[Senate Report 108-381]
[From the U.S. Government Publishing Office]
Calendar No. 741
108th Congress Report
SENATE
2d Session 108-381
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JUNK FAX PREVENTION ACT OF 2004
__________
R E P O R T
OF THE
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
on
S. 2603
September 28, 2004.--Ordered to be printed
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
one hundred eighth congress
second session
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois RON WYDEN, Oregon
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
FRANK LAUTENBERG, New Jersey
Jeanne Bumpus, Staff Director and General Counsel
Rob Freeman, Deputy Staff Director
Robert W. Chamberlin, Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
(ii)
Calendar No. 741
108th Congress Report
SENATE
2d Session 108-381
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JUNK FAX PREVENTION ACT OF 2004
_______
September 28, 2004.--Ordered to be printed
_______
Mr. McCain, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany S. 2603]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 2603) ``A Bill to amend section
227 of the Communications Act of 1934 (47 U.S.C. 227) relating
to the prohibition on junk fax transmissions.'', having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
Purpose of the Bill
The purposes of this legislation are the following:
To create a limited statutory exception to
the current prohibition against the faxing of
unsolicited advertisements to individuals without their
``prior express invitation or permission'' by
permitting such transmission by senders of commercial
faxes to those with whom they have an established
business relationship (EBR).
To require that senders of faxes with
unsolicited advertisements (i.e., ``junk faxes'')
provide notice of a recipient's ability to opt out of
receiving any future faxes containing unsolicited
advertisements and a cost-free mechanism for recipients
to opt out pursuant to that notice.
To require the Federal Communications
Commission (FCC) and Comptroller General of the United
States to provide certain reports to Congress regarding
the enforcement of these provisions.
Background and Needs
TELEPHONE CONSUMER PROTECTION ACT OF 1991
Congress first addressed the legality of faxing unsolicited
advertisements to residential telephone subscribers in the
Telephone Consumer Protection Act of 1991 (TCPA).\1\ The law,
which is still in effect, generally prohibits anyone from
faxing unsolicited advertisements without ``prior express
invitation or permission'' from the recipient. The statute
contains no other exceptions for junk faxes, and does not
authorize the FCC to create any additional exceptions.
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\1\ P.L. 102-243; 47 U.S.C. 227.
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In October 1992, the FCC released its original order
interpreting the TCPA and establishing the rules implementing
the junk fax prohibition. In response to comments by Mr. Fax
and National Faxlist urging the Commission not to ban
unsolicited faxes, the FCC in its order noted in a footnote
(which remains unpublished in the Code of Federal Regulations)
that the TCPA did not give it ``discretion to create exemptions
from or limit the effects of the prohibition.'' \2\ The
footnote continued to say, ``We note, however, that facsimile
transmission from persons or entities who have an established
business relationship with the recipient can be deemed to be
invited or permitted by the recipient.'' \3\ On this basis,
many commercial entities considered an ``established business
relationship'' or ``EBR'' to be a permissible exemption from
the general prohibition of sending unsolicited faxes.
Additionally, from 1992 through July 2003, the FCC enforced the
TCPA junk fax provisions under this original interpretation.
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\2\ See Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CC Docket No. 92-90, Report and Order, 7 FCC
Rcd 8752 (rel. 1992) (hereinafter, ``1992 TCPA Order''), at 8779, para.
54, n. 87.
\3\ Id.
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The Commission continued to assess the effectiveness of the
TCPA's provisions over the course of the decade and, in
September 2002 sought public comment on a number of issues,
including whether the FCC should refine or adopt new rules
related to ``unsolicited facsimile advertisements.'' The FCC
explained its purpose for initiating this formal review
proceeding as follows: ``In the last ten years, telemarketing
practices have changed significantly. New technologies have
emerged that allow telemarketers to target potential customers
better and that make marketing using telephones and facsimile
machines more cost-effective. At the same time, the new
telemarketing techniques have increased public concern about
the impact on consumer privacy.'' \4\
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\4\ FCC Press Release, September 12, 2002 (http://
hraunfoss.fcc.gov/edocs--public/attachmatch/DOC-226183A1.doc).
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On March 11, 2003, the Do-Not-Call Act was signed into law.
In addition to authorizing the Federal Trade Commission (FTC)
to implement a national registry, it also required the FCC to
issue a final rule in its ongoing TCPA proceeding within 180
days. Additionally, it required the FCC to consult and
coordinate with the FTC to ``maximize consistency'' with the
rules promulgated by the FTC.\5\
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\5\ See Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC
Rcd 14014 (2003) (hereinafter, ``July 2003 TCPA Order'').
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JULY 2003 FEDERAL COMMUNICATIONS COMMISSION TCPA ORDER: REVISED JUNK
FAX RULES
On July 3, 2003, the FCC issued its report and order
establishing the Do-Not-Call registry and updating the
provisions of the TCPA, including the junk fax provisions.
After reviewing the record regarding the use and enforcement of
junk faxes as well as the legislative history of the TCPA, the
Commission reversed its prior conclusion that the presence of
an EBR between a fax sender and recipient establishes the
requisite consent necessary to permit businesses to send
commercial faxes to their customers, effectively eliminating
the EBR exception to the general prohibition on unsolicited fax
advertisements.\6\ Instead, the FCC concluded that a
recipient's express invitation or permission must be obtained
in writing, include the recipient's signature, contain a clear
indication that he or she consents to receiving such faxed
advertisements, and provide the fax number to which faxes are
permitted to be sent.\7\
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\6\ Id.
