[Federal Register Volume 69, Number 156 (Friday, August 13, 2004)]
[Proposed Rules]
[Pages 50091-50107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18565]


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FEDERAL TRADE COMMISSION

16 CFR Part 316

[Project No. R411008]
RIN 3084-AA96


Definitions, Implementation, and Reporting Requirements Under the 
CAN-SPAM Act

AGENCY: Federal Trade Commission (FTC).

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: In this document, the Federal Trade Commission (the 
``Commission'' or ``FTC'') proposes rules to implement the Controlling 
the Assault of Non-Solicited Pornography and Marketing Act of 2003 
(``CAN-SPAM Act'' or ``Act''). Sections 7702(2)(C) and 7711(a) of the 
Act direct the FTC to prescribe rules, within 12 months after December 
16, 2003, defining the relevant criteria to facilitate the 
determination of the primary purpose of an electronic mail message and 
making such other modifications as the Commission deems appropriate to 
implement the provisions of the Act.
    This document invites written comments on issues raised by the 
proposed Rule and seeks answers to the specific questions set forth in 
Section VII of this NPRM.

DATES: Written comments will be accepted until Monday, September 13, 
2004. Due to the time constraints of this rulemaking proceeding, the 
Commission does not contemplate any extensions of this comment period 
or any additional periods for written comment or rebuttal comment.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``CAN-SPAM Act Rulemaking, Project No. 
R411008'' to facilitate the organization of comments. A comment filed 
in paper form should include this reference both in the text and on the 
envelope, and should be mailed to the following address: Federal Trade 
Commission, CAN-SPAM Act, Post Office Box 1030, Merrifield, VA 22116-
1030. Please note that courier and overnight deliveries cannot be 
accepted at this address. Courier and overnight deliveries should be 
delivered to the following address:

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Federal Trade Commission/Office of the Secretary, Room H-159, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
Supplementary Information section. Comments filed in electronic form 
should be submitted by clicking on the following weblink: https://secure.commentworks.com/ftc-canspam/ and following the instructions on 
the web-based form.
    To ensure that the Commission considers an electronic comment, you 
must file it on the web-based form at the https://secure.commentworks.com/ftc-canspam/ weblink. You may also visit http://www.regulations.gov to read this proposed Rule, and may file an 
electronic comment through that Web site. The Commission will consider 
all comments that regulations.gov forwards to it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
public comments it receives before placing those comments on the FTC 
Web site. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Michael Goodman, Staff Attorney, (202) 
326-3071; or Catherine Harrington-McBride, Staff Attorney, (202) 326-
2452; Division of Marketing Practices, Bureau of Consumer Protection, 
Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: 

I. Background

A. CAN-SPAM Act of 2003

    On December 16, 2003, the President signed into law the CAN-SPAM 
Act.\1\ The Act, which took effect on January 1, 2004, imposes a series 
of new requirements on the use of commercial electronic mail 
(``email'') messages. In addition, the Act gives federal civil and 
criminal enforcement authorities new tools to combat unsolicited 
commercial email (``UCE'' or ``spam''). The Act also allows state 
attorneys general to enforce its civil provisions, and creates a 
private right of action for providers of Internet access services.
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    \1\ 15 U.S.C. 7701-7713.
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    In enacting the CAN-SPAM Act, Congress made the following 
determinations of public policy, set forth in Sec.  7701(b) of the Act:

    (1) There is a substantial government interest in regulation of 
commercial electronic mail on a nationwide basis;
    (2) Senders of commercial electronic mail should not mislead 
recipients as to the source or content of such mail; and
    (3) Recipients of commercial electronic mail have a right to 
decline to receive additional commercial electronic mail from the 
same source.

    Based on these policy determinations, Congress set forth in 
Sec. Sec.  7704(a) and (b) of the CAN-SPAM Act certain acts and 
practices that are unlawful in connection with the transmission of 
commercial email messages, including those practices which are 
aggravated violations that compound the available statutory damages 
when alleged and proven in combination with other CAN-SPAM violations. 
Section 7704(a)(1) of the Act prohibits transmission of any email that 
contains false or misleading header or ``from'' line information, and 
clarifies that a header will be considered materially misleading if it 
fails to identify accurately the computer used to initiate the message 
because the person initiating the message knowingly uses another 
protected computer to relay or retransmit the message in order to 
disguise its origin.\2\ The Act also prohibits false or misleading 
subject headings,\3\ and requires a functioning return email address or 
similar Internet-based mechanism for recipients to use to ``opt-out'' 
of receiving future commercial email messages.\4\ The Act prohibits the 
sender, or others acting on the sender's behalf, from initiating a 
commercial email to a recipient more than 10 business days after the 
recipient has requested not to receive additional emails from the 
sender,\5\ and prohibits sending a commercial email message without 
providing three disclosures: (1) clear and conspicuous identification 
that the message is an advertisement or solicitation, (2) clear and 
conspicuous notice of the opportunity to decline to receive further 
commercial email messages from the sender, and (3) a valid physical 
postal address of the sender.\6\ Section 7704(b) of the Act specifies 
four aggravated violations: address harvesting, dictionary attacks, 
automated creation of multiple email accounts, and relaying or 
retransmitting through unauthorized access to a protected computer or 
network.\7\
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    \2\ 15 U.S.C. 7704(a)(1).
    \3\ 15 U.S.C. 7704(a)(2).
    \4\ 15 U.S.C. 7704(a)(3).
    \5\ 15 U.S.C. 7704(a)(4).
    \6\ 15 U.S.C. 7704(a)(5).
    \7\ 15 U.S.C. 7704(b). The Act's provisions relating to 
enforcement by the states and providers of Internet access service 
create the possibility of increased statutory damages if the court 
finds a defendant has engaged in one of the practices specified in 
Sec.  7704(b) while also violating Sec.  7704(a). Specifically, 
Sec. Sec.  7706(f)(3)(C) and (g)(3)(C) permit the court to increase 
a statutory damages award up to three times the amount that would 
have been granted without the commission of an aggravated violation. 
Sections 7706(f)(3)(C) and (g)(3)(C) also provide for this 
heightened statutory damages calculation when a court finds that the 
defendant's violations of Sec.  7704(a) were committed ``willfully 
and knowingly.''
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    The Act authorizes the Commission to enforce violations of the Act 
in the same manner as an FTC trade regulation rule.\8\ Section 7706(f) 
authorizes the attorneys general of the states to enforce compliance 
with certain provisions of Sec.  7704(a) of the Act by initiating 
enforcement actions in federal court, after serving prior written 
notice upon the Commission when feasible.\9\ Finally, CAN-SPAM 
authorizes providers of Internet access services to bring a federal 
court action for violations of certain provisions of Sec. Sec.  
7704(a), (b), and (d).\10\
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    \8\ Sections 7706(a) and (c) of the CAN-SPAM Act provide that a 
violation of the Act shall be treated as a violation of a rule 
issued under Sec.  18(a)(1)(B) of the FTC Act. 15 U.S.C. 
57a(a)(1)(B).
    \9\ 15 U.S.C. 7706(f). Specifically, the state attorneys general 
may bring enforcement actions for violations of Sec. Sec.  
7704(a)(1), 7704(a)(2), or 7704(d). The states may also bring an 
action against any person who engages in a pattern or practice that 
violates Sec. Sec.  7704(a)(3), (4), or (5).
    \10\ 15 U.S.C. 7706(g). Section 7704(d) of the Act requires 
warning labels on email containing sexually oriented material. 15 
U.S.C. 7704(d). The Commission recently promulgated its final rule 
regarding such labels: ``Label for Email Messages Containing 
Sexually Oriented Material'' (``Sexually Explicit Labeling Rule''). 
69 FR 21024 (Apr. 19, 2004). The Commission is integrating the 
provisions of that existing rule into the proposed Rule, renumbering 
certain provisions as follows: former Sec. Sec.  316.1(a) and (b) 
appear at Sec.  316.4(a) and (b) in the proposed Rule; former Sec.  
316.1(c) [definitions] appears at Sec.  316.2 in the proposed Rule; 
and former Sec.  316.1(d) [severability] appears at 316.5 and 
applies to the entire rule, not only the Sexually Explicit Labeling 
Rule provisions.
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    Congress directed the Commission to issue regulations, not later 
than 12 months after December 16, 2003, ``defining the relevant 
criteria to facilitate the determination of the primary purpose of an 
electronic mail message.'' \11\ The term ``primary purpose'' is 
incorporated in the Act's definition of the key term ``commercial 
electronic mail message.'' Specifically, ``commercial electronic mail 
message'' encompasses ``any electronic mail message the primary purpose 
of which is the commercial advertisement or

[[Page 50093]]

promotion of a commercial product or service (including content on an 
Internet web site operated for a commercial purpose).'' \12\ In 
addition to the mandatory rulemaking regarding the definition of 
``primary purpose,'' CAN-SPAM also provides discretionary authority for 
the Commission to issue regulations concerning certain of the Act's 
other definitions and provisions.\13\ Specifically, the Commission is 
authorized to:
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    \11\ 15 U.S.C. 7702(2)(C).
    \12\ 15 U.S.C. 7702(3)(A) (Emphasis supplied). The term primary 
purpose is also used in the Act's definition of ``transactional or 
relationship message.'' 15 U.S.C. 7702(17).
    \13\ The Act authorizes the Commission to use notice and comment 
rulemaking pursuant to the Administrative Procedures Act, 5 U.S.C. 
553. 15 U.S.C. 7711.
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     Modify the definition of the term ``transactional or 
relationship message'' under the Act ``to the extent that such 
modification is necessary to accommodate changes in electronic mail 
technology or practices and accomplish the purposes of [the] Act''; 
\14\
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    \14\ 15 U.S.C. 7702(17)(B).
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     Modify the 10-business-day period prescribed in the Act 
for honoring a recipient's opt-out request; \15\
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    \15\ 15 U.S.C. 7704(c)(1)(A)-(C).
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     Specify activities or practices as aggravated violations 
(in addition to those set forth as such in Sec.  7704(b) of CAN-SPAM) 
``if the Commission determines that those activities or practices are 
contributing substantially to the proliferation of commercial 
electronic mail messages that are unlawful under subsection [7704(a) of 
the Act]''; \16\ and
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    \16\ 15 U.S.C. 7704(c)(2).
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     ``issue regulations to implement the provisions of this 
Act.'' \17\
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    \17\ 15 U.S.C. 7711(a). This provision excludes from the scope 
of its general grant of rulemaking authority Sec.  7703 of the Act 
(relating to criminal offenses) and Sec.  7712 of the Act (expanding 
the scope of the Communications Act of 1934). In addition, Sec.  
7711(b) limits the general grant of rulemaking authority in Sec.  
7711(a) by specifying that the Commission may not use that authority 
to establish ``a requirement pursuant to Section 7704(a)(5)(A) to 
include any specific words, characters, marks, or labels in a 
commercial electronic mail message, or to include the identification 
required by Section 7704(a)(5)(A) * * * in any particular part of 
such a mail message (such as the subject line or body).'' Section 
7704(a)(5)(A) provides that, among other things, ``it is unlawful 
for any person to initiate the transmission of any commercial 
electronic mail message to a protected computer unless the message 
provides clear and conspicuous identification that the message is an 
advertisement or solicitation. * * *'' Thus, Sec.  7711(b) 
explicitly precludes the Commission from promulgating rule 
provisions requiring inclusion of any specific words, characters, 
marks, or labels in a commercial email message, or inclusion of the 
identification required by Sec.  7704(a)(5)(A)(i) in any particular 
part of a commercial email message.
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B. Advance Notice of Proposed Rulemaking

    On March 11, 2004, the Commission published an Advance Notice of 
Proposed Rulemaking (``ANPR'') which solicited comments on a number of 
issues raised by the CAN-SPAM Act, most importantly, the definition of 
``primary purpose.'' In addition, the ANPR requested comment on the 
modification of the definition of ``transactional or relationship 
message,'' on the appropriateness of the 10-business-day opt-out period 
that had been set by the Act, on additional aggravated violations that 
might be appropriate, and on implementation of the Act's provisions 
generally.\18\ The ANPR set a date of April 12, 2004, to submit 
comments. In response to petitions from several trade associations, the 
Commission announced on April 7 that it would extend the comment period 
to April 20, 2004.\19\
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    \18\ 69 FR 11776 (Mar. 11, 2004). The ANPR also solicited 
comment on questions related to four reports that the Commission 
must submit to Congress within the next two years: a report on 
establishing a ``Do Not Email'' Registry that was submitted on June 
15, 2004; a report on establishing a system for rewarding those who 
supply information about CAN-SPAM violations to be submitted by 
September 16, 2004; a report setting forth a plan for requiring 
commercial email to be identifiable from its subject line to be 
submitted by June 15, 2005; and a report on the effectiveness of 
CAN-SPAM to be submitted by December 16, 2005. The comments related 
to the ``Do Not Email'' registry are discussed in the Commission's 
June 15, 2004 report. The Commission will consider the relevant 
comments received in response to the ANPR in preparing the remaining 
reports.
    \19\ 69 FR 18851 (Apr. 9, 2004). The associations seeking 
additional time were the Direct Marketing Association, the American 
Association of Advertising Agencies, the Association of National 
Advertisers, the Consumer Bankers Association, and the Magazine 
Publishers of America. The associations indicated that an extension 
was necessary because of the religious holidays and the need to 
consult more fully with their memberships to prepare complete 
responses.
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    In response to the ANPR, the Commission received approximately 
13,517 comments from representatives from a broad spectrum of the 
online commerce industry, trade associations, individual consumers, and 
consumer and privacy advocates.\20\ Commenters generally applauded CAN-
SPAM as an effort to stem the flood of unsolicited and deceptive 
commercial email that has threatened the convenience and efficiency of 
online commerce. Commenters also offered several suggestions for the 
Commission's consideration in drafting regulations to implement the 
Act. Suggestions with respect to the Commission's ``primary purpose'' 
rulemaking and CAN-SPAM's definition of ``commercial electronic mail 
message'' and the Commission's reasons for accepting or rejecting them 
are discussed in detail in Section II. Because the ``primary purpose'' 
proceeding must meet a tight statutory deadline, the Commission will 
address issues of discretionary rulemaking upon which comment was 
solicited in the ANPR in a future Federal Register notice that the 
Commission anticipates will be published shortly.
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    \20\ This figure includes comments received on the ``Do Not 
Email'' Registry, which had a comment period that ended March 31, 
2004. Appendix A is a list of commenters and the acronyms used to 
identify each commenter who submitted a comment in response to the 
ANPR, including comments on the ``Do Not Email'' Registry, the 
proposed reward program, the proposal for labeling commercial email, 
and the efficacy of the Act. A full list of commenters, as well as a 
complete record of this proceeding, may be found on the Commission's 
web site: http://www.ftc.gov/os/comments/canspam/index.htm.
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C. Notice of Proposed Rulemaking

