[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                  THE JUNK FAX PREVENTION ACT OF 2004

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

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 15, 2004

                               __________

                           Serial No. 108-87

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house




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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas                   Ranking Member
MICHAEL BILIRAKIS, Florida           HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania     FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California          SHERROD BROWN, Ohio
NATHAN DEAL, Georgia                 BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi, Vice Chairman           TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma

                      Bud Albright, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                 Ranking Member
  Vice Chairman                      ALBERT R. WYNN, Maryland
PAUL E. GILLMOR, Ohio                KAREN McCARTHY, Missouri
CHRISTOPHER COX, California          MICHAEL F. DOYLE, Pennsylvania
NATHAN DEAL, Georgia                 JIM DAVIS, Florida
ED WHITFIELD, Kentucky               CHARLES A. GONZALEZ, Texas
BARBARA CUBIN, Wyoming               RICK BOUCHER, Virginia
JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
HEATHER WILSON, New Mexico           BART GORDON, Tennessee
CHARLES W. ``CHIP'' PICKERING,       PETER DEUTSCH, Florida
Mississippi                          BOBBY L. RUSH, Illinois
VITO FOSSELLA, New York              ANNA G. ESHOO, California
STEVE BUYER, Indiana                 BART STUPAK, Michigan
CHARLES F. BASS, New Hampshire       ELIOT L. ENGEL, New York
MARY BONO, California                JOHN D. DINGELL, Michigan,
GREG WALDEN, Oregon                    (Ex Officio)
LEE TERRY, Nebraska
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Graham, John H., President and Chief Executive Officer, 
      American Society of Association Executives.................    18
    Kaechele, Cheryl, Publisher, Allegan County News.............    23
    McDonald, Walt, President, National Association of Realtors..    11
    Snowden, K. Dane, Chief, Consumer and Government Affairs 
      Bureau, Federal Communications Commission..................     6
Material submitted for the record by:
    Brady, Phillip D., President, National Automobile Dealers 
      Association, prepared statement of.........................    34

                                 (iii)




                  THE JUNK FAX PREVENTION ACT OF 2004

                              ----------                              


                         TUESDAY, JUNE 15, 2004

              House of Representatives,    
              Committee on Energy and Commerce,    
                     Subcommittee on Telecommunications    
                                          and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m., in 
room 2322 Rayburn House Office Building, Hon Fred Upton, 
(chairman), presiding.
    Members present: Representatives Upton, Cox, Deal, Shimkus, 
Buyer, Walden, Barton (ex officio), Markey, and Wynn.
    Staff present: Kelly Cole, majority counsel; Will Nordwind, 
majority counsel and policy coordinator; Will Carty, 
legislative clerk; and Peter Filon, minority counsel.
    Mr. Upton. Good morning. Today's hearing is on the Junk Fax 
Prevention of 2004, which I plan on introducing tomorrow, 
hopefully with strong bipartisan support.
    In 1991, Congress passed the Telephone Consumer Protection 
Act, which included landmark legislation that protected 
consumers from receiving unwanted and unsolicited commercial 
faxes. And for over 10 years, the FCC had interpreted that law 
to provide businesses with an exception to the general ban when 
they faxed commercial or advertising material to their existing 
business customers.
    Then in 2003, the FCC made a major change in its 
interpretation of the law. Under the new FCC rules, every 
business, small, large, home-based, every association, every 
non-profit organization and every charity, would be required to 
obtain prior written approval from each individual before it 
sent a commercial fax. The logistical and financial costs of 
the new FCC rules, particularly to small business and non-
profit associations, would be enormous, staggering.
    For instance, a survey by the United States Chamber of 
Commerce suggested the cost to the average small business would 
be at least $5,000 in the first year and more than $3,000 every 
year after. The survey further indicates that it would take, on 
average, more than 27 hours of staff time to obtain the initial 
written consent from their customers and an additional 20 hours 
each year to keep the forms current.
    Recent survey by the National Association Wholesale 
Distributors revealed that its member companies expected to pay 
an average of $22,500 just to obtain the consent forms. With 
our economy in the fragile stages of an economic recovery, I 
would much rather see those dollars going toward production and 
job creation.
    Given the dramatic impact which the new rules would have, 
last August, just before the new rules were to go into effect, 
Billy Tauzin and I wrote the FCC and requested that the FCC 
delay the effective date of the new rules. Thankfully, the FCC 
did; in fact, stayed the effective date until January 1 of 
2005. Moreover, while the FCC currently has the new rules under 
reconsideration, I think it is the wisest course for Congress 
to step in and fix the law to resolve any lingering statutory 
interpretation problems which led to the FCC's new rules, and 
that is why we are here today.
    The Junk Fax Prevention Act would clearly reinstate the 
established business relationship exemption to allow 
businesses, associations and charities to send commercial faxes 
to their customers and members without first receiving written 
permission. Additionally, the bill would establish ne opt-out 
safeguards to provide additional protections for fax 
recipients. Under the bill, senders of faxes must alert 
recipients of their right to opt out for future faxes and must 
abide by such requests. And, finally, the bill sets out FCC 
reporting requirements so that Congress can monitor the FCC's 
enforcement activity.
    This act, I think, is common sense regulatory relief, and 
time is of the essence for Congress to pass it since many 
businesses will very soon need to begin making arrangements to 
be in compliance with the new rules by January of 2005. So I 
would ask my colleagues--tell my colleagues that I intend to 
introduce the bill tomorrow and expedite its consideration in 
both this subcommittee as well as the full committee perhaps as 
early as next week.
    I look forward to hearing from today's witnesses, 
particularly my constituent and friend Cheryl Kaechele of the 
Allegan County News, which covers a good share of my 
congressional district. We appreciate all of you coming all 
this way, and I would yield to my friend and ranking member of 
the subcommittee, Mr. Markey, for an opening statement.
    Mr. Markey. Thank you, Mr. Chairman, and thank you for 
having this hearing. Mr. Chairman, I was the principal House 
sponsor of the Telephone Consumer Protection Act of 1991, which 
addressed issues affecting telemarketing, automated dialing 
machines, pre-recorded messages and junk faxes, among other 
issues. Congress endorsed my call in 1991 for a general 
prohibition against just faxes because of the intrusive nature 
of that form of advertising.
    Junk faxes represent a form of advertising in which the ad 
is essentially paid for by the recipient. The recipient of a 
junk fax pays for the fax paper and printer costs, pays in the 
form of precious time as lost, as the machine is tied up, and 
also in the form of the clutter in which important faxes are 
lost in the midst of a pile of junk faxes.
    For these reasons and for additional important consumer 
privacy interests, I believe it is important that Congress 
retain the general prohibition against junk faxes and the 
essential enforcement remedies contained in the 1991 law which 
the draft legislation leaves in tact.
    During the original implementation of the TCPA's junk fax 
provisions, the Federal Communications Commission included an 
exception to the general prohibition against sending a junk fax 
for established business relationships. In the statutory 
provisions addressing telephone solicitations, this term was 
included in the law to capture the notion of business 
relationships between commercial entities as well as 
relationships between entities and residential consumers that 
were not incidental or minor but voluntary two-way 
relationships.
    This concept of an established business relationship 
permitted a commercial entity to invoke its ability to prove 
such a relationship with a consumer in order to contact that 
consumer in spite of the general prohibitions of the law. It 
was hoped that business relationships with consumers that were 
so established would be consistent with consumer expectations 
and not lead consumers to resent the contact or get irate at 
receiving such commercial solicitations.
    The FCC has more recently determined that the term, 
``established business relationship,'' was not specifically 
included in the provisions addressing junk faxes and the TCPA 
and, therefore, rescinded this regulatory exception. The new 
rules require written permission from consumers and these new 
rules have been stayed from going into effect until January of 
2005.
    The legislation before us is designed to put specific 
language into the statute permitting an established business 
relationship to the general prohibition against junk faxes. 
Many businesses have complained that written permission is too 
onerous a regulatory requirement. While many other faxes that 
they stipulate are routinely sent in the ordinary course of 
business, presumably without complaints from the recipients of 
such faxes.
    The draft is responsive to these complaints from many 
businesses. We must recognize, however, that many small 
business and residential consumers find many of these faxes to 
be a considerable irritant and strongly object to receiving 
them. The legislation, therefore, addresses additional issues.
    First, the draft bill includes important consumer 
provisions that will avail consumers of the opportunity to stop 
junk faxes being sent to them, even under the established 
business relationship exception. This is something that wasn't 
in the original law, nor in the FCC's previous regulations, but 
it represents an important addition to the statute. My feeling 
is that even if a commercial entity can prove it has an 
established business relationship which allows it to legally 
send an unsolicited fax to a consumer, many consumers may still 
object and want to stop all future faxes.
    The draft bill, therefore, requires entities to include on 
the first page of the unsolicited advertisement a notice 
informing consumers that they have the right not to receive any 
future junk faxes from the entity. And this notice must also 
include a domestic contact telephone and fax number for the 
consumer to express that request. This is an important right 
for consumers to have, and they shouldn't have to call Canada 
or the Cayman Islands to reach someone to object to receiving 
junk faxes.
    Moreover, I think it is important to take a comprehensive 
look at overall enforcement of the junk fax law. While the 
existing statute has permitted consumers to take action in 
court to seek redress from jun fax senders, and this has served 
as a deterrent to some, I am concerned that some of the most 
egregious junk fax operations, the entities to broadcast such 
faxes to millions often escape enforcement. They may be found 
guilty, cited by the FCC and sometimes fined, but often it 
appears as if they either ignore the fine, skip town or live 
overseas.
    For these reasons, the bill includes provisions that will 
give us an annual accounting of the FCC's enforcement 
activities, as well as a GAO analysis of what additional 
enforcement tools may be necessary to provide support 
deterrent, especially to the most egregious and abusive junk 
fax senders. I am hopeful that this legislation proceeds 
through the committee, that we can continue fine tune the bill 
and strengthen its consumer protection provisions.
    I want to commend you, Chairman Upton, for your willingness 
to work with me and Ranking Member Dingell, and we look forward 
to continuing our progress on this bill with Chairman Barton 
and the other colleagues in the coming weeks. Thank you.
    Mr. Upton. Thank you. The Chair would recognize the 
chairman of the full committee, Mr. Barton, for an opening 
statement.
    Chairman Barton. Thank you, Chairman Upton. I appreciate 
the opportunity to testify today and appreciate you holding 
this hearing on the Junk Fax Prevention Act of 2004. I want to 
commend you for the bipartisan effort to make sure that this 
bill can become law this year.
    The committee has tackled many issues that frustrated 
consumers, including telemarketing and spam. Today, we are 
going to tackle junk faxes. There is nothing in this bill that 
will make it easier to send unsolicited faxes to consumers. 
Current law does not allow companies, organizations, businesses 
or charities to fax unsolicited advertisements, and this bill 
makes no changes to those strong consumer protections.
    What the bill does do is remedy a problem in the original 
Telephone Consumer Protection Act. For those companies and 
associations with an existing business relationship, this bill 
would allow commercial faxes to be sent to those relationships. 
Without a law to fix this problem, all organizations will be 
forced to get written permission for each fax that it sends. 
This would present a huge logistical and financial hurdle that 
would have an enormous negative impact.
    For instance, school associations would be forced to 
initiate the tedious process of collecting written permission 
slips from its thousands of member just to send a fax. Small 
businesses who market on a national level would be pulled away 
from running their businesses to manually contact each customer 
to get permission to send them a fax. This bill will remove 
that hurdle and allow commercial faxing without written 
permission if there is an existing business relationship.
    But the bill goes a step further. If those who have an 
existing business relationship choose that they no longer wish 
to receive a commercial fax, this bill would give them the 
right to opt out of receiving future faxes. This is a strong 
protection that would provide a necessary fix to the current 
law. It properly, in my opinion, balances the need for 
efficient and effective communication between businesses and 
its customers and also provides the required consumers 
protections to ensure those who don't want faxes don't receive 
faxes.
    I look forward to working at the full committee, not only 
with Chairman Upton, Ranking Member Markey but with the ranking 
member of the full committee, Mr. Dingell, if we need to 
improve this bill. The Junk Fax Prevention Act is a good step 
and right direction, and I hope that we can move it through it 
subcommittee, full committee, through the House, through the 
Senate and on to the President's desk sometime this year.
    I want to thank you, Mr. Upton, for your strong work on 
this, and I would yield back the balance of my time.
    Mr. Upton. Thank you. Mr. Wynn?
    Mr. Wynn. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus?
    Mr. Shimkus. I woll also defer.
    Mr. Upton. Mr. Deal?
    Mr. Deal. I defer.
    Mr. Upton. At this point, I will ask unanimous consent that 
all members have an opportunity to put their opening statements 
in as part of the record, and we will proceed with the panel.
    [Additional statements submitted for the record follow:]
    Prepared Statement of Hon. Paul E. Gillmor, a Representative in 
                    Congress from the State of Ohio
    I would like to thank the Chairman for calling us here to not only 
examine the details of the Junk Fax Prevention Act, but also to address 
both consumer and industry concerns with regard to the FCC's 
unsolicited fax advertisement rules scheduled to be implemented on 
January 1st of next year.
    Of note, I welcome the well-balanced panel of witnesses and look 
forward to hearing more about the history of this rulemaking as well as 
its recent revisions and potential impacts on the parties represented 
today.
    Like the measure before us, we should continue to focus our efforts 
on maintaining a balance of protecting businesses and consumers' 
privacy while at the same time ensuring that those who market them are 
not overly burdened.
    Again, I thank the Chairman and yield back the remainder of my 
time.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman.
    I look forward to our hearing today on stemming the scourge of 
``junk faxes.'' This problem goes back many years and many Congresses. 
In 1991, the Congress essentially banned ``junk faxes,'' referred to as 
``unsolicited advertisements'' under the Telecommunications Consumer 
Protection Act (TCPA). The law did, however, allow for ``prior express 
invitation or permission'' to be given by the intended recipient of the 
fax. This ``permission'' must have been what the FCC interpreted as 
authorizing unsolicited faxes under an ``existing business 
relationship.'' Unfortunately, since these laws and regulations went on 
the books, they have not been effective in stemming instances of ``junk 
faxes'' clogging consumer's fax machines.
    In an effort to shore up the rules, the FCC whipsawed in the other 
direction, and last summer revised its regulations to require written 
authorization to be provided for folks to receive these unsolicited 
advertisements. Now I am hearing that these regulations are too 
restrictive.
    No one wants to unduly burden legitimate commerce. But I think 
everyone would agree with me that we need to reduce, and hopefully 
eliminate, the abuses that have been going on for years. I am not 
certain, however, that an existing business relationship is the best 
avenue to protect consumers. Perhaps the better course is to clarify 
what constitutes ``prior express invitation or permission'' to receive 
these faxes. After all, we are in an electronic age, where electronic 
signatures are allowed for commerce, even paying one's taxes to the 
I.R.S., so why can't we leverage technology to help expedite a 
recipient's authorization?
    I would like to hear from the FCC what they could do to improve the 
rule, in light of the outcry we've heard since last August, to address 
the concerns of the groups represented here, while keeping in mind that 
it is consumers, small businesses, and other fax owners who bear the 
cost-shifting burden of paper and toner that fax spamming entails.
    That's why I look forward to hearing from our distinguished panel 
on these matters Today and look forward to a productive dialog on 
solutions for this very real problem.
    I yield back the balance of my time.