\7\ Id.
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Reviewing the record, the FCC found that a majority of
consumer advocates disagreed with the Commission's prior
interpretation that an EBR constituted prior express
permission, and they urged the Commission to eliminate the EBR
exemption. In describing the record they had examined since
2002, the FCC stated that consumers felt `` `besieged' by
unsolicited faxes'' and that ``advertisers continue to send
faxes despite [their] asking to be removed from senders' fax
lists.'' The FCC also said consumers indicated they bore the
burden of not only paying for the cost of paper and toner, but
also the opportunity costs of ``time spent reading and
disposing of faxes, the time the machine is printing an
advertisement and is not operational for other purposes, and
the intrusiveness of faxes transmitted at inconvenient times,
including in the middle of the night.'' \8\
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\8\ Id. at para. 186.
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Conversely, the FCC found that the majority of industry
commenters on the issue not only supported the Commission's
prior interpretation permitting reliance on an EBR, but also
urged the Commission to amend its rules implementing the TCPA
to expressly provide for the EBR exemption. Industry comments
maintained that ``faxing is a cost-effective way to reach
customers'' particularly for small businesses for whom faxing
is a cheaper way to advertise.'' They also warned that
eliminating an EBR would ``interfere with ongoing business
relationships, raise business costs, and limit the flow of
valuable information to consumers.\9\
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\9\ Id.
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In addition to weighing consumer and industry comments, the
FCC's order analyzed the legislative history of the TCPA. The
Commission stated that Congress's primary purpose in passing
the Act was to protect the public from bearing the costs of
unwanted advertising, and the FCC maintained that ``certain
practices were treated differently because they impose costs on
consumers.'' \10\ The FCC cited other examples where the TCPA
prohibits advertising calls without prior express consent, such
as calls to wireless phones and other numbers where the called
party is charged, viewing that cost-shifting onto consumers as
identical in nature with respect to fax advertising where
consumers must pay for paper and toner. It also pointed out
that, unlike telemarketing, Congress provided no mechanism for
opting out of unwanted faxes, arguing that to create such a
system would ``require the recipient to possibly bear the cost
of the initial facsimile and inappropriately place the burden
on the recipient to contact the sender and request inclusion on
a `do-not-fax' list.'' \11\ For these reasons, the FCC
concluded that Congress had made the determination that
entities desiring to fax unsolicited advertisements must obtain
express permission from the recipient before they do so.
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\10\ Id. at para. 190.
\11\ Id.
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With respect to the other new requirements imposed by the FCC
for obtaining prior permission (e.g., written consent,
signature, etc.), the Commission justified them on the basis
that they believed ``the interest in protecting those who would
otherwise be forced to bear the burdens of unwanted faxes
outweighs the interests of companies that wish to advertise via
fax.'' \12\
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\12\ Id. at para. 191.
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AUGUST 2003 FEDERAL COMMUNICATIONS COMMISSION ORDER ON RECONSIDERATION:
STAY OF EFFECTIVE DATE FOR REVISED JUNK FAX RULES
Following the FCC's release of the amended TCPA rules,
numerous petitions for reconsideration were filed with the
Commission requesting that the FCC maintain its earlier
interpretation of the junk fax rules. Those businesses,
associations, and other organizations that had relied on the
prior interpretation for over a decade argued that to now
require prior, written permission for every fax sent out to an
existing customer or client was an overly burdensome regulation
that would be expensive to implement and was ultimately
unnecessary to protect consumers. Many companies also argued
that it would be impossible to change their practices overnight
and obtain the necessary consents by August 25th (30 days after
the appearance of rules in the Federal Register) in order to
comply with the rule's effective date, leaving them with only
the option to immediately litigate.
Finally, many industry petitioners challenged the FCC's
fundamental premise that the new rules were better for
consumers, contending instead that the revised interpretation
would have significant, unintended consequences that harmed
consumers. For example, restaurants pointed out that they would
not be able to fax a menu to a customer who called and
requested one unless the caller provided them with a written
consent (presumably by fax) or had one on file. Additionally,
realtors explained that, in their business, potential home
buyers often call and request faxes when passing by homes for
sale. They argued that the FCC's new requirement for a written
signature would effectively prevent realtors from faxing
potential new home buyers the listing information they
requested when they made such calls, adding unnecessary hurdles
and delays even when consumers clearly wanted to receive the
faxes as quickly as possible.
In light of these additional claims, on August 18, 2003, the
Commission stayed until January 1, 2005, the effective date of
both the written consent requirements as well as its July 2003
determination that an EBR would no longer be sufficient to show
that an individual or business has given express permission to
receive unsolicited fax advertisements. At the time, the FCC
justified its adoption of the stay because ``the public
interest would best be served by allowing senders of such
advertisements additional time to obtain such express
permission before the new rules become effective.'' The order
also noted that this extension would give the FCC itself more
time to fully consider any more petitions for reconsideration
on these or related issues, and that the FCC reserved the right
to further extend the effective date if necessary.\13\
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\13\ See Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, CG Docket No. 02-278, Order on Reconsideration,
FCC 03-208 (rel. Aug. 18, 2003) (hereinafter, ``August 2003 Order on
Reconsideration'').
