162 and H.R. 3113. Through the leadership of these 
outstanding Members of Congress, and hopefully with the input from and 
support of Representatives Goodlatte and Boucher--two of the most 
respected advocates for strong Internet commerce--we hope to be able to 
take part in crafting a compromise. We would like to thank the talented 
staff in the offices of Representative Wilson, Representative Green and 
Representative Miller for allowing our coalition to share our concerns 
and ideas.
    It is my hope that we can ultimately reach agreement on language 
that can win not only bipartisan support in Congress, but can be 
supported by e-commerce firms, ISPs, advertisers, and advocates for 
consumers. If we can meld the approaches contained in these two bills, 
I believe we can reach language that will give ISPs and e-commerce 
businesses the tools they need to react to the concerns of their 
customers, without creating unnecessary government involvement in the 
Internet.
    In conclusion, electronic mail is a marvelous tool of business and 
personal communication. It is simple, it is accessible, and it is 
becoming more and more an indispensable part of our professional lives. 
Yet in just a few short years, the outrageous volumes of unsolicited 
advertisements by e-mail have clearly begun to have a profoundly 
negative effect upon all Internet commerce. My fear is that the 
untapped potential of e-mail may be lost if its functionality and 
utility are destroyed by the unchecked activity of the extreme minority 
of individuals who send unsolicited commercial e-mail. Unless Congress 
acts to preserve the viability of the medium and to give businesses and 
consumers the ability to protect themselves from floods of unsolicited 
e-mail, our electronic mailboxes will cease to be a useful tool for 
business and personal communications and we will have squandered one of 
the most powerful tools of communication this planet has ever known.
    Thank you, Mr. Chairman, for allowing me the opportunity to address 
the committee. I look forward to answering any questions you might 
have.

    Mr. Tauzin. Thank you very much.
    The Chair thanks you all.
    The Chair will go out of order in respect for the authors 
of the legislation, and the Chair will recognize Mrs. Heather 
Wilson for a round of questions.
    Mrs. Wilson. Thank you, Mr. Chairman.
    I have a number of different questions. I would first like 
to ask probably Mr. Brown and Mr. Church and possibly also Mr. 
Russina about technology issues. Is there filtering technology 
that is effective now or could legislation combined with 
filtering technology--legislation, for example, that required 
some kind of a header or a tag or something that could--for 
unsolicited commercial e-mail, could that be a solution to this 
problem?
    Mr. Brown. I think that filtering is--I guess the easiest 
answer is filtering is not scalable, either technically or 
economically. As spam increases or more unsolicited e-mail goes 
out there, we are going to need to implement more systems, more 
computers to process that mail to determine whether or not that 
is a message that we want to take or not to take by examining 
the messages.
    So I would say that, as volume of e-mail goes up, we are 
going to have to look at every e-mail that comes through to 
determine whether or not it is a message or not. So we have to 
touch each one of them. I don't think that is necessarily a 
scalable solution economically or technically.
    Mrs. Wilson. Mr. Church or Mr. Russina? Do you have 
anything?
    Mr. Russina. Some of the things that we do today as far as 
trying to track where the user is coming from and put some 
tracking and legitimizing behind the e-mails, we look at the IP 
address from which the e-mail is coming from, and it has to 
match the domain name from which the e-mail is coming from, but 
we cannot check the user. We do not have that capability yet.
    So if we have a consumer that is logging in, say, the 
Southwestern Bell Internet Service and spamming the Pacific 
Bell Internet Service, if they are coming from an IP address 
that belongs to Southwestern Bell and they use a bogus name on 
the front of the ``at'' sign, they can do it. There is not any 
means of tracking that piece down right now.
    Mr. Everett-Church. If you think about the way a computer 
processes information, as fast as it operates, it really only 
processes one thing at a time. It just does it one at a time 
very, very rapidly.