    Mr. Upton. We are pleased to say that we have Mr. Dane 
Snowden, Chief of the Consumer and Government Affairs Bureau 
from the FCC here with us today, along with Mr. Walt McDonald, 
president of the National Association of Realtors thank you for 
making the trip; Mr. John Graham, president and chief executive 
officer of the American Society of Association Executives, and 
Ms. Cheryl Kaechele, publisher of the Allegan County news from 
Allegan, Michigan on behalf of the National Newspaper 
Association.
    We appreciate your testimony being submitted in advance, 
and if you could limit your opening statement to about 5 
minutes, that would be terrific, and Mr. Snowden, we will start 
with you. Thank you for being with us this morning.

 STATEMENTS OF K. DANE SNOWDEN, CHIEF, CONSUMER AND GOVERNMENT 
    AFFAIRS BUREAU, FEDERAL COMMUNICATIONS COMMISSION; WALT 
MCDONALD, PRESIDENT, NATIONAL ASSOCIATION OF REALTORS; JOHN H. 
GRAHAM, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN SOCIETY 
  OF ASSOCIATION EXECUTIVES; AND CHERYL KAECHELE, PUBLISHER, 
                      ALLEGAN COUNTY NEWS

    Mr. Snowden. Thank you. Good morning, Chairman Upton, 
Ranking Member Markey and members of the subcommittee. My name 
is Dane Snowden, and I am the Chief of the Consumer and 
Governmental Affairs Bureau at the FCC. I appreciate the 
opportunity to appear before you, and I look forward to 
discussing both the history of the rules on the transmission of 
unsolicited fax advertisements under the Telephone Consumer 
Protection Act, as well as the FCC's role in implementing and 
enforcing these rules.
    As many of you know, Congress passed the TCPA in 1991 in an 
effort to address a growing number of telephone marketing calls 
and certain telemarketing practices Congress found to be an 
invasion of consumer privacy and even a risk to public safety. 
The statute also restricts the use of telephone fax machines to 
send unsolicited advertisements, making it unlawful, ``to use 
any telephone facsimile machine, computer, or other device to 
send an unsolicited advertisement to a telephone facsimile 
machine.'' The TCPA's fax provision acts as a ban on fax 
advertisements unless the recipient has given prior express 
invitation or permission to receive the fax.
    In adopting rules in 1992 to implement the TCPA, the 
Commission stated that the statute leaves the Commission 
without discretion to create exemptions from or limit the 
effects of the fax prohibition. The Commission indicated 
however that fax transmissions from persons or entities that 
have an established business relationship with the recipient 
can be deemed to be invited or permitted by the recipient.
    In 2002, the Commission initiated a rulemaking proceeding 
to update its rules under the TCPA. A part of that review 
included the restrictions on fax advertising. Specifically, we 
sought comment on the continued effectiveness of the fax rules, 
including whether an established business relationship 
establishes the requisite express permission to receive fax 
advertisements. We also sought comment on any developing 
technologies that might warrant revisiting the rules. The 
record we compiled indicated the many individuals and 
businesses are in fact inundated with unsolicited faxes.
    Some commenters explained that advertisers continue to send 
faxes despite efforts to be removed from the sender's fax 
lists. Again, according to the record, such faxes can be 
burdensome and costly to receive.
    The Commission in 1992 found that ``prior express 
invitation or permission'' could be interpreted broadly enough 
to allow an ``established business relationship'' to suffice. 
However, a more extensive consideration of the statutory 
language in our 2003 rulemaking, informed by enforcement 
experience, led us to a different outcome.
    The record revealed that inclusion of an established 
business relationship within the meaning of prior express 
permission had resulted in consumers and businesses alike, 
particularly small businesses, assuming the unwanted 
advertising costs of faxing of any entity with which they 
conduct business. Therefore, based on the record before us, we 
reversed our prior conclusion that an established business 
relationship provides companies with the necessary express 
permission to send faxes to their customers. We instead 
determined that companies that wish to fax unsolicited 
advertisements to customers must obtain their express 
permission before transmitting faxes to them.
    Under the revised rules, which will not become effective 
until January 1 of 2005, such permission must be provided in 
writing and include the recipient's signature and fax number. 
This written permission requirement was designed to ensure that 
consumers and businesses have a means to control the messages 
sent to their fax machines. Since the FCC adopted rules to 
implement the TCPA, the Commission has aggressively enforced 
the rules on sending fax advertisements despite the fact that 
identifying and tracking down the senders of junk fax messages 
can be, and quite frankly is, a very difficult task.
    Complaints filed with the Commission often contain 
insufficient information for the FCC to pursue alleged 
violations, primarily because some fax senders do not include 
adequate identification information or a working telephone 
number on their faxes. Instead, senders of junk faxes often 
disguise their identities with aliases, acronyms or simply 
provide no identifying information whatsoever. Nevertheless, 
under Chairman Powell, the Commission, through our enforcement 
bureau, has been able to identify violators and issue 
forfeiture orders totaling $6.9 million in penalties for junk 
faxing. The Commission has also issued over 233 citations for 
faxes sent in violation of the TCPA. Most recently, the 
Commission issued a forfeiture of nearly $5.4 million against 
fax.com for violating the TCPA and FCC's junk fax rules.
    As part of our normal rulemaking process, the Commission is 
currently reviewing the numerous petitions filed seeking review 
of the fax rules. Many such petitions are from entities that 
did not comment on the fax rules in our 2003 proceeding, 
including each of the panelists here today. Since the release 
of our item, they, along with others, argue that the 
elimination of the established business relationship exemption, 
on which businesses have come to rely, will cause serious 
disruption to routine business operations. They point out that 
for businesses in trade or membership associations, the fax 
machine continues to be a valuable tool for communicating with 
customers and conducting routine business.
    Because these petitions are currently pending before the 
Commission, I am extremely limited as to what I can say about 
them. I will, nevertheless, endeavor to answer as many of your 
questions as I can. The goal of the TCPA is to protect 
consumers from certain marketing practices that can be 
intrusive and costly. As companies continue to advertise via 
fax, we must ensure that consumers and businesses alike have a 
means to control the messages they receive on their fax 
machines.
    I thank you, and I look forward to answering any of your 
questions.
    [The prepared statement of K. Dane Snowden follows:]
Prepared Statement of K. Dane Snowden, Chief, Consumer and Governmental 
           Affairs Bureau, Federal Communications Commission
                            i. introduction
    Good morning Chairman Upton, Ranking Member Markey, and members of 
the Subcommittee. My name is K. Dane Snowden, and I am Chief of the 
Consumer & Governmental Affairs Bureau of the Federal Communications 
Commission (``FCC'' or ``Commission''). I appreciate this opportunity 
to appear before you to discuss the history of the rules on the 
transmission of unsolicited facsimile advertisements under the 
Telephone Consumer Protection Act of 1991 (TCPA), as well as the FCC's 
role in implementing and enforcing these rules.
    In 2002, the FCC initiated a rulemaking proceeding to update its 
rules under the TCPA, which culminated in the establishment of the 
popular and successful national ``do-not-call'' registry. While the do-
not-call registry certainly garnered a great deal of media attention 
with over 60 million telephone numbers now registered on the list, the 
Commission undertook at the same time a comprehensive review of the 
unsolicited fax rules under the TCPA. The Commission asked for public 
comment on the effectiveness of those rules and on any developing 
technologies that might warrant revisiting the restrictions on fax 
advertising. Based on the FCC's own extensive enforcement experience 
and on the record before us, the Commission revised the rules 
implementing the TCPA to require any entity transmitting a fax 
advertisement to first obtain the recipient's express permission in 
writing. We concluded that an established business relationship would 
no longer be sufficient to constitute the necessary permission under 
the TCPA to allow the lawful transmission of an advertisement to a 
person's fax machine. I appreciate this opportunity to explain the 
Commission's action in 2003 and how these revised rules differ from our 
prior ruling in 1992 on sending fax advertisements.
                             ii. background
A. The TCPA and 1992 Commission Rules
    On December 20, 1991, Congress passed the TCPA to address a growing 
number of telephone marketing calls and certain telemarketing practices 
Congress found to be an invasion of consumer privacy and even a risk to 
public safety. The statute also restricts the use of telephone 
facsimile machines to send unsolicited advertisements, making it 
unlawful ``to use any telephone facsimile machine, computer, or other 
device to send an unsolicited advertisement to a telephone facsimile 
machine.'' In addition, the TCPA requires all fax messages to identify 
the sender on the first page or on each page of a transmission.
    It is important to emphasize that the TCPA treats fax advertising 
differently than it does telemarketing calls. In defining a ``telephone 
solicitation,'' the TCPA excludes calls to consumers with whom a 
company has either their ``prior express invitation or permission'' or 
an ``established business relationship.'' Thus, a company may make a 
telemarketing call to an existing customer. If that customer asks not 
to be called again, the company must place the consumer on its company-
specific do-not-call list and honor the consumer's request not to be 
called. The TCPA does not, however, expressly exempt from its fax 
provision those faxes that are sent to ``established business 
relationship'' customers. Instead, the TCPA's fax provision acts as a 
ban on fax advertisements unless the recipient has given ``prior 
express invitation or permission'' to receive the fax. Neither the 
statute nor the legislative history contemplates a mechanism for 
consumers to ``opt out'' of unwanted fax transmissions, as is the case 
with telemarketing calls.
    In adopting rules in 1992 to implement the TCPA, the Commission 
stated in its Report and Order that the TCPA leaves the Commission 
without discretion to create exemptions from or limit the effects of 
the fax prohibition. The Commission noted, however, that fax 
transmissions from persons or entities that have an established 
business relationship with the recipient can be deemed to be invited or 
permitted by the recipient. The Commission subsequently made clear in 
1995 that the existence of an established business relationship between 
a fax sender and recipient establishes consent to receive telephone 
facsimile advertisement transmissions.
B. Enforcement
    Since the FCC adopted rules to implement the TCPA, the Commission 
has aggressively enforced the rules on sending fax advertisements, 
despite the fact that identifying and tracking down the senders of junk 
fax messages can be a difficult task. Complaints filed with the 
Commission often contain insufficient information for the FCC to pursue 
alleged violations--primarily because fax senders do not include 
adequate identification information or a working telephone number on 
their faxes. Instead, senders of junk faxes often disguise their 
identities with aliases, acronyms, or simply provide no identifying 
information whatsoever.
    It is also worth noting that the obstacles that senders of junk 
faxes use to avoid identification create a significant challenge for 
enforcement action within the one-year statute of limitations period 
for proposing forfeiture penalties. This is because before the 
Commission can consider a forfeiture penalty against most senders of 
junk faxes, it is required under section 503 of the Communications Act 
to issue a warning citation to any violator that does not hold a 
Commission authorization (which would include most fax senders). Only 
if the non-licensee violator subsequently engages in conduct described 
in the citation may the Commission propose a forfeiture, and the 
forfeiture may only be issued as to the subsequent violations. 
Nevertheless, the Commission has issued forfeiture orders totaling over 
$6.9 million in penalties for junk faxing. The Commission has also 
issued 233 citations for faxes sent in violation of the TCPA. Most 
recently, the Commission issued a forfeiture of nearly $5.4 million 
against Fax.com for violating the TCPA and the Commission's junk fax 
rules. This enforcement action marked the largest forfeiture the 
Commission had ever issued with respect to the sending of unlawful 
faxes.
    Despite a general ban on unsolicited facsimile advertisements, and 
aggressive enforcement by the Commission, unwanted faxed advertisements 
have proliferated, particularly as facsimile service providers (or fax 
broadcasters) enable sellers to send advertisements to multiple 
destinations at relatively little cost.
                     iii. recent commission action
    Against this backdrop, the Commission decided to review the fax 
rules under the TCPA when it took up the telemarketing rules in 
September of 2002. In a Notice of Proposed Rulemaking, the Commission 
sought comment on both telemarketing and fax practices and asked 
whether any of the rules should be revised to ensure the TCPA's mandate 
was being carried out. Specifically, we sought comment on the continued 
effectiveness of the fax rules, including whether an established 
business relationship establishes the requisite express permission to 
receive faxed advertisements, and on any developing technologies that 
might warrant revisiting the rules.
    With regard to the effectiveness of the rules under the existing 
regime, the record we compiled indicated that many individuals and 
businesses are, in fact, inundated with unsolicited faxes. Some 
commenters explained that advertisers continue to send them faxes 
despite efforts to be removed from senders' fax lists. The record 
revealed that, in addition to the cost of paper and toner associated 
with receiving faxes, consumers and businesses--both small and large--
are burdened by the time spent reading and disposing of faxes. In 
addition, the record demonstrated that when fax machines must print 
unsolicited advertisements and are not operational for other purposes, 
there is a loss in productivity for those businesses.
    In reviewing whether an established business relationship between a 
fax sender and recipient establishes the requisite express permission 
to receive facsimile advertisements, the Commission received comments 
from a small number of businesses that opposed the elimination of the 
established business relationship ``exemption'' for faxing. These 
businesses argued that doing so would interfere with ongoing business 
relationships and raise business costs. Consumer advocates, however, 
maintained that the TCPA requires companies to obtain express 
permission from consumers--even their existing customers--before 
transmitting a fax to a consumer. They argued that consumers should not 
have to assume the cost of the paper used, the cost associated with the 
use of the facsimile machine, and the costs associated with the time 
spent receiving a facsimile advertisement during which the machine 
cannot be used by its owner to send or receive other facsimile 
transmissions, without their permission. Some businesses indicated that 
facsimile advertisements interfere with receipt of faxes connected to 
their own business, and that the time spent collecting and sorting such 
faxes increases their own labor costs.
    In addition, the Commission reviewed closely the express language 
of the TCPA and its legislative history. One of Congress's primary 
concerns behind the TCPA was to protect the public from bearing the 
costs of unwanted advertising. It restricts certain practices found to 
impose unacceptable costs on consumers, such as autodialed calls to 
wireless numbers and unsolicited advertisements sent to fax machines. 
Although the TCPA expressly excludes calls to persons with whom a 
company has an ``established business relationship'' from the 
restrictions on ``telephone solicitations,'' it does not contain a 
similar exception from the fax prohibition. Similarly, the legislative 
history describes the need to protect ongoing business relationships in 
terms of companies being able to make telemarketing calls to their 
customers. It contains no similar references to an established business 
relationship for fax senders. As some commenters pointed out, Congress 
initially included in the TCPA an EBR exemption for sending faxes, but 
removed it from the final version of the statute. Instead, the 
legislative history focuses exclusively on the concern that, in the 
words former Representative Matthew Rinaldo (R-NJ), ``unsolicited and 
unwanted faxes can tie up a machine for hours and thwart the receipt of 
legitimate and important messages.''
    Although the Commission in 1992 noted that ``prior express 
invitation or permission'' could be interpreted broadly enough to allow 
an ``established business relationship'' to suffice, a more extensive 
consideration of the statutory language in our 2003 rulemaking informed 
by our enforcement experience, led us to a different outcome. The 
record in our proceeding revealed that inclusion of an established 
business relationship within the meaning of prior express permission 
had resulted in consumers and businesses assuming the unwanted 
advertising costs of faxing, of any entity with which they conduct 
business. Therefore, we reversed our prior conclusion that an 
established business relationship provides companies with the necessary 
express permission to send faxes to their customers. We instead 
determined that companies that wish to fax unsolicited advertisements 
to customers must obtain their express permission before transmitting 
faxes to them. Under the revised rules (which will not become effective 
until January 1, 2005), such permission must be provided in writing, 
including through electronic mail, and include the recipient's 
signature and facsimile number. This written permission requirement was 
intended to ensure that consumers and businesses have a means to 
control the messages sent to their fax machines.
                    iv. current status of fax rules
    Following the release of the Commission's 2003 Report and Order, 
businesses, associations, and other entities that advertise via fax 
filed comments indicating that obtaining written permission from 
persons to whom they fax will be burdensome--both time consuming and 
costly. In light of these additional claims, the Commission immediately 
stayed the effective date of the written consent requirement until 
January 1, 2005. In the interim, we also concluded that businesses 
could continue to rely on an established business relationship for 
permission to send fax advertisements. And, we clarified that the time 
limitations on the duration of an established business relationship for 
telephone solicitations--18 months from any purchase or transaction and 
3 months from an inquiry or application--would not apply to the sending 
of unsolicited advertisements.
    The stay has provided the Commission with an opportunity to review 
industry and consumer concerns. As part of our normal rulemaking 
process, numerous petitions have been filed with the Commission, 
seeking review of the fax rules. Many such petitions are from entities 
not involved in our 2003 proceeding. These petitioners have asked the 
Commission to reinstate the established business relationship 
``exemption'' for faxing and to allow businesses to secure permission 
orally or via fax. They argue that elimination of the established 
business relationship exemption, on which businesses have come to rely, 
will cause serious disruption to routine business operations. They 
point out that businesses and membership and trade associations use the 
fax machine to send customers a variety of communications, such as 
invitations to conferences and event, pricing sheets, announcements of 
weekly specials and real estate listings. According to these 
businesses, the fax machine continues to be a valuable tool for 
communicating with customers and conducting normal business. Because 
these petitions for reconsideration are currently before the 
Commission, I am extremely limited as to what I can say about the 
Commission's deliberations regarding these matters.
                             v. conclusion
    The goal of the TCPA is to protect consumers from certain marketing 
practices that can be intrusive and costly to the consumer. As 
companies continue to advertise via facsimile, we must ensure that 
consumers and businesses have a means to control the messages they 
receive on their fax machines.
    I look forward to answering any questions you have.