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OCTOBER 2003 FEDERAL COMMUNICATIONS COMMISSION ORDER: STAY OF ``18/3''
TIME LIMITS ON EXISTING BUSINESS RELATIONSHIP EXCEPTION FOR JUNK FAXES
In the July 2003 TCPA Order, the FCC had also modified its
definition of an EBR in the context of telephone solicitations
to limit the duration that a telemarketer could rely on the
exception to a maximum of 18 months following a purchase or
transaction, or a maximum of three months following an inquiry
or application (commonly referred to as the ``18/3'' time
limits). Prior to that ruling, no limitation had been placed on
the duration of the EBR as it applied to either telephone or
fax solicitations, but the FCC concluded that establishing time
limits was ``necessary to minimize confusion and frustration
for consumers who receive calls from companies they have not
contacted or patronized for many years.'' Because there was
``little consensus'' among industry players who had offered
various lengths of time, the FCC sought a duration that
``strikes an appropriate balance between industry practices and
consumer privacy interests,'' settling on the 18/3 time frame.
Acknowledging that these time limits created burdens on
industry (especially small businesses) to monitor the length of
their customer relationships, the FCC argued that endorsing a
rule consistent with the FTC's own 18/3 time limit would
benefit businesses by creating a ``uniform standard with which
businesses must comply'' regardless of which agency's
jurisdiction the businesses fell under.\14\ This also helped
fulfill the FCC's charge from Congress to maximize consistency
between the agencies' telemarketing rules.
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\14\ See July 2003 TCPA Order at para. 34.
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Recognizing that the FCC's August 2003 Order on
Reconsideration had reinstated an EBR for junk faxes, but
potentially limited its duration to the 18/3 rule for
telemarketing, the U.S. Chamber of Commerce and others filed a
petition for reconsideration one week later on August 25, 2003,
requesting, among other things, that the FCC reconsider the new
18/3 rule.\15\ In response, the FCC issued an order on October
3, 2003, that stayed until January 1, 2005, the 18/3
limitations only with respect to their application to
unsolicited fax advertisements. Because their modification of
the EBR duration in the July 2003 TCPA Order was promulgated in
the context of telephone solicitations, the FCC held that there
was good cause to stay application of those time limitations to
the EBR in the context of junk faxes until they had time to
consider the application of the 18/3 time limits in the context
of junk faxes.\16\ The FCC concluded, however, that nothing in
this new order would affect its August 2003 decision to
recognize an EBR exception to the general prohibition against
unsolicited faxes until January 1, 2005.
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\15\ See, e.g., Chamber of Commerce of the United States, Petition
for Reconsideration of Facsimile Advertisements Rules, filed August 25,
2003; National Association of Chain Drug Stores, Petition for
Clarification and Revision, filed August 25, 2003.
\16\ See August 2003 Order on Reconsideration.
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EFFECTS OF REVISED RULES AND NEED FOR LEGISLATION
In practice, the revised junk fax rules, as ordered by the
FCC would have significant consequences. The cost and effort of
compliance could place significant burdens on some businesses,
particularly those small businesses that rely heavily on the
efficiency and effectiveness of fax machines. In particular,
organizations such as trade associations and other non-profits,
that have hundreds of thousands of members, would be saddled
with a huge burden to collect signatures from each member just
to send an unsolicited fax advertisement.
For instance, the National Association of Wholesaler-
Distributors claimed that its member companies expected to pay
an average of $22,500 to obtain consent forms and an average of
$20,000 for annual compliance. The National Association of
Realtors estimated that it would have to collect over 67
million permissions to sustain the roughly 6 million home sales
from last year. Other economic impacts included the costs of
training, making multiple contracts to obtain signatures
providing consent, and obtaining permission for each fax
machine when the recipients change location.
Finally, over the past 10 years, following enactment of the
TCPA and issuance of previous FCC orders implementing and
interpreting the rules on junk faxes, many legitimate
businesses and associations have appropriately relied on the
FCC's interpretation and have sent unsolicited faxes to
recipients with whom they have an EBR. During this time, the
FCC has acknowledged that businesses faxing under EBRs were in
compliance with the FCC's existing junk fax rules. If the
revised rules go into effect, the previously legitimate
practices will be immediately unlawful, and unsuspecting or
uninformed businesses may be subject to unforeseen and costly
litigation unrelated to legitimate consumer protection aims.
The revised rules are currently set to go into effect in
January 2005 following the expiration of the FCC's currently
self-imposed stay. Because the Commission may choose not to
reverse its new rule removing the EBR exception from the
general ban on sending unsolicited facsimile advertisements, S.
2603, the ``Junk Fax Prevention Act of 2004'' specifically
creates a statutory exception from the general prohibition on
sending unsolicited advertisements if the fax is sent based on
an EBR and certain conditions are met. This legislation is
designed to permit legitimate businesses to do business with
their established customers and other persons with whom they
have an established relationship without the burden of
collecting prior written permission to send these recipients
commercial faxes. Nonetheless, in reinstating the EBR
exception, the Committee determined it was necessary to provide
recipients with the ability to stop future unwanted faxes sent
pursuant to such relationships. The Committee therefore also
added the requirement that every unsolicited facsimile
advertisement contain an opt-out notice that gives the
recipient the ability to stop future unwanted fax solicitations
and that senders of such faxes provide recipients with a cost-
free mechanism to stop future unsolicited faxes.
Summary of Provisions
S. 2603, the ``Junk Fax Prevention Act of 2004,''
reestablishes an ``established business relationship''
exception to allow entities to send commercial faxes to their
customers and members without first receiving written
permission, and establishes new opt-out safeguards to provide
additional protections for fax recipients.