    Based on the comments received in response to the ANPR, as well as 
the Commission's law enforcement experience, the Commission proposes in 
this NPRM regulations establishing criteria for determining ``the 
primary purpose'' of an email message. The Commission invites written 
comment on the questions in Section VII to assist the Commission in 
determining whether the proposed Rule provisions strike the appropriate 
balance, maximizing protections for email recipients while avoiding the 
imposition of unnecessary compliance burdens on legitimate industry.

II. Analysis of Comments and Discussion of the Proposed Rule

A. Section 316.1--Scope of the Regulations

    Section 316.1 of the proposed Rule states that this part implements 
the CAN-SPAM Act. The Commission received a number of comments in 
response to the ANPR asking that the Commission expressly exempt from 
CAN-SPAM those entities that are not subject to the FTC's jurisdiction 
under the FTC Act (``FTC Act''), 15 U.S.C. 41 et seq.\21\
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    \21\ See, e.g., ASAE; NSBA; Walters; ASTC; UNC; Independent.
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    Section 7706(d) of the CAN-SPAM Act makes clear that the Commission 
may not initiate an enforcement action under the Act against any person 
or entity over which the Commission lacks jurisdiction under the FTC 
Act.\22\ The

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CAN-SPAM Act does not expand or contract the Commission's jurisdiction 
or the scope of the proposed Rule's coverage. Limits on the FTC's 
jurisdiction, however, do not affect the ability of other federal 
agencies, the states, or providers of Internet access service to bring 
actions under the Act against any entity within their jurisdiction as 
authorized.\23\ Thus, many persons and entities not within the FTC's 
jurisdiction may still be subject to an enforcement action for 
violating the CAN-SPAM Act.
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    \22\ Under Sec.  5(a)(2) of the FTC Act, the Commission does not 
have jurisdiction over ``banks, savings and loan institutions 
described in section 18(f)(3) [of the FTC Act], Federal credit 
unions described in section 18(f)(4) [of the FTC Act], common 
carriers subject to the Acts to regulate commerce, air carriers and 
foreign air carriers subject to the Federal Aviation Act of 1958, 
and persons, partnerships, or corporations insofar as they are 
subject to the Packers and Stockyards Act, 1921, as amended, except 
as provided in Section 406(b) of said Act.'' 15 U.S.C. 45(a)(2) 
(footnotes omitted). In addition, the FTC does not have jurisdiction 
over any entity that is not ``organized to carry on business for its 
own profit or that of its members.'' 15 U.S.C. 44. Finally, the FTC 
does not have jurisdiction over the business of insurance to the 
extent that such business is regulated by state law. See Sec.  2 of 
the McCarran-Ferguson Act, 15 U.S.C. 1012(b).
    \23\ Sections 7706(b) and (c) of the CAN-SPAM Act authorize 
federal agencies other than the FTC to enforce the Act against 
various entities outside the FTC's jurisdiction.
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B. Section 316.2--Definitions

    Section 316.2 of the proposed Rule includes the definitions of a 
number of key terms of the Rule.\24\ Thirteen of these terms are 
defined by references to the corresponding sections of the Act; the 
definition of the fourteenth term--``character''--is repeated verbatim 
from the Sexually Explicit Labeling Rule. Section 316.2 tracks Sec.  
316.1(c) of the Sexually Explicit Labeling Rule.\25\
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    \24\ Most of the terms listed in Sec.  316.2 occur in the text 
of the proposed Rule; several of them are not in the Rule text, but 
are defined in the proposed Rule because CAN-SPAM incorporates and 
defines them within the definition of another term. For example, the 
term ``procure'' is listed in the Rule's definitions [at Sec.  
316.2(h)] because the Act defines and includes it in the term 
``initiate.''
    \25\ Section 316.2 contains definitions of fourteen (14) terms, 
renumbered from Sec.  316.1(c) of the Sexually Explicit Labeling 
Rule. These fourteen (14) terms are: ``affirmative consent;'' 
``character;'' ``commercial electronic mail message;'' ``electronic 
mail address;'' ``electronic mail message;'' ``initiate;'' 
``Internet;'' ``procure;'' ``protected computer;'' ``recipient;'' 
``routine conveyance;'' ``sender;'' ``sexually oriented material;'' 
and ``transactional or relationship message.''
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    The Commission believes that by referencing the definitions found 
in the Act, and any future modifications to those definitions, the Rule 
will accurately and effectively track any future changes made to the 
definitions in the Act. Thus, with the sole exception of the addition 
of the definition of ``character,'' the Commission has defined key 
terms of the proposed Rule by reference to the Act without any 
substantive changes to any definition.

C. Section 316.3--Primary Purpose

    Section 7702(2)(C) of the CAN-SPAM Act directs the Commission to 
``issue regulations pursuant to section 13 [of the Act] defining the 
relevant criteria to facilitate the determination of the primary 
purpose of an electronic mail message.'' (Emphasis supplied.) The term 
``primary purpose'' comes into play in the Act's definition of 
``commercial electronic mail message,'' which is ``any electronic mail 
message the primary purpose of which is the commercial advertisement or 
promotion of a commercial product or service (including content on an 
Internet web site operated for a commercial purpose).'' \26\ Section 
7702(2)(B) expressly excludes from the Act's definition of ``commercial 
electronic mail message'' messages that meet the definition of 
``transactional or relationship message,'' \27\ which also incorporates 
the term ``primary purpose.'' Generally, CAN-SPAM applies only to 
messages that fall within the Act's definition of ``commercial 
electronic mail message.'' \28\
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    \26\ 15 U.S.C. 7702(2)(A) (Emphasis supplied).
    \27\ Section 7702(17)(A) of the Act defines a ``transactional or 
relationship message'' as ``an electronic mail message the primary 
purpose of which is--
    (i) to facilitate, complete, or confirm a commercial transaction 
that the recipient has previously agreed to enter into with the 
sender;
    (ii) to provide warranty information, product recall 
information, or safety or security information with respect to a 
commercial product or service used or purchased by the recipient;
    (iii) to provide--
    (I) notification concerning a change in the terms and features 
of;
    (II) notification of a change in the recipient's standing or 
status with respect to; or
    (III) at regular periodic intervals, account balance information 
or other type of account statement with respect to, a subscription, 
membership, account, loan, or comparable ongoing commercial 
relationship involving the ongoing purchase or use by the recipient 
of products or services offered by the sender;
    (iv) to provide information directly related to an employment 
relationship or related benefit plan in which the recipient is 
currently involved, participating, or enrolled; or
    (v) to deliver goods or services, including product updates or 
upgrades, that the recipient is entitled to receive under the terms 
of a transaction that the recipient has previously agreed to enter 
into with the sender.''
    \28\ One provision, Sec.  7704(a)(1), which prohibits false or 
misleading transmission information, applies equally to ``commercial 
electronic mail messages'' and ``transactional or relationship 
messages;'' otherwise, CAN-SPAM's prohibitions and requirements 
cover only ``commercial electronic mail messages.''
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1. Proposed Primary Purpose Provision
    Proposed Sec.  316.3 sets forth criteria for determining the 
``primary purpose'' of an email message.\29\ Because the Commission 
does not believe that a single standard can adequately cover the 
various ways that senders present commercial content in email messages, 
this proposal includes three sets of criteria that apply in specified 
circumstances. All three sets of criteria are based on a single 
fundamental principle: determining ``the primary purpose'' of an email 
message must focus on what the message's recipient would reasonably 
interpret the primary purpose to be.
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    \29\ These criteria will amplify and inform CAN-SPAM's 
definition of ``commercial electronic mail message,'' as 
contemplated by Sec. Sec.  7702(2)(C) and 7711(a). The proposed Rule 
provision specifically addresses how CAN-SPAM applies to email 
messages that contain both ``commercial'' and ``transactional or 
relationship'' content. The latter term is defined in Sec.  
7702(17)(A).
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    First, proposed Sec.  316.3(a)(1) states that if an email message 
contains only content that advertises or promotes a product or service 
(``commercial content''), then the ``primary purpose'' of the message 
would be deemed to be commercial.
    Second, proposed Sec.  316.3(a)(2) covers email messages that 
contain both commercial content and content that falls within one of 
the categories listed in Sec.  7702(17)(A) of the Act (``transactional 
or relationship content''). The ``primary purpose'' of such an email 
message would be deemed to be commercial if either: (1) a recipient 
reasonably interpreting the subject line of the message would likely 
conclude that the message advertises or promotes a product or service; 
or (2) the message's transactional or relationship content does not 
appear at or near the beginning of the message.
    Third, proposed Sec.  316.3(a)(3) covers email messages that 
contain both commercial content and content that is neither commercial 
nor ``transactional or relationship.'' In such a case, the primary 
purpose of the message would be deemed to be commercial if either: (1) 
a recipient reasonably interpreting the subject line of the message 
would likely conclude that the message advertises or promotes a product 
or service; or (2) a recipient reasonably interpreting the body of the 
message would likely conclude that the primary purpose of the message 
is to advertise or promote a product or service. Proposed Sec.  
316.3(a)(3)(ii) sets out certain factors as illustrative of those 
relevant to this interpretation, including the placement of commercial 
content at or near the beginning of the body of the message; the 
proportion of the message dedicated to commercial content; and how 
color, graphics, type size, and style are used to highlight commercial 
content.
    Proposed Sec.  316.3(b) restates subparagraph (A) of the Act's 
definition

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of ``transactional or relationship message'' for clarity in applying 
the criteria that would be established in proposed Sec.  316.3(a).

a. The Function of the Subject Line in Determining the Primary Purpose 
of an Email Message

    The Commission believes that the subject line is important because 
consumers reasonably use the information it contains to decide whether 
to read a message or delete it without reading it. For this reason, 
bona fide email senders likely use the subject line to announce or 
provide a preview of their messages.\30\ These email senders, when they 
are advertising or promoting a product or service, will likely 
highlight that fact in their subject lines so that recipients may 
decide whether to read the messages.
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    \30\ Although some senders may use a ``teaser'' subject line 
from which advertising or promoting a good or service may not be 
apparent until the recipient views the body of the message, as 
explained below, Sec.  7704(2) of CAN-SPAM places a limit on this 
practice. Unlike teasers in conventional advertising, where 
contextual features such as program breaks or layout likely alert 
consumers that the teaser has a commercial purpose, consumers 
viewing subject lines in an email browser have no other cues that 
they are about to view an advertisement.
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i. Deception in Subject Lines