    Mr. Upton. Thank you.
    Mr. McDonald.

                   STATEMENT OF WALT MCDONALD

    Mr. McDonald. Chairman Upton, Representative Markey and 
members of the subcommittee, my name is Walt McDonald, and I am 
president of the National Association of Realtors. NAR is the 
Nation's largest trade association with over 1 million members. 
Our members include brokers, salespeople, property managers and 
other professionals engaged in every aspect of the real estate 
business.
    I appreciate the opportunity to share some thoughts with 
you regarding the Junk Fax Prevention Act of 2004 and commend 
this subcommittee for its leadership in recognizing that the 
Federal Communication Commission's revised rules governing the 
use of facsimile transmission are a radical departure from 
current practice and would significantly interfere with day-to-
day business activities.
    First, let me say that NAR members understand and strongly 
support the goal of the Telephone Consumer Protection Act. 
Realtors themselves are recipients of unsolicited fax that tie 
up our business fax machines. NAR does, however, question the 
need for change that the FCC has made to the TCPA rules. The 
prior rule with its established business relationship exception 
has worked well over the past 12 years. In reversing its rule, 
the Commission did not note any consumer complaints with the 
result of the established business relationship rule. However, 
it is clear that the Commission revised rule to address 
unsolicited fax will have the unintended consequences of 
interfering with solicited fax.
    Despite all the advantages in technology, the prices of 
buying and selling a home is still dependent upon fax. While 
fax are most commonly used today to facilitate the paperwork 
associated with home sales, fax also are used in ways that 
could be construed as advertisement and would therefore meet 
the FCC definition of an unsolicited fax. Real estate 
professionals use fax to communicate quickly with consumers who 
have contacted them about real estate.
    Take the case of a seller looking for an agent to list 
their home. After an initial phone call, an agent routinely 
will offer to fax comparable market analysis for seller's 
review prior to an actual meeting. This CMA provides comparable 
listing data on homes on markets, describes what the agent will 
do to market the home and proactively solicits the listing. 
Under the revised rule, faxing is presentation or even 
information on other homes on the market would not be 
permissible without prior signed permission.
    Real estate brokers and agents also use fax to send home 
listing information directly to potential buyers upon request. 
Under the revised rule, a real estate agent could no longer 
follow up with consumer inquiries with a fact of available 
properties. In a tight housing market, which we have 
experienced throughout the country, the delay caused by having 
to obtain written permission could mean the difference between 
a buyer getting the house they want or losing it.
    Consider, too, how awkward this scenario would be when a 
potential customer calls and asks for information on a home for 
sale. Under the revised rule, the agent would not be able to 
fax the information. Instead, the agent would have to explain 
why he can't fax the information direct to consumer to a web 
site where they can provide the required written consent or for 
an address so that the agent can mail or courier the 
information along with the consent form for future use.
    This will cause frustration, suspicion and in some cases I 
think ill will. This wold be a giant step backwards in a 
business where good customer service depends on quick 
turnaround time. Similarly, NAR and its State and local 
associations routinely fax communications to their members. 
These faxes inform members about upcoming continuing education 
classes or products and services available to them. And 
sometimes at member-preferred pricing. Once again, since these 
opportunities are available for a fee, these faxes would meet 
the definition of an unsolicited fax.
    The FCC has argued that obtaining written permission is not 
difficult. We disagree. Each of the means proposed by the FCC 
for obtaining a written permission, the face-to-face meeting, 
direct mail, emails with electronic signatures all present a 
challenge for consumers. Interestingly enough, one technology 
which is fast, inexpensive and widely available is not an 
allowed means of distributing or returning the permission form. 
That technology is a fax. In discussion with the FCC staff, 
they have indicated that faxing the permission form would not 
be allowed since the form could be construed as a solicitation 
for which written permission is needed.
    Finally, we would like to have been able to quantify for 
you some of the costs associated with the implementation of 
these FCC rules. Unfortunately, though, we are unable to 
predict how many of the 1 million realtors and approximately 12 
million home sellers and buyers would have had to interact if 
they revised rules had been in place last year when 6 million 
homes were sold throughout the country.
    In our written testimony; however, we have presented some 
conservative simple assumptions. We estimate that over 67 
million written permissions would have to be required to 
sustain last year's roughly 6 million home sales. Obviously, 
the dollar cost involved in preparation, distribution and 
management of the 67 million forms would be sizable, and a 
result NAR believes that it is critical that the established 
business relationship exception which has functioned well since 
the FCC first issued the rules to implement the TCPA some 12 
years ago. We think it is important that they be reestablished 
and that alternate means of giving consent be allowed. We 
believe that narrowly drafted technical correction language of 
the Junk Fax Act can rectify the problem created by the new 
rules and continue to protect consumers from unwanted faxes 
that are already prohibited under TCPA rules.
    We look forward to working with you to achieve this end, 
and thank you for the opportunity to be here today.
    [The prepared statement of Walt McDonald follows:]
Prepared Statement of The National Association of Realtors '
    Chairman Upton, Representative Markey, and Members of the 
Subcommittee, the NATIONAL ASSOCIATION OF REALTORS ' (NAR) 
appreciates the opportunity to share its thoughts regarding the Junk 
Fax Prevention Act of 2004. NAR is the nation's largest professional 
trade association with a million members who belong to over 1500 
REALTOR ' associations and boards at the state and local 
levels. NAR membership includes brokers, salespeople, property 
managers, appraisers and counselors as well as others engaged in every 
aspect of the real estate industry.
    NAR commends the Subcommittee for its leadership in recognizing 
that the Federal Communication Commission's (FCC) revised rules 
governing the use of facsimile transmissions are a radical departure 
from current practice, would significantly interfere with day-to-day 
businesses activities and impose a significant new compliance burden on 
business of all types.
    NAR understands the goal of Congress in enacting the Telephone 
Consumer Protection Act (TCPA) to protect consumers' privacy 
expectations to not be bothered by unwanted faxes. As business people 
and consumers, REALTORS ' are often the recipients of 
unsolicited faxes that tie up the fax machines vital to their real 
estate practices and business communications. We strongly support, 
therefore, the goals of the TCPA and believe that the law's provisions 
banning unsolicited faxes are appropriate. Likewise, we appreciate the 
FCC's efforts to craft rules to effectively implement the law and the 
Commission's willingness to meet with NAR members as we have worked to 
understand the new fax requirements.
    We do, however, question the need for the changes that the FCC has 
made to the rules governing the fax provisions of the law. The prior 
rules, with an established business relationship (EBR) exception for 
faxes sent by firms to established clients and allowances for 
alternative forms of permission, have worked well over the past twelve 
years since implementation. The prior ruling created settled 
expectations among consumers and businesses alike.
    Now, however, it is also very clear to us that the Commission's new 
rules which are intended to stop unsolicited, junk faxes will have the 
unintended consequences of interfering with solicited faxes. In the 
case of the real estate industry, for example, faxes sent in response 
to a consumer inquiry or in the course of normal business and desired 
by the recipient (consumer, agent or firm) will no longer be allowed. 
These new rules will also interfere with NAR's and its state and local 
associations' abilities to satisfy their members' expectations 
regarding communications and service to those members.
    As a result, we believe that it is critical that (1) the 
established business relationship (EBR) exception which has functioned 
well since the FCC first issued rules to implement of the TCPA some 
twelve years ago be reestablished and (2) alternative means of giving 
consent also be allowed. These steps are necessary so that 
communication with existing clients and those who have inquired about a 
good or service is not subject to overly burdensome and disruptive 
regulation.
    We believe that narrowly crafted, technical correction language 
such as is being considered by the Committee in the Junk Fax Act of 
2004 can rectify the problems created by the new rules while at the 
same time continuing to protect consumers and businesses from unwanted 
faxes that are already prohibited by the TCPA.
Background
    The Telephone Consumer Protection Act (TCPA) of 1991 prohibits the 
use of any telephone facsimile machine, computer or other device to 
send an ``unsolicited advertisement'' to a telephone facsimile machine. 
An unsolicited advertisement is defined ``as any material advertising 
the commercial availability or quality of any property, goods or 
services which is transmitted to any person without that person's prior 
express invitation or permission.'' 1
---------------------------------------------------------------------------
    \1\ 47 C.F.R.  64.1200(f)(10).
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    When first implementing the new law in 1992, the Federal 
Communications Commission determined that an established business 
relationship constituted express invitation or permission to receive an 
unsolicited fax. As part of its July 2003 Do-Not-Call (DNC) rulemaking, 
the FCC revised that original interpretation.
    In reversing its long-standing rule, the FCC determined that the 
TCPA requires a person or entity to obtain the express invitation or 
permission from the recipient before transmitting any unsolicited fax 
advertisement. This express invitation or permission must be in writing 
and include the recipient's signature. The recipient must clearly 
indicate that he or she consents to receiving such faxed advertisements 
from the company and individual within the company to which permission 
is given. Furthermore, the consent form must provide the individual and 
their business fax number to which faxes may be sent. The permission 
form cannot be faxed to the recipient or submitted via fax to the 
business to whom permission to fax is granted.2
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    \2\ 1992 Report and Order, In the Matter of Rules and Regulations 
Implementing the Telephone Consumer Protection Act of 1991, 7 FCC Rcd 
8752,  191 (rel. Oct. 16, 1992)(CC Docket No. 92-90) (``1992 Report 
and Order'').
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The Importance of Faxed Information to the Real Estate Industry
    Despite all the advances in communication technology, the process 
of buying and selling a house is still heavily dependent on the ability 
to send and receive faxed information. Consequently, real estate 
brokers and agents use facsimiles regularly to communicate with other 
real estate professionals, settlement and other service firms, as well 
as with both home buyers and sellers.
    The most common use of fax by the real estate sales industry today 
is to facilitate the completion of the paperwork associated with the 
sales transaction, i.e. offers to purchase, counteroffers, disclosure 
forms, etc. While these transactional faxes seemingly would be exempt 
from the new rules, faxes are also routinely used for purposes that 
would unfortunately meet the current definition of an ``unsolicited'' 
fax.
    Business to Business Faxes. Real estate sales agents and brokers 
commonly use facsimiles to quickly share new property listings with 
other real estate professionals who are active in a given market and 
may have clients interested in purchasing a newly listed property. In a 
recent survey by NAR, REALTORS ' also indicated that faxes 
are commonly used to inform other real estate professionals of price 
reductions on a property that had been viewed by that agent's clients 
or the time and date of open houses for newly listed homes. Such faxes 
communicate valuable market information that benefits recipients and 
their clients in a manner that is both timely and cost-effective.
    Business to Consumer Faxes. Real estate sales professionals also 
use faxes to communicate in a quick and cost-effective manner with 
consumers who are looking to sell or buy a home.
    In the case of a homeowner interested in selling their home, a 
seller may contact an agent or a number of agents about listing their 
home. In response to the contact, an agent would typically prepare a 
comparative market analysis which would (1) describe what the agent 
would do to market the home, (2) provide comparable listing data on 
homes currently on the market so as to begin discussions about a 
suggested listing price and (3) proactively solicit the listing.
    In those situations where time is of the essence, such an analysis 
is faxed for review prior to any face-to-face meeting. In some cases, 
such as the sale of a resort or inherited property, a face-to-face 
meeting may not even occur due to time or distance constraints. In all 
cases, this informational exchange takes place prior to any formal 
business agreement, i.e. listing agreement, which could provide the 
vehicle for the necessary written permission to fax. Under the new 
rules, faxing this listing presentation or even comparative listing 
information would not be permissible without prior signed permission.
    Real estate brokers and agents also routinely use faxes to send 
house listing information directly to potential buyers who may request 
it by telephone, but with whom the agent has not yet entered into a 
formal agreement for representation. Under the new rules, a real estate 
professional could no longer share new listings or follow-up a 
telephone, personal or even Internet-delivered inquiry with targeted 
research via fax. Consequently, the new rules meant to deal with 
unsolicited faxes would have the unintended effect of interfering with 
solicited faxes.
    In a tight housing market, the delay caused by having to obtain 
written permission from a potential client or another real estate 
professional before the relevant house listing information is sent 
could mean the difference between a buyer getting a house they want or 
losing it.
    Consider too how awkward this scenario would be when a potential 
customer calls and asks for information on a home for sale. Under the 
new rule, the real estate professional would not be able to fax the 
information requested. Instead the agent or broker will have to explain 
why they can't fax the information, direct the consumer to a website 
where they can provide the required written consent or ask for an 
address so the real estate professional can mail or courier the 
information along with a consent form for future use. This will create 
frustration, suspicion and, in some cases, ill-will. This would be a 
giant step backwards in a business where good customer service depends 
on quick turnaround.
    REALTOR ' Association to Member Fax. Similarly, NAR and 
its state and local associations routinely use facsimiles to 
communicate effectively with their members. These facsimiles inform 