Legislative History
Senator Smith, the chairman of the Competition, Foreign
Commerce, and Infrastructure Subcommittee, introduced S. 2603
on June 24, 2004, with Senators Hollings, Allen, and Sununu as
original cosponsors. The bill is also cosponsored by Senators
Breaux, Bunning, Burns, Carper, Craig, Dorgan, Lautenberg,
Lott, Nelson of Florida, Snowe, and Stevens.
On July 22, 2004, the Committee held an executive session
chaired by Senator McCain at which S. 2603 was considered. The
bill was approved unanimously by voice vote and was ordered
reported without amendment.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
S. 2603--Junk Fax Prevention Act of 2004
S. 2603 would amend current law and regulations relating to
unsolicited advertisements sent via telephone facsimile
machine. The bill would direct the Federal Communications
Commission (FCC) to issue regulations to control such
advertisements and would require the FCC and the Government
Accountability Office to issue reports to the Congress on the
effectiveness of those regulations. The FCC currently enforces
laws relating to unsolicited advertisements, including
assessing and collecting civil penalties for violations of such
laws. (Civil penalties are recorded in the federal budget as
revenues.) Based on information from the FCC, CBO estimates
that implementing S. 2603 would not have a significant effect
on revenues or spending subject to appropriation. Enacting the
bill would not affect direct spending.
S. 2603 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments.
S. 2603 would impose private-sector mandates, as defined in
the UMRA, on senders of unsolicited facsimile advertisements.
The bill would require senders to include an opt-out notice
that is clear, conspicuous, and on the first page. Such a
notice would allow recipients to contact the sender to prevent
them from sending unsolicited advertisements in the future.
Additionally, the opt-out notice must include ``a domestic
contact telephone and facsimile machine number for the
recipient to transmit such a request to the sender; and a cost-
free mechanism for a recipient to transmit a request.'' The
cost-free mechanism might include either a toll-free or a local
telephone number.
Regulations promulgated by the FCC in July 2003, which are
slated to take effect in January 2005, would require written
permission from recipients prior to senders' transmission of
any unsolicited fax advertisements. If this bill were enacted,
it would eliminate the requirement to obtain written permission
from customers but replace this requirement with the opt-out
mechanism. Based on information from industry sources, CBO
expects that the aggregate direct cost of mandates in the bill
would be fully offset by savings from the bill and thus would
fall below the annual threshold established by UMRA for
private-sector mandates ($120 million in 2004, adjusted
annually for inflation).
On July 7, 2004, CBO transmitted a cost-estimate for H.R.
4600, the Junk Fax Prevention Act of 2004, as ordered reported
by the House Committee on Energy and Commerce on June 24, 2004.
The two pieces of legislation are similar, and the estimated
costs are the same.
The CBO staff contacts for this estimate are Melissa E.
Zimmerman (for federal costs), Sarah Puro (for the state and
local impact), and Karen Raupp (for the private-sector impact).
The estimate was approved by Robert A. Sunshine, Assistant
Director for Budget Analysis.
Regulatory Impact Statement
NUMBER OF PERSONS COVERED
S. 2603 would provide all individuals with fax machines
certain protections from unsolicited senders of unsolicited
faxes, and an opportunity to opt out of receiving future
unsolicited faxes from them. Additionally, the legislation
would require all persons who send commercial faxes to meet
certain requirements, including proper identification, and to
provide phone numbers or another mechanism for recipients so
they may opt out of future commercial faxes sent by that
sender. Therefore, S. 2603 would cover all consumers who
receive faxes, and all senders of commercial faxes.
ECONOMIC IMPACT
The legislation would result in new or incremental costs for
senders of commercial faxes to comply with the legislation's
requirements, to the extent that those senders have not already
made provisions to ensure proper identification of the sender,
and provide mechanisms that allow recipients to choose whether
to receive future commercial faxes.
PRIVACY
S. 2603 would increase the personal privacy of all users of
fax machines by providing them with the ability to decline to
receive future unsolicited commercial faxes from the same
sender. S. 2603 also would require senders of unsolicited
commercial faxes to identify themselves to the recipients with
truthful facsimile and telephone numbers where a recipient can
contact the sender, thereby better informing the recipient of
the identity of the sender.
PAPERWORK
S. 2603 would require the Comptroller General to conduct a
study on junk fax enforcement and make recommendations to
Congress on whether additional enforcement measures are
necessary to protect consumers. S. 2603 would also require the
FCC to submit an annual report to Congress on enforcement of
the junk fax provisions of this legislation over the previous
year. The legislation is expected to generate similar amounts
of administrative paperwork as other legislation requiring
agency enforcement, recommendations for enhancing enforcement,
and reports to Congress.
Section-by-Section Analysis
Section 1. Short title
Section 1 establishes the short title as the ``Junk Fax
Prevention Act of 2004.''
Section 2. Prohibition on fax transmissions containing unsolicited
advertisements.
Section 2(a) amends section 227(b)(1)(C) of the
Communications Act of 1934 by creating an exception to the
general prohibition against sending unsolicited commercial
advertisements to fax machines. This provision would permit the
sending of unsolicited commercial advertisements if the fax is
sent based on an ``established business relationship'' and if
the fax contains an opt-out notice and a cost-free mechanism
for the recipient to respond to the notice. In the event a
recipient opts out of receiving future unsolicited
advertisements, it is unlawful for a sender to fax any
additional unsolicited advertisements to such recipients.