    If you think of each e-mail message coming in, a lot of 
operations occur. It has got to be passed through a system, 
sorted, deposited in the correct mailbox, written to the hard 
disk, et cetera.
    If you add filtering to that process, matching the data to 
a list, to a data base of known spamming addressing or what 
have you, in some cases you are doubling or tripling the amount 
of actions that must be taken on any piece of data. And when 
you try and scale that to a large quantity such as the kind of 
data traversing systems like America Online and SBC and others, 
you find that the--as John Brown said, the filtering solutions 
don't always scale.
    Mrs. Wilson. Thank you.
    Mrs. Harrington, you may be the best one to ask this 
question because of the data base that the FTC keeps. Is most 
pornographic e-mail also commercial e-mail? In other words, if 
we restricted legislation to unsolicited commercial e-mail, 
would we capture much of the problem with the pornographic e-
mail?
    Ms. Harrington. I don't know. We see a good deal of 
commercial e-mail that is intended to induce people to call or 
visit sexually explicit chat lines and sites. But we only know 
what we know. I think that consumers are more inclined to 
forward to us commercial e-mail than noncommercial e-mail, and 
so I don't have an answer to your question.
    Mrs. Wilson. Do any of you who deal with this or who run 
ISPs and watch your computers have a sense of this?
    Mr. Brown. Well, I would ask the question, if I am sending 
a solicitation to come and visit my pornographic web site, some 
of those web sites recoup their costs by charging you a monthly 
service fee or subscription rate to visit their site, and some 
of those places are now taking--advertising on the web site, 
banner ads, et cetera, to recoup their costs.
    So I guess my question is--that would be an indirect form 
of commercial. Would it be a direct and would that relate to 
your question? I am not sure. But I think one could get 
slippery with we are not directly deriving revenue from sending 
that e-mail; we are getting it indirectly. I would be sort of 
curious about how slippery that could get.
    Mrs. Wilson. Thank you, Mr. Chairman.
    Mr. Tauzin. The gentleman from Texas, Mr. Green, is 
recognized.
    Mr. Green. Thank you, Mr. Chairman.
    I would like to ask Mr. Cerasale a couple of questions. 
When--the first bill I introduced was 1910, and it was the one 
that dealt with fraud on spam. Could you expand a little bit 
and tell me why you prefer spam legislation that only deals 
with fraud?
    Mr. Cerasale. Why we prefer only legislation that deals 
with fraud?
    Mr. Green. Yes, do you think that is more where the 
Congress should be addressing?
    Mr. Cerasale. Well, first, I think that we have State and 
Federal laws on fraud. The thing--why I discussed fraud was 
that we think that, right now, that is the means to bypass 
filtering. The fraudulent headers are the means to bypass 
filtering. And that fraud I was talking about was in that area, 
the fraudulent header. A fraudulent get-rich-quick scheme, et 
cetera, whether it is over the Internet or in the phone or 
through the mail, they are all the same, people trying to get 
rich quick. And I think they are clearly covered by section 5 
of the FTC Act, and strong enforcement is what is needed.
    I think the change here is that the fraudulent header is a 
meaning to deceive usually--deceive the recipient, but 
basically to deceive the ISP in their filtering operation.
    Mr. Green. I know the DMA has taken a positive step from 
the marketer's perspective on addressing spam through their 
EMPS service, your opt-out list. And my concern is more with 
the bad actors, the people who will open a shop for a few hours 
and send out millions of spam and then move on. In that 
instance don't you think there should be a legislative 
solution?
    And, further, could you explain what would happen to a 
member or a company who uses your EMPS service and then sends 
out spam anyway? And what action would DMA take to stop their 
own members from doing this?
    Mr. Cerasale. The first part of the question is, looking at 
the bad actors--thank you for thinking that our members are 
good actors, I appreciate that--but the bad actors who are not 
members of the DMA, who don't use the service--the service is 
not limited to just DMA members. Anyone who is willing to pay 
the $100 can use it.