members about upcoming continuing educations classes, meetings, 
seminars, products, services, and membership renewal. This is 
information that members not only expect, but for which they have paid 
NAR, state and local associations dues in order to receive. Once again, 
many of these faxes will meet the definition of unsolicited fax 
advertisements and could not be sent under the new FCC rules.
The Feasibility of FCC-Suggested Means of Obtaining Permission
    The FCC has argued that obtaining written permission is not a 
difficult thing to do. We disagree. A close examination of the business 
consent methods proposed by the FCC for business to obtain consent--
``direct mail, websites and interaction with their customers in their 
stores''--points out some of the hurdles unanticipated by the FCC that 
will be encountered by the real estate professional.
    Face-to-Face Meetings. As our previous examples have indicated, 
face-to-face meetings are not the norm and are impracticable prior to 
the occasion to fax. Unlike the corner grocery or restaurant, consumers 
do not routinely visit their local real estate firm offices. (Most 
consumers engage in a real estate transaction every seven years.) 
Consequently, most real estate practitioners will have not had a 
consumer's permission on file when a request for information is 
received.
    A face-to-face meeting will require a special trip with the 
commitment of time, travel expenses, etc. At a minimum, these costs 
will increase the cost of a transaction that will need to be absorbed 
by the agent, firm or consumer. At its worst, a face-to-face meeting 
will be impracticable, if not impossible, e.g. where an owner lives out 
of the area as is commonly the case in a resort market or when property 
is inherited.
    Courier. A permission form could be hand-delivered to a potential 
fax recipient via courier. This is not an inexpensive means of delivery 
and would be impracticable from a cost perspective for all but a very 
small number of transactions or those transactions with an assured 
outcome. In order to make a living, real estate real estate 
professionals commonly respond to large number of customer requests for 
information--only one in twelve contacts eventually results in a home 
sale and compensation.
    Mail/Overnight Delivery. Using an overnight service will have the 
same cost drawbacks as a courier service. Both regular and overnight 
mail will suffer from the additional problem that an interested 
customer will have to wait 24 hours or more before the information that 
they requested can be delivered. In our ``instant gratification'' 
world--and an industry where quick customer service can be the 
difference between gaining a new customer or not--the delayed delivery 
would make this an unattractive approach.
    Internet/E-Mail/Electronic Signature. Despite the rapid adoption 
that the Internet and e-mail have had in the United States, there are 
still significant numbers of households--including underserved 
minority, immigrant and low-income populations, etc.--with limited or 
no access to the Internet, e-mail or the technology which would allow 
them to access, let alone electronically sign, documents. Additionally, 
not all states have enacted legislation that allows for electronic 
signature of documents. This method, therefore, is seriously limited in 
those markets where real estate real estate professionals serve a 
population with limited access to this means of access or without the 
appropriate state enacting legislation.
    Fax. We would point out that faxing a permission form to a consumer 
would be a quick and inexpensive way to disseminate the form and 
receive permission. However, in discussions held with the FCC staff on 
this matter and in its written guidance, the FCC has indicated that 
faxing the permission form would not be allowed since the form itself 
could be construed as a solicitation or advertisement.3 
Likewise, a faxed permission form with a signature would not provide 
the necessary written permission because the signature is not a valid, 
original signature.
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    \3\  1992 Report and Order,  191.
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    Faxes have been used by the real estate industry to deliver 
information to consumers and other real estate professionals because of 
(1) the speed of information transmission and (2) the minimal cost 
associated with that speedy transmission. While it is possible to use 
one of the FCC recommended means to obtain written permission, doing so 
will result in delay and increased costs for fax senders and 
recipients. It is hard to imagine that these new rules will not impede 
the ability of real estate professionals to quickly and efficiently 
help homebuyers and seller complete their real estate transactions.
The Magnitude of the Resources Needed for Compliance Purposes
    While the cost of obtaining a signed permission in any one instance 
may not seem significant, in the aggregate, the magnitude of the new 
paperwork required for permission and/or the associated costs of 
alternative delivery methods (e.g. courier, overnight, or mail) 
required by the new rules are sizable. While no means exhaustive, we 
would offer the following very conservative estimates of simply the 
number of permissions that would be required for the real estate 
industry to continue to operate as it currently does.
    Agent to a Consumer. Last year, approximately six million homes 
changed hands. If we make a very conservative assumption that each 
seller requested information from two potential listing agents that 
would typically be faxed today (listing presentations and/or comparable 
listing data that could be construed as a solicitation) and each buyer 
received two faxes from two different agents during their home search 
that were subject to the new rules (e.g. Multiple Listing Service (MLS) 
listing sheets on a particular property, for example), then 
approximately 24,000,000 faxes would have been sent and 24 million 
signed permission forms would now be required before those faxes could 
be sent. Those 24 million permission forms would have to be printed, 
delivered to the consumer by some means at a cost, returned to the 
agent also at a cost, filed and stored.
    This estimate does not recognize that many families shop for a new 
home each year without purchasing a home. Consequently, the above 
estimate of 24 million permissions required is a significant 
underestimate of the volume of permission forms that would in fact be 
generated by the industry acting to comply with the new rules.
    Agent to Agent/Real Estate Firms. According to our surveys, faxes 
are typically used by real estate real estate professionals to 
advertise open houses, announce new property listings and changes in 
asking prices for listed homes. To estimate the number of permissions 
needed to facilitate faxes for these purposes, we can conservatively 
assume that each of our one million, self-employed members will want to 
fax, at one time or another, to at least ten real estate firms/offices, 
ten individual agents home offices, five settlement service providers 
and five general business service providers. Thirty (30) million 
permissions, therefore, would need to be gathered to allow for 
unfettered faxing between real estate professionals and the other real 
estate professionals and firms with which they work.
    Given that the real estate sales population changes significantly 
from year to year as new agents enter the industry, others leave the 
business, and fax numbers are changed and added, the need to seek 
permissions will be an ongoing yearly effort. Consequently, the 30 
million estimate will be a first year figure that will be added to each 
year as new permissions are needed to stay current of all the changes 
that have ensued.
    Real Estate Firms to Agents/Other Firms. In addition, the nation's 
145,000 real estate firms, as legal entities distinct from their 
independent contractor agent sales force, would also need to obtain 
permission to fax to real estate professionals and other firms. 
Assuming that each firm will have the need to fax to ten other real 
estate firms, thirty agents, twenty settlement service providers and 
twenty other general business service firms, the number of permissions 
required to support the current level of fax activity that is accepted 
as common practice would total 11,600,000. Again, this figure is a 
first year estimate that will need constant updating to account for 
changes in the industry players and fax numbers.
    REALTOR ' Association to Member. In order for NAR and 
its state and local associations to continue to fax their one million 
members, an additional 3,000,000 signed written permission forms would 
be generated. REALTORS ' do not join just the national 
association but join their state associations as well as their local 
associations. Hence, the need for 3 million separate permission forms 
to be circulated, complied, maintained and checked prior to any 
communications via fax would be undertaken. We would anticipate that 
this would be an annual exercise in which each of our associations 
would engage.
    A Final Thought. It is important to recognize that each of the 
forgoing estimates of numbers of permissions to fax that would be 
required to comply with the FCC's new fax rules are only one part of 
the cost equation. We have not attempted to estimate the dollar cost of 
obtaining each of these permissions and maintaining the resulting 
records since to do so would require a level of detail that we do not 
have available to us. However, it is clear that given the shear 
magnitude of the numbers involved and the costs of preparation, 
distribution, and management of the resulting paperwork that the costs 
will be substantial.
Compliance Cost vs. Benefits Achieved
    As we have illustrated, the costs associated with the elimination 
of the EBR and alternative means of granting permission to fax are 
enormous. The new rules do this despite the fact that the Commission's 
do-not-fax rules have worked for over a decade. In reversing the 1992 
decision, the Commission did not note any consumer complaints that were 
a result of the established business relationship rule. Indeed, there 
is scant evidence of harm to justify the Commission's abrupt change.
    Though there is not evidence of harm that needed to be fixed by 
eliminating the EBR exception or alternative means of giving the 
requisite permission, there is evidence of over ten years of business 
expectations in reliance on that exception. NAR, real estate 
professionals, and entities in countless other industries implemented a 
practice of routinely faxing information regarding products and 
services to other entities with which they have an established business 
relationship.
    Accordingly, while the compliance costs of the new rule in the 
aggregate would be quite high, the benefits would be minimal, because 
the faxes sent and received by real estate agents are the type 
routinely exchanged by those persons who do business together. These 
are not the type of ``junk'' faxes that the TCPA and Commission rule 
were designed to prohibit. But the Commissions' revised rule for the 
first time covers all faxes, including those integral to existing and 
new business relationships in the real estate market.
A Solution to the Problems Created by the New Fax Rules
    NAR believes that the established business relationship exception 
to the TCPA rules should be reestablished and that others forms of 
consent should be allowed. In the matter of the EBR exception, NAR 
believes that the Commission correctly analyzed consumer expectations 
and the affect privacy interests in its 1992 rulemaking: ``a 
solicitation to someone with whom a prior business relationship exists 
does not adversely affect subscriber privacy interests.'' 4 
Also, the Commission prudently found that the standards for a telephone 
solicitation and faxed advertisement should be the same and thus 
exempted established business relationships from both sets of rules.
---------------------------------------------------------------------------
    \4\ 1992 Report and Order,  34.
---------------------------------------------------------------------------
    With respect to the allowance for means of permission beyond 
express written permission, NAR believes that consent should be allowed 
that is:

 faxed;
 provided electronically (whether by a web-based ``click-through: or 
        in an e-mail);
 orally (in person, by telephone, or in a telephone message); or
 by automated means (in response to an automated fax-on-demand phone 
        system by which the caller can request faxed information).
    Written signed consent is unnecessary and imposes a requirement far 
out of proportion to the harm it seeks to address, and thus contradicts 
the intent of Congress in adopting the TCPA. The legislative history 
shows that Congress considered imposing a written requirement and 
decided against that high threshold of consent. The House Report 
accompanying the TCPA states that Congress ``did not see a compelling 
need for [] consent to be in written form. Requiring written consent 
would, in the Committee's view, unreasonably restrict the subscriber's 
rights to accept solicitations of interest and unfairly expose 
businesses to unwarranted risk from accepting permissions or 
invitations from subscribers.'' 5 The Senate Report is 
equally on point. The Senate bill as introduced contained the phase 
``express written consent'' in the context of telemarketing, but 
dropping the requirement tat consent be written was one of three 
changes the Senate Committee made before favorably reporting the bill. 
The Committee justified its decision to drop the written requirement 
because the Committee found that mandatory written consent was ill-
suited to the interests of consumers and sellers.6
---------------------------------------------------------------------------
    \5\ H.R. Rep 102-317, at 13 (1991). Though this statement was made 
in the context of telephone solicitations, the same rationale applies 
equally to the fax context.
    \6\ S. Rep. 102-178, at 5 (1991).
---------------------------------------------------------------------------
    A written consent requirement also is contrary to the Commission's 
telemarketing rules. Those regulations exclude from the definition of a 
telephone solicitation any call concerning the sale of goods or 
services in response to an individual's inquiry, when the individual 
would be expecting such a call.7 In contrast, the fax 
advertising rules not only specify that a fax sent in the same 
situation is an ``unsolicited advertisement,'' but actually prohibit 
such a fax.
---------------------------------------------------------------------------
    \7\ Report and Order  114.
---------------------------------------------------------------------------
    This is problematic for two reasons. First, classifying a telephone 
call made in response to an inquiry as not a solicitation, but a fax 
sent in exactly the same circumstances as an unsolicited advertisement 
is confusing, contradictory, and arbitrary since the terms 
``solicitation'' and ``advertisement'' have the same meaning. This is 
particularly the case since, under the plain meaning of the term, a fax 
is not unsolicited if the recipient has made a request for the 
information and there are numerous other ways to invite or permit a fax 
other than by providing prior written and signed consent.
Conclusion
    In conclusion, we want to thank the leadership of the Subcommittee 
and the full Energy and Commerce Committee for the opportunity to share 
the views of the NATIONAL ASSOCIATION OF REALTORS ' on the 
need for Congressional attention to the problems faced by the real 
estate industry as the result of the new fax regulations that will take 
effect January 1, 2005. We strongly believe that consumers looking for 
new homes and rental units will be disadvantaged by the new regime as 
will real estate professionals and firms. We urge you to take action to 
create the statutory authority for an established business relationship 
exception needed by the FCC to allow the EBR exception that has served 
consumers and businesses well for over a decade and clarify once again 
that permission can and should be allowed to be granted by means other 
than express written permission.

