Associations and their marketing agents often rely on broadcast faxing to market a wide array of products, services and membership itself to members and non-members alike. Increasingly, associations are looking to email solicitations as an effective and cost-efficient marketing medium. Despite the cost and administrative efficiency of fax and email marketing, however, a patchwork of federal and state laws and regulations impose a number of limitations on the use of these marketing tools or prohibit their use. Penalties for noncompliance can be severe, and often can be enforced by private parties, as well as by federal or state government agencies. It is imperative for every association engaged in or considering such marketing efforts to understand completely these legal rules and restrictions, and to plan and execute their marketing accordingly.
Outlined below is an overview of the current federal and state laws governing the use of faxes and email messages for marketing purposes. Specifically, this summary highlights the implications of existing laws and regulations on nonprofit membership associations (and their marketing agents) that may wish to market a variety of products and services by sending faxes and email messages to prospects. For example, associations may want to advertise their publications, training materials, and other products and services; promote attendance at conferences, seminars, and other meetings; or market paid membership in their associations. An association may want to market to members, non-members, or both.
This overview focuses most heavily on standards imposed under current federal law. A review of the myriad state laws affecting email and fax advertising is beyond the scope of this article. It is, however, important to note that most states have enacted their own laws governing one or more aspects of telemarketing (including via fax), and an increasing number have enacted or are considering laws to restrict the use of bulk, unsolicited commercial email ("UCE").
It is also very important to note that this is a rapidly evolving area of the law, at both the federal and state levels. For instance, while no federal law currently limits unsolicited commercial email marketing, a number of bills are pending and working their way through Congress. In addition, a handful of states have already enacted laws in this area. In short, the legal landscape may look very different six months from now than it does today.
Although the outcome of the various state and federal proposals is uncertain, based on general advertising law standards, certain state requirements, and the probable elements of any future federal law, it is possible to outline a few "rules of thumb" to guide good marketing practices in these areas. First, it is advisable for associations to accompany any bulk, unsolicited email message with a notice that the recipient can elect not to receive future messages and can ask the association not to sell or rent the recipient's name and email address to others. The notice should include instructions on how to exercise this "opt-out" alternative (i.e., by sending a return email or calling a toll-free telephone number). In addition, associations should consider the use of "opt-in" mechanisms for both members and non-members, as described below. In appropriate situations, "opt-in" structures can better enable an association to manage and minimize the current legal risk and uncertainty without sacrificing the major benefits of email marketing. Moreover, associations should not rely on third-party or false "header" or sender address information, and should be sure to receive permission to use any third-party server, domain names, or computer system to send bulk email.
FAX SOLICITATIONS
Federal Law
At the federal level, the Telephone Consumer Protection Act of 1991 and the implementing regulations of the Federal Communications Commission (FCC) under that statute (collectively, the "TCPA") govern the use of fax machines for marketing purposes. The TCPA is enforceable in actions for damages brought by individual consumers, and, in certain cases, actions for damages and injunctive relief instituted by state law enforcement authorities. The FCC also may seek to assess monetary penalties for violations. Although nonprofit organizations are exempt from certain TCPA requirements (either by definition or in practical effect), the limits on the use of fax machines apply to for-profit and nonprofit entities.
The TCPA imposes a general ban on the use of fax machines to send an "unsolicited advertisement," which is defined to include advertising material promoting the "commercial availability" of any goods, property, or services and transmitted without the recipient's "prior express invitation or permission." The FCC has stated, however, that an existing business relationship with the recipient can be deemed to reflect the recipient's permission. The rules define an established business relationship as:
"a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction by the residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party."
Therefore, under the TCPA, an association may send a fax solicitation promoting sales of its publications, a conference or seminar, membership renewals, or the like only to (1) members, or (2) anyone else that has provided the association with permission to do so. Arguably, someone who has supplied their fax number to the association in connection with attendance at an association event, meets the requirement of being someone with whom the association has an "existing business relationship" -- at least unless and until the individual requests that the association cease sending material via fax.