Section 2(b) defines the term ``established business
relationship'' by incorporating the definition of ``established
business relationship'' in 47 C.F.R. 64.1200 as those
regulations were in effect as of January 1, 2003, except that
the definition now applies to both residential and commercial
entities. Additionally, section 2(b) allows the Commission to
limit the duration of the EBR pursuant to section 2(f).
Section 2(c) adds a new subparagraph (D) to section 227(b)(2)
of the Communications Act of 1934 by setting forth the
necessary elements of an opt-out notice. The opt-out notice
must be clear and conspicuous and on the first page of the
unsolicited advertisement. The Committee used the phrase
``first page of the unsolicited advertisement'' as opposed to
the ``first page of the facsimile'' to ensure that senders of
unsolicited fax advertisements inadvertently would not be
liable if such faxes were sent and the clear and conspicuous
notice was not on the first page received by the recipient
because pages were faxed or received in the wrong order. The
Committee believes an opt-out notice should comply with this
section if it clearly and conspicuously appears on the first
page of a fax, such as a fax cover page, or on the first page
of the faxed unsolicited advertisement if no fax cover page has
been provided.
The opt-out notice must inform the recipient of his or her
ability to opt-out of future unsolicited advertisements to any
fax machine or machines, and that request must be complied with
in the shortest reasonable time. The notice must include a
domestic telephone and facsimile number that will receive an
opt-out request, and a cost-free mechanism for the recipient to
send such a request to the sender. This provision should not be
interpreted as a mandate for such businesses to establish any
particular cost-free mechanism to receive opt-out requests, but
should allow businesses to exercise some flexibility and
creativity in providing cost-free options that all fax
recipients could use to submit opt-out requests. In order to
minimize the possible financial consequences of this provision,
section 2(c) gives the Commission the authority to, by rule,
exempt certain classes of small business senders from the
requirement to provide the additional cost-free mechanism if
the Commission determines that the costs to those businesses is
unduly burdensome given the revenues generated by that class of
small business.
Section 2(c) also requires that the telephone and facsimile
machine numbers and the cost-free mechanism provided to a
recipient must permit an individual or business to make an opt-
out request during regular business hours. Finally, the opt-out
notice must comply with the current provisions of section
227(d), which require that any fax being sent contain in the
margins at the top or bottom of each page the date and time it
is sent, the identification of the sender of the message, and
the telephone number of the sending machine.
Section 2(d) adds a new subparagraph (E) to section 227(b)(1)
of the Communications Act of 1934 by setting forth what a
recipient must do to opt-out of future unsolicited
advertisements. The Commission, by rule, shall provide that an
opt-out request is valid if it (1) identifies the telephone
number or numbers of the fax machine or machines subject to the
request; (2) is made to the telephone or fax number of the
sender that is provided under subparagraph (D)(iv), or by any
other method as determined by the Commission; and (3) is made
by a person who has not subsequently provided express
invitation or permission to receive unsolicited advertisements.
Although the ``established business relationship'' has been
defined on the basis of a commercial transaction or inquiry,
with or without the exchange of consideration, the Commission
should take precautions to ensure that if a recipient opts out
of receiving unsolicited facsimile advertisements, that any
subsequent purchases or inquiries do not create or renew the
``established business relationship'' exemption without some
affirmative opt-in by the recipient.
Section 2(e) adds a new subparagraph (F) to 227(b)(1) of the
Communications Act of 1934 by giving the Commission the
authority to establish an exemption from the opt-out notice
requirements for tax-exempt, nonprofit trade or professional
associations if those faxes are in furtherance of the group's
tax-exempt purpose. Section 2(e) is designed to apply to
certain entities classified under the Internal Revenue
Service's definition of section 501(c)(6) organizations, which
include such groups as business leagues, chambers of commerce,
real estate boards, and boards of trade which are not organized
for profit and no part of the net earnings inures to the
benefit of any private shareholder or individual. This section
is not designed to apply to charities. This provision is
discretionary, and the Commission may create a rule only if the
Commission finds that such opt-out notices are not necessary to
protect the ability of association members to stop future
unsolicited facsimile advertisements sent by the association.
The Committee provided the Commission with this authority
because members of tax-exempt, nonprofit trade and professional
associations have chosen to affirmatively join a particular
organization, which typically requires the payment of annual
dues. Arguably, these members may have an expectation of
communications, including faxes, as part of their membership
and have a greater degree of control in effectuating their
preferences with respect to how their association communicates
with them.
Although under section 2(e), the Commission may decide to
exempt tax-exempt, nonprofit trade and professional
associations from the opt-out notice requirements, nothing in
S. 2603 is designed to exempt these organizations from the
requirement to honor a request to opt-out of future unsolicited
facsimile advertisements from their members.
Section 2(f) adds a new subparagraph (G)(i) to section
227(b)(2) of the Communications Act of 1934 by giving the
Commission the authority to establish a time limit on the
``established business relationship'' exemption. Under the TCPA
junk fax rules as interpreted prior to January 1, 2003, there
was no specific time limit on the length of the EBR.