    The Commission is well aware that, in contrast, spammers frequently 
misrepresent or fail to disclose the commercial purpose of their 
messages in the subject line in order to induce recipients to open 
messages they otherwise would delete without opening.\31\ Section 
7704(a)(2) of CAN-SPAM, however, prohibits the use of ``a subject 
heading * * * [that] would be likely to mislead a recipient, acting 
reasonably under the circumstances, about a material fact regarding the 
contents or subject matter of the message (consistent with the criteria 
used in enforcement of Section [5 of the FTC Act]).'' (Emphasis 
supplied.) Thus, CAN-SPAM specifically applies to the subject line of 
covered email messages the deception jurisprudence the Commission has 
developed under Sec.  5(a) of the FTC Act.\32\ Accordingly, actual 
deception need not be shown, only that a representation, omission, or 
practice is likely to mislead.\33\ The ``acting reasonably under the 
circumstances'' aspect of the analysis considers the representation 
from the perspective of the ordinary consumer to whom it is 
directed.\34\ A material fact ``is one which is likely to affect a 
consumer's choice of or conduct regarding a product. In other words, it 
is information that is important to consumers.'' \35\
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    \31\ See, e.g., FTC v. Brian Westby, et al., Case No. 03 C 2540 
(N.D. Ill. Amended Complaint filed Sept. 16, 2003) (FTC alleged in 
part that Defendants used deceptive subject lines to expose 
unsuspecting consumers to sexually explicit material).
    \32\ 15 U.S.C. 45(a). The express language of Sec.  7704(2)(a) 
of CAN-SPAM tracks the deception standard developed in the 
Commission's cases and enforcement statements, thereby prohibiting 
subject line content that is likely to mislead a consumer acting 
reasonably under the circumstances about a material fact regarding 
the content or subject matter of the message. Cliffdale Associates, 
Inc., 103 F.T.C. 164-5. The framework for analyzing alleged 
deception is explicated in an Appendix to this decision, reprinting 
a letter dated Oct. 14, 1983, from the Commission to The Honorable 
John D. Dingell, Chairman, Committee on Energy and Commerce, U.S. 
House of Representatives (1984) (``Deception Statement''). Note, 
however, that Sec.  7704(a)(6) of the Act establishes a definition 
of ``materially'' that is distinct from, but consistent with, the 
definition articulated in the Deception Statement. The Sec.  
7704(a)(6) definition applies only to Sec.  7704(a)(1), which 
prohibits header information that is ``materially false or 
materially misleading.''
    \33\ Id. at 176. Thiret v. FTC, 512 F.2d 176, 180 (10th Cir. 
1975); Ger-Ro-Mar, Inc. v. FTC, 518 F.2d 33, 36 (2d Cir. 1975); 
Resort Car Rental System, Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 
1975).
    \34\ Cliffdale at 177-8.
    \35\ Id. at 182 (citations omitted).
---------------------------------------------------------------------------

    CAN-SPAM's focus on subject lines that misrepresent the content or 
subject matter of the message is in accord with case law developed 
under Sec.  5 of the FTC Act with respect to deceptive ``door-
openers.'' The subject line of an email message serves as a door-
opener--an initial contact between a sender and a recipient that 
typically makes an express or implied representation about the purpose 
of the contact. Before the recipient views the body of an email 
message, he typically may view the subject line that, as the 
designation ``subject line'' implies, announces what the email message 
concerns. Some senders may be tempted to use misrepresentations in the 
subject line to induce recipients to open their messages. These senders 
would be well advised that CAN-SPAM prohibits using the subject line as 
an initial contact with consumers to get their attention by 
misrepresenting the purpose of the contact.\36\
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    \36\ ``[W]hen the first contact between a seller and a buyer 
occurs through a deceptive practice, the law may be violated even if 
the truth is subsequently made known to the purchaser.'' Deception 
Statement at 180. See also Carter Products, Inc. v. FTC, 186 F.2d 
821, 824 (5th Cir. 1951); Exposition Press, Inc. v. FTC, 295 F.2d 
869, 873 (2d Cir. 1961), cert. denied 370 U.S. 917 (1962); National 
Housewares, Inc., 90 F.T.C. 512, 588 (1977); Resort Car Rental v. 
FTC, 518 F.2d 962, 964 (9th Cir. 1975); Encyclopaedia Britannica, 
Inc., 87 F.T.C. 421, 497 (1976), aff'd sub nom. Encyclopaedia 
Britannica, Inc. v. FTC, 605 F.2d 964 (7th Cir. 1979), cert. denied 
445 U.S. 934 (1980).
---------------------------------------------------------------------------

ii. Subject Lines in Email Messages that Contain Only Content 
Advertising or Promoting a Product or Service

    In view of the legal obligation under both CAN-SPAM and Sec.  5 of 
the FTC Act for senders to ensure that the subject lines of their email 
messages are not deceptive, the Commission believes that when the body 
of an email message contains only content that advertises or promotes a 
product or service, then the subject line of that message must be 
consistent with that content. A non-deceptive subject line of such a 
message is therefore not a separate signifier of the primary purpose of 
the email; it complements and is consistent with the body of the email 
message. Therefore, the proposed criterion covering such messages does 
not include a separate element addressing the subject line.

iii. Subject Lines in Email Messages That Contain Both Commercial and 
Noncommercial Content (``Dual-Purpose Messages'')

    In the case of a dual-purpose message with a subject line that a 
recipient would reasonably interpret as signaling a commercial message, 
under the proposed criteria, the message would be deemed to be 
commercial, regardless of whether the body of the message contained--in 
addition to commercial content--either: content that is ``transactional 
or relationship;'' or content that is neither commercial nor 
``transactional or relationship.'' \37\ This criterion is supported by 
the Commission's belief, discussed above, that bona fide email senders, 
when they are advertising or promoting a product or service, likely 
highlight that fact in their subject lines so that recipients may 
decide whether to read the messages. Thus it is reasonable to deem an 
email message to have a commercial primary purpose if the sender 
highlights the message's commercial content in the subject line.
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    \37\ This ``subject line'' discussion is not intended to require 
that every email message with any commercial content must use a 
subject line that refers to the message's commercial content. 
Depending on the facts of a given situation, a dual-purpose message 
may use a subject line that is not deceptive and does not refer to 
commercial content.
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b. Analysis of the Body of a Dual-Purpose Message To Determine the 
Message's Primary Purpose

    With respect to dual-purpose email messages, if a recipient 
reasonably interpreting the subject line of the message would not 
likely conclude that the message advertises or promotes a product or 
service, then the Commission proposes two additional criteria relevant 
to determining a message's ``primary purpose.''

[[Page 50096]]

i. Dual-Purpose Messages Containing Commercial and ``Transactional or 
Relationship'' Content

    The Commission proposes a criterion to apply to messages containing 
both commercial content and transactional or relationship content. That 
criterion states that the ``primary purpose'' of the message shall be 
deemed to be commercial if the message's content pertaining to one of 
the functions listed in subparagraph (b)(1)-(5) of the proposed Rule 
provision \38\ (i.e., the message's transactional or relationship 
content) does not appear at or near the beginning of the message.
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    \38\ Subparagraph (b) of proposed Sec.  316.3 restates the five 
categories of ``transactional or relationship messages'' identified 
in Sec.  7702(17)(A) of CAN-SPAM. See note 27.
---------------------------------------------------------------------------

    Commenters argued that CAN-SPAM's ``primary purpose'' standard 
should distinguish between such dual-purpose messages--which arise from 
a business relationship between the sender and the recipient--and dual-
purpose messages that are basically ``cold-call'' contacts where no 
relationship exists between the sender and recipient. These commenters 
claimed that senders of messages with transactional or relationship 
content will not abuse their ability to communicate with customers via 
email by sending unnecessary transactional or relationship messages 
larded with commercial content, or by continuing to send unwanted 
messages to customers who have expressed a desire not to receive the 
sender's commercial messages.\39\
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    \39\ See Comerica; Venable; Wells Fargo.
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    One commenter noted that the Act's legislative history supports 
treating as ``transactional or relationship'' messages that contain 
both commercial and transactional or relationship content:

    Our goal here is not to discourage legitimate online 
communications between businesses and their customers. Senator Burns 
and I have no intention of interfering with a company's ability to 
use e-mail to inform customers of warranty information, provide 
account holders with monthly account statements, and so forth.\40\
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    \40\ Verizon (citing Statement of Sen. Wyden, 149 Cong. Rec. 
S5208 (Apr. 10, 2003)).

    The Act's use of the phrase ``primary purpose'' in the 
``commercial'' and ``transactional or relationship'' definitions 
establishes that a message can contain both types of content and still 
be regulated as either commercial or transactional or relationship. The 
Act does not specify that a ``transactional or relationship message'' 
is one containing only transactional or relationship content.
    Commenters' arguments regarding messages containing commercial and 
transactional or relationship content, as well as the legislative 
history quoted above, persuade the Commission that the proposed 
``primary purpose'' criteria should distinguish between messages that 
contain transactional or relationship content and those that do not. 
The Commission's proposed criteria give clear guidance to senders of 
messages that contain both commercial and transactional or relationship 
content: if the subject line criterion is not determinative, such dual-
purpose messages have a commercial primary purpose unless the 
transactional or relationship content appears at or near the beginning 
of the message.\41\
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    \41\ The Commission rejects an argument made by several 
commenters that CAN-SPAM establishes that messages with any 
transactional or relationship content are necessarily 
``transactional or relationship messages.'' See, e.g., NFCU; 
Verizon; ACLI; SIIA. The view espoused by these commenters is not 
supported by CAN-SPAM's ``transactional or relationship'' 
definition, which indicates that a message is ``transactional or 
relationship'' only if the primary purpose of the message is 
``transactional or relationship.'' 15 U.S.C. 7702(17)(A) (Emphasis 
supplied).
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    There is no evidence on the record establishing that senders of 
bona fide transactional or relationship content would suffer any 
detriment under a CAN-SPAM regime calling for transactional or 
relationship content to be placed before commercial content in an email 
message.\42\ Moreover, the harm that CAN-SPAM is meant to address--
primarily, the time and resources wasted in dealing with unwanted 
unsolicited commercial messages--probably does not result from messages 
that begin with transactional or relationship content, followed by 
commercial content, if any.\43\ Congress's decision largely to exempt 
transactional or relationship messages from CAN-SPAM requirements 
supports this determination. CAN-SPAM's definition of ``transactional 
or relationship message'' includes specific categories of messages that 
Congress determined to be ones that consumers want to receive. These 
categories include vital information such as bank account statements, 
product recalls, transaction confirmations, and warranty information. 
For messages containing both commercial and transactional or 
relationship content to be considered ``transactional'' rather than 
commercial, the Commission's proposed ``primary purpose'' criteria 
would require only that senders of such messages place their 
transactional or relationship content ``at or near the beginning of the 
message.'' This would allow recipients quickly to identify messages 
providing transactional or relationship content without first having to 
wade through commercial content. The Commission seeks comment and 
information regarding this approach to messages containing both 
commercial and transactional or relationship content.
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    \42\ Without this requirement, some senders might be tempted to 
use dual-purpose messages that begin with commercial content and 
close with transactional or relationship content as a means of 
taking advantage of their business relationship with a recipient to 
send commercial messages that do not comply with CAN-SPAM.
    \43\ See 15 U.S.C. 7701 (Congressional findings and policy of 
the CAN-SPAM Act).
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ii. Dual-Purpose Messages That Contain Both Commercial Content and 
Content That Is Neither Commercial Nor Transactional/Relationship

    In addition to the subject line criterion that would apply to all 
dual-purpose messages under the Commission's proposed ``primary 
purpose'' criteria, a separate criterion would apply to messages 
containing both commercial content and other content that is neither 
commercial nor transactional/relationship. Even if a recipient 
reasonably interpreting the subject line of the message would not 
likely conclude that the message advertises or promotes a product or 
service, the primary purpose of the message still would be deemed to be 
commercial if a recipient reasonably interpreting the body of the 
message would likely conclude that the primary purpose of the message 
is to advertise or promote a product or service. Factors relevant to 
this interpretation include, but are not necessarily limited to, the 
placement of commercial content at or near the beginning of the body of 
the message; the proportion of the message dedicated to commercial 
content; and how color, graphics, type size, and style are used to 
highlight commercial content.
    The criterion for this type of dual-purpose message derives from 
the Commission's traditional analysis of advertising under Sec.  5 of 
the FTC Act.\44\ The Commission assesses claims made in advertising by, 
among other things, evaluating the entire document. ``[I]n advertising, 
the Commission will examine `the entire mosaic, rather than each tile 
separately.' '' \45\ ``[T]he Commission looks to the impression made by 
the advertisement as a whole.'' \46\ The Commission draws on this 
approach in its proposed criteria to

[[Page 50097]]

determine whether a dual-purpose email message is commercial when it 
contains both commercial content and content that is neither commercial 
nor transactional/relationship. The Commission believes this approach 
would provide guidance to email marketers while preventing spammers 
from evading CAN-SPAM by adding noncommercial content to an email sales 
pitch.
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    \44\ See Deception Statement.
    \45\ Deception Statement at 181, citing and quoting FTC v. 
Sterling Drug, 317 F.2d 669, 674 (2nd Cir. 1963).
    \46\ Deception Statement at 181, citing and quoting FTC v. 
American Home Products, 695 F.2d 681, 688 (3rd Cir. 1982).
---------------------------------------------------------------------------

    This proposed criterion is rooted firmly in traditional Commission 
legal analysis. Marketers have long been under an obligation to 
evaluate their advertising material from the reasonable consumer's 
perspective and determine what impression their material makes on 
consumers.\47\
---------------------------------------------------------------------------