Neither the association nor its marketing agent should use fax solicitations to market to association members that affirmatively terminated their membership. Instead, it is a good idea to conduct reinstatement marketing by direct mail, telephone, or some other means. It is not entirely clear under curent law whether an association may, consistent with the TCPA, market to a member who has simply neglected to renew, rather than affirmatively terminated, their membership. An established relationship expressly encompasses a "prior" relationship, yet an association or its members may terminate that relationship at any time. A member that simply fails to renew arguably has not "terminated" the relationship - just as a customer who makes one catalog purchase cannot be assumed to have terminated his relationship with the catalog seller only because he has not yet made a second purchase. On the other hand, unlike catalog purchasers, association members do have to make a periodic decision to continue their relationship with the association and there may be no way to know whether an individual that does not renew has done so based on affirmative choice or through neglect. Thus, there is risk in sending fax solicitations to these former members. A conservative approach is not to send fax solicitations to former members absent renewed or other express consent. In any event, if an association does not distinguish former members who affirmatively decline renewal from those who merely fail to renew, then as a practical matter, all former members must be treated alike and the association should not send unsolicited faxes to any former member. It also is a good idea to accompany all fax solicitations with an easy-to-utilize "opt-out" alternative, so recipients can indicate if they do not want to receive fax ads from the association in the future.
It is important to bear in mind that the fax ban applies not only to stand-alone fax machines, but also to computer fax boards or modems that can send a fax from a personal computer. Finally, any fax must identify, on each page or on the first page, the date and time it is sent, the sender's identity, and the telephone number of the fax machine sending the transmission.
(See Federal Court Holds Federal Fax Ban Unconstitutional , an article about a March 2002 federal court decision regarding the constitutionality of this law.)
State Law
Although the TCPA applies to both inter- and intrastate calls, it does not preempt state law. Most states have adopted statutes or regulations (or both) that specifically affect telemarketing activities, including, in some instances, specific provisions governing the use of facsimile machines. Most of the state telemarketing laws are patterned after the federal model, but some do not include an exception for fax solicitations sent to existing customers or members. On the other hand, some states' laws carve out an exemption for faxes sent by or on behalf of a nonprofit entity. These state statutes, including state registration laws, plainly apply to telephone calls that originate and terminate within that state. The statutes of several states specifically limit their application to these types of calls or to circumstances in which the seller or the telemarketing service bureau otherwise has a presence in the state. Many state statutes, however, do not contain such a jurisdictional limitation, and others specifically claim jurisdiction with respect to calls made to in-state consumers from outside of the state.
UNSOLICITED COMMERCIAL EMAIL ("UCE")
Federal Law
There is currently no federal law governing UCE. There are several bills pending in Congress that would limit the use of unsolicited electronic messages for marketing purposes. Virtually all of the proposals would require organizations to provide consumers an opportunity to opt-out of receiving such solicitations. Some proposals call for individual companies to maintain their own lists; others call for a national database or for Internet access providers to compile a list of individuals who elect to receive - or not to receive - email solicitations. A number of bills, in effect, permit Internet service providers (ISPs) to decide whether and how their online access customers may receive such email by making it illegal to send an unsolicited commercial message if it violates the ISP's own policies. Most of the bills provide a private right of action and enforcement by the Federal Trade Commission (FTC) or FCC; some would impose criminal sanctions. At least one bill would permit state enforcement, but preempt similar state and local laws.
The FTC (which has jurisdiction over most nonprofit trade and professional membership associations) is authorized to prevent "unfair or deceptive" trade practices and has relied on this broad power to challenge a variety of Internet-based marketing activities. Although the FTC has been studying UCE issues, in testimony before Congress in November 1999, the FTC noted that its enforcement has thus far focused on deceptive UCE - messages that convey false or misleading information or promotions or are otherwise used in connection with an allegedly deceptive or fraudulent promotion.
The FTC has expressed concern about the burden (economic and technological) UCE places on ISPs, the annoyance and frustration it causes consumers, and the effects it may have on consumer confidence in Internet/electronic commerce. The FTC asked the industry to examine these issues, and to report back. The report recommended, among other things, that marketers provide consumers with a choice to "opt-in" or "opt-out" of receiving UCE. This is consistent with the general trend in Internet privacy debates and discussions, and the FTC's position on Web site privacy policies.