    Mr. Upton. Thank you. Mr. Graham?

                   STATEMENT OF JOHN H. GRAHAM

    Mr. Graham. Mr. Chairman, Ranking Member Markey and members 
of the subcommittee, my name is John Graham----
    Mr. Upton. If you'd just turn that mike on.
    Mr. Graham. My name is John Graham, president and CEO of 
the American Society of Association Executives. ASAE is a 
Washington-based association representing 24,000 members who 
represent and managed 11,000 trade, professional and individual 
voluntary organizations.
    I wanted to thank you for the opportunity today to testify 
on the legislation before you, which ASAE strongly supports. 
The legislation addresses the unfortunate situation created by 
the new fax regulations issued last year by the Federal 
Communications Commission. These regulations, which have been 
stayed until January 1, 2005 following an almost unprecedented 
outcry from the association and business community, have 
fostered tremendous uncertainty for everyone. These new rules 
would require any organization or business to obtain prior 
written consent before it could legally send a fax of a 
commercial nature. For associations, this would require keeping 
physical records for members that range from hundreds to in 
some cases, like we just heard from NAR, nearly a million 
members and at this time when many associations are moving 
toward paperless registrations and membership records.
    The situation has been further confused by the expansive 
nature of the FCC's determination of unsolicited advertisements 
covered by the new regulations. The new standard of prior 
written approval appears to apply to any fax associated with a 
current or future monetary exchange.
    It also appears that the FCC would apply rules to 
activities such as fundraising by charitable organizations and 
to faxes involving those transactions. This would make these 
regulations some of the most intrusive requirements on the 
basic activities of both tax-exempt entities and for-profit 
businesses. It is therefore imperative that Congress act before 
these new rules take effect. Absent a statutory correction, 
these new rules will greatly hinder basic communications and 
commerce and have a chilling effect on the use of this 
important means of communication.
    The legislation before you has several components on which 
we wish to comment. The bill reestablishes a statutory existing 
business relationship. This is critical for the use of faxing 
by associations as well as businesses. The bill also contains a 
new requirement of a mandatory opt-out for unsolicited faxes 
sent under the auspices of the reestablished EBR. This opt-out 
requirement is a new and important way to help consumers, 
whether they are private individuals or businesses, eliminate 
unwanted faxes.
    As part of this requirement, the legislation before the 
committee also contains a provision to allow the FCC to 
consider waiving the opt-out provision for trade and 
professional associations. Members of these tax-exempt groups 
have chosen to join a particular organization which usually 
requires the payment of annual dues. These members expect 
communications, including faxes, as part of their membership.
    Since tax-exempt associations are not commercial by either 
definition or nature, without such a provision for this 
regulatory flexibility, there is real likelihood for confusion 
as to the application of the Federal opt-out requirement. This 
situation is much more clear cut for a regular business or 
commercial operation but not for tax-exempt groups.
    There are several items of the current law that we believe 
should be clarified in report language or clarifying 
legislative history. It should be clarified that unsolicited 
advertisements do not include charitable fundraising activities 
or faxes related to a specific or expected transaction. There 
appears to be agreement among both the majority and minority 
staff that neither current law nor the proposed changes would 
classify these types of faxes as unsolicited advertisements. 
However, the confusion created by the FCC regulations causes 
great concern. We believe it is appropriate that Congress 
clarify the situation.
    In summary, we would hope that the committee and the entire 
Congress approve this corrective legislation as soon as 
possible. Associations and businesses are already planning for 
the onerous, burdensome and expensive task that will be 
necessary if the new rules take effect as scheduled. The 
earlier the corrective legislation is passed, the less time and 
money will be expended in planning for a worst-case scenario.
    Thank you again for allowing me to come here to testify, 
and appreciate working with you on the pending legislation.
    [The prepared statement of John H. Graham follows:]
 Prepared Statement of John H. Graham IV, President and CEO, American 
                   Society of Association Executives
    Mr. Chairman, Ranking Member Markey, and members of the 
subcommittee, my name is John Graham, and I am President and CEO of the 
American Society of Association Executives (ASAE). ASAE is a 
Washington, D.C.-based association comprised of more than 24,000 
professionals who manage approximately 11,000 trade, individual, and 
voluntary organizations and associations. Almost all the associations 
represented by ASAE's membership are exempt from taxation under section 
501(c)(3), 501(c)(4) or 501(c)(6) of the Internal Revenue Code.
    I want to thank you for the opportunity to testify today on the 
legislation before you, the Junk Fax Prevention Act of 2004. ASAE 
strongly supports the swift passage of this important and necessary 
legislation.
    The legislation before the subcommittee addresses the unfortunate 
situation created by the new federal facsimile regulations issued last 
year by the Federal Communications Commission (FCC). These regulations, 
which have been stayed until January 1, 2005, have fostered tremendous 
uncertainty in both the association and business community regarding 
this important and necessary form of communication.
    While in many ways faxing is not as technologically advanced as 
other forms of communication, it remains a very valuable and important 
tool both for our everyday dealings with our members and for regular 
commerce on the part of our nation's business community. Despite the 
evolution of e-mail and electronic attachments, faxing is still a key 
part of the operations of the organizations represented by our members 
and of basic commerce.
                               background
    As you all are well aware, last year the FCC issued regulations to 
alter the treatment of fax communications under the 1991 Telephone 
Consumer Protection Act, to be effective in August 2003. In their 
rulemaking, the FCC repealed the ``existing business relationship'' 
principal, or EBR, that had guided facsimile communications for 10 
years. As part of the FCC's rewrite of its regulations to implement the 
``do-not-call'' rules, the FCC determined that the EBR exception for 
faxes could not be supported by existing law, despite the existence of 
these regulations for a decade.
                  effect of the fcc's new regulations
    Consequently, the FCC's new rules would require any organization or 
business to obtain prior written consent before it could legally send a 
fax of a ``commercial'' nature to any other person or place of 
business. This consent would have to be obtained for each person and 
for each fax number in order to comply with the new rules. An 
organization or business could not simply get a blanket permission 
form, let alone verbal permission, but instead would need signed 
permission from each fax recipient stating the specific fax number for 
which permission is granted. Consent forms could not even be faxed 
under our understanding of the FCC regulations, but would have to be 
distributed by another method such as by regular mail or e-mail.
    For associations, this would require keeping physical records 
substantiating permission for memberships that range from hundreds of 
members to, in some cases, near or above one million members. And these 
physical records would have to be maintained at a time when many 
associations are moving towards ``paperless'' registration and 
membership records as new systems are being developed to take advantage 
of technological capabilities and innovations.
    The situation has been further confused by the expansive nature of 
the FCC's determination of unsolicited advertisements covered by the 
new regulations. The new standard of prior written approval appears to 
apply to any fax that in any way could be considered commercial in 
nature. In discussions with FCC staff, this standard appears to cover 
any fax associated with a monetary charge, or any fax that might be 
associated with a future monetary charge. As such, it appears to apply 
to notices of annual meetings of an association if a registration fee 
is required, an annual membership renewal notice, education seminars 
with an associated fee, information on books and publications that 
members can purchase, and other basic communications that are routinely 
sent to members.
    It also appears that the FCC would apply the new prior written 
approval requirement to activities such as fundraising by charitable 
organizations and to basic transactions between associations and their 
members and between businesses and their customers. This would make 
these regulations some of the most intrusive requirements on the basic 
activities of both tax-exempt entities and for profit businesses.
    fcc rules delayed pending deliberation on the issue by congress
    Fortunately, the FCC has delayed the effective date of these new 
regulations until January 1, 2005. This delay, announced shortly before 
the regulations were to take effect last year, came after an almost 
unprecedented outcry from the association and business community 
objecting to the new rules. The FCC has stated that this delay will 
give Congress time to examine whether legislative changes are 
appropriate before the new rules take effect.
    Because of the obvious cost and administratively burdensome nature 
of these new rules, ASAE, on behalf of hundreds of associations, filed 
Petitions for Stay and Emergency Clarification with the FCC to 
encourage more deliberate consideration of these new rules and to allow 
time to determine congressional intent. More than 1,500 ASAE members 
ultimately signed onto the petitions.
    While ASAE and other entities have asked that the FCC return to its 
prior interpretation of the federal fax laws, it appears clear that 
they will not do this absent legislative action by Congress. Now that 
they have determined that, in their opinion, they never had the 
authority to grant the EBR exception that existed for a decade, it does 
not appear that they will return to what they view as an incorrect 
interpretation of current law.
                      need for action by congress
    Because of this, it is imperative that Congress act to rationalize 
our federal fax laws before these new rules take effect. Absent a 
statutory correction, these new rules will greatly hinder basic 
communications and commerce after the end of the year, at great expense 
and burden to associations and businesses.
    The need for Congress to act promptly is further dictated by the 
``private right of action'' that exists under current law. Under this 
provision as it has evolved over the years, private citizens can sue in 
state court for up to $1,500 per violation if they receive an 
unsolicited fax. As the law is currently drafted, a single fax can 
contain multiple violations, each subject to a potential $1,500 
judgment. Moreover, we are seeing a surge in frivolous lawsuits that 
could not have been envisioned or intended by Congress.
    The newest twist on this activity is the assignment of the right to 
sue under the private right of action provision. In the most egregious 
cases, individuals have actually solicited and purchased faxes from 
office support personnel for minimal sums such as $2 per fax in 
exchange for a signed document assigning the right to sue for damages. 
Some of our members have actually had their associations sued by a 
third party for faxes sent to their own members, despite the fact that 
the communication was desired and not in violation of the law.
    It is important to note that these lawsuits are often filed across 
state lines, and a written demand letter generally offers to settle for 
an amount less than the cost of fighting the action. This has amounted 
in some cases to extortion and financial harassment of law abiding 
associations and businesses. A simple Internet search can find step-by-
step instructions, including sample demand letters, suggested strategy, 
and forms for assigning rights to sue. While the intent of this 
provision was to arm consumers with a weapon to fight illegal faxes, in 
many cases it is being used to terrorize law abiding associations, 
businesses and citizens whose faxes fall into the hands of unscrupulous 
individuals.
    While we understand that the abuses of the private right of action 
cannot be addressed in this bill, the pattern that has developed in 
filing frivolous lawsuits underscores the need to pass the pending 
legislation as soon as possible. If January 1, 2005 comes around and 
the new FCC rules take effect, there will be literally millions of 
technical violations of the law that could result in an avalanche of 
lawsuits. This prospect would have a chilling effect on the use of an 
important means of communication in our nation.
       discussion of legislation proposal before the subcommittee
    The legislation before you has several components on which we wish 
to comment. The bill reestablishes a statutory ``existing business 
relationship.'' This is critical for the use of faxing by associations 
and businesses. It allows entities to fax legitimate information 
covered by the law without the fear of retribution in state courts. It 
essentially restores the situation that existed prior to the FCC rule 
change last summer.
    The bill also contains a new requirement of a mandatory ``opt-out'' 
for unsolicited faxes sent under the auspices of the newly 
reestablished EBR. This opt-out information must appear prominently on 
the first page of the fax stating that the receiver may make a request 
not to receive any future unsolicited faxes. It must include a domestic 
telephone and facsimile number that can be accessed during regular 
business hours. While this opt-out requirement is reasonable, we 
caution as to the exact enforcement of this provision.
    While the requirement calls for this information to be provided 
``in a conspicuous notice'' on the first page of the fax communication, 
we are concerned that human or mechanical errors could result in faxing 
of pages out of order or other unavoidable ``glitches.'' Our concern is 
that this would trigger a technical violation of the law, 
inappropriately subjecting the sender to liability under the private 
right of action. We would hope that this issue could be addressed in 
either legislative or report language so that the intent of the law can 
be enforced without punitive consequences. Additionally, we would 
request that report language discuss the requirements necessary to 
comply with the ``conspicuous notice'' criteria. Many organizations and 
businesses design faxes to be sent on one page, and we believe it is 
possible to comply with this requirement without devoting the type of 
space that would in many cases require the faxing of multiple pages.
    This opt-out requirement is a new and important right to help 
consumers, whether they are private individuals or businesses, 
eliminate unwanted faxes. It should be noted, however, that many 
current faxes that are unwanted are already illegal under current law. 
New requirements may not be effective in reducing the actions of those 
who willfully choose to violate the law. Prudence, then, needs to be 
exercised to insure that new requirements do not unduly burden law-
abiding citizens and businesses who want to operate in accordance with 
federal and state laws governing faxing.
    The legislation before the committee also contains a provision that 
would allow the FCC, after receiving public comment, to waive the opt-
out provision for trade and professional associations similar to the 
types represented by ASAE. This flexibility would apply only to a tax-
exempt organization faxing to its members on items related to the 
exempt purpose of the organization. If this legislation is enacted into 
law and the FCC exercises this provision, which of course we would 
encourage them to do, it would work to relieve some of the new 
regulatory burden of the opt-out provision that may be unnecessary for 
membership organizations. By definition, members of these tax-exempt 
groups have chosen to join a particular organization, which usually 
requires the payment of annual dues. These members expect 
communications, including faxes, as part of their membership. 
Associations generally have opt-out rules already in place for member 
communication, and know that members have the choice not to renew their 
membership if such requests are not respected.
    Since much of the fax material sent to members is often not an 
``unsolicited advertisement,'' this provision, if implemented by the 
FCC, could help prevent confusion in determining which faxes under 
federal law require a mandated opt-out mechanism. Since tax-exempt 
associations are not commercial by either definition or nature, without 
such a provision for this regulatory flexibility there is a real 
likelihood for confusion as to the application of the federal opt-out 
requirement. This situation is much more clear-cut for a regular 
business or commercial operation, but not for tax-exempt groups.
        need for clarification of existing law in certain areas
    There are several items that, while not included in the bill before 
the committee, should be clarified in report language or clarifying 
legislative history. This has to do with the fact that ``unsolicited 
advertisements'' do not include charitable fundraising activities or 
faxes related to a specific or expected transaction.
    In discussion with both majority and minority staff of this 
committee, it appears clear that neither current law nor the proposed 
legislative changes would classify these types of fax communications as 
unsolicited advertisements. However, the confusion created by the new 
FCC regulations causes us great concern. We believe it appropriate and 
necessary that Congress clarify this situation so that an unintended 
interpretation of the law does not take place.
    ASAE members represent a large number of charitable organizations. 
These organizations are by definition not commercial, and they rely 
heavily on volunteers for their good works. It is extremely important 
for Congress to clarify that neither current law nor the proposed 
legislative corrections apply to their activities.
    Associations also engage in a large number of ``transactions'' with 
their members, such as dues payments and registrations for seminars and 
continuing education programs. It is important to clarify that faxes 
relating to these activities as well as faxes related to transactions 
that occur in the business world are outside the scope of both current 
law and the proposed changes, and that they are not ``unsolicited 
advertisements.''
                         summary and conclusion
    In summary, we would hope that the committee and the entire 
Congress approve this corrective legislation as soon as possible. While 
the new FCC fax rules are delayed until January 1, 2005 to give 
Congress time to address the necessary statutory changes and hopefully 
prevent their implementation, it is important that legislation be 
approved sooner rather than later. Associations and businesses are 
already planning for the onerous, burdensome and expensive task that 
will be necessary if the new rules take effect as scheduled. The 
earlier corrective legislation is passed, the less time and money will 
be expended in planning for a worse case scenario.
    I want to take this opportunity again to thank you all for your 
leadership on this important issue, and to thank you again for allowing 
me to come here today to testify on the pending legislation.