    \47\ The ``reasonable consumer'' standard focuses on the 
ordinary or average consumer, not any particular consumer. Deception 
Statement at 178. If a particular act or practice is directed to a 
particular audience, then the Commission assesses the overall 
sophistication and understanding of that particular group in 
determining the reaction of the ``reasonable consumer.'' Id. at 178, 
180. For a more detailed explanation of the ``reasonable consumer'' 
standard, see Deception Statement at 176-87.
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    In enforcing CAN-SPAM and the primary purpose criteria, the 
Commission will approach the issue of whether the body of an email 
message, taken as a whole, is primarily commercial in the same way it 
approaches the issue of whether certain claims are made in a challenged 
advertisement. ``In cases of implied claims, the Commission will often 
be able to determine meaning through an examination of the 
representation itself, including an evaluation of such factors as the 
entire document, the juxtaposition of various phrases in the document, 
the nature of the claim, and the nature of the transactions.'' \48\ In 
other situations, extrinsic evidence--such as expert opinion, consumer 
testimony, copy tests, surveys, or any other reliable evidence of 
consumer interpretation--may be necessary to make this 
determination.\49\ In all instances, the Commission will carefully 
consider any extrinsic evidence that is introduced.\50\
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    \48\ Cliffdale at 176.
    \49\ Id.
    \50\ Id.
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2. Overview of ``Primary Purpose'' Comments
    In response to the ANPR, the Commission received approximately 220 
comments addressing ``primary purpose'' issues. Many individual 
consumers opined that a message has a commercial primary purpose if it 
contains any commercial content. Other consumers expressed the view 
that CAN-SPAM should regulate only unsolicited messages and should not 
apply to messages sent with the recipient's consent or where there is 
an established business relationship between the sender and the 
recipient.
    Many commenters noted that criteria based upon the ``importance'' 
of a message's commercial content relative to any noncommercial content 
would not, on their own, provide adequate guidance.\51\ According to 
these commenters, such criteria would need additional substance and 
structure to provide industry with the guidance it needs to comply with 
the Act's requirements. Many of these commenters--particularly email 
marketers--advocated criteria based on the sender's intent.
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    \51\ The ANPR suggested three possible approaches, based 
respectively on whether the commercial purpose was (1) ``more 
important than all of the email's other purposes combined;'' (2) 
``more important than any other single purpose of the email, but not 
necessarily more important than all other purposes combined;'' or 
(3) ``more than incidental.'' The ANPR also identified three other 
approaches that might be used to determine ``the primary purpose'' 
of an email: (1) A ``net impression'' analysis; (2) a ``financial 
support'' analysis; and (3) a ``sender'' analysis. The ANPR also 
asked whether there were ``other ways to determine whether a 
commercial advertisement or promotion in an email is the primary 
purpose of the email.'' 69 FR at 11779-80.
---------------------------------------------------------------------------

    Other commenters supported criteria based on the ``net impression'' 
of a message, which was a possible approach suggested in the questions 
included in the ANPR. Under this approach, the primary purpose of an 
email message would be determined by assessing the message from the 
recipient's point of view, not the sender's. Many of these comments 
endorsed the ``net impression'' elements suggested in the ANPR--
chiefly, placement and prominence of commercial content within the 
message. A number of comments also proposed that if a message's subject 
line refers to a promotion or advertisement, then the message likely 
has a commercial primary purpose. Each of these proposals is discussed 
below.
3. Commenters' Suggestions Not Adopted as Part of the Commission's 
Proposed Standard for Determining the ``Primary Purpose'' of an Email 
Message
    In addition to suggesting several possible approaches to determine 
the ``primary purpose'' of an email message, the ANPR sought to elicit 
alternatives. The commenters responded with approximately 25 proposals. 
Some commenters were concerned primarily with advocating an objective 
standard for determining an email message's primary purpose. A second 
group advocated the sender's intent as the characteristic that 
determines an email's primary purpose. A third group focused on certain 
attributes that, in their view, rendered messages possessing them 
commercial. A fourth group discussed characteristics that, in their 
view, placed messages exhibiting those characteristics outside the 
commercial category.\52\ The following sections discuss each of these 
groups.
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    \52\ A few commenters proposed standards for determining when an 
email is ``spam,'' such as: sending a message in bulk; including a 
tracking device in a message; ``spoofing'' identifying information 
in a message; or committing an aggravated violation when sending a 
message. See, e.g., Bighorse; Sewing; Gitzendanner; Emmers; Just. 
The Commission appreciates that some commenters respond negatively 
to messages with these characteristics, but the proposals they 
advanced are too narrow as criteria and probably unworkable to 
determine the primary purpose of an email message. Additionally, a 
few commenters argued that a message is commercial if it is not 
``transactional'' or personal, or if the message begins with an opt-
out mechanism. See RealTime; Practice; BestPrac; Hawkins. Other 
commenters suggested that a message should be considered 
``commercial'' only if it refers to an offer for a specific product 
or service. See MCI. Cf. Reed. The Commission does not believe that 
these proposals adequately reflect Congressional intent or provide 
the most useful guidance in establishing criteria to determine a 
message's primary purpose. Finally, two consumers argued that the 
government should not regulate email marketing. See Quinn; Ewing. 
Nevertheless, in CAN-SPAM, Congress has determined that commercial 
email is subject to regulation.
---------------------------------------------------------------------------

a. Comments Discussing Use of an ``Objective Standard'' as a ``Primary 
Purpose'' Criterion

    Many comments from industry members criticized some or all of the 
``primary purpose'' standards suggested in the ANPR questions.\53\ A 
common thread throughout these critiques was that any ``subjective'' 
standard would provide inadequate guidance to industry members who need 
to determine (1) whether CAN-SPAM applies to their messages, and, if 
so, (2) whether their messages comply with the law.\54\ These 
commenters recommended that the Commission adopt some form of 
``objective'' test for determining the primary purpose of a 
message.\55\
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    \53\ Several consumers also supported this view. See Lunde; Ord; 
Mead; Marzuola. These suggested standards and commenters' criticisms 
are discussed in more detail below.
    \54\ See, e.g., MBNA; MasterCard; Nextel; SIA.
    \55\ See, e.g., DMA.
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    Many advocates of an objective standard supported a ``proportion of 
content'' standard. Under such a proposal, a message would have a 
commercial primary purpose if its commercial content comprised, for 
example, at least 25%,\56\ 33\1/3\%,\57\ or

[[Page 50098]]

51% \58\ of the message's total content. Supporters of these 
``percentage'' proposals claimed that a quantitative standard had the 
advantage of providing a clear standard while preserving marketers' 
flexibility in message design.\59\
---------------------------------------------------------------------------

    \56\ Mead; Goth.
    \57\ MPAA (proposing a safe harbor under which a message will 
not have a commercial primary purpose if its commercial content 
``constitutes no more than 33\1/3\%'' of the message's overall 
content, which MPAA claims is consistent with consumer 
expectations). See also Marzuola.
    \58\ Go Daddy; Nextel; MBNA.
    \59\ See, e.g., MPAA, whose ``percentage'' proposal would 
measure the amount of email ``space'' or ``volume'' dedicated to 
commercial content.
---------------------------------------------------------------------------

    On the other hand, a number of commenters criticized such a 
``proportion'' standard as unworkable. AeA wrote that ``[d]etermining 
whether a message is a commercial promotion or not based on pre-set 
proportions is not a viable alternative, because setting a formula * * 
* would be arbitrary and unreliable.'' AeA noted that, with respect to 
messages with both commercial and transactional content--e.g., 
``account balance information''--a ``proportion'' standard could yield 
different results depending on whether or not a recipient's account 
reflected a lot of activity.\60\ Presumably, this is because the amount 
of space in a message occupied by transactional content would increase 
as account activity increased. If so, a message reflecting a lot of 
account activity could be considered transactional and a message 
reflecting little account activity could be considered commercial even 
if both messages contained the same amount of commercial content. IAC 
opposed a bright-line test which would ``likely be easy for those 
intent on violating the statute to exploit and circumvent.'' \61\
---------------------------------------------------------------------------

    \60\ AeA instead favored a ``net impression'' test using the 
sender's intent as the perspective.
    \61\ IAC instead favored a standard that considered the sender's 
intent, a reasonable consumer's perception, and the subject line.
---------------------------------------------------------------------------

    The Commission declines to adopt a rigidly mechanical 
``proportion'' standard for determining the primary purpose of a 
message. A standard that, for example, counts the lines of commercial 
versus noncommercial content is not responsive to the countless ways to 
market products and services via email. Such an approach would likely 
miss entirely the nuances that characterize any communication, 
including email. Moreover, as one commenter noted, a percentage-based 
standard is inadequate when non-commercial content is presented as text 
and commercial content is in the form of a Web site URL.\62\ As IAC 
noted, such a standard could be easily sidestepped by email marketers 
seeking to evade CAN-SPAM. The Commission is particularly persuaded by 
this critique.
---------------------------------------------------------------------------

    \62\ Danko.
---------------------------------------------------------------------------

    As was explained above, the Commission's proposed criteria 
distinguish between messages that package commercial content with 
transactional or relationship content and those that package commercial 
content with some other type of content. The Commission believes that 
senders of the former category of dual-purpose message are far less 
likely to attempt to evade CAN-SPAM. Moreover, messages in the former 
category provide content that Congress has legislatively determined to 
be particularly important to recipients.\63\ The Commission's proposed 
``primary purpose'' criteria for these messages would require them to 
provide transactional or relationship content at or near the beginning 
of the message in order to qualify as ``transactional or relationship'' 
rather than commercial.
---------------------------------------------------------------------------

    \63\ See statement from Sen. Wyden cited above.
---------------------------------------------------------------------------

    IAC's cautionary comment, however, supports the Commission's view 
that messages that contain both commercial content and content that is 
neither commercial nor transactional/relationship merit a different 
standard. Such messages may or may not deliver content that is 
important to recipients; Congress has made no legislative determination 
on this issue. Therefore, the proposed criterion does not rely entirely 
on placement of the noncommercial content, although placement is one 
element to consider in determining the net impression. The Commission's 
proposed criteria with respect to these messages looks to the net 
impression created by the message.

b. Comments Discussing a ``Primary Purpose'' Criterion Based on 
Sender's Intent, Such as a ``But For'' Standard

    As a whole, industry members expressed greatest support for a 
``primary purpose'' standard based on the sender's intent. Most of 
these commenters framed this proposal as a ``but for'' test, under 
which a message would not be considered ``commercial'' if it would have 
been sent in any event because of its noncommercial content. These 
comments framed the ``but for'' test in several ways, such as asking 
whether a message would have been sent but for its commercial purpose 
\64\ or its non-commercial purpose.\65\ Other comments refined the 
standard and stated that the relevant question is whether a message 
would have been sent but for particular commercial content \66\ or any 
commercial content.\67\ Several other commenters proposed that the 
sender's intent should be part of a ``net impression'' approach to 
determining a message's primary purpose.
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    \64\ See, e.g., DMA; PMA; Visa.
    \65\ CBA; SIA; Wells Fargo.
    \66\ ERA; MBNA; USCC.
    \67\ NAR.
---------------------------------------------------------------------------

    Several commenters argued that Congress's use of the phrase 
``primary purpose'' evidences its ``clear intent to establish a 
standard which evaluates the status of the email based on the sender's 
objective and motivation.'' \68\ The Commission is not persuaded by 
this argument. CAN-SPAM refers to the primary purpose of the message, 
not of the sender. While one way to determine a message's purpose could 
be to assess the sender's intent, a more appropriate way is to look at 
the message from the recipient's perspective.\69\ Several commenters 
made this point. One urged the Commission ``to refrain from adopting 
any `primary purpose' test that seeks to prioritize the subjective 
motivations of email senders.'' \70\
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    \68\ PMA. See also Coalition; ERA; AT&T ICC.
    \69\ It is well-settled that the Commission need not show intent 
to prove a violation of Sec.  5 of the FTC Act. See, e.g., FTC v. 
Publishing Clearing House, Inc., 104 F.3d 1168 (9th Cir. 1997); In 
re National Credit Management Group, LLC, 21 F. Supp. 2d 424 (D.N.J. 
1998); FTC v. Patriot Alcohol Testers, Inc., 795 F. Supp. 851 (D. 
Mass. 1992); FTC v. Affordable Media, LLC, 1999 U.S. App LEXIS 
13130, 1999-1 Trade Cas. (CCH) ] 72,547 (11th Cir. Jun. 15, 1999). 
Consistent with that principle, the Commission does not believe 
that, generally, the sender's intent would serve as a workable 
indicator of an email message's primary purpose. Nevertheless, the 
Commission discusses below the possibility that spammers may be 
tempted to use a ``deceptive format'' to trick recipients into 
thinking that an email message does not have a commercial primary 
purpose. In that discussion, the Commission asks whether the 
sender's intent should be added to the proposed ``primary purpose'' 
criteria to establish clearly that spammers may not evade CAN-SPAM 
in this manner.
    \70\ Cox. See also Microsoft; NetCoalition.
---------------------------------------------------------------------------

    Based largely on the analytical approach the Commission takes with 
respect to advertising--which looks at claims in marketing material 
from the consumer's perspective rather than the marketer's \71\--the 
Commission declines, at this time, to adopt an approach that instead 
considers the advertiser's intent. Nevertheless, as is discussed in 
more detail below, the Commission recognizes that some spammers could 
attempt to evade CAN-SPAM by deceptively portraying commercial content 
as noncommercial content.\72\
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    \71\ See generally Deception Statement.
    \72\ Spammers could claim that such messages do not have a 
commercial primary purpose under the Commission's proposed criteria 
if, due to a sender's use of a deceptive advertising format, a 
recipient reasonably interpreting the body of the message would not 
likely conclude that the primary purpose of the message is to 
advertise or promote a product or service. See the ``net 
impression'' discussion below, including note 99, for the 
Commission's conclusion that such messages may still be deemed to 
have a commercial primary purpose under the Commission's proposed 
criteria.