Accordingly, and because of state requirements described below, it is a good practice to include with each email solicitation an opt-out notice, including instructions for how recipients can opt-out of receiving future email solicitations from the association (e.g., by providing a return email address) and from having the association share consumers' individually-identifiable contact information with third parties for marketing purposes.
State Laws
Several states have enacted laws governing unsolicited or bulk email mail messages. At present, all of the state laws enacted thus far include at least limited exceptions for messages an organization sends to its members, when there is an existing business relationship between the sender and recipient, or both. It also is acceptable to send advertisements by email with a recipient's consent or on request (e.g., using "opt-in" databases). For instance, new members could be asked when they join an association if they would like to receive email updates about issues, products, or services that might be of interest to them.
If an association implements an "opt-in" mechanism, it may be advisable to clarify explicitly the scope and limitations of members' agreement, and to provide a variety of options from which members can choose. For instance, does the "opt-in" apply to all products and services of the association or only to certain ones? Does it apply to products and services offered by, and email messages sent by, third parties to association members (such as endorsed affinity providers, sponsors, exhibitors, supplier members, etc.)? Does it apply only while the individual or company remains a member, or does it continue thereafter?
Virtually all of the states' laws exempt ISPs that merely transmit messages across their system and many are crafted to protect ISPs against use of their systems for sending UCE. Some states' laws are not truly focused on the use of "bulk" UCE for marketing. Oklahoma law, for instance, simply prohibits the use of using false or misleading header or return address information, false or misleading statements in the body of the message, unapproved use of another party's service, computer system, or network to send bulk messages, and similar practices.
State laws that do focus on marketing uses follow different models. In California, the general rule is that anyone sending unsolicited email that advertises any goods or services must include in the message a notice concerning consumers' right to opt out of receiving future emails, and include either a toll-free telephone number or return email address so that consumers can easily notify the sender that they do not wish to receive any further email messages. The statute also requires the sender to include "ADV:" at the beginning of the subject line to indicate that the email is an advertisement. The California law applies when email is delivered to a California resident via the equipment or service of an email provider located in California, but the statute will become inoperative if Congress passes a federal law in this area. California law exempts email messages if the "initiator" has an existing business relationship with the recipient or if the recipient expressly consents to or requests the emails. Thus, so long as an association limits its email messages to members, the California statute should not come into play. If an association wants to send UCE to non-members in California, it will need to include the opt-out notice and subject line information.
Virginia enacted a statute that prohibits unauthorized use of a computer network to send fraudulent unsolicited bulk email. Consequently, there are two elements to this crime; both elements must be present for the statute to be violated. First, a person must engage in unauthorized use of a computer network. Simply put, a person must violate the ISP's policies on sending email. The statute clarifies that sending email to an organization's members is never an unauthorized use. Second, a person must intentionally "falsify or forge electronic mail transmission information or other routing information" when sending unsolicited bulk email. Thus, this statute reaches so-called "spammers" who change the sender's information on an email message to make it appear that the message is from someone other than the true sender. It does not preclude sending unsolicited email under a person's own account. Even though associations generally are not going to change the sender's information (and therefore generally will not be at risk of violating the Virginia statute), associations would be well-served to consult with the service provider that furnishes email service to the association (and the association's marketing agent, if any) to ensure that sending UCE to members will not run afoul of ISP policies, thereby jeopardizing continued access to the ISP's services or risking legal action.
Maryland recently enacted a law that establishes a body authorized to develop standards and make recommendations concerning a variety of Internet-related topics, including UCE, but no new rules have been adopted at this point. Other states with laws in this area at present include Delaware, Louisiana, Rhode Island, Tennessee, Colorado, Iowa, Idaho, and Missouri.
States vary as to the degree to which they purport to govern actions by non-resident entities, and case law regarding the extent to which these new statutes may be applied to non-residents is just beginning to evolve. Moreover, the constitutionality of these statutes has come into question. A state court in Washington recently found that state's email statute to be unconstitutional as an unreasonable burden on interstate commerce because it impermissibly requires the sender of a message to determine if the recipient is a resident of the state. Specifically, the Washington statute prohibited certain conduct when transmitting an email message to someone the sender knows or has reason to know is a resident of Washington. Many other states' laws include similar language and might be challenged on these grounds. This appears, however, to be the first ruling of its kind and it is by no means certain the decision will stand. Moreover, even slight variations in a state's law may tip the balance in one direction or another. It is clear, however, that associations engaged in nationwide email marketing campaigns should carefully consider applicable state laws.