    I think our point is that we would like to see a little bit 
of time to take a look at it to see if this becomes a norm, if 
we have an educational process and so forth, that you should 
have the opportunity to opt out. It may be even looking at an 
e-mail coming out should give you the opportunity to opt out 
individually on it. Those kinds of things the DMA is looking at 
and maybe a little bit of time to see how EMPS works.
    We are not standing here opposed to legislation that would 
say that you have to give people notice and choice, because 
that is clearly the DMA's privacy promise. That is what we 
stand for.
    What would happen if the e-mail preference--if a DMA member 
who has to use the e-mail preference service doesn't use it, 
sends out unsolicited commercial e-mail without scrubbing it 
against the list?
    The first thing, you have to look was there a mistake made 
would be one. But let's assume it was not a mistake. They did 
it in violation of the privacy promise. The procedure would be 
we would do an investigation, but they would be brought before 
the board of directors and could be kicked out of the DMA, and 
that would be publicly stated.
    So there would be a press release from the DMA that says--
let's use my name--the Jerry Cerasale Company has been kicked 
out of the DMA for not fulfilling its privacy promise and 
violating it here. That would create some fairly significant 
negative publicity toward the Jerry Cerasale Company. And we 
found when we went around with the privacy promise and we put 
ads in the trade press to say these are the people who have 
signed up already prior to July 1 when it started, we have--it 
was applied to business-to-consumers, so we had some business-
to-business members who said we want to be able to sign up 
because we are not getting the good press from this that we 
signed up for.
    So I think that is where the negative is. Sorry to take so 
long on the answer.
    Mr. Green. Thank you, Mr. Chairman.
    If I could throw one question out and they could answer it 
however. Because it is one you brought up earlier concerning 
the technological blocks that are available maybe now for spam 
or filters, and both, whether it be the ISP or the individual, 
and is there new technology that we might be able to use that 
would do it? And that would be for everyone to answer as quick 
as you could.
    Mr. Tauzin. Anyone wants to handle it, please. What is the 
status of filtering technology both from the consumer and to 
the ISP?
    Mr. Cerasale. I don't think there is too much from the 
consumer standpoint. I do not see any status of technology--I 
am not the expert here--any technology where the consumer can 
stop certain e-mail. When it comes in to you it is not bulk at 
that time. It is individual. And it comes to my station, and 
you can potentially have a block. I think technology can be 
made that you only want to receive e-mail from certain places. 
That is available.
    Mr. Tauzin. I think what the gentleman is asking, though, 
is if--assuming, as Mrs. Wilson pointed out, that unsolicited 
bulk e-mail was required by law to be headed in that fashion so 
that you had a violation of section 5 if you failed to properly 
head it. Could the consumer conceivably have filtering devices 
and the ISP similarly have filtering devices that could then 
either block it going to the consumer or stop it from entering 
the consumer's PC?
    Mr. Cerasale. I think if you had certain words that were 
required likely there is a technology that could stop it from 
coming in. That raises the issue of labeling speech, however, 
and we have to look at that as we talk about----
    Mr. Tauzin. Mr. Brown?
    Mr. Brown. Thank you, Mr. Chairman.
    I think the easy answer to that question is I am sitting in 
Roswell, New Mexico, and for me to get to America Online I have 
to make a long distance intrastate call to get to Albuquerque, 
New Mexico. I go to my local computer store. I buy my filtering 
software. I load it on my PC. I have still spent the money to 
call Albuquerque, so I download that message and then I use my 
filtering software to throw away. The cost is shifted to the 
end user.
    That would be my statement, Mr. Chairman.
    Mr. Tauzin. Okay. The gentlewoman from California is 
recognized.
    Ms. Eshoo. Thank you, Mr. Chairman, for holding this 
hearing. And, first, may I ask, has there been a unanimous 
consent request that members be able to submit statements?