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[[Page 50099]]

The Commission requests comment and information on whether it should 
consider the sender's intent to advertise or promote a product or 
service within the criteria for determining the primary purpose of 
email messages that contain both commercial content and content that is 
neither commercial nor transactional/relationship.

c. Commenters' Proposals for Determining When a Message Has a 
Commercial Primary Purpose

    Several commenters supported a standard that treated any 
unsolicited message (not sent with the recipient's consent) as 
commercial.\73\ The regulatory scheme incorporated into the CAN-SPAM 
Act, however, obviates such an approach. The Act defines ``affirmative 
consent'' and describes how ``consent'' affects CAN-SPAM 
compliance.\74\ It is clear from the Act that Congress did not intend 
for the primary purpose of an e-mail message to be determined based on 
whether a message was unsolicited. The Commission's proposed Rule is 
consistent with the Act's treatment of ``consent.''
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    \73\ See Teevan; Smith; Lane; ClickZ; Lenox.
    \74\ Under CAN-SPAM, commercial messages sent based on the 
recipient's ``affirmative consent'' need not provide the ``clear and 
conspicuous identification that the message is an advertisement or 
solicitation'' required by Sec.  7704(a)(5)(A)(i); and a recipient's 
affirmative consent provided subsequent to an opt-out request 
overrides that previous request. 15 U.S.C. 7704(a)(5)(A)(i), 
7704(a)(4)(B).
---------------------------------------------------------------------------

    Another proposal widely supported by consumers was to treat the 
primary purpose of an e-mail message as commercial if the message 
contains any commercial content.\75\ CAN-SPAM specifies, however, that 
a ``commercial electronic mail message'' is a message ``the primary 
purpose of which is the commercial advertisement or promotion of a 
product or service. * * *'' \76\ (Emphasis supplied.) That language 
establishes that mere inclusion of any commercial content is not enough 
by itself to bring an e-mail message within the ambit of the Act's 
coverage. Therefore, the Commission declines to adopt this proposed 
standard.
---------------------------------------------------------------------------

    \75\ See, e.g., Dobo-Hoffman (``If ANYONE is going to 
potentially generate income in any way, the email is commercial.''); 
DeHotman (``Any language which could be interpereted [sic] as an 
inducement to buy, sell, or support an action or position should be 
considered commercial.'').
    \76\ See 15 U.S.C. 7702(2)(A).
---------------------------------------------------------------------------

    At the opposite extreme, some commenters urged that a message can 
be deemed to have a commercial primary purpose only if it contains 
nothing but commercial content.\77\ EFF argued that ``when the ad or 
promotional aspects of the message are inextricably intertwined with 
noncommercial aspects, then the message is noncommercial for purposes 
of First Amendment analysis,'' and therefore likely beyond the reach of 
CAN-SPAM's requirements and prohibitions.\78\ EFF criticized the 
standards posited in the ANPR that were based on the ``importance'' of 
commercial content and on the ``net impression.'' Cox's extensive 
comment developed the analysis more fully. Cox discussed the potential 
First Amendment implications of the ``primary purpose'' rule on the 
company's web sites that offer consumers the opportunity to register 
online to receive a variety of free content and information services, 
such as electronic newsletters and weather alerts. Cox argued that:
---------------------------------------------------------------------------

    \77\ See EFF; Cox; Davis; Anderson; Lykins. See also M&F SIA; 
Wells Fargo; CBA; Cox; MCI; MPAA; Hekimian-Williams (arguing that 
electronic newsletters should not be regulated by CAN-SPAM as 
commercial messages).
    \78\ See also MPAA; OPA; Courthouse (arguing that the First 
Amendment prohibits the Commission from treating messages with 
editorial content as commercial speech, even if such content is 
supported by advertising).

[t]o avoid encroaching on core constitutionally-protected 
expression, Cox urges the Commission to refrain from adopting any 
``primary purpose'' test that seeks to prioritize the subjective 
motivations of e-mail senders. Instead, the FTC should clarify that 
the ``primary purpose'' of an e-mail message that contains 
substantial editorial content is to convey constitutionally-
protected speech--regardless of whether the message is supported by 
advertising. As discussed below, such an objective test is 
consistent with the intent of Congress and would harmonize the CAN-
SPAM Act with the requirements of the First Amendment. (Emphasis 
---------------------------------------------------------------------------
supplied.)

    The Commission believes that the proposed ``primary purpose'' 
standard achieves the goal that Cox espouses, and avoids the 
constitutional problems that prompt Cox's cautionary comments. The 
Commission is mindful of First Amendment limitations, but believes that 
the law is clear that commercial content generally may be regulated 
without violating the First Amendment.\79\
---------------------------------------------------------------------------

    \79\ See, e.g., Central Hudson Gas & Electric Corp v. Public 
Service Comm'n. of N.Y., 447 U.S. 557 (1980).
---------------------------------------------------------------------------

    Under the ``primary purpose'' standard, an electronic newsletter 
that combines editorial or informational content and advertising would 
be governed by the proposed criteria for dual-purpose messages. If the 
newsletter satisfies any element of the ``transactional or relationship 
message definition--for example, if the newsletter constitutes 
``deliver[y of] goods or services * * * that the recipient is entitled 
to receive under the terms of a transaction that the recipient has 
previously agreed to enter into with the sender'' \80\--then it would 
not be considered to have a commercial primary purpose unless (1) a 
recipient reasonably interpreting the subject line of the message would 
likely conclude that the message advertises or promotes a product or 
service, or (2) the transactional or relationship content does not 
appear at or near the beginning of the message.
---------------------------------------------------------------------------

    \80\ 15 U.S.C. 7702(17)(A)(v).
---------------------------------------------------------------------------

    If the newsletter does not satisfy any element of the 
``transactional or relationship message'' definition--for example, a 
message combining unrequested informational and commercial content--
then it would not be considered to have a commercial primary purpose 
unless (1) a recipient reasonably interpreting the subject line of the 
message would likely conclude that the message advertises or promotes a 
product or service, or (2) a recipient reasonably interpreting the body 
of the message would likely conclude that the primary purpose of the 
message is to advertise or promote a product or service.\81\ In the 
case of a bona fide electronic newsletter, application of this analysis 
is likely to result in the conclusion that the message does not have a 
primary purpose that is commercial.
---------------------------------------------------------------------------

    \81\ As is explained above, factors illustrative of those 
relevant to this interpretation include the placement of content 
advertising or promoting a product or service at or near the 
beginning of the body of the message; the proportion of the message 
dedicated to such content; and how color, graphics, type size, and 
style are used to highlight commercial content.
---------------------------------------------------------------------------

    Articulating a concern noted by other commenters,\82\ Cox opined 
that the Commission should adopt a standard ``that retains enough 
flexibility to allow for `common sense' judgments'' necessary to ensure 
that unscrupulous `spammers' cannot sidestep CAN-SPAM through the ruse 
of faux newsletters. As Cox put it, spammers should not be able to:
---------------------------------------------------------------------------

    \82\ See, e.g., ABM; CASRO.

immunize commercial messages from the requirements of the CAN-SPAM 
Act merely by including an incidental reference to a public issue or 
an editorial comment in a commercial sales solicitation. Thus, for 
example, spammers using commercial email messages to advertise 
discounts on generic Viagra tablets could not avoid the Act's 
requirements simply by larding their solicitations with an appeal 
---------------------------------------------------------------------------
for expanded Medicare prescription drug benefits.


[[Page 50100]]


    Again, the Commission's proposed ``primary purpose'' criteria 
should provide the requisite flexibility that Cox advocates. The 
Commission seeks comment on how email messages with both commercial and 
noncommercial content should be treated.

d. Commenters' Proposals for Determining When a Message Does NOT Have a 
Commercial Primary Purpose

    A significant number of comments, especially from industry members, 
proposed a number of criteria that would establish when a message is 
not commercial. Many of these comments urged that certain categories of 
messages should be exempted from the Act's ``commercial electronic mail 
message'' definition.
    Messages From Nonprofit Entities--One category of messages that 
commenters recommended should not be treated as ``commercial'' under 
the Act are those sent by nonprofit entities. The nature and subject of 
email messages from nonprofit entities encompass a wide range, and the 
treatment of such messages under the Act elicited a variety of 
opinions. Some consumers argued for a broad interpretation of 
``commercial'' that would extend the term to nonprofit entities.\83\ 
NAA espoused a similar position: ``[A] not-for-profit university 
advertising grandfather clocks to alumni probably is sending a 
commercial advertisement that should be covered by the regulations, 
regardless of the sender's not for profit status.'' \84\
---------------------------------------------------------------------------

    \83\ See K. Krueger; Sawyer.
    \84\ NAA.
---------------------------------------------------------------------------

    Nonprofit commenters took the opposite position. Some argued for a 
broad exemption, asserting that messages from nonprofit entities either 
should not be regulated at all, or should be treated as ``transactional 
or relationship messages.'' \85\ Other nonprofit entities argued for a 
narrower exemption, which would be limited to messages ``primarily 
related to one or more of the organization's duly authorized tax exempt 
nonprofit purposes.'' \86\ A third set of nonprofit entities urged that 
messages between a nonprofit entity and its members should not be 
regulated as commercial,\87\ arguing for a nonprofit-based exemption 
that would apply to messages sent to both current and former 
members.\88\
---------------------------------------------------------------------------

    \85\ See NADA; KSU.
    \86\ ASAE. See also IAAMC; AWWA; ABA; PMA; ASTC; Bankers.
    \87\ See NSBA; AVHA; NTA; PAR.
    \88\ See, e.g., NTA.
---------------------------------------------------------------------------

    As a preliminary matter, the Commission notes that, under the FTC 
Act, the Commission does not have jurisdiction over entities that do 
not operate for their own profit or the profit of their members.\89\ 
Nevertheless, this limit on the FTC's jurisdiction does not exclude 
these entities totally from the ambit of CAN-SPAM. States and providers 
of Internet access service have a right of action under the Act. Thus, 
if a nonprofit organization were to send messages that could be deemed 
to have a primary purpose that is commercial, conceivably the 
organization could face the necessity of defending against an action 
brought by a state or provider of Internet access service based on the 
failure to abide by the requirements and prohibitions of CAN-SPAM. 
While such a scenario may seem unlikely, it could possibly arise.
---------------------------------------------------------------------------

    \89\ 15 U.S.C. 44. For purposes of this discussion, the term 
``nonprofit entities'' refers to entities that do not operate for 
their own profit or that of their members.
---------------------------------------------------------------------------

    At least one nonprofit argued that Sec.  7701 of the Act--setting 
out Congressional findings and policy--reveals an intent to leave 
nonprofit entities unregulated. These commenters, however, are unable 
to point to any statement in Sec.  7701 of CAN-SPAM (or, indeed, in any 
other provision) expressly exempting nonprofit organizations from 
coverage.
    Some nonprofit entities argued that the multiple references to the 
word ``commercial'' in the definition of ``commercial electronic mail 
message'' reflect an intent to distinguish between for-profit and 
nonprofit messages.\90\ The Commission is not persuaded by this 
argument. CAN-SPAM does not set up a dichotomy between ``commercial'' 
and ``nonprofit'' messages. Rather, it focuses on messages whose 
primary purpose is to sell something, as distinguished from 
``transactional or relationship messages,'' informational and editorial 
messages, and (relevant to nonprofit entities) messages seeking a 
charitable contribution.
---------------------------------------------------------------------------

    \90\ See NSBA.
---------------------------------------------------------------------------

    Under the Commission's proposed ``primary purpose'' criteria, it 
seems likely that only nonprofit entities' messages whose strongest, 
most prominent content advertises or promotes a product or service--
i.e., seeks to induce a purchase of goods or services--would be deemed 
to have a commercial primary purpose and therefore be covered by the 
Act. On the issue of messages between a nonprofit entity and its 
members, it is possible--or even likely--that such messages are 
``transactional or relationship messages'' under Sec.  7702(17)(A)(v), 
depending on the facts of a particular membership. Even if such 
messages also include commercial content, they will not have a 
commercial primary purpose unless (1) a recipient reasonably 
interpreting the subject line of the message would likely conclude that 
the message advertises or promotes a product or service, or (2) the 
transactional or relationship content does not appear at or near the 
beginning of the message. Consistent with CAN-SPAM, the proposed 
``primary purpose'' criteria apply to all email messages with 
commercial content, regardless of whether sent by a nonprofit entity or 
a for-profit entity.
    Arguments Advanced to Treat Other Types of Messages As Not Having a 
Primary Purpose That Is Commercial--Some businesses sought an exemption 
from CAN-SPAM for specialized messages sent in a narrow set of 
circumstances. For example, BMI argued that the primary purpose of its 
``commercial email message[s] to enforce bona fide copyright rights of 
its affiliates'' is not commercial even if the messages also promote a 
music licensing service.\91\ The Commission believes that specific 
criteria addressing narrow categories of messages like BMI's would 
create an unwieldy standard.\92\ Moreover, such an approach is 
unnecessary in light of the criteria proposed by the Commission, which 
apply the same test to all email messages. A message containing 
commercial content as well as content that is neither commercial nor 
transactional/relationship has a commercial primary purpose if a 
recipient reasonably interpreting the subject line of the message would 
likely conclude that the message advertises or promotes a product or 
service, or a recipient reasonably interpreting the body of the message 
would likely conclude that the primary purpose of the message is to 
advertise or promote a product or service.\93\ One main advantage of 
the Commission's proposed ``primary purpose'' criteria is that they 
work well with respect to all