REVISED APRIL 2002
Outlined below is an overview of the current federal and state laws governing the use of faxes and email messages for marketing purposes. Specifically, this summary highlights the implications of existing laws and regulations on nonprofit membership associations (and their marketing agents) that may wish to market a variety of products and services by sending faxes and email messages to prospects. For example, associations may want to advertise their publications, training materials, and other products and services; promote attendance at conferences, seminars, and other meetings; or market paid membership in their associations. An association may want to market to members, non-members, or both.
This overview focuses most heavily on standards imposed under current federal law. A review of the myriad state laws affecting email and fax advertising is beyond the scope of this article. It is, however, important to note that most states have enacted their own laws governing one or more aspects of telemarketing (including via fax), and an increasing number have enacted or are considering laws to restrict the use of bulk, unsolicited commercial email ("UCE").
It is also very important to note that this is a rapidly evolving area of the law, at both the federal and state levels. For instance, while no federal law currently limits unsolicited commercial email marketing, a number of bills are pending and working their way through Congress. In addition, a handful of states have already enacted laws in this area. In short, the legal landscape may look very different six months from now than it does today.
Although the outcome of the various state and federal proposals is uncertain, based on general advertising law standards, certain state requirements, and the probable elements of any future federal law, it is possible to outline a few "rules of thumb" to guide good marketing practices in these areas. First, it is advisable for associations to accompany any bulk, unsolicited email message with a notice that the recipient can elect not to receive future messages and can ask the association not to sell or rent the recipient's name and email address to others. The notice should include instructions on how to exercise this "opt-out" alternative (i.e., by sending a return email or calling a toll-free telephone number). In addition, associations should consider the use of "opt-in" mechanisms for both members and non-members, as described below. In appropriate situations, "opt-in" structures can better enable an association to manage and minimize the current legal risk and uncertainty without sacrificing the major benefits of email marketing. Moreover, associations should not rely on third-party or false "header" or sender address information, and should be sure to receive permission to use any third-party server, domain names, or computer system to send bulk email.
FAX SOLICITATIONS
Federal Law
At the federal level, the Telephone Consumer Protection Act of 1991 and the implementing regulations of the Federal Communications Commission (FCC) under that statute (collectively, the "TCPA") govern the use of fax machines for marketing purposes. The TCPA is enforceable in actions for damages brought by individual consumers, and, in certain cases, actions for damages and injunctive relief instituted by state law enforcement authorities. The FCC also may seek to assess monetary penalties for violations. Although nonprofit organizations are exempt from certain TCPA requirements (either by definition or in practical effect), the limits on the use of fax machines apply to for-profit and nonprofit entities.
The TCPA imposes a general ban on the use of fax machines to send an "unsolicited advertisement," which is defined to include advertising material promoting the "commercial availability" of any goods, property, or services and transmitted without the recipient's "prior express invitation or permission." The FCC has stated, however, that an existing business relationship with the recipient can be deemed to reflect the recipient's permission. The rules define an established business relationship as:
"a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction by the residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party."
Therefore, under the TCPA, an association may send a fax solicitation promoting sales of its publications, a conference or seminar, membership renewals, or the like only to (1) members, or (2) anyone else that has provided the association with permission to do so. Arguably, someone who has supplied their fax number to the association in connection with attendance at an association event, meets the requirement of being someone with whom the association has an "existing business relationship" -- at least unless and until the individual requests that the association cease sending material via fax.