    Mr. Tauzin. I think we have done it, but I will do it. I 
ask unanimous consent that all members' written statements be 
made a part of the record. Without objection, so ordered.
    Ms. Eshoo. Thank you very much.
    Welcome to the witnesses. I have three questions, one of 
Ms. Harrington and two of Mr. Everett-Church; and I have 5 
minutes, so try to get your answers in. All right?
    First to Ms. Harrington, do you believe that by increasing 
the penalties in the Computer Fraud and Abuse Act and current 
State law that we could solve many of the ongoing problems that 
the witnesses identified with regard to spam and spamming?
    Ms. Harrington. I think that increased penalties operate as 
a deterrent, yes. But I think that there is a pervasive problem 
with deceptive and fraudulent UCE and other deception on the 
Internet that goes to the difficulty that consumers and 
enforcers have in authenticating the identity of a site owner 
or a mail sender.
    We have heard talk about false headers and so forth. When a 
false header is used, which probably is in most instances 
deceptive and in violation of the FTC act, there is a task of 
investigating to determine who the sender is, and that may or 
may not be a difficult task. Likewise, if a URL is falsely 
registered, it is very difficult to learn who the true owner of 
the URL is. And so if we are thinking about increased 
penalties, I think it is very important to increase penalties 
for falsifying that information, both e-mail header information 
and URL registration information.
    Ms. Eshoo. As a deterrence. How would you characterize it 
in terms of percentage, one, and the other that you just 
described? Do you have any idea?
    Ms. Harrington. URL versus false e-mail? Well, I think that 
URL registration--the falsification of URL registration 
information is a huge problem.
    Ms. Eshoo. How huge, though? Give us an idea.
    Ms. Harrington. When we go out on the Internet and find web 
sites that make egregiously false claims it is not uncommon 
when we check the ``who is'' and other registration information 
to find that it is patently and facially false. And what we 
know is that the registrars take the position that it is not 
their job to verify the truthfulness or authenticity of that 
information. So we will find a fraudulent site and see that it 
is registered to a party who identifies itself as Amanda 
Hugandkiss living in Here, There, Everywhere. And when we go to 
the registrar and say how can you allow someone to sign up with 
this facially false information, and they say, hey, not our 
job.
    Ms. Eshoo. Thank you. That is instructive for the shaping 
of legislation.
    To Mr. Everett-Church, fellow Californian, welcome. It is 
good to have you here.
    Service providers are already bringing lawsuits against 
spammers. Why would service providers seek action from an 
agency like the FTC instead of bringing an action themselves? 
And, also, you are a board member of the Coalition Against 
Unsolicited Commercial E-mail, which you mentioned just a few 
moments ago. What does the Coalition membership see as the key 
elements of legislation to stop spam?
    Mr. Everett-Church. To address your first question, the 
problem with bringing an action in court for most service 
providers is that it is extremely costly and time consuming, 
both in investigating, trying to track down--as Ms. Harrington 
mentioned, it can be very difficult to locate the appropriate 
defendant to bring a case and then to pursue that only to find 
that there is no possibility of recovery against an individual. 
So for small service providers, that kind of cost can make 
seeking legal redress insurmountable for them and leave that 
unavailable.
    The resources of an agency like the Federal Trade 
Commission are a little bit larger than that of a small service 
provider and so the hope is that by turning to the agency they 
can get the relief that they need.
    As to your second question, very briefly, the Coalition, 
the members of the Coalition Against Unsolicited Commercial E-
mail are real eager to see a marketplace solution but one that 
is grounded in legal recognition of the rights of service 
providers and consumers to be free from the harm imposed by 
senders of unsolicited commercial e-mail.
    So we are hoping to see legislative solution that addresses 
itself to the specific issues of service providers' rights of 
action, ability for consumers to protect themselves and to make 
their preferences known and to seek recovery in the event that 
those wishes are violated.
    Ms. Eshoo. I hope you move to my district.
    Mr. Everett-Church. Can you help us find office space?