The Committee is mindful that the financial and
administrative costs incurred by senders to implement a
specific time limit on the EBR could be burdensome. On the
other hand, the costs of not implementing a specific time limit
could also harm fax recipients. Accordingly, the Committee has
given the Commission the authority to create such a specific
time limit. Three years after enactment of S. 2603, the
Commission may by rule create a time limit for the EBR
exemption for junk faxes that may be no less than 5 years and
no more than 7 years. The Commission may only create a rule if
it (1) determines that the existence of the EBR exception has
resulted in a significant number of complaints to the
Commission regarding the sending of unsolicited advertisements
to telephone facsimile machines; (2) upon review of such
complaints, the Commission has reason to believe that a
significant number of such complaints involve unsolicited
advertisements that were sent based onan EBR that was longer
than the Commission believes is consistent with the reasonable
expectations of consumers; (3) determines that the costs to senders of
demonstrating the existence of an EBR within a specified period of time
do not outweigh the benefits to recipients of establishing a limitation
on the EBR; and (4) determines that for small businesses, the costs are
not unduly burdensome given the revenues generated by small businesses
and taking into consideration the number of specific complaints to the
Commission involving faxes sent by small businesses.
Section 2(g) amends section 227(a)(4) of the Communications
Act of 1934 by clarifying that ``express invitation or
permission'' may be secured in writing or otherwise, as
determined by the Commission.
Section 2(h) requires the Commission to issue its regulations
no later than 270 days after enactment of this Act.
Section 3. FCC annual report regarding junk fax enforcement
Section 3 adds a new section (g) to section 227 of the
Communications Act of 1934 that requires the Commission to
report annually to the Congress on the enforcement of the junk
fax provisions of the TCPA. Specifically, the report must
include the following: (1) The number of complaints received by
the Commission annually alleging a violation of the general ban
on sending unsolicited advertisements; (2) the number of such
complaints received during the year on which the Commission has
taken action; (3) the number of such complaints that remain
pending at the end of the year; (4) the number of citations
issued for sending unsolicited advertisements; (5) the number
of notices of apparent liability issued for sending unsolicited
advertisements; (6) for each such notice (a) the amount of the
proposed forfeiture; (b) the person to whom the notice was
issued; (c) the length of time between the date on which the
complaint was filed and the date the notice was issued; (d) the
status of the proceeding; (7) the number of final orders
imposing forfeiture penalties for sending unsolicited
advertisements; (8) for each such forfeiture order (a) the
amount of the penalty; (b) the person to whom the order was
issued; (c) whether the penalty was paid; and (d) the amount
paid; and (9) for each case that was referred for recovery (a)
the number of days from the date the Commission issues such
order to the date of referral; (b) whether an action has been
commenced to recover the penalty; and (c) whether the recovery
action resulted in any amount collected.
Section 4. GAO study on junk fax enforcement
Section 4(a) requires the Comptroller General of the United
States (GAO) to conduct a study regarding complaints received
by the Commission dealing with unsolicited advertisements that
shall determine the following: (1) The mechanisms established
by the Commission to receive, investigate and respond to such
complaints; (2) the level of enforcement success by the
Commission; (3) whether complainants are adequately informed by
the Commission regarding their complaints; (4) whether
additional enforcement measures are necessary to protect
consumers, including recommendations for additional enforcement
measures.
Section 4(b) requires the Comptroller General to specifically
examine (1) the adequacy of existing statutory enforcement
actions available to the Commission; (2) the adequacy of
existing statutory enforcement actions and remedies available
to consumers; (3) the impact of existing statutory enforcement
remedies on senders of facsimiles; (4) whether increasing the
amount of financial penalties is warranted to achieve greater
deterrent effect; and (5) whether establishing penalties and
enforcement actions for repeat violators similar to those
established in section 1037 of title 18, United States Code,
would have a greater deterrent effect.
Section 4(c) states that the Comptroller General shall submit
a report to Congress no later than 270 days after enactment of
this Act.
ADDITIONAL VIEWS OF SENATOR BOXER
I strongly support preventing junk faxes, as the title of
this bill purports to do.
However, what the bill actually does falls far short and does
not adequately protect consumers.
S. 2603 would allow any business with an ``established
business relationship'' with a customer to send unrequested
faxes to that customer's machine for up to seven years. The
bill sets a customer inquiry as the very low threshold
necessary for businesses to claim an established business
relationship with a customer.
In a seven year time frame individuals interact with dozens,
if not hundreds, of businesses. To say that all those
businesses should then be allowed to indiscriminately inundate
individuals with faxes does not put a stop to a lot of junk
faxes.
Now that computers have made it dramatically easier to send
faxes, many businesses have deemed it their right to drown
consumers in junk faxes at their homes and places of business.
One expert estimates that 2 billion faxes are sent every year
and that the loose language in this bill will allow for twice
that number in the near future.
And, as the San Jose Mercury News editorial page stated on
August 27, 2004, ``Junk faxes rival only spam as the most
egregious form of intrusive marketing. They unfairly force
recipients to pay, in reams of paper and toner cartridges, for
ads they did not ask for.''
The Commerce Committee approved this bill without ever
holding a hearing on it and without considering a single
amendment in Committee. As a result, consumers never had a say,
and Senators were never given an opportunity to improve the
legislation through the amendment process.
A new Federal Communications Commission rule is scheduled to
go into effect in January 2005. Some have argued that it places
an onerous burden on business by requiring prior written
permission before sending any fax. But, this bill goes much too
far in the opposite direction, and we should not let this bill
become law without additional provisions to protect consumers.
I believe that we should amend this bill to allow consumers
to place their fax numbers on a Do-Not-Fax list that trumps the
``established business relationship'' rule in the legislation.
Others have suggested that we limit the right of sending faxes
to consumers with which a business has an established business
relationship to those consumers from whom the business received
the fax number directly. And, others have said that at a very
minimum, we should place a firm 18-month limit on the duration
of an established business relationship after a sale or 3
months after an inquiry.