Neither the association nor its marketing agent should use fax solicitations to market to association members that affirmatively terminated their membership. Instead, it is a good idea to conduct reinstatement marketing by direct mail, telephone, or some other means. It is not entirely clear under curent law whether an association may, consistent with the TCPA, market to a member who has simply neglected to renew, rather than affirmatively terminated, their membership. An established relationship expressly encompasses a "prior" relationship, yet an association or its members may terminate that relationship at any time. A member that simply fails to renew arguably has not "terminated" the relationship - just as a customer who makes one catalog purchase cannot be assumed to have terminated his relationship with the catalog seller only because he has not yet made a second purchase. On the other hand, unlike catalog purchasers, association members do have to make a periodic decision to continue their relationship with the association and there may be no way to know whether an individual that does not renew has done so based on affirmative choice or through neglect. Thus, there is risk in sending fax solicitations to these former members. A conservative approach is not to send fax solicitations to former members absent renewed or other express consent. In any event, if an association does not distinguish former members who affirmatively decline renewal from those who merely fail to renew, then as a practical matter, all former members must be treated alike and the association should not send unsolicited faxes to any former member. It also is a good idea to accompany all fax solicitations with an easy-to-utilize "opt-out" alternative, so recipients can indicate if they do not want to receive fax ads from the association in the future.
It is important to bear in mind that the fax ban applies not only to stand-alone fax machines, but also to computer fax boards or modems that can send a fax from a personal computer. Finally, any fax must identify, on each page or on the first page, the date and time it is sent, the sender's identity, and the telephone number of the fax machine sending the transmission.
(See Federal Court Holds Federal Fax Ban Unconstitutional , an article about a March 2002 federal court decision regarding the constitutionality of this law.)
State Law
Although the TCPA applies to both inter- and intrastate calls, it does not preempt state law. Most states have adopted statutes or regulations (or both) that specifically affect telemarketing activities, including, in some instances, specific provisions governing the use of facsimile machines. Most of the state telemarketing laws are patterned after the federal model, but some do not include an exception for fax solicitations sent to existing customers or members. On the other hand, some states' laws carve out an exemption for faxes sent by or on behalf of a nonprofit entity. These state statutes, including state registration laws, plainly apply to telephone calls that originate and terminate within that state. The statutes of several states specifically limit their application to these types of calls or to circumstances in which the seller or the telemarketing service bureau otherwise has a presence in the state. Many state statutes, however, do not contain such a jurisdictional limitation, and others specifically claim jurisdiction with respect to calls made to in-state consumers from outside of the state.
UNSOLICITED COMMERCIAL EMAIL ("UCE")
Federal Law
There is currently no federal law governing UCE. There are several bills pending in Congress that would limit the use of unsolicited electronic messages for marketing purposes. Virtually all of the proposals would require organizations to provide consumers an opportunity to opt-out of receiving such solicitations. Some proposals call for individual companies to maintain their own lists; others call for a national database or for Internet access providers to compile a list of individuals who elect to receive - or not to receive - email solicitations. A number of bills, in effect, permit Internet service providers (ISPs) to decide whether and how their online access customers may receive such email by making it illegal to send an unsolicited commercial message if it violates the ISP's own policies. Most of the bills provide a private right of action and enforcement by the Federal Trade Commission (FTC) or FCC; some would impose criminal sanctions. At least one bill would permit state enforcement, but preempt similar state and local laws.
The FTC (which has jurisdiction over most nonprofit trade and professional membership associations) is authorized to prevent "unfair or deceptive" trade practices and has relied on this broad power to challenge a variety of Internet-based marketing activities. Although the FTC has been studying UCE issues, in testimony before Congress in November 1999, the FTC noted that its enforcement has thus far focused on deceptive UCE - messages that convey false or misleading information or promotions or are otherwise used in connection with an allegedly deceptive or fraudulent promotion.
The FTC has expressed concern about the burden (economic and technological) UCE places on ISPs, the annoyance and frustration it causes consumers, and the effects it may have on consumer confidence in Internet/electronic commerce. The FTC asked the industry to examine these issues, and to report back. The report recommended, among other things, that marketers provide consumers with a choice to "opt-in" or "opt-out" of receiving UCE. This is consistent with the general trend in Internet privacy debates and discussions, and the FTC's position on Web site privacy policies.
Accordingly, and because of state requirements described below, it is a good practice to include with each email solicitation an opt-out notice, including instructions for how recipients can opt-out of receiving future email solicitations from the association (e.g., by providing a return email address) and from having the association share consumers' individually-identifiable contact information with third parties for marketing purposes.