    Ms. Eshoo. It is at a premium, I know.
    Mr. Tauzin. The gentleman from Illinois is recognized.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I think Ms. Eshoo asked a couple of questions I wanted to, 
especially with the ISPs and, actually, with Ms. Harrington on 
the FTC. Let me just follow up just on my own since I was out. 
Catching the end of the question, do you feel the FTC has tools 
necessary right now to prevent the fraudulent and deceptive e-
mail?
    Ms. Harrington. Yes, I think that section 5 of the FTC act 
is sufficiently broad and expansive, that it gives the 
Commission the authority to take action to prohibit deceptive 
practices.
    There are some challenges involved in investigating 
deceptive marketers who use false header information. The 
investigative challenge there is great. And the cost of doing 
that kind of investigation is significant and so I would be 
remiss--and I want to make clear that I am speaking for myself 
and not necessarily the Commission or the Chairman, but I would 
be remiss in failing to say that the more resources that we can 
have in terms of people and computers to do these kinds of 
investigations, the better job we will do. This is a whole new 
area of marketing that we are I think working hard to stay on 
top of. And all of the other areas of marketing that we have 
been policing for years are still vibrant and active, so it has 
really expanded our work.
    Mr. Shimkus. Thank you, Mr. Chairman. And appreciating the 
time and the vote, I think I will yield back. I thank the folks 
for their testimony.
    Mr. Tauzin. The Chair recognizes himself briefly.
    In the time we have remaining, let me try to follow up on 
some of the things that have been suggested and that we have 
heard.
    Mr. Kennedy, first of all, if a law was passed--part of the 
laws we passed required unsolicited bulk e-mail to be properly 
identified by the sender. Do you see any constitutional 
problems with such a provision in terms of inhibiting free 
speech? After all, we have similar laws regarding bulk mail at 
the post office. Is this similar and could it be sustained on a 
similar basis or is there a problem?
    Mr. Kennedy. No, I believe it would be sustained if it 
applies to commercial e-mail only. You get a more lenient 
standard of review for restrictions on commercial speech. And, 
after all, in the commercial context what we are dealing with 
are people who falsify header information to defeat anti-spam 
software. Sometimes they violate trademark by doing this. Often 
they violate section 5 of the FTC act. That is not protected 
speech.
    Mr. Tauzin. Assuming we could do that then, the next 
question I want to ask all of you, if you had in place some or 
parts of all the laws that have been discussed here today as 
possible remedies, if you had in place rights of action by the 
ISP to go against someone who is defrauding them by stealing 
their mailers and their servers or hijacking their systems to 
flood someone with e-mail, if you had indeed a requirement that 
bulk commercial e-mailers had to properly identify on the 
header exactly what it is, that bulk unsolicited e-mail, so 
that filtering systems could eventually be more effective both 
for the ISP who might filter them out at the request of the 
customers or to the customers themselves who might filter them 
out at the PC end, and if you had systems like Mr. Cerasale has 
talked about where at least the better players would be signing 
up to literally take themselves out of the play of sending e-
mail to people who don't want it, is there a possibility that 
combinations of that sort could work to effectively lower the 
scale, if you will, of unsolicited bulk e-mail so that Mr. 
Everett-Church's and Mr. Brown's filtering systems would not be 
overwhelmed so that the FTC would not necessarily be 
overwhelmed in terms of the work, so that the consumers would 
the least see a lowering of the level, the tempo of this stuff? 
Anyone want to hit it?
    Ms. Harrington. Mr. Chairman, I am not a technologist, but 
I just read in a Salon Magazine online magazine article the 
other day about an entrepreneur who made his fortune developing 
the software that is used for push technology, that is, that 
sends much of this out. He has taken that fortune and invested 
it in a new enterprise that is going to filter it all out.
    Mr. Tauzin. Like the radars and the radar detectors?