All three ideas would be improvements upon the bill as
reported. To date, there has been no opportunity to consider
them. Before the bill passes the Senate, we must have that
opportunity.
Policymakers must protect consumers from junk faxes. It is
disingenuous to name this bill the Junk Fax Prevention Act when
in fact we are doing exactly the opposite. We must find a
middle ground solution between the FCC rule and this
legislation.
Barbara Boxer.
ADDITIONAL VIEWS OF SENATOR McCAIN, SENATOR HOLLINGS, SENATOR SMITH,
AND SENATOR SNOWE
During our consideration of S. 2603, the Junk Fax Protection
Act of 2004, we had hoped to have an amendment adopted by
unanimous consent that had been filed by Senators Smith,
Hollings, and Snowe. The amendment would have struck language
currently in the bill that restricts the FCC's ability to
establish a durational limit on an ``existing business
relationship'' to a period ``not shorter than 5 years and not
longer than 7 years.'' In our view, this language unwisely
limits the discretion of the FCC in this area. The amendment
would have also deleted certain reporting requirements tasked
to the FCC under the original bill. Due to the invocation of a
Senate rule which prevented the consideration of amendments to
this bill, this amendment could not be considered by the
committee. It is our expectation and hope, however, that these
changes will be agreed to and accepted as this legislation
receives further consideration before the full Senate.
John McCain.
Ernest F. Hollings.
Gordon Smith.
Olympia J. Snowe.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill,
as reported, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new material is printed
in italic, existing law in which no change is proposed is shown
in roman):
SECTION 227 OF THE COMMUNICATIONS ACT OF 1934
SEC. 227. RESTRICTIONS ON THE USE OF TELEPHONE EQUIPMENT.
(a) Definitions.--As used in this section--
(1) * * *
(2) The term ``established business relationship'',
for purposes only of subsection (b)(1)(C)(i), shall
have the meaning given the term in section 64.1200 of
the Commission's regulations, as in effect on January
1, 2003, except that--
(A) such term shall include a relationship
between a person or entity and a business
subscriber subject to the same terms applicable
under such section to a relationship between a
person or entity and a residential subscriber;
and
(B) an established business relationship
shall be subject to any time limitation
established pursuant to paragraph (2)(G).
[(2)] (3) The term ``telephone facsimile machine''
means equipment which has the capacity (A) to
transcribe text or images, or both, from paper into an
electronic signal and to transmit that signal over a
regular telephone line, or (B) to transcribe text or
images (or both) from an electronic signal received
over a regular telephone line onto paper.
[(3)] (4) The term ``telephone solicitation'' means
the initiation of a telephone call or message for the
purpose of encouraging the purchase or rental of, or
investment in, property, goods, or services, which is
transmitted to any person, but such term does not
include a call or message (A) to any person with that
person's prior express invitation or permission, (B) to
any person with whom the caller has an established
business relationship, or (C) by a tax exempt nonprofit
organization.
[(4)] (5) The term ``unsolicited advertisement''
means any material advertising the commercial
availability or quality of any property, goods, or
services which is transmitted to any person without
that person's prior express invitation or permission,
in writing or otherwise.
(b) Restrictions on the Use of Automated Telephone
Equipment.--
(1) Prohibitions.--It shall be unlawful for any
person within the United States, or any person outside
the United States if the recipient is within the United
States--
(A) * * *
* * * * * * *
[(C) to use any telephone facsimile machine,
computer, or other device to send an
unsolicited advertisement to a telephone
facsimile machine; or]
(C) to use any telephone facsimile machine,
computer, or other device to send, to a
telephone facsimile machine, an unsolicited
advertisement, unless--
(i) the unsolicited advertisement is
from a sender with an established
business relationship with the
recipient, and
(ii) the unsolicited advertisement
contains a notice meeting the
requirements under paragraph (2)(D),
except that the exception under clauses (i) and
(ii) shall not apply with respect to an
unsolicited advertisement sent to a telephone
facsimile machine by a sender to whom a request
has been made not to send future unsolicited
advertisements to such telephone facsimile
machine that complies with the requirements
under paragraph (2)(E); or
* * * * * * *
(2) Regulations; exemptions and other provisions.--
The Commission shall prescribe regulations to implement
the requirements of this subsection. In implementing
the requirements of this subsection, the Commission--
(A) * * *
(B) may, by rule or order, exempt from the
requirements of paragraph (1)(B) of this
subsection, subject to such conditions as the
Commission may prescribe--
(i) * * *
(ii) such classes or categories of
calls made for commercial purposes as
the Commission determines--
(I) * * *
(II) do not include the
transmission of any unsolicited
advertisement; [and]
(C) may, by rule or order, exempt from the
requirements of paragraph (1)(A)(iii) of this
subsection calls to a telephone number assigned
to a cellular telephone service that are not
charged to the called party, subject to such
conditions as the Commission may prescribe as
necessary in the interest of the privacy rights
this section is intended to protect[.];
(D) shall provide that a notice contained in
an unsolicited advertisement complies with the
requirements under this subparagraph only if--
(i) the notice is clear and
conspicuous and on the first page of
the unsolicited advertisement;
(ii) the notice states that the
recipient may make a request to the
sender of the unsolicited advertisement
not to send any future unsolicited
advertisements to a telephone facsimile
machine or machines and that failure to
comply, within the shortest reasonable
time, as determined by the Commission,
with such a request meeting the
requirements under subparagraph (E) is
unlawful;
(iii) the notice sets forth the
requirements for a request under
subparagraph (E);
(iv) the notice includes--
(I) a domestic contact
telephone and facsimile machine
number for the recipient to
transmit such a request to the
sender; and
(II) a cost-free mechanism
for a recipient to transmit a