State Laws
Several states have enacted laws governing unsolicited or bulk email mail messages. At present, all of the state laws enacted thus far include at least limited exceptions for messages an organization sends to its members, when there is an existing business relationship between the sender and recipient, or both. It also is acceptable to send advertisements by email with a recipient's consent or on request (e.g., using "opt-in" databases). For instance, new members could be asked when they join an association if they would like to receive email updates about issues, products, or services that might be of interest to them.
If an association implements an "opt-in" mechanism, it may be advisable to clarify explicitly the scope and limitations of members' agreement, and to provide a variety of options from which members can choose. For instance, does the "opt-in" apply to all products and services of the association or only to certain ones? Does it apply to products and services offered by, and email messages sent by, third parties to association members (such as endorsed affinity providers, sponsors, exhibitors, supplier members, etc.)? Does it apply only while the individual or company remains a member, or does it continue thereafter?
Virtually all of the states' laws exempt ISPs that merely transmit messages across their system and many are crafted to protect ISPs against use of their systems for sending UCE. Some states' laws are not truly focused on the use of "bulk" UCE for marketing. Oklahoma law, for instance, simply prohibits the use of using false or misleading header or return address information, false or misleading statements in the body of the message, unapproved use of another party's service, computer system, or network to send bulk messages, and similar practices.
State laws that do focus on marketing uses follow different models. In California, the general rule is that anyone sending unsolicited email that advertises any goods or services must include in the message a notice concerning consumers' right to opt out of receiving future emails, and include either a toll-free telephone number or return email address so that consumers can easily notify the sender that they do not wish to receive any further email messages. The statute also requires the sender to include "ADV:" at the beginning of the subject line to indicate that the email is an advertisement. The California law applies when email is delivered to a California resident via the equipment or service of an email provider located in California, but the statute will become inoperative if Congress passes a federal law in this area. California law exempts email messages if the "initiator" has an existing business relationship with the recipient or if the recipient expressly consents to or requests the emails. Thus, so long as an association limits its email messages to members, the California statute should not come into play. If an association wants to send UCE to non-members in California, it will need to include the opt-out notice and subject line information.
Virginia enacted a statute that prohibits unauthorized use of a computer network to send fraudulent unsolicited bulk email. Consequently, there are two elements to this crime; both elements must be present for the statute to be violated. First, a person must engage in unauthorized use of a computer network. Simply put, a person must violate the ISP's policies on sending email. The statute clarifies that sending email to an organization's members is never an unauthorized use. Second, a person must intentionally "falsify or forge electronic mail transmission information or other routing information" when sending unsolicited bulk email. Thus, this statute reaches so-called "spammers" who change the sender's information on an email message to make it appear that the message is from someone other than the true sender. It does not preclude sending unsolicited email under a person's own account. Even though associations generally are not going to change the sender's information (and therefore generally will not be at risk of violating the Virginia statute), associations would be well-served to consult with the service provider that furnishes email service to the association (and the association's marketing agent, if any) to ensure that sending UCE to members will not run afoul of ISP policies, thereby jeopardizing continued access to the ISP's services or risking legal action.
Maryland recently enacted a law that establishes a body authorized to develop standards and make recommendations concerning a variety of Internet-related topics, including UCE, but no new rules have been adopted at this point. Other states with laws in this area at present include Delaware, Louisiana, Rhode Island, Tennessee, Colorado, Iowa, Idaho, and Missouri.
States vary as to the degree to which they purport to govern actions by non-resident entities, and case law regarding the extent to which these new statutes may be applied to non-residents is just beginning to evolve. Moreover, the constitutionality of these statutes has come into question. A state court in Washington recently found that state's email statute to be unconstitutional as an unreasonable burden on interstate commerce because it impermissibly requires the sender of a message to determine if the recipient is a resident of the state. Specifically, the Washington statute prohibited certain conduct when transmitting an email message to someone the sender knows or has reason to know is a resident of Washington. Many other states' laws include similar language and might be challenged on these grounds. This appears, however, to be the first ruling of its kind and it is by no means certain the decision will stand. Moreover, even slight variations in a state's law may tip the balance in one direction or another. It is clear, however, that associations engaged in nationwide email marketing campaigns should carefully consider applicable state laws.
REVISED APRIL 2002