[[Page 50101]]

messages that may be subject to CAN-SPAM, regardless of the subject 
matter or the sender of the message.
---------------------------------------------------------------------------

    \91\ BMI.
    \92\ Similarly, the Commission rejects the proposal that the Act 
exempt business-to-business messages. See MMS; DSA. The comments did 
not present a persuasive reason to treat messages to businesses 
differently from messages to consumers. The Congressional findings 
in Sec.  7701(a) of the Act clearly evidence Congress's concern with 
the economic injury to businesses caused by unsolicited emails. See, 
e.g., 15 U.S.C. 7701(a)(4) and (6).
    \93\ As is explained above, factors illustrative of those 
relevant to this interpretation include the placement of content 
advertising or promoting a product or service at or near the 
beginning of the body of the message; the proportion of the message 
dedicated to such content; and how color, graphics, type size, and 
style are used to highlight commercial content.
---------------------------------------------------------------------------

    Standards Mentioned in the ANPR Questions but Not Included as Part 
of the Commission's Proposed Criteria--Standards Based on 
``Importance''--Questions included in the ANPR to aid in eliciting 
comment made reference to three separate standards for determining an 
email's primary purpose based on the importance of the commercial 
content of an email message: whether the commercial content was, 
respectively, ``more important than all of the email's other purposes 
combined,'' ``more important than any other single purpose of the 
email, but not necessarily more important than all other purposes 
combined,'' or ``more than incidental to the email.''
    Several commenters--mostly industry representatives--supported the 
first of these approaches.\94\ The two other standards based on the 
importance of the commercial content received little support from 
commenters. The Commission received many more comments, especially from 
businesses, opposing as unhelpfully subjective all standards mentioned 
in the ANPR that were based on importance of the commercial content of 
an email message. These comments typically asserted that an objective 
standard would provide more useful and certain guidance for email 
marketers.\95\
---------------------------------------------------------------------------

    \94\ See ACB; AT&T Visa; ABM; MPAA; NEPA; NetCoalition; NADA. 
In addition, some consumers proposed their own standards for 
``primary purpose'' that were akin to the FTC's importance-based 
standards, using phrases such as ``chief emphasis'' and ``main 
focus'' to describe when the commercial content of a message is its 
primary purpose. See McMichael; Narcum; Noll.
    \95\ See BMO; Grogan; Ford; MasterCard; NetCoalition; Nextel.
---------------------------------------------------------------------------

    The Commission is persuaded that an importance-based standard, 
without more, probably would not adequately ``facilitate the 
determination of the primary purpose of an electronic mail message.'' 
Any such standard would likely fail to provide email marketers with 
specific criteria they could apply to their messages to determine with 
confidence whether a particular message is covered by CAN-SPAM's 
requirements and prohibitions. The Commission's proposed ``primary 
purpose'' standard, which consists of specific criteria, will provide 
the reliability marketers and other email senders need to operate under 
the Act.
    ``Net Impression'' as Determining the ``Primary Purpose'' of an 
Email Message--Commenters from across the entire spectrum of interested 
parties supported the ANPR's suggestion that the primary purpose of an 
email message should be determined based on the ``net impression'' 
created by the message. Consumers, advertisers, email service 
providers, and industry associations all supported the placement, 
proportion, style, and subject line elements of this approach, as well 
as the proposed criteria's focus on the reasonable recipient.\96\ The 
Commission's proposed criteria include a ``net impression'' criterion 
to determine whether the primary purpose of a message is commercial 
when the message contains both commercial content and content that is 
neither commercial nor transactional/relationship.\97\
---------------------------------------------------------------------------

    \96\ See, e.g., NCL; Cook; Swallow; Tietjens; NFCU; Microsoft; 
DoubleClick; Discover; Time Warner; IAC; ABM; DSA.
    \97\ As was explained above, the Commission's proposed criteria 
for messages that contain both commercial and transactional/
relationship content does not employ a ``net impression'' approach.
---------------------------------------------------------------------------

    As was discussed above, the Commission considers the ``net 
impression'' of an advertisement to determine if it is deceptive under 
Sec.  5 of the FTC Act. Under this approach, `` `the Commission looks 
to the impression made by the advertisements as a whole. Without this 
mode of examination, the Commission would have limited recourse against 
crafty advertisers whose deceptive messages were conveyed by means 
other than, or in addition to, spoken words.' '' \98\ The Commission 
asked about the utility of the ``net impression'' approach as applied 
to CAN-SPAM because the primary purpose of an email message may not be 
stated expressly.
---------------------------------------------------------------------------

    \98\ Deception Statement at 181, citing and quoting American 
Home Products, 695 F.2d 681, 688 (3rd Cir. 1982).
---------------------------------------------------------------------------

    One of the Commission's concerns in the ``primary purpose'' 
rulemaking process is that spammers not be able to structure their 
messages to evade CAN-SPAM by placing them outside the technical 
definition of ``commercial electronic mail message.'' A typical example 
is a hypothetical message, unrequested by the recipient, that begins 
with a Shakespearean sonnet (or paragraphs of random words) and 
concludes with a one-line link to a commercial website. The Commission 
believes that a recipient of such a message could reasonably conclude 
that the message's primary purpose is commercial.
    Spammers may also try to evade CAN-SPAM by presenting the 
commercial content of their email messages in the guise of 
informational content, deliberately structuring their messages to 
create the mistaken impression in the minds of reasonable recipients 
that the messages do not have a commercial primary purpose. A spammer 
might try to argue that, applying the Commission's proposed criteria, 
CAN-SPAM does not cover such a message, because a recipient reasonably 
interpreting the message would not likely conclude that the primary 
purpose of the message is commercial. The Commission believes this 
strategy may tempt some spammers, although it is unclear whether email 
messages are as conducive to deceptive format ploys as are other 
media.\99\ In any event, if a sender deliberately structures his 
message to create a false impression that the message does not have a 
commercial primary purpose, the message should be considered to have a 
commercial primary purpose under the proposed criteria. In the 
Commission's view, if a message's entire design is to disguise 
commercial content as noncommercial content, the message is 
commercial.\100\ In this regard, the Commission seeks comment and 
information on whether the proposed ``primary purpose'' criteria should 
include an element expressly providing that a message may be deemed to 
have a commercial primary purpose if the message creates a false ``net 
impression'' that the message is noncommercial because it is 
deliberately structured to do so.
---------------------------------------------------------------------------

    \99\ In other contexts, such as direct mail marketing, the 
Commission has sued marketers for violating the FTC Act because they 
disguised their sales pitches as informational content. The 
Commission recently filed a complaint against A. Glenn Braswell and 
four of his corporations alleging, among other things, that the 
defendants used deceptive advertising formats (including advertising 
material portrayed as an independent health magazine) to market 
their products. See FTC v. A. Glenn Braswell, et al., No. CV 03-3700 
DT (PJWx) (C.D. Cal. filed May 27, 2004). For other deceptive format 
enforcement actions brought by the Commission, see FTC v. Direct 
Mktg. Concepts, Inc., Civ. No. 04-11136-GAO (D. Mass. filed June 1, 
2004); Mega Sys., Int'l., Inc., 125 F.T.C. 973 (consent order) C-
3811 (June 8, 1998); Olsen Laboratories, Inc., 119 F.T.C 161 
(consent order) C-3556 (Feb. 6, 1995); Wyatt Mrktg.Corp., 118 F.T.C. 
86 (consent order) C-3510 (July 27, 1994); Synchronal Corp., 116 
F.T.C. 989 (consent order) D-9251 (Oct. 1, 1993); Nat'l. Media 
Corp., 116 F.T.C. 549 (consent order) C-3441 (June 24, 1993); CC 
Pollen Co., 116 F.T.C. 206 (consent order) C-3418 (March 16, 1993) 
(consent order); Nu-Day Enterprises, Inc., 115 F.T.C. 479 (consent 
order) C-3380 (Apr. 22, 1992); Twin Star Productions, 113 F.T.C. 847 
(consent order) C-3307 (Oct. 2, 1990) (consent order); JS&A Group, 
Inc., 111 F.T.C. 522 (consent order) C-3248 (Feb. 24, 1989).
    \100\ See proposed Rule Sec.  316.3(a)(1): ``If an electronic 
mail message contains only content that advertises or promotes a 
product or service, then the ``primary purpose'' of the message 
shall be deemed to be commercial.''
---------------------------------------------------------------------------

    The Commission believes that the proposed ``net impression'' 
approach for messages that contain commercial

[[Page 50102]]

content as well as content that is neither commercial nor 
transactional/relationship gives guidance to email marketers but also 
retains flexibility to allow the standard to reflect recipients' 
perceptions of the primary purpose of the messages they receive.\101\
---------------------------------------------------------------------------

    \101\ Several commenters argued that the ``net impression'' 
analysis is vague and arbitrary. See, e.g., ACB; EFF; SIA; MBNA; 
MBA. The Commission disagrees. It is not vague because it directs 
marketers to clear-cut and fundamental signifiers of an email 
message's primary purpose: the subject line and the message's 
content. It is not arbitrary because it derives from the 
Commission's long-standing approach to the scrutiny of advertising 
under its deception authority. One commenter claimed that a ``net 
impression'' standard could be ``potentially draconian.'' This 
commenter was concerned that a message could inadvertently have a 
commercial primary purpose when that was not the sender's intent. 
See Visa. Nevertheless, the Commission believes it unlikely that the 
proposed standard would apply in ways that would take an email 
marketer by surprise. The record thus far does not provide support 
for the argument that an email message could inadvertently be 
considered ``commercial'' in light of the fact that marketers retain 
control over the content of their messages' subject lines and their 
messages' presentation of content. A marketer who has concerns about 
the net impression of an email message with both commercial and 
noncommercial content could always copy test a planned email to 
determine whether the reasonable recipient would interpret it to 
have a primary purpose that is commercial.
---------------------------------------------------------------------------

    Standards Based on Whether Commercial Content Finances Other 
Aspects of an Email Message--The ANPR also asked whether a message's 
commercial content financially supporting its other aspects might be 
useful to determine the primary purpose of the message. In requesting 
comment on this possible standard, the Commission noted that, in the 
case of an electronic newsletter funded by advertising within the 
newsletter, ``[s]uch advertising arguably would not constitute the 
primary purpose of the newsletter.'' \102\
---------------------------------------------------------------------------

    \102\ 69 FR at 11780.
---------------------------------------------------------------------------

    A small number of commenters argued that it may be proper to treat 
a message as commercial when commercial content funds noncommercial 
content.\103\ Most commenters, however, were generally negative in 
responding to the ANPR's question regarding a standard for determining 
the primary purpose of an email message based upon whether 
noncommercial content was financially supported by commercial 
content.\104\ Commenters criticized such a standard as, among other 
things, unworkable.\105\ The Commission agrees that the mere fact that 
noncommercial content is financially supported by accompanying 
commercial content is not enough to decide the question of an email 
message's primary purpose.
---------------------------------------------------------------------------

    \103\ See ABM; CASRO. These commenters seemed most concerned 
with preventing a marketer from evading CAN-SPAM by adding minimal 
noncommercial content, or by masking commercial content as 
noncommercial information content. The Commission believes the 
proposed ``primary purpose'' criteria would prevent such 
illegitimate conduct from being successful.
    \104\ See, e.g., DMA; Cox; MasterCard; Nextel; CFC.
    \105\ See Nextel; Experian; NetCoalition.
---------------------------------------------------------------------------

    Other commenters attacked this standard as contrary to legislative 
intent regarding CAN-SPAM's intended scope, citing comments from the 
floor debate that indicate intent to limit CAN-SPAM's reach to only 
commercial email.\106\ The Commission does not dispute that CAN-SPAM, 
by its terms, encompasses only commercial and ``transactional or 
relationship'' email messages.\107\ Nevertheless, the Commission 
appreciates the concern raised by Cox, ABM and CASRO that spammers 
could avoid regulation under the Act by adding informational content to 
their commercial messages. The Commission's proposed criteria with 
respect to messages containing commercial content as well as content 
that is neither commercial nor transactional/relationship provide 
needed flexibility to ensure that such marketers will not evade CAN-
SPAM's compliance obligations.
---------------------------------------------------------------------------

    \106\ NEPA; Cox. ``Specifically, the [CAN-SPAM] legislation 
concerns only commercial and sexually explicit email and is not 
intended to intrude on the burgeoning use of email to communicate 
for political, news, personal and charitable purposes.'' Rep. 
Sensenbrenner's comments are available at 149 Cong. Rec. H12186, 
H12193 (Nov. 21, 2003). The text of the Act is in accord with this 
statement; the Act focuses on ``commercial'' email messages--
messages the primary purpose of which is the advertisement or 
promotion of a product or service. The Act's limited regulation of 
``transactional or relationship'' messages--see note 27 above for 
this definition--only prohibits use of false or misleading header 
information. Thus, emails that are not commercial, and are not sent 
pursuant to a designated transaction or a relationship between the 
sender and the recipient--e.g., messages that do no more than 
solicit charitable contributions, or promulgate political or other 
non-commercial content--are not regulated under CAN-SPAM.
    \107\ SIIA's comment noted that the FTC stated at a 
Congressional hearing on spam that legislation should distinguish 
emails consisting of newspaper articles and advertising from 
messages that most consumers would consider ``spam.'' SIIA. The 
comments of BCP Bureau Director, Howard J. Beales, III, are 
available at http://energycommerce.house.gov/108/action/108-35.pdf 
(July 9, 2003).
---------------------------------------------------------------------------