    Mr. Upton. Thank you very much. Ms. Kaechele.

                  STATEMENT OF CHERYL KAECHELE

    Ms. Kaechele. Good morning, Mr. Chairman and members of the 
subcommittee. With your permission, I will summarize my remarks 
and submit a longer statement for the record.
    My name is Cheryl Kaechele. I publish the Allegan County 
News and two other weekly newspapers in southwest Michigan. We 
serve a rural area with total circulation just under 10,000. I 
am here to testify in favor of the Junk Fax Prevention Act of 
2004 and to explain why I believe the FCC's signed consent rule 
is the wrong solution to unsolicited fax problems.
    I am regional director for the National Newspaper 
Association which was established in 1885 to represent small 
daily and weekly newspapers such as mine. Our newspapers rely 
upon the fax to help our small business customers to use our 
services. The written consent rule surprised us. It was 
released on June 26, 2003 at first allowing only 60 days to 
collect the consents. Without a change in the law, we will 
begin to comply later this summer.
    This requirement punishes businesses that respect their 
customers and use the fax machine responsibly. Without the fax, 
we would be unable to tell our established customers of 
advertising opportunities. Even a transaction after a sale 
would require the consent form. Sending an ad proof would 
require a signed form. The customer needs another form from us 
to send it back.
    Mr. Chairman, our customers' time is precious. We all have 
small staffs and the fax is a time saver. Our advertising 
departments cannot possibly call on every small business in our 
area. Our county takes at least an hour to traverse, and with 
gas prices what they are today the cost would be prohibitive. 
Without the fax, we might never reach the home-based hair salon 
or the backyard fish and tackle shop.
    In my written testimony, I have explained some of the ways 
we use the fax. Let me highlight three. We alert businesses to 
special opportunities. Without the fax, they would lose an 
opportunity to grow their businesses. Some weeklies use the fax 
as a substitute for a mid-week addition. For example, NNA's 
member, the semi-weekly Weis County messenger in Decatur, 
Texas, distributes its daily fax newspaper update to about 
1,000 of its subscribers. Finally, some newspapers allow 
citizens to use their fax machines. That practice would surely 
have to end.
    Some proponents of the rule have said, ``Just get the form 
signed. What is the big deal?'' Mr. Chairman, that may be a 
fair question to a big business with an Information Technology 
Department, but we do not collect and massage massive data 
bases. I cannot think of a single community paper with a data 
base manager.
    Most of my publisher colleagues would have to hire new 
staff to comply. The new staff and publisher would have to 
acquire or upgrade a data base program, mail out hundreds of 
consent forms, explain a hundred times at the post office, at 
the golf course and while we are having lunch that we must 
require the forms, irritate customers by saying, ``No, we can't 
fax you the ad rates because you forgot to send your form 
back,'' send someone out repeatedly to try to collect the 
forms. The cost and effort of compliance could wipe out a 
year's profit for some very small papers.
    Mr. Chairman, I believe your bill takes the right approach. 
It says that if we have an established business relationship 
with the people and businesses to whom we are sending faxes, 
the burden of written consent forms is unnecessary. It 
recognizes good business practices and leaves the FCC free to 
go after those who od send junk faxes.
    Mr. Chairman, I want to close by expressing urgency. If 
your bill does not become law, we will have to begin absorbing 
the cost of compliance in August or September. I would like to 
pledge NNA's commitment to work with you to help move the bill 
forward quickly.
    Thank you for your time. If any questions come up following 
the hearing, I would be happy to supply responses for the 
record, and I am willing to answer anything now. Thank you.
    [The prepared statement of Cheryl Kaechele follows:]
 Prepared Statement of Cheryl Kaechele, Publisher, Allegan County News 
         on Behalf of the National Newspaper Association, Inc.
    Good morning, Mr. Chairman and members of the subcommittee. Thank 
you for inviting the National Newspaper Association to appear before 
you today.
    My name is Cheryl Kaechele. I am publisher of the Allegan County 
News, the Commercial Record, which covers the communities of Saugatuck 
and Douglas and the Union Enterprise which covers the communities of 
Plainwell and Otsego all in southwest Michigan. Our newspapers cover a 
fairly rural area, with a combined circulation of a little less than 
10,000. I am here to testify in favor of the Junk Fax Preservation Act 
of 2004, and to explain why I believe the Federal Communications 
Commission's fax consent rule is the wrong approach to solving 
unsolicited fax problems.
    I have owned my newspapers for more than 22 years. Before I came to 
the newspaper business, I was a school teacher. The opportunity to 
serve the communities I live in through newspaper publishing was an 
exciting opportunity for me after 15 years in the classroom. I believe 
community newspapers are an important part of American life. We serve a 
unique niche in the information world.
    I am a former president of the Michigan Press Association. I 
presently serve as regional director for NNA, which was established in 
1885 to represent the interests of hometown newspapers. NNA has been 
prominent in its public policy work for local papers since that time.
    Our organization represents about 2,500 newspapers from coast to 
coast. The typical member is a weekly newspaper in the 2,000-5,000 
circulation range or a daily in the 5,000-10,000 circulation range. It 
includes papers like mine, small dailies like the Daily Times Chronicle 
in Woburn, MA, the Bradford County Telegraph in Starke, FL, and the 
Archbold Buckeye, in Archbold, OH. We are primarily in rural areas and 
small towns, but our membership also contains urban and niche markets 
like the Intowner, here in Washington, DC. I have provided, as an 
attachment to my testimony, a map that indicates where our members 
publish.
    The wide majority of our titles are owned by their publishers, 
mostly small family operations, many of whom are in their third, fourth 
or fifth generations. I like to think that our segment of the newspaper 
industry is where hometown journalism is best nurtured, and where civic 
pride is an asset.
    The establishment of a new requirement for written consent for 
advertising faxes caught our industry completely by surprise.
    The FCC order establishing this requirement appeared in revisions 
of its regulations under the Telephone Consumer Protection Act. The 
requirement was codified as follows:

We may not:
(3) Use a telephone facsimile machine, computer, or other device to 
        send an unsolicited advertisement to a telephone facsimile 
        machine.
    (i) For purposes of paragraph (a)(3) of this section, a facsimile 
            advertisement is not ``unsolicited'' if the recipient has 
            granted the sender prior express invitation or permission 
            to deliver the advertisement, as evidenced by a signed, 
            written statement that includes the facsimile number to 
            which any advertisements may be sent and clearly indicates 
            the recipient's consent to receive such facsimile 
            advertisements from the sender.
    The regulation was released on June 26, 2003, providing a scant 60 
days before newspapers would be required to have these written 
statements on file for hundreds of fax numbers. Needless to say, our 
advertising people were dismayed. Reports to our NNA offices in 
Washington about families being required to cancel vacations began to 
flow in, and calls from newspaper staffs wondering what in the world 
was going on in Washington became a daily matter.
    Plus, the breadth of the interpretation of advertisement, our 
attorneys tell us, is such that even a transaction carried out after a 
sale is already completed--such as the transmittal of an ad proof--
might well require compliance with this new rule. In fact, if we sent 
an ad proof to a customer, it appears the customer would have to have a 
signed consent from us in order to fax it back. In other words, any fax 
with advertising, or even about advertising, appears to require these 
written consents.
    You can imagine that our newspaper staffs were amazed. The fax is 
such a common communication tool for us, and for our own customers, 
that we never dreamed that an agency in Washington might find reason to 
object.
    Very few of us--and I've recently re-posed this question to NNA's 
leadership--ever receive a request from one of our customers not to use 
the fax machine. Certainly, if we do, we honor it. Quite the contrary, 
our customers very often prefer the fax to any other route, but they 
would be dumbfounded if we told them we could not honor their wishes 
unless they signed a form.
    Prior to last June, we had received no indication that the Federal 
Communications Commission believed we had a problem, nor that it 
intended to consider revising the requirements for fax use. If we had 
realized the Commission intended to pursue this direction, we would 
certainly have made our case to the commissioners. I have since learned 
that the Commission continues to receive complaints about junk fax, 
even though it was illegal under the old rules, and that it concluded 
that imposing regulations upon the law abiding and the scofflaw alike 
was the only solution. I have to think that if they saw what we see 
every day, they would realize that a more targeted approach was needed.
    Our typical customers are small businesses. They would far prefer 
to have us send them information by fax than to spend their precious 
minutes on the telephone or in personal sales calls. Most of them know 
who we are, and they know what they want. All they count on us to do is 
to let them know when there is a new opportunity. And our own 
newspapers are small. Most newspaper advertising departments comprise 
only three or four people. They cannot possibly make personal calls on 
every small business that might need our paper. Nor, with gasoline 
prices what they are today, would it be a smart use of resources for 
them to do so. They rely on the fax to reach customers, and all of our 
customers--particularly the smallest businesses that we would never 
reach in person--seem to welcome the contact. Without the fax, we 
probably would never reach the hairdresser with a salon in her home, 
the shadetree mechanic who repairs cars on the weekend or the fish and 
tackle shop that operates outside of someone's garage.
    Let me detail some of the ways our members use the fax:

1) We alert businesses to special sections and themed editions that we 
        intend to publish. For example, I have attached a flier from 
        one of our members in Virginia that I would say is pretty 
        typical of the promotion that might go out to a small business. 
        This newspaper was producing a special edition to honor the 
        American troops serving our country, and benefiting the 
        American Red Cross. It wanted its customers to know about it, 
        in case they wanted to participate.
2) We let them know when there is going to be a new discount, or a 
        price break for a certain volume of ads that will save them 
        money and bring them new customers.
3) We send out rate cards--often because of telephone requests.
4) We create ads, and send out proofs for their approval (and we get 
        them back, with edits.)
5) We send invoices and statements so they can keep their bookkeeping 
        up to date.
6) And we have a host of other creative ways that are used in small 
        towns to keep people informed. For example, NNA's member, the 
        semi-weekly Wise County Messenger in Decatur, TX, has a daily 
        fax newspaper ``Update'' that is distributed to about 1,000 of 
        its business and residential subscribers, to carry news and 
        advertising promotions that break between weekly editions.
7) Finally, many of our members provide a public fax service. By that I 
        mean that they may own the only fax machine in town. They 
        permit citizens to come in and use it as needed. This is a 
        practice that would surely come to an end under the FCC rule, 
        because citizens would commonly not possess the signed consent 
        forms, the publishers would not be able to risk the liability 
        of improper use, and the exercise of explaining all of the new 
        rules would take more time and generate more ill will among 
        customers than most newspapers would be able to sustain.
    The question we have heard from some of your staffs as we have 
discussed our difficulty with the consent rule is: ``so . . . keep 
using the fax. Just get the forms signed. What's the big deal?'' NNA's 
Government Relations Chairman, Jerry Reppert, publisher of the Anna 
(IL) Gazette Democrat, met recently with the Federal Communications 
Commission staff in charge of this rule, and that was pretty much the 
question he heard.
    I think that question is not meant to be belligerent, although to 
our ears, it sometimes sounds so. I think it reflects the thinking of 
people in a big city accustomed to working with big businesses that 
keep Information Technology departments busy round the clock, 
collecting, massaging and managing data.
    It probably is hard to imagine businesses like ours--although I'm 
confident there are tens of thousands operating out of office buildings 
and in small offices and home offices in this very area. I can't speak 
for a big business on this issue, but I can tell you what I know about 
community newspapers.
    We do not collect, absorb and massage massive amounts of data. We 
keep simple lists of our subscribers, and our advertisers. We do not, 
by and large, have sophisticated databases, and I cannot think of a 
single community paper that has a database manager. What luxury!
    Here is what I believe most of my publisher colleagues would have 
to do, in order to comply with this rule:

1) Acquire or upgrade a database program;
2) Mail out, or hand carry, several thousand consent forms;
3) Explain over and over, at the post office, at the golf course, at 
        church, standing in the school parking lot, that, yes, we 
        really must have these forms back;
4) Send someone out again to get some of them back;
5) Send someone out again to get some of them back;
6) Explain over and over on the phone, ``no, we can't fax you the ad 
        rates, because you forgot to send your form back.''
7) Apologize to an irate customer, while standing in the post office or 
        in the school parking lot;
8) Send someone out again to get some of them back.
9) Hire someone to file them, make a note of them in the database, and 
        remember to check them periodically to make sure nothing has 
        changed, and then . . .
10) Send someone out again to get new forms back.
    You get the picture. It is going to require, in all probability, 
hiring someone to do this work. Or it will require shifting someone 
from selling ads or writing stories to take on this new task.
    We do very little survey work within NNA, primarily because of the 
cost. But we did ask some of our leadership earlier this year what they 
thought of the compliance costs and problems with this rule. I am 
attaching a talking paper that we produced with some of the responses, 
for your record.
    With many of our papers--particularly in America's struggling small 
towns, where the newspaper is only as healthy as the dwindling 
downtown--this extra cost may be the difference between a profitable 
year and a losing year.
    For what reason do we do this? Because someone out there is 
violating the fax rules that are already in place, blasting out offers 
for everything from vacation cruises to lower mortgage rates. That's 
not us. We see no reason why we should pay the price for those antics.
    Mr. Chairman, I believe your bill takes the right approach. It 
basically says that if we have an established business relationship 
with the people and businesses to whom we are sending our faxes, 
neither we nor they are required to shoulder the burden of written 
consent forms. It recognizes the existing good business practices of 
those who use the fax machine responsibly, and leaves the Commission 
free to go after those who do abuse it.
    We and our customers do not need a written consent form to 
understand one another. We work together because we need one another, 
and we have developed a good working relationship and mutual trust. We 
would not abuse our customers' fax machines, nor they ours.
    We understand the established business relationship rule. Our 
industry has conducted training in compliance with the Do Not Call 
rules. It makes sense, for simplicity's sake, to use a similar 
approach.
    I would be remiss if I did not say a word, as well, on behalf of 
our association, operating as its own business.
    I am active in both our national organization and the Michigan 
Press Association, where I served as president in 2000. Our 
associations were nearly as shocked as the members to learn that a 
collection of consent forms might be required before staffs could fax 
our conference registration forms and the like. All of us had to deal 
with shrinking resources in our association offices during the recent 
recession. I can assure you that they have few enough resources to put 
the conference on, let alone find staff to badger our busy members to 
remember to return the forms. Surely the payment of dues is an 
indicator that a business or individual wishes to have contact with the 
association. Requiring an additional consent, to me, would prove 
nothing.
    Mr. Chairman, I want to close by expressing the urgency of my 
concern with this requirement. The requirement will go into effect in 
January if your bill does not become law. To be realistic, most of us 
will have to begin absorbing the cost of compliance in August or 
September.
    I recognize that the Congress has a very busy season ahead. I 
fervently hope most of your colleagues recognize this bill to be a very 
rational and sensible change in the law, to simply have the law reflect 
what most of us are doing anyway. I would like to pledge the commitment 
of the National Newspaper Association to work with this committee and 
its staff to help move the bill forward quickly.
    Thank you for your time. If there are any questions that come up 
following the hearing, I would be happy to supply responses for the 
record.

