Law Offices of David F. Michail

Resources & Publications

Articles:
Can Spam Act's E-Mail Limits Could Prove Tricky For Firms, March 29, 2004
Electronic Marketing: Privacy, Spamming and The New World Order, February 2, 2004
Consumer Protection Against Identity Theft, September 15, 2003
Considerations For Tenants Entering Into Commercial Leases, January 15, 2003
Account Receivables Factoring: A Cash Flow Solution, November 1, 2002
The Importance Of Buy-Sell Agreements, October 1, 2002
Considerations in Retaining Independent Contractors, September 1, 2002
Securing Capital in a Recessed Economy, August 1, 2002
Protecting Your Proprietary Information,July 1, 2002
To Incorporate or Not to Incorporate, June 1, 2002
Taking Precautionary Steps to Protect Your Business, May 1, 2002
The Myths About Forming a Nevada Entity, April 1, 2002

ALL PUBLICATIONS AND ARTICLES ARE PROVIDED BY THE LAW OFFICES OF DAVID F. MICHAIL FOR INFORMATIONAL PURPOSES ONLY, AND ARE NOT TO BE CONSTRUED OR RELIED UPON AS LEGAL ADVICE. THE READER AGREES TO CONSULT AN ATTORNEY IN THEIR JURISDICTION REGARDING LOCAL LAWS AND THEIR SPECIFIC LEGAL NEEDS OR CIRCUMSTANCES.

Electronic Marketing: Privacy, Spamming and The New World Order
Prepared by
Law Offices of David F. Michail, a Professional Corporation

Over the past decade, e-mail has become the most efficient and cheapest method of transmitting vital information globally. Because of the low cost and the high measurability for marketing and brand loyalty management, this medium has won over advertisers and their agencies as a compliment to an integrated marketing campaign. Although different that traditional advertising mechanisms, marketers should ensure that their electronic campaigns comply with the various advertising, and privacy laws that are unique to digital communication.

Historically, regulators have relied upon traditional enforcement mechanisms promulgated under Federal Trade Commission Act and state consumer protection laws to police the Internet. As advertisers and their agencies face potential liability for non-compliance, any integrated marketing methodology should not to circumvent or avoid implementing traditional safeguards in the electronic portion of the campaign. Moreover, as digital communications are trans-jurisdictional in nature, marketers and advertisers face many challenges with inconsistent global standards, which may have a chilling effect on campaigns.

I. False and Misleading Email Advertising

All advertising publications require that the advertiser make a good faith substantiation of advertising claims in order to comply with federal and state consumer protection laws, regardless of medium. Substantiation can be accomplished by various testing, surveys and other methodologies to support claims made about the advertiser's products or services. Merely publishing a claim electronically does not invalidate this requirement. Unfortunately, without the advantage of television network clearance departments, there is no gatekeeper for this electronic medium.

As a consequence, many fly by night marketers are abusing electronic media as a way to circumvent traditional consumer protection and advertising laws. The Federal Trade Commission and state attorney general offices have instituted various legal initiatives against email marketers and web-based businesses that have run afoul of the law. For example, the FTC recently imposed penalties against a credit card provider that allegedly mislead consumers into paying a fee for an unsecured major credit card in a bait and switch scheme (See Federal Trade Commission v. Clickformail.com, et al., Civ. No. 03C 3033 (N.D. Ill., Oct. 2, 2003)). Also, in a recent decision by the Superior Court of California, the Court awarded a final $2 Million judgment against the Defendant's for deceptive spamming practices (See The People of the State of California v. Paul Willis, Claudia Griffen, PW Marketing, LLC, Civ. No. 1-020CV811428, slip. op. (Ca. Sup. Ct., Santa Clara, October 24, 2003). These types of enforcement actions will become more common as regulators tighten the noose around abusive Internet practices.

Although the FTC has cracked down on clear violations, legitimate advertisers and agencies would be ill-advised to maintain lax policies regarding electronic marketing. Remedies against deceptive practices often involve significant penalties, consumer litigation, and in some cases, costly corrective advertising. Additionally, although compliance is voluntary, the National Advertiser's Division ("NAD"), the Children's Advertising Review Unit ("CARU") and the National Advertising Review Board ("NARB") oversee false and deceptive claims challenges for Internet based advertising. Therefore, agencies that can maintain a review mechanism on behalf of its customers as part of their service offering may have some leverage over its competition.

Nonetheless, as a matter of good practice, industry associations are instituting helpful guidelines to self-police this issue. For more information on best practice guidelines with respect to use of information and structuring email campaigns, agencies may refer to the recently released guidelines promulgated by the American Association of Advertising Agencies (AAAA), the Association of National Advertisers (ANA), the Association for Interactive Marketing (AIM), the Direct Marketing Association (DMA), as well as the United Kingdom's All Party Internet Group (APIG).

II. Privacy and Spamming

As privacy and anti-spam legislation continue to emerge as a predominant issue in communications law, agencies and information aggregators should at least be familiar with some of the regulations pertaining to this medium. Marketers can refer to the various bulletins supplied by the FTC as well as other federal statutes such as the Children's Online Privacy Act (COPPA), the Health Insurance Portability and Accountability Act (HIPPA), the Gramm-Leach-Bliley Act (GLB), the CAN-SPAM bill entitled "Controlling the Assault of Unsolicited Pornography and Marketing Act of 2003, (S.877)" as well as a series of European Directives (including the most recent passage of EU Directive 2002/58/EC)). Further, internal data aggregation and sharing policies should be evaluated so as to ensure compliance with applicable FTC regulations.

Although many marketers have historically purchased their email distribution lists from third parties for general branding and targeted promotional campaigns, agencies should perform due diligence as to how personally identifiable information had been collected. By reviewing the privacy policy of the list seller's web site to ensure they are in compliance, the marketer can at least ensure that the addresses are being sold legally. The CAN-SPAM bill prescribes that e-mail information be obtained legally and voluntarily, and not through software scanning devices that extract email addresses from the Internet. Further, some states have enacted their own anti-spam laws, the most aggressive of which is found in California. California's Business and Professions Code § 17529 (effective January 2004) prohibits the aggregation of email addresses for the purpose of initiating or advertising with an unsolicited commercial email sent to or from the state of California. In essence, the marketer must have a prior business relationship with the targeted party and their consent in order to send an email in this state. California prescribes fines of $1,000 for each transmission, up to $1,000,000 per incident. Although the California law may likely be pre-empted by the passage of CAN-SPAMM, marketers should nonetheless be careful treading in these murky waters. Therefore, until CAN-SPAMM is passed, conservative advertisers would perhaps consider organically growing their consumer database through loyalty and permission based marketing initiatives.

Finally, marketers should be aware that the CAN-SPAMM legislation is much more protective of commercial speech than its European counterpart. As the US is purporting to adopt an "opt out" mechanism as opposed to the more stringent European Union "opt-in" requirement, the inconsistencies may lead to exposure for marketers with a global customer base. Therefore, as long as the international standards are inconsistent, marketers are forced to either scrub their email database within the safe harbor of U.S. territories, or universally adopt the more stringent "opt-in" standard.

© Copyright 2004 David F. Michail. All Rights Reserved.

Mr. Michail is an Advertising, Marketing, Media and Internet law attorney in Los Angeles, California. This article is intended for general informational purposes only, and shall not be construed as rendering legal advice to any particular party. As individual circumstances and state laws may differ, readers should consult competent legal counsel in their jurisdiction to address their specific needs. For further information on this issue, or to schedule Mr. Michail for public speaking engagements related to this or other business law topics, please call 310-670-4656 or email Mr. Michail at david.michail@michaillaw.com.