    ``Sender's Identity'' as Determining the ``Primary Purpose'' of an 
Email Message--The ANPR posed the question of whether an email sender's 
identity should be an element that affects the determination of the 
primary purpose of an email message. Relatively few commenters 
addressed this question. Only two consumers supported using the 
sender's identity to determine if an email had a commercial primary 
purpose.\108\ Some industry commenters supported using the sender's 
identity, arguing that an identity test could be used to exempt 
nonprofit entities' messages from compliance with the Act.\109\ The 
majority of comments opposed using the sender's identity as a way to 
determine ``the primary purpose.'' \110\ The Commission agrees with 
commenters who oppose using the sender's identity to help determine a 
message's primary purpose. The sender's identity is not a reliable 
indicator of whether the primary purpose of an email message is 
commercial. Any sender of email messages--regardless of its identity--
may send messages that advertise or promote a product or service. The 
Commission believes that its proposed ``primary purpose'' criteria 
provide a more sensible approach because they focus on characteristics 
of the message rather than the sender.
---------------------------------------------------------------------------

    \108\ See R. Fowler; Sachau.
    \109\ See IS; ABA. The Commission's views on how its proposed 
``primary purpose'' standard would apply to email messages sent by 
or on behalf of nonprofit entities are discussed above.
    \110\ See Microsoft; NetCoalition; MasterCard. Nextel asserted 
that an identity test would violate the First Amendment. Other 
commenters argued that it would be an unreliable criterion because 
many for-profit businesses send email for noncommercial purposes. 
See NAA; SIIA.
---------------------------------------------------------------------------

D. Section 316.5--Severability

    This provision, which is identical to the analogous provision 
included in the Sexually Explicit Labeling Rule, provides that if any 
portion of the Rule is found invalid, the remaining portions will 
survive. This provision would pertain to the entirety of the proposed 
Rule, not just the provisions containing the Sexually Explicit Labeling 
requirements.

III. Invitation to Comment

    All persons are hereby given notice of the opportunity to submit 
written data, views, facts, and arguments addressing the issues raised 
by this NPRM. Written comments must be submitted on or before Monday, 
September 13, 2004. Comments should refer to ``CAN-SPAM Act Rulemaking, 
Project No. R411008'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission, CAN-SPAM Act, Post Office 
Box 1030, Merrifield, VA 22116-1030. Please note that courier and 
overnight deliveries cannot be accepted at this address. Courier and 
overnight deliveries should be delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room H-159, 600 
Pennsylvania Avenue, NW., Washington, DC 20580.

[[Page 50103]]

Comments containing confidential material must be filed in paper form, 
and the first page of the document must be clearly labeled 
``Confidential.'' \111\
---------------------------------------------------------------------------

    \111\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
---------------------------------------------------------------------------

    To ensure that the Commission considers an electronic comment, you 
must file it on the web-based form at the https://secure.commentworks.com/ftc-canspam/ weblink. You may also visit http://www.regulations.gov to read this proposed Rule, and may file an 
electronic comment through that Web site. The Commission will consider 
all comments that regulations.gov forwards to it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

IV. Communications by Outside Parties to Commissioners or Their 
Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding from any 
outside party to any Commissioner or Commissioner's advisor will be 
placed on the public record. See 16 CFR 1.26(b)(5).

V. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506) (``PRA''), the Commission has reviewed the proposed Rule. The 
proposed Rule does not impose any recordkeeping, reporting, or 
disclosure requirements or otherwise constitute a ``collection of 
information'' as it is defined in the regulations implementing the PRA. 
See 5 CFR 1320.3(c).

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612, 
requires an agency to provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with a proposed rule and a Final Regulatory 
Flexibility Analysis (``FRFA'') with the final rule, if any, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. See 5 U.S.C. 603-605.
    The Commission requested comment in the ANPR regarding whether CAN-
SPAM regulations would have a significant economic impact on a 
substantial number of small entities. Although the Commission received 
very few responsive comments, the Commission has determined that it is 
appropriate to publish an IRFA in order to inquire into the impact of 
the proposed Rule on small entities. Therefore, the Commission has 
prepared the following analysis.

A. Reasons for the Proposed Rule

    The proposed Rule was created pursuant to the Commission's mandate 
under the CAN-SPAM Act, 15 U.S.C. 7701 et seq. The Act seeks to ensure 
that senders of commercial email not mislead recipients as to the 
source or content of such messages, and to ensure that recipients of 
commercial email have a right to decline to receive additional 
commercial email from a particular source. Specifically, Section 
7702(c) of the Act requires the Commission to issue regulations 
defining the relevant criteria to facilitate the determination of the 
primary purpose of an electronic mail message.

B. Statement of Objectives and Legal Basis

    The objective of the proposed Rule is to implement the CAN-SPAM 
Act, 15 U.S.C. Sec.  7701 et seq. Specifically, the proposed Rule sets 
forth the criteria by which the primary purpose of an email message can 
be ascertained. The legal basis for the proposed Rule is the CAN-SPAM 
Act, 15 U.S.C. Sec.  7701 et seq.\112\
---------------------------------------------------------------------------

    \112\ Specifically, the authority for the mandatory rulemaking 
``defining the relevant criteria to facilitate the determination of 
the primary purpose of an electronic mail message'' is 15 U.S.C. 
7702(2)(c).
---------------------------------------------------------------------------

C. Description of Small Entities to Which the Proposed Rule Will Apply

    The proposed CAN-SPAM Rule, which incorporates by reference many of 
the CAN-SPAM Act's definitions, applies to ``senders'' of ``commercial 
electronic mail messages'' and, to a lesser extent, to ``senders'' of 
``transactional or relationship messages.'' \113\ Under the Act, and 
the proposed Rule, a ``sender'' is ``a person who initiates [a 
commercial electronic mail message] and whose product, service, or 
Internet web site is advertised or promoted by the message.'' \114\ To 
``initiate'' a message, one must ``originate or transmit such message 
or * * * procure the origination or transmission of such 
message.''\115\ The Act does not consider ``routine conveyance'' 
(defined as ``the transmission, routing, relaying, handling, or storing 
through an automatic technical process, of an electronic mail message 
for which another person has identified the recipients or provided the 
recipient addresses'') to be initiation.\116\
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    \113\ One provision, Sec.  7704(a)(1), which prohibits false or 
misleading transmission information, applies equally to ``commercial 
electronic mail messages'' and ``transactional or relationship 
messages;'' otherwise, CAN-SPAM's prohibitions and requirements 
cover only ``commercial electronic mail messages.''
    \114\ 15 U.S.C. 7702(16)(A); Proposed Rule Sec.  316.2(n).
    \115\ 15 U.S.C. 7702(9).
    \116\ 15 U.S.C. 7702(9) and (15).
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    Any company, regardless of industry or size, that sends commercial 
email messages or transactional or relationship messages would be 
subject to the proposed Rule. This would include entities that use 
email to advertise or promote their goods, services, or websites, as 
well as entities that originate or transmit such messages. Therefore, 
numerous small entities across almost every industry could potentially 
be subject to the proposed Rule. For the majority of entities subject 
to the proposed Rule, a small business is defined by the Small Business 
Administration as one whose average annual receipts do not exceed $6 
million or which has fewer than 500 employees.\117\
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    \117\ These numbers represent the size standards for most retail 
and service industries ($6 million total receipts) and manufacturing 
industries (500 employees). A list of the SBA's size standards for 
all industries can be found at <http://www.sba.gov/size/summary-whatis.html.
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    Although it is impossible to identify every industry that sends 
commercial email messages or transactional or relationship messages, 
some surveys suggest that an ever-increasing number are using the 
Internet. A recent Harris Interactive poll, for example, found that 
about 70 percent of small businesses have an online presence or plan to 
have one by 2005.\118\ A 2001 study by the National Federation of 
Independent Business found that, at that time, 57 percent of all small 
employers used the

[[Page 50104]]

Internet for business-related activities.\119\ While these statistics 
do not quantify the number of small businesses that send commercial 
email messages or transactional or relationship messages, they suggest 
that many small businesses are using the Internet in some capacity. The 
Commission is aware of at least one survey, conducted by a web hosting 
provider, Interland, that suggests that 85 percent of small businesses 
surveyed communicate with existing customers via email, and 67 percent 
of those small businesses communicate with potential buyers via 
email.\120\
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    \118\ See <http://www.ecommercetimes.com/story/35004.htm.
    \119\ See <http://www.nfib.com/object/2937298.html.
    \120\ See Electronic Commerce News, Mar. 15, 2004, ``Gearing Up 
for Next Front In the War on Spam.'' SBA also cited studies that 
show that 83 percent of small businesses use email.''
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    Given the paucity of data concerning the number of small businesses 
that send commercial email messages or transactional or relationship 
messages, it is not possible to determine precisely how many small 
businesses would be subject to the proposed Rule. Accordingly, the 
Commission believes that a precise estimate of the number of small 
entities subject to the proposed Rule is not currently feasible, and 
specifically requests information or comment on this issue.

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    The proposed Rule would not impose any specific reporting, 
recordkeeping, or disclosure requirements within the meaning of the 
Paperwork Reduction Act. The CAN-SPAM Act establishes a comprehensive 
regulatory scheme for commercial and transactional or relationship 
email messages, and is enforceable by the FTC as though it were an FTC 
Rule. The proposed Rule sets forth the criteria by which the primary 
purpose of an email message would be ascertained. The proposed Rule 
does not impose substantive compliance obligations.
    In any event, as explained further below, after considering various 
alternatives, the Commission has determined to propose criteria 
designed to enable regulated entities to determine as clearly and 
objectively as possible when ``the primary purpose'' of an email 
message is commercial and subject to CAN-SPAM. Such criteria, in the 
Commission's view, should help reduce any interpretive uncertainty that 
could potentially contribute to compliance costs, and ensure that the 
scope of the proposed Rule will not sweep any more broadly than 
reasonably necessary to carry out the purpose and intent of the CAN-
SPAM Act. The Commission invites comment and information on the 
proposed ``primary purpose'' criteria, including ways, if any, that the 
Commission might further minimize their possible scope and impact while 
still satisfying the Act's mandate.

E. Identification of Other Duplicative, Overlapping, or Conflicting 
Federal Rules

    The FTC has not identified any other federal statutes, rules, or 
policies that would conflict with the proposed Rule's provisions, 
which, as noted above, set forth the criteria by which the primary 
purpose of an email message can be ascertained. The FTC seeks comment 
and information about any statutes or rules that may conflict with the 
proposed requirements, as well as any other state, local, or industry 
rules or policies that may overlap or conflict with the requirements of 
the proposed Rule.

F. Discussion of Significant Alternatives

    As discussed above, the CAN-SPAM Act primarily seeks to ensure that 
senders of commercial email not mislead recipients as to the source or 
content of such messages, and to ensure that recipients of commercial 
email have a right to decline to receive additional commercial email 
from a particular source. The Act, not the proposed Rule, imposes these 
obligations. The Commission nonetheless has considered and is proposing 
to adopt a provision setting out criteria to facilitate the 
determination of when an email message has a commercial primary 
purpose. Although the proposed criteria do not impose any compliance 
burden, they should help avoid legal or other costs that could 
otherwise result from uncertainty, if any, about what the proposed Rule 
covers or requires.
    As noted in its ANPR, the Commission also considered other criteria 
for determining when the primary purpose of an email message is 
commercial, including, for example, the identity of the sender, the use 
of commercial content to fund noncommercial content, and various 
approaches based on the relative importance of the commercial content 
(i.e., more important than all other purposes combined, more important 
than any other single purpose, or more than incidental). As noted 
earlier, the Commission has instead determined to propose criteria that 
it believes will be clearer, more objective, and easier to interpret 
and apply. This should help ease compliance burdens by avoiding 
interpretive uncertainty and by ensuring that the Rule extends no 
further than reasonably necessary to implement the purpose and intent 
of the CAN-SPAM Act. The Commission nonetheless seeks comment on any 
significant alternatives that should be further considered in order to 
minimize CAN-SPAM's impact on entities under the Rule, including small 
entities.

VII. Questions for Comment on the Proposed Rule

    The Commission seeks comment on various aspects of the proposed 
Rule. Without limiting the scope of issues on which it seeks comment, 
the Commission is particularly interested in receiving comments on the 
questions that follow. In responding to these questions, include 
detailed, factual supporting information whenever possible.

A. General Questions for Comment

    Please provide comment, including relevant data, statistics, or any 
other evidence, on each proposed change to the Rule. Regarding each 
proposed provision commented on, please include answers to the 
following questions:
    1. What is the effect (including any benefits and costs), if any, 
on consumers?
    2. What is the impact (including any benefits and costs), if any, 
on individual firms that must comply with the Rule?
    3. What is the impact (including any benefits and costs), if any, 
on industry?
    4. What changes, if any, should be made to the proposed Rule to 
minimize any cost to industry or consumers?
    5. How would each suggested change affect the benefits that might 
be provided by the proposed Rule to consumers or industry?
    6. How would the proposed Rule affect small business entities with 
respect to costs, profitability, competitiveness, and employment?