    Ms. Harrington. I think that gives me hope. That is, if 
there is someone who is a technologist who made his first 
fortune figuring out how to cause this problem and he now has 
invested his fortune in a company that is purportedly going to 
solve the problem, that gives me hope.
    Mr. Tauzin. It's like Dillinger joining the FBI.
    Ms. Harrington. That is right. So I think it is worth--
certainly worth trying to pull together the components that you 
just mentioned.
    Mr. Tauzin. If those components were pulled together, there 
is no question that section 5 would give you authority to deal 
with anyone who consistently was failing to correctly identify 
their commercial bulk e-mail as commercial bulk e-mail.
    Ms. Harrington. It might be helpful to, if there is going 
to be a labeling requirement, to give us some specific 
authority to enforce that.
    Mr. Tauzin. Mr. Brown.
    Mr. Brown. Mr. Chairman, I want to go back to my example a 
moment ago about the consumer level filtering. One of the 
things that I would like to try to make very clear is that, 
regardless of whether we label this, et cetera, the message has 
to still be delivered. There is a cost to that delivery. And 
who bears that cost? And so the question I would have is, are 
we attempting to try to minimize that cost or are we trying to 
get rid of that cost?
    Mr. Tauzin. Well, Mr. Brown, assuming that filtering 
systems could be developed both for the ISP to filter them at 
the server----
    Mr. Brown. I still have to receive that from the upstream 
link that I am paying for.
    Mr. Tauzin. But in fact if consumers knew, if you had to 
post your policy that we are not going to send you unsolicited 
e-mail, and you have the equipment, how to filter it out, 
because of the requirements that it be properly labelled and 
the FTC is there to help you enforce that policy, the 
opportunities for people to use your system to flood people 
with e-mail would be decreased dramatically, don't you think?
    Mr. Brown. Yes, I would agree. I would think that it would 
be decreased dramatically.
    I guess where my stance is coming from is that I don't want 
to spend even a penny on having to deal with it.
    Mr. Tauzin. Well, I know you don't, but if I am a customer 
of yours and I can choose from among ISPs who are not willing 
to spend that penny to protect me from this e-mail that I don't 
want or to choose a company like yours that is willing to spend 
the penny, I might choose you over the other company. I mean, 
that is the premise at least of the Miller approach, that 
consumers would make choices in the marketplace among ISPs 
depending on which one better protects them. And if we provided 
you with better capabilities to protect them by a labeling 
requirement, enforceable through the FTC, would you not be 
encouraged then to be one of those companies who wants to 
attract customers who want that protection? I think you might.
    I know you would rather not spend the penny, but I am 
saying if the customers say they are going to choose you if you 
spend that penny and are maybe even willing to pay a little 
more if you do that for them, you might be encouraged to do 
that.
    Ms. Harrington. Mr. Chairman, I would add to this package 
the importance of opt-out and consumer empowerment to opt out. 
And on the opt-out matter, something that is tricky is defining 
the prior business relationship. And the caution we would sound 
is that the exception not be so broad that it swallows the 
rule.
    Mr. Everett-Church. I wanted to add briefly, as I mentioned 
in my remarks, technology alone cannot solve the problem, but 
the legal component is important. And by addressing both the 
technology and the legal issues and pulling them together and, 
in fact, even combining the approaches contained in the various 
bills that we have talked about today, I think we can reach a 
solution that is very carefully targeted and crafted to address 
the most significant of the problems.
    Mr. Tauzin. That is what I am learning today, too. I think 
it is possible to take the best of all of these approaches and 
maybe add this labeling. With the FTC clearly in charge of 
enforcement on the labeling end we might be able to put 
something together. We are going to try.
    Let me thank you then. You have contributed mightily.
    And as I said, Mr. Church, if we have come to the 
conclusion about one of the best parts of all these bills we 
have done a lot of good today.
    Thank you very much. The hearing stands adjourned.
    [Whereupon, at 12:25 p.m., the subcommittee was adjourned.]