    Mr. Upton. Well, thank you, all of you, for your very good 
testimony. I want to way in at the outset and say that we are 
intending to move this bill. I don't think it is any secret 
that Chairman Barton and I are trying to make sure that we 
remove any roadblock of getting this bill moved with the utmost 
speed and to the floor of the House as quickly as we can. And 
it does appear as though we will have very strong bipartisan 
support as we move forward.
    I do have a couple of questions in my time, and I want to 
say, Mr. McDonald, we welcome your testimony as well. The FCC 
has indicated that written permission is not difficult. Tell me 
a little bit--listening to Ms. Kaechele talk about the enormous 
burden that it would impose on particularly small businesses, I 
think about myself as I have, I think as almost every American 
has refinanced their house or bought a house, all the different 
forms you have got to fill in and checks that you have to write 
to a whole bunch of different entities along the way, and you 
want to make sure that that paperwork is clear as you move 
forward, but tell me about your thoughts about the feasibility 
of the FCC suggested means of obtaining specific permission for 
every single one of those transactions.
    Mr. McDonald. Well, Chairman Upton, the FCC has indicated 
that they have some alternative methods of obtaining that 
permission. They start first with the face-to-face meeting, 
direct mail, email with electronic signatures. All of these are 
options that do present, I think, a challenge for real estate 
professionals and the consumers involves in real estate 
transactions. The face-to-face meeting would seem to be a 
reasonable alternative, but unlike many businesses, many 
purchasers have a very close relationship with the people 
providing those products. But in the real estate business, 
while we have close relationships with those clients, they 
might not be purchasing something but about every 7 years. And 
so where your permission expires in a much, much shorter period 
of time, it would be very, very difficult to continue getting 
those written permissions if you were talking about a face-to-
face meeting.
    When you are talking about direct mail, well, it is true 
that permission could be delivered to a recipient by mail or by 
overnight UPS, Fed Ex, one of those delivery services or a 
courier. The time and the cost is the issue. As I mentioned 
earlier in my testimony, in the market that we are in today, 
that time element could mean the difference between a buyer 
successfully obtaining a home of their choice or losing that 
home of their choice, because property does not always stay on 
the market for very long.
    Mr. Upton. Let me ask this question: Some have suggested 
that perhaps you put a time limit on, maybe 3, 4, 5 years. What 
are each of your thoughts on some time limit? What would be 
reasonable? Would you support any time limit? What might you 
think is----
    Mr. McDonald. Well, my first reaction would be that we 
would not be in a position to support a time limit because we 
think that the basic problem here is not only time but the cost 
of implementing the signature request, maintaining those files 
on those. As I said a while ago, you are looking to support the 
type of real estate market which we hope will continue. You 
could be looking at millions and millions of forms being 
required to meet the requirements.
    Mr. Upton. Mr. Graham, what is your thought on a time 
limit?
    Mr. Graham. I think a time limit is unnecessary. I think 
particularly if the opt-out clause is put in there, that solves 
the problem.
    Mr. Upton. Ms. Kaechele?
    Ms. Kaechele. I have to agree with the gentlemen. The time 
limit in our business, businesses change and requiring the 
right signature can be a problem as well. For example, the 
local restaurant may change who owns it. Now I have got to make 
sure that I know who is the owner now. I am not dealing 
essentially always with individuals, I am dealing with 
businesses. And in that kind of an environment, often those 
people change.
    I also have a seasonal nature to my business, and we have a 
newspaper in the resort town of Saugatuck and those people are 
difficult to chase down in the winter, so to speak, and often 
again those businesses change. I just think it is unnecessary. 
I have never had anyone, Mr. Chairman, complain about getting a 
fax from me, because we don't send faxes except to people how 
have required our services.
    Mr. Upton. Well, thank you very much. Mr. Shimkus?
    Mr. Shimkus. I don't have any questions, Mr. Chairman.
    Mr. Upton. Mr. Walden?
    Mr. Walden. Thank you, Mr. Chairman. I appreciate this 
hearing and tackling this issue, although I am a small market 
radio guy in my other life, so I don't know how much I want to 
help the small newspapers, of course, our competitors.
    Mr. Walden. No. I share the frustration that you have 
expressed in your written testimony and here and would hope 
that we can get this bill moving and out the door.
    I found that opt-out provision is pretty useful. I get back 
to my apartment here in Washington and usually have a few 
solicitations on the phone and a few faxes on the machine, and 
you can dial in the number and get off the list. And this issue 
of the established business relationship, I mean I understand 
exactly what you are saying. Businesses do change ownerships 
and then who is the right signature, and it is just, to me, a 
bit overkill.
    And so I guess the question I would have for the panel is, 
and especially the FCC, I suppose, is in terms of complaints 
about faxes, how many of them really are business-to-business 
complaints that you see? How much of this is business-to-
consumers and not where there is an established business 
relationship?
    Mr. Snowden. Out of the complaints that we have received, 
Congressman, the majority of business-to-business complaints 
that we receive are from small businesses.
    Mr. Walden. Right.
    Mr. Snowden. Most of them for the record that we compiled 
for this particular proceeding, the small business community 
said they were being inundated with these business-to-business. 
So that is the majority of where we are getting the complaints 
from in terms of the----
    Mr. Walden. And of those, how many, though, were you able 
to differentiate were business-to-business--existing business-
to-business relationships?
    Mr. Snowden. I don't have those numbers, but we can do some 
research and get that for you. But to give you an example, last 
year, from March to April of last year, we received about 1,500 
complaints a month on faxes in terms of the TCPA.
    Mr. Walden. Okay. All right. Thank you, Mr. Chairman. That 
is all I have.
    Mr. Upton. Mr. Markey?
    Mr. Markey. So it is 1,500 per month total?
    Mr. Snowden. Each month for that year.
    Mr. Markey. Now, you said that there was a $5.4 million 
forfeiture order against fax.com?
    Mr. Snowden. That is correct.
    Mr. Markey. Have you collected that money?
    Mr. Snowden. Right now it is over at the Department of 
Justice, and they are looking at it and working with us.
    Mr. Markey. What is the process to ensure that that $5.4 
million gets into the government's pockets?
    Mr. Snowden. To the U.S. Treasury? The process is twofold. 
According by statute, under Section 503, what we are required 
to do, if you are a licensee of the FCC, there is one process, 
and for those that are not, there is another. For example, if 
you are a licensee, we can automatically go to a Notice of 
Apparent Liability. If you are not, we must first issue a 
citation, then----
    Mr. Markey. Have you issued a citation?
    Mr. Snowden. We have issued a citation, we have issued a 
NAL, and that is how we got to the over $5 million forfeiture 
amount that we got to.
    Mr. Markey. So what is the Justice Department saying to 
you? Are they going to be the collection agency?
    Mr. Snowden. Well, they are our collection agency, that is 
correct.
    Mr. Markey. And so where are we in the process? Because as 
soon as that is finalized, that will really send a chilling 
effect out to anyone who is abusing consumers. So what is the 
timeframe on that?
    Mr. Snowden. The timeframe is up to the Department of 
Justice, and we are working with them now to get some more 
information from them as to when they are going to go after and 
what they are going to do as next steps for this particular 
violator of the rules.
    Mr. Markey. Now, how many cases do you bring a year on 
those 1,500 complaints, 1,500 per month?
    Mr. Snowden. I will need to check with my colleagues in the 
Enforcement Bureau. As you know, I represent the Consumer and 
Government Affairs Bureau. We have issued over 233 citations in 
the past years.
    Mr. Markey. Past years.
    Mr. Snowden. Yes. That----
    Mr. Markey. But it is 1,500 per month. The complaints are 
1,500 per month, so how many per year--how many per month do 
you, on average----
    Mr. Snowden. One of the challenges that we have with 
enforcing these rules is that it is hard to find who these 
faxers are. As the panel said earlier, some of these faxers are 
offshore, some of them go bankrupt, some are out of business.
    Mr. Markey. So, on average, do you bring ten cases per 
month?
    Mr. Snowden. I don't have the information at my fingertips, 
but----
    Mr. Markey. Are you talking in the range of 100 to 150 a 
month or 5 to 10 per month? Which is the closer?
    Mr. Snowden. Again, sir, I will have to check with our 
enforcement--I don't want to give you any false information.
    Mr. Markey. But you said it is only 200 per year.
    Mr. Snowden. No, we have issued 233 citations so far.
    Mr. Markey. Two hundred and thirty-three citations over how 
many years?
    Mr. Snowden. And that is starting, I would say, back from 
1999 to now.
    Mr. Markey. So over the last 5 years 200, so that is about 
40 a year that you actually--the citations that you bring, but 
at 1,500 per month, you are looking at like 18,000 complaints a 
year.
    Mr. Snowden. Correct.
    Mr. Markey. Over a 5-year period. That brings you up close 
to 100,000 complaints, 90,000 to 100,000 complaints if that 
average stayed in tact. So if you only brought action against a 
handful, then it is--a driver on the road, 100,000 drivers on 
the road, if only a small handful ever get stopped or if you 
are able not to put the money in the parking meter, then you 
are not really providing a real deterrent. So is there any 
effort to increase the frequency with which there is a 
prosecution or there is an action taken? It does seem like a 
low level.
    Mr. Snowden. One of the things that we are trying to do put 
in place or we have put in place, our Enforcement Bureau has 
increased their enforcement activity regarding the TCPA. We 
announced that when we announced the new rules back in 2003.
    Mr. Markey. Increasing it to what?
    Mr. Snowden. Enforcement activity.
    Mr. Markey. Right. Increasing it to what level?
    Mr. Snowden. Well, we have not articulated a particular 
number goal, because the challenge that we have before us is 
that we have to find them.
    Mr. Markey. No, I am saying but out of 90,000 complaints, 
potentially, say in that range over the last 5 years, you must 
be able to find more than 10 a month.
    Mr. Snowden. Believe it or not, Congressman, it is very, 
very difficult to find these individuals who are violating the 
rules. There are a lot of ways that they escaped us. We do 
everything we can. Out of the 233, we have had to go through a 
lot of work to be able to even track them down to get to the 
point where we are right now. This is a very arduous task to 
get to the--they obfuscate the law, and they obfuscate us as 
well.
    Mr. Markey. Thank you, Mr. Chairman.
    Mr. Upton. I have an additional question. Ms. Kaechele, you 
indicated that without a change you would see your paper 
beginning to try to focus on this as early as August. Mr. 
McDonald and Mr. Graham, what is your sense in terms of when 
you would actually have to start making changes if you don't 
see legislation begin to move in a proper direction? How 
quickly will you have to begin to really address that, knowing 
that the deadline is, what, the very end of December, December 
31, January 1?
    Mr. McDonald. If your bill were not introduced and 
successful within a reasonably short period of time, we would 
have to anticipate the implementation of those rules and start 
our members' activity on making sure they were in compliance 
with the rules that had been issued by the FCC. I can't give 
you an exact date, but I would say it would be a relatively 
short period of time.
    Mr. Upton. Mr. Graham?
    Mr. Graham. We are monitoring it very closely, and if we 
don't have some action I think by August, the August recess, we 
are going to have to go into September with some guidance to 
our members and associations on how this will affect them and 
how to implement it.
    Mr. Upton. You know, again, as I indicated, we are going to 
try to put this on the fast track. We have been working and I 
commend my colleague Mr. Markey and Mr. Dingell and others on 
both sides of the aisle. Let's say that we get a bill moving, 
let's say that we get to full committee markup as early as next 
week, we get it on the floor under suspension. I would like to 
think if we continue the bipartisan cooperation, we pass it 
with only Mr. Paul voting against it in July.
    And let's say the Senate just doesn't move, molasses 
continues. Mr. Snowden, if you saw a bill introduced in the 
Senate with bipartisan support, a bill that actually has passed 
the House because of the actions of Mr. Tauzin and myself and 
other members that contacted the FCC you were able to put a 
stay, in essence, in terms of when the regulations were going 
to take place, would the FCC, would they look at Congress' 
intent and perhaps give us another stay until we could actually 
get this bill done, maybe in lame duck session or something 
like that, at least give a signal to the many businesses out 
there that are looking for some help? Do you think that would--
--
    Mr. Snowden. Well, as you noted, sir, when we first learned 
of the challenges that were facing the business community with 
your urging and their urging, we quickly put a stay in place to 
allow businesses to get up to speed, because our goal, of 
course, is to be pro-consumer and to also ensure that consumers 
and businesses alike can have some control over the messages 
they receive.
    In terms of a future stay, it will be up to the five 
members of the Commission to vote on that. That is something 
that is not done at the Bureau level, that is done at the 
Commission level, and I would urge the committee, whatever you 
all are going to do to bring clarity to this issue----
    Mr. Upton. So you would be on our side?
    Mr. Snowden. I would be on the side----
    Mr. Upton. A letter may come to you before it goes 
upstairs.
    Mr. Snowden. For the record, sir, I will be on the side----
    Mr. Upton. And we may not fax it either. We will have to 
call to see if I can send it down there.
    Mr. Snowden. If I may, Chairman Upton, I would like to go 
back to a point to Mr. Markey for a second. One of the 
questions, I think, where you were going to in terms of our 
enforcement activity that could help the Commission, for 
example, our forfeiture amounts are $11,000 per violation right 
now. And for many of these companies, that is peanuts. For the 
fax.com case, they had over 480 different violations, and we 
fined them $11,000 each, and that is what got to that amount. 
Raising that amount would be helpful.
    Mr. Markey. What would you like it at?
    Mr. Snowden. I think I will leave that to the Chairman. I 
think Chairman Powell will get back to the committee on that 
particular matter, but right now it is not where it needs to be 
to have a dent. In addition to the citation--right now we have 
to issue a citation to the non-licensees. Eliminating that 
phase would be helpful as well.
    Mr. Upton. In some of these cases, does the faxer often 
hide their own identity, their own fax number in terms of 
trying to respond back to them?
    Mr. Snowden. They sure do. In fact, what we have found is, 
and it seems counterintuitive when you first think about it, if 
I am trying to sell a product, why am I hiding my identity 
because I need to be able to call you to sell that product, but 
when a consumer begins to call that number, it is very 
difficult for them to get off a list. It is very difficult for 
us to find out who actually owns this, who do we actually put 
this forfeiture or this citation against? And so that is a 
challenge, and as you all point out, it appears you all are 
addressing that issue with the domestic call.
    Mr. Upton. Mr. Markey?
    Mr. Markey. Mr. Snowden, should we have a requirement on 
the opt-out notice requiring the legal name of the sender?
    Mr. Snowden. Well, the----
    Mr. Markey. Would that help your enforcement if legally in 
the law they actually had to put their legal name?
    Mr. Snowden. Any clarity that we can have in terms of 
knowing who the individuals are would help our enforcement 
activity.
    Mr. Markey. So you would have us make it a requirement that 
they have to put their legal name?
    Mr. Snowden. I would ask for any clarity that you all could 
provide for this matter.
    Mr. Markey. So you would support that.
    Mr. Snowden. I would ask for clarity, sir, yes. We offer 
technical advice to the Congress. Since we have many of these 
issues before us right now on reconsideration, it would be 
inappropriate for me to voice the opinion of the Commission 
since some of these issues are before us right now.
    Mr. Markey. Would a requirement that they have to use their 
legal name be more useful to you than they use a bogus name?
    Mr. Snowden. Absolutely.
    Mr. Markey. So maybe we can make that a requirement. Thank 
you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus?
    Mr. Shimkus. Mr. Chairman, along this line of questioning, 
who is the legal name of an association? Who would that be? 
Would that be the executive director?
    Mr. Graham. The legal name of an association is in the case 
of ASAE would be the American Society of Association Executives 
is the legal name. That is the name that would appear. That is 
the registered business name.
    Mr. Shimkus. So who is, in essence--I guess the confusion 
is if we are going after bad guys and the idea is get a legal 
name so we know who to go to, if it is an association, it is 
still--well, it is--I mean it would be protection under 
corporations.
    Mr. Graham. Most associations are incorporated, so the 
legal responsible party would be the incorporated entity.
    Mr. Shimkus. I mean so if it is a nefarious, sinister 
intentional organization that uses an association name, that 
you still can't--you still wouldn't be able to track them, you 
would still have the same problem.
    Mr. Snowden. You are identifying the challenges that we 
have in our enforcement capabilities, absolutely.
    Mr. Shimkus. I just thought I would ask. I didn't know how 
that would work. Thank you.
    Mr. Upton. Mr. Graham?
    Mr. Graham. I mean the unintended consequence here, of 
course, as I am hearing this testimony, is that we are very 
easy to spot. You can find the realtors, you can find us, you 
can find newspapers. We are easy to find. The people who are 
violating the law, it sounds like, in large part, are people 
who you can't find. And so we are putting in place perhaps a 
law that--we are not putting in place a law but we have a law 
in place now that penalizes the honest and the other ones are 
going off scott-free.
    Mr. Shimkus. Welcome to Washington.
    Mr. Graham. Right. Just thought I would point that out. 
Thank you.
    Mr. Shimkus. I think other people have mentioned that to 
us.
    Mr. Snowden. To us as well, sir.
    Mr. Upton. Mr. Walden, do you have additional questions? 
Any comments, remaining comments from the panel?
    Mr. McDonald. Mr. Chairman, I really wanted to add that 
from my perspective after hearing the testimony from everybody 
this morning, if you allow the OCC rules to go in effect the 
way they were proposed--I am sorry, not OCC, the FCC rules, 
what you are doing----
    Mr. Upton. We do like banking jurisdiction.
    Mr. Oxley used to be a favored member of the committee and 
no longer is.
    Mr. McDonald. There you go. What you are doing by taking 
away the existing business relationship exception that has been 
in place is you are penalizing the good guys that they can find 
and doing nothing to curtail the bad, unsolicited fax that are 
out there. So our point to you today is that your bill is 
important to get that exception back in place so that the good 
guys aren't the ones that are being penalized and that somehow 
or another they find the bad guys and eliminate those that are 
doing the unsolicited faxing.
    Mr. Upton. Mr. Snowden?
    Mr. Snowden. Chairman Upton, I would offer as well that 
since we have issued these rules, I have personally met with 
each of the individuals on the--excuse me, each of the 
associations on this panel here.
    Mr. Upton. We would like to know if you have gotten a 
subscription to the Allegan County News?
    Mr. Snowden. I have not purchased that, but I know the 
Chairman is very supportive of making sure that we have a voice 
in small communities, so I will look into that. But the issue I 
wanted to bring forward is that no matter what happens the 
FCC's doors are always open to each of these panelists and 
others who want to come and talk to us about these rules and 
our records as we go forward.
    Mr. Upton. Well, again, we appreciate your testimony, your 
help with us as we move forward. Again, I want to announce it 
as early as tomorrow. I intend to introduce this legislation 
with strong bipartisan support, and we intend to move it as 
quickly as we can through the legislative process, hoping that 
the other body begins to take action as well, and we appreciate 
your thoughts, we look forward to working with you in the days 
ahead, and we now stand adjourned. Thank you.
    [Whereupon, at 11:21 a.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Phillip D. Brady, President, National Automobile 
                          Dealers Association
    The National Automobile Dealers Association (NADA), which 
represents 20,000 franchised automobile and truck dealers who sell both 
domestic and import vehicles and employ more than one million people 
nationwide, strongly supports legislative efforts to remedy the Federal 
Communication Commission's (FCC) rule to require written permission 
prior to sending any commercial fax. Without remedial legislative 
action before January 1, 2005, when the FCC's rule will take effect, 
there will be a severe disruption to trade associations in 
communications with their members and businesses responding to their 
customers' needs.
                               background
    In 1991 Congress enacted the Telephone Consumer Protection Act 
(TCPA) to prohibit sending unsolicited fax advertisements to any person 
or entity, including businesses. The statute defines an unsolicited 
advertisement as any commercial material transmitted to any person 
without that person's prior express invitation or 
permission.1. In 1992, the Federal Communications Commission 
(FCC) determined that an ``established business relationship'' with a 
recipient serves as prior invitation or permission for a commercial 
fax.2
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    \1\ P.L. 102-243
    \2\ The FCC regulations implementing the TCPA define an 
``established business relationship'' as ``a prior or existing 
relationship formed by a voluntary two-way communication between a 
person or entity and a residential subscriber with or without an 
exchange of consideration, on the basis of an inquiry, application, 
purchase or transaction by the residential subscriber regarding 
products or services offered by such person or entity, which 
relationship has not been previously terminated by either party.'' 47 
CFR  64.1200(f)(4).
---------------------------------------------------------------------------
    Despite years of reliance on an ``established business 
relationship'' that allowed tax-exempt trade associations to 
communicate with their members and businesses to respond to customer 
requests for faxed material without restriction, the FCC on July 25, 
2003 reversed its prior fax rules to remove the ``established business 
relationship'' exemption on the grounds that it did not have a basis in 
law. This part of the new FCC regulation, scheduled to take effect 
January 1, 2005, will require all senders, including tax exempt trade 
associations and businesses, to obtain prior written consent from their 
members and customers before sending faxes of a commercial nature. This 
written permission must include the recipient's signature, the fax 
number to which the material may be sent, and the recipient's clear 
consent to receive such faxes from the sender.
                        impact of fcc's fax rule
    While these new fax regulations issued by the FCC are intended to 
stop abusive faxing of unsolicited materials, a goal fully supported by 
NADA and its members, we believe the regulations are overly broad and 
impose significant and unnecessary burdens on businesses and trade 
associations. The fax regulation as currently structured would also 
impose substantial burdens on consumers and their ability to obtain 
information they seek in a timely and expeditious manner.
    Under the new FCC rules for example, major trade associations with 
thousands of members would need to undertake substantial efforts, in 
both time and resources, to obtain the written permission of their 
members to send any faxes that may be of a commercial nature. Because 
these members are individuals and entities who have voluntarily sought 
the benefit of the association's services, we do not believe there 
should be government-imposed restrictions on a tax-exempt trade 
association's ability to communicate with its members. This 
particularly applies since under the TCPA fax recipients can terminate 
the established business relationship at any time simply by notifying 
the sender.
    If the new FCC rules applied to our members' businesses, they would 
not be able to respond to oral requests from consumers, existing 
customers, or other commercial enterprises for faxed information. For 
example, a fax of product or service information (such as a price 
quote), even if specifically requested, could not be carried out unless 
there was prior written permission to do so. There should not be any 
doubt that such a rule would result in tremendous cost, burdensome 
record keeping, and divert time and resources away from the active 
conduct of the business. Automobile retailers are already struggling to 
keep up with all the other regulatory burdens imposed on them by 
government at all levels. There is no public policy rationale to 
subject them to the costs and difficulty associated with obtaining and 
tracking such written consent forms where a business relationship 
already exists or the fax is specifically requested.
                           legislative remedy
    Any legislative remedy to the FCC's impending fax rules should 
amend the Telephone Consumer Protection Act (TCPA) to specifically 
create a statutory ``established business relationship'' exemption to 
the ban on unsolicited commercial faxes. This would codify the 
``established business relationship'' exemption for commercial faxes 
that has worked well for more than ten years while also preserving 
protections currently in law to prohibit and punish truly unsolicited 
commercial advertisements.
    We understand that any legislative action to restore an 
``established business relationship'' may also include an ``opt-out'' 
option on future faxes for those with existing relationships. While we 
do not oppose such a step, we believe, if that step is taken, the 
definition of ``unsolicited advertisement'' should also be amended to 
specifically exclude fax communications that: respond to a specific 
inquiry; complete a transaction requested by the recipient; and are 
sent by a tax-exempt trade association to its members and affiliates. 
We believe that there is no public policy rationale to treat such 
communications as unsolicited, and the application of the opt-out 
mechanism to such communications may impose some of the same 
unjustifiable burdens as the FCC's new written permission rule. It is 
especially important that there is no ambiguity on these points since 
the TCPA establishes substantial penalties including a private cause of 
action and the Federal Communications Act separately authorizes the FCC 
to issue fines that can be up to $11,000 per violation.
                               conclusion
    In conclusion, NADA believes that unless the current ``established 
business relationship'' exemption to unsolicited commercial faxes is 
preserved, there will be substantial and unnecessary disruption to 
ongoing communications between trade associations and their members and 
businesses responding to their customers. Such legislation is only a 
technical change and would preserve the FCC's previous determination 
that a prior business relationship between a fax sender and recipient 
establishes the proper consent to receive fax advertisements. The FCC's 
recent change requiring prior written permission for such faxes must 
not be the final word on this issue. By remedying the FCC's fax rule, 
Congress can alleviate a serious and adverse impact on trade 
associations and small businesses such as automobile dealerships and 
continue to allow the unburdened use of a fax transmission to convey 
valuable information among those with a prior business relationship.
    With the new fax regulations scheduled to take effect January 2005, 
trade associations and businesses are in flux and will have to 
undertake extraordinary and costly compliance measures unless there is 
prompt legislative action. There is an urgent need to enact this 
straightforward legislation before Congress adjourns this fall, and 
NADA urges this committee and the Congress to work expeditiously on 
this matter. Thank you for your consideration.

                                 
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