request pursuant to such notice
to the sender of the
unsolicited advertisement; the
Commission shall by rule
require the sender to provide
such a mechanism and may, in
the discretion of the
Commission and subject to such
conditions as the Commission
may prescribe, exempt certain
classes of small business
senders, but only if the
Commission determines that the
costs to such class are unduly
burdensome given the revenues
generated by such small
businesses;
(v) the telephone and facsimile
machine numbers and the cost-free
mechanism set forth pursuant to clause
(iv) permit an individual or business
to make such a request during regular
business hours; and
(vi) the notice complies with the
requirements of subsection (d);
(E) shall provide, by rule, that a request
not to send future unsolicited advertisements
to a telephone facsimile machine complies with
the requirements under this subparagraph only
if--
(i) the request identifies the
telephone number or numbers of the
telephone facsimile machine or machines
to which the request relates;
(ii) the request is made to the
telephone or facsimile number of the
sender of such an unsolicited
advertisement provided pursuant to
subparagraph (D)(iv) or by any other
method of communication as determined
by the Commission; and
(iii) the person making the request
has not, subsequent to such request,
provided express invitation or
permission to the sender, in writing or
otherwise, to send such advertisements
to such person at such telephone
facsimile machine;
(F) may, in the discretion of the Commission
and subject to such conditions as the
Commission may prescribe, allow professional or
trade associations that are tax-exempt
nonprofit organizations to send unsolicited
advertisements to their members in furtherance
of the association's tax-exempt purpose that do
not contain the notice required by paragraph
(1)(C)(ii), except that the Commission may take
action under this subparagraph only by
regulation issued after public notice and
opportunity for public comment and only if the
Commission determines that such notice required
by paragraph (1)(C)(ii) is not necessary to
protect the ability of the members of such
associations to stop such associations from
sending any future unsolicited advertisements;
and
(G)(i) may, consistent with clause (ii),
limit the duration of the existence of an
established business relationship to a period
not shorter than 5 years and not longer than 7
years after the last occurrence of an action
sufficient to establish such a relationship,
but only if--
(I) the Commission determines
that the existence of the
exception under paragraph
(1)(C) relating to an
established business
relationship has resulted in a
significant number of
complaints to the Commission
regarding the sending of
unsolicited advertisements to
telephone facsimile machines;
(II) upon review of such
complaints referred to in
subclause (I), the Commission
has reason to believe that a
significant number of such
complaints involve unsolicited
advertisements that were sent
on the basis of an established
business relationship that was
longer in duration than the
Commission believes is
consistent with the reasonable
expectations of consumers;
(III) the Commission
determines that the costs to
senders of demonstrating the
existence of an established
business relationship within a
specified period of time do not
outweigh the benefits to
recipients of establishing a
limitation on such established
business relationship; and
(IV) the Commission
determines that, with respect
to small businesses, the costs
are not unduly burdensome,
given the revenues generated by
small businesses, and taking
into account the number of
specific complaints to the
Commission regarding the
sending of unsolicited
advertisements to telephone
facsimile machines by small
businesses; and
(ii) may not commence a proceeding to
determine whether to limit the duration of the
existence of an established business
relationship before the expiration of the 3-
year period that begins on the date of the
enactment of the Junk Fax Prevention Act of
2004.
* * * * * * *
(g) Junk Fax Enforcement Report.--The Commission shall submit
a report to the Congress for each year regarding the
enforcement of the provisions of this section relating to
sending of unsolicited advertisements to telephone facsimile
machines, which shall include the following information:
(1) The number of complaints received by the
Commission during such year alleging that a consumer
received an unsolicited advertisement via telephone
facsimile machine in violation of the Commission's
rules.
(2) The number of such complaints received during the
year on which the Commission has taken action.
(3) The number of such complaints that remain pending
at the end of the year.
(4) The number of citations issued by the Commission
pursuant to section 503 during the year to enforce any
law, regulation, or policy relating to sending of
unsolicited advertisements to telephone facsimile
machines.
(5) The number of notices of apparent liability
issued by the Commission pursuant to section 503 during
the year to enforce any law, regulation, or policy
relating to sending of unsolicited advertisements to
telephone facsimile machines.
(6) For each such notice--
(A) the amount of the proposed forfeiture
penalty involved;
(B) the person to whom the notice was issued;
(C) the length of time between the date on
which the complaint was filed and the date on
which the notice was issued; and
(D) the status of the proceeding.
(7) The number of final orders imposing forfeiture
penalties issued pursuant to section 503 during the
year to enforce any law, regulation, or policy relating
to sending of unsolicited advertisements to telephone
facsimile machines.
(8) For each such forfeiture order--
(A) the amount of the penalty imposed by the
order;
(B) the person to whom the order was issued;
(C) whether the forfeiture penalty has been
paid; and
(D) the amount paid.
(9) For each case in which a person has failed to pay
a forfeiture penalty imposed by such a final order,
whether the Commission referred such matter for
recovery of the penalty.
(10) For each case in which the Commission referred
such an order for recovery--
(A) the number of days from the date the
Commission issued such order to the date of
such referral;
(B) whether an action has been commenced to
recover the penalty, and if so, the number of
days from the date the Commission referred such
order for recovery to the date of such
commencement; and
(C) whether the recovery action resulted in
collection of any amount, and if so, the amount
collected.