[House Hearing, 106 Congress]
[From the U.S. Government Publishing 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
------------------------------------------------------------------------------
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
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.
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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.
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\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).
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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\
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\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.
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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.
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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\
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\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).
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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.
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\1\ See attached brochure.
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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.]