B. Questions on Proposed Specific Provisions

    In response to each of the following questions, please provide: (1) 
Detailed comment, including data, statistics, and other evidence, 
regarding the problem referred to in the question; (2) comment as to 
whether the proposed changes do or do not provide an adequate solution 
to the problems they were intended to address, and why; and (3) 
suggestions for additional changes that might better maximize consumer 
protections or minimize the burden on industry.

[[Page 50105]]

1. Section 316.1--Scope
    Does the proposed section appropriately describe the scope of the 
CAN-SPAM rules? If not, how should it be modified?
2. Section 316.3--Primary Purpose
    a. Does the Commission's ``primary purpose'' standard provide 
sufficient guidance as to when a message will be considered 
``commercial'' under the CAN-SPAM Act? When a message will be 
considered ``transactional or relationship''? Why or why not? What 
``primary purpose'' standard would provide better guidance?
    b. Does the Commission's ``primary purpose'' standard fail to cover 
any types of messages that should be treated as commercial messages 
under the Act? If so, what types of messages are not covered? Does the 
standard cover any types of messages that should not be treated as 
commercial? If so, what types of messages are covered? Is there some 
other ``primary purpose'' standard that would provide more appropriate 
coverage, and if so, what is it?
    c. The Commission's proposed criteria identify three categories of 
email messages that contain commercial content: those that contain only 
commercial content; those that contain both commercial content and 
transactional/relationship content; and those that contain both 
commercial content and content that is neither commercial nor 
transactional/relationship. The Commission's approach proposes 
different criteria for each category of email messages. Is this 
approach useful for determining the primary purpose of email messages? 
Why or why not? Should the Commission use a single set of criteria for 
all email messages? Why or why not?
    d. Does the proposed approach to email messages containing only 
commercial content provide criteria to facilitate the determination of 
the primary purpose of an email message? Why or why not? Would a 
different approach better accomplish this goal? Why or why not?
    e. Does the proposed approach to email messages containing both 
commercial and transactional/relationship content provide criteria to 
facilitate the determination of the primary purpose of an email 
message? Why or why not?
    f. Would a different approach better facilitate the determination 
of the primary purpose of an email message that contains both 
commercial and transactional/relationship content? Why or why not? Are 
there any additional legal or factual issues that support an approach 
based on either (1) calculating whether a fixed percentage of the 
message is dedicated to transactional/relationship content, or (2) an 
exclusively ``net impression'' test? Are there any arguments supporting 
these approaches to which the Commission did not give adequate weight? 
Should the Commission consider additional factors to determine the 
primary purpose of an email message that contains both commercial and 
transactional/relationship content--such as whether the transactional/
relationship content is clearly and prominently displayed, or whether 
the commercial content interferes with, detracts from, or otherwise 
undermines the presentation of the transactional/relationship content? 
Why or why not?
    g. Does the proposed approach to email messages containing both 
commercial content and content that is neither commercial nor 
transactional/relationship provide criteria to facilitate the 
determination of the primary purpose of an email message? Why or why 
not? Would a different approach better accomplish this goal? Why or why 
not?
    h. The Commission's proposed criteria for email messages containing 
both commercial content and content that is neither commercial nor 
transactional/relationship identify placement of commercial content, 
proportion of message dedicated to commercial content, and how color, 
graphics, type size, and style are used to highlight commercial content 
as factors to consider in assessing the net impression of an email 
message. Are these factors appropriate? Should additional factors be 
considered? Why or why not? Should the sender's identity be considered 
as a factor, and if so, how? Why or why not? Should the sender's intent 
be considered as a factor? Why or why not? If so, how? And if so, how 
should the sender's identity be measured?
    i. The Commission suggests that a message with a noncommercial 
``net impression'' may still be deemed to have a commercial primary 
purpose if the sender deliberately structures his message to create a 
mistaken impression in the mind of a reasonable recipient that the 
message has a noncommercial primary purpose. Should the sender's 
deliberate structuring of a message affect ``primary purpose'' analysis 
under CAN-SPAM, and if so, how? Why or why not?
    j. The Commission's proposed criteria use the subject line in one 
criterion to determine the primary purpose of ``dual-purpose 
messages.'' Is this an appropriate criterion for this determination? 
Why or why not?
    k. The Commission's proposed criteria do not use the subject line 
as a criterion to determine the primary purpose of messages that 
contain only commercial content. Is this choice proper? Why or why not?
    l. Do bona fide email marketers use a message's subject line to 
highlight the fact that the message is advertising or promoting a 
product or service when that is a purpose of the message? Why or why 
not?
    m. Do bona fide e-mail marketers use a message's subject line to 
highlight the fact that their message is a transactional or 
relationship message when that is a purpose of the message? Why or why 
not?
    n. Are there potential loopholes in the proposed ``primary 
purpose'' standard? If so, what are they, and how might they be 
eliminated?
    o. The Commission suggests that spammers could add unrelated 
noncommercial content (or paragraphs of random words) to commercial e-
mail messages if doing so might mean that CAN-SPAM would not apply to 
their messages. Is this likely? Why or why not?
    p. Should the same three-category ``primary purpose'' criteria be 
applied to messages sent by for-profit entities and nonprofit entities 
alike? Why or why not?
    q. Where a recipient has entered into a transaction with a sender 
that entitles the recipient to receive future newsletters or other 
electronically delivered content, should such e-mail messages be deemed 
to be transactional or relationship messages? Why or why not? Should 
the inclusion of commercial content affect this analysis? If so, how?
3. Renumbering of Provisions of the Sexually Explicit Labeling Rule and 
Integration of Those Provisions Into the Proposed CAN-SPAM Rule
    a. Is the Commission's proposal to renumber and integrate into the 
Proposed CAN-SPAM Rule the provisions of the previously-adopted 
Sexually Explicit Labeling Rule a good solution? If not, why not? What 
other approach would be better? Why?

IX. Proposed Rule

List of Subjects in 16 CFR Part 316

    Advertising, Computer technology, Electronic mail, Internet, Trade 
practices.
    Accordingly, it is proposed that chapter 1 of title 16 of the Code 
of Federal Regulations, be amended by

[[Page 50106]]

adding a new part 316 to read as follows:

PART 316--CAN-SPAM RULE

Sec.
316.1 Scope.
316.2 Definitions.
316.3 Primary purpose.
316.4 Requirement to place warning labels on commercial electronic 
mail that contains sexually oriented material.
316.5 Severability.

    Authority: 15 U.S.C. 7701-7713.


Sec.  316.1  Scope.

    This part implements the Controlling the Assault of Non-Solicited 
Pornography and Marketing Act of 2003 (``CAN-SPAM Act''), 15 U.S.C. 
7701-7713.


Sec.  316.2  Definitions.

    (a) The definition of the term ``affirmative consent'' is the same 
as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(1).
    (b) ``Character'' means an element of the American Standard Code 
for Information Interchange (``ASCII'') character set.
    (c) The definition of the term ``commercial electronic mail 
message'' is the same as the definition of that term in the CAN-SPAM 
Act, 15 U.S.C. 7702(2).
    (d) The definition of the term ``electronic mail address'' is the 
same as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 
7702(5).
    (e) The definition of the term ``electronic mail message'' is the 
same as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 
7702(6).
    (f) The definition of the term ``initiate'' is the same as the 
definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(9).
    (g) The definition of the term ``Internet'' is the same as the 
definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(10).
    (h) The definition of the term ``procure'' is the same as the 
definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(12).
    (i) The definition of the term ``protected computer'' is the same 
as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(13).
    (j) The definition of the term ``recipient'' is the same as the 
definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(14).
    (k) The definition of the term ``routine conveyance'' is the same 
as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(15).
    (l) The definition of the term ``sender'' is the same as the 
definition of that term in the CAN-SPAM Act, 15 U.S.C. 7702(16).
    (m) The definition of the term ``sexually oriented material'' is 
the same as the definition of that term in the CAN-SPAM Act, 15 U.S.C. 
7704(d)(4).
    (n) The definition of the term ``transactional or relationship 
messages'' is the same as the definition of that term in the CAN-SPAM 
Act, 15 U.S.C. 7702(17).


Sec.  316.3  Primary purpose.

    (a) In applying the term ``commercial electronic mail message'' 
defined in the CAN-SPAM Act, 15 U.S.C. Sec.  7702(2), the ``primary 
purpose'' of an electronic mail message shall be deemed to be 
commercial based on the following criteria:
    (1) If an electronic mail message contains only content that 
advertises or promotes a product or service, then the ``primary 
purpose'' of the message shall be deemed to be commercial;
    (2) If an electronic mail message contains content that advertises 
or promotes a product or service as well as content that pertains to 
one of the functions listed in paragraph (b) of this section, then the 
``primary purpose'' of the message shall be deemed to be commercial if:
    (i) A recipient reasonably interpreting the subject line of the 
electronic mail message would likely conclude that the message 
advertises or promotes a product or service; or
    (ii) The electronic mail message's content pertaining to one of the 
functions listed in paragraph (b) of this section does not appear at or 
near the beginning of the message;
    (3) If an electronic mail message contains content that advertises 
or promotes a product or service as well as other content that does not 
pertain to one of the functions listed in paragraph (b) of this 
section, then the ``primary purpose'' of the message shall be deemed to 
be commercial if:
    (i) A recipient reasonably interpreting the subject line of the 
electronic mail message would likely conclude that the message 
advertises or promotes a product or service; or
    (ii) A recipient reasonably interpreting the body of the message 
would likely conclude that the primary purpose of the message is to 
advertise or promote a product or service. Factors illustrative of 
those relevant to this interpretation include the placement of content 
that advertises or promotes a product or service at or near the 
beginning of the body of the message; the proportion of the message 
dedicated to such content; and how color, graphics, type size, and 
style are used to highlight commercial content.
    (b) Transactional or relationship functions of e-mail messages 
under the CAN-SPAM Act are:
    (1) To facilitate, complete, or confirm a commercial transaction 
that the recipient has previously agreed to enter into with the sender;
    (2) To provide warranty information, product recall information, or 
safety or security information with respect to a commercial product or 
service used or purchased by the recipient;
    (3) To provide--
    (i) Notification concerning a change in the terms or features of;
    (ii) Notification of a change in the recipient's standing or status 
with respect to; or
    (iii) At regular periodic intervals, account balance information or 
other type of account statement with respect to, a subscription, 
membership, account, loan, or comparable ongoing commercial 
relationship involving the ongoing purchase or use by the recipient of 
products or services offered by the sender;
    (4) To provide information directly related to an employment 
relationship or related benefit plan in which the recipient is 
currently involved, participating, or enrolled; or
    (5) To deliver goods or services, including product updates or 
upgrades, that the recipient is entitled to receive under the terms of 
a transaction that the recipient has previously agreed to enter into 
with the sender.


Sec.  316.4  Requirement to place warning labels on commercial 
electronic mail that contains sexually oriented material.

    (a) Any person who initiates, to a protected computer, the 
transmission of a commercial electronic mail message that includes 
sexually oriented material must:
    (1) Exclude sexually oriented materials from the subject heading 
for the electronic mail message and include in the subject heading the 
phrase ``SEXUALLY-EXPLICIT:'' in capital letters as the first nineteen 
(19) characters at the beginning of the subject line;\1\
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    \1\ The phrase ``SEXUALLY-EXPLICIT'' comprises 17 characters, 
including the dash between the two words. The colon (:) and the 
space following the phrase are the 18th and 19th characters.
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    (2) Provide that the content of the message that is initially 
viewable by the recipient, when the message is opened by any recipient 
and absent any further actions by the recipient, include only the 
following information:

[[Page 50107]]

    (i) The phrase ``SEXUALLY-EXPLICIT:`` in a clear and conspicuous 
manner;\2\
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    \2\ This phrase consists of nineteen (19) characters and is 
identical to the phrase required in Sec.  316.4(a)(1).
---------------------------------------------------------------------------

    (ii) Clear and conspicuous identification that the message is an 
advertisement or solicitation;
    (iii) Clear and conspicuous notice of the opportunity of a 
recipient to decline to receive further commercial electronic mail 
messages from the sender;
    (iv) A functioning return electronic mail address or other 
Internet-based mechanism, clearly and conspicuously displayed, that--
    (A) A recipient may use to submit, in a manner specified in the 
message, a reply electronic mail message or other form of Internet-
based communication requesting not to receive future commercial 
electronic mail messages from that sender at the electronic mail 
address where the message was received; and
    (B) Remains capable of receiving such messages or communications 
for no less than 30 days after the transmission of the original 
message;
    (v) Clear and conspicuous display of a valid physical postal 
address of the sender; and
    (vi) Any needed instructions on how to access, or activate a 
mechanism to access, the sexually oriented material, preceded by a 
clear and conspicuous statement that to avoid viewing the sexually 
oriented material, a recipient should delete the email message without 
following such instructions.
    (b) Prior affirmative consent. Paragraph (a) of this section does 
not apply to the transmission of an electronic mail message if the 
recipient has given prior affirmative consent to receipt of the 
message.


Sec.  316.5  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Commission's intention that the remaining provisions shall continue 
in effect.

    By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-18565 Filed 8-12-04; 8:45 am]
BILLING CODE 6750-01-P