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GT Alert

National Law Regulating Commercial E-Mail Became Effective January 1, 2004

January 2004
By Alan N. Sutin and David M. Greenberg, Greenberg Traurig, New York Office

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Over the past few years, unsolicited commercial e-mail (“UCE” or “spam”) has grown to be viewed by consumers as a major nuisance and by corporate information technology departments as a significant burden. Unsolicited commercial e-mail is currently estimated to account for more than half of all electronic mail traffic.

Alan Sutin
"In order to create a uniform national framework and hopefully provide a more meaningful legal regime for addressing UCE, Congress enacted the 'Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003.'"

In recent years, more than 35 states have enacted anti-spam legislation. While similar in theme, the various state statutes take different approaches and impose different requirements. The resulting patchwork of inconsistent state anti-spam laws has proven largely ineffective. In order to create a uniform national framework and hopefully provide a more meaningful legal regime for addressing UCE, Congress enacted the “Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003,” known also as the “CAN-SPAM Act.” The Act became effective on January 1, 2004.

The new law generally pre-empts existing state anti-spam statutes. It establishes stringent requirements for e-mail advertisements as well as criminal penalties. Critics of the new law maintain, however, that, notwithstanding the new standards, the law will not prohibit unwanted messages and indeed may allow certain e-mail advertisements that may have been prohibited under many of the stringent state statutes pre-empted by the Act.

Applies to E-Mails if Their Primary Purpose is “Advertisement” or “Promotion”

The CAN-SPAM Act applies to all “commercial electronic mail messages,” which include any e-mail message whose primary purpose is to advertise or promote a commercial product or service. The Act does not describe the quantity or quality of other content that may transform an advertising or promotion to a mere “secondary” purpose of a message, although the Federal Trade Commission (“FTC”) has been charged with defining the meaning of “primary” purpose.

The New National Law Generally Pre-empts State Statutes

Prior to the Act, states were left to devise their own standards for commercial e-mail. As reported in our October 2003 Alert, California’s Attempt to Can Spam May Cost Legitimate Advertisers Millions, California recently enacted legislation that would have become effective on January 1, 2004 and would have instituted an opt-in requirement on e-mail advertisers, i.e., requiring that they received prior consent from consumers before sending commercial e-mail in California.

The new national anti-spam law now pre-empts the provisions of most state laws, including California’s strict “opt-in” requirement. However, not all aspects of state anti-spam legislation are pre-empted. The CAN-SPAM Act “supersedes any statute, regulation, or rule of a state or political subdivision of a state that expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such statute, regulation, or rule prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto.” Accordingly, e-mailers and advertisers should not assume that all state law provisions are pre-empted by the CAN-SPAM Act. State consumer protection laws will continue to apply, and the CAN-SPAM Act does not pre-empt computer fraud and abuse laws or claims based on trespass to chattels, contract or tort law, and other common-law theories.

Labeling Requirements and Prohibitions On Misleading Practices

The new law includes a number of requirements with which a sender of commercial e-mail must comply:

  • A commercial message must have a “clear and conspicuous identification that the message is an advertisement or solicitation” unless the recipient has provided “prior affirmative consent” to receive the message;
  • Commercial e-mail messages that include sexually oriented material must include a special subject heading in a form to be specified by the FTC; and
  • All commercial e-mail messages must include a valid postal address of the sender.

The CAN-SPAM Act also outlaws a number of practices that Congress believes are misleading and deceptive, including:

  • Using materially misleading “From” and “Subject” lines;
  • Falsely registering for e-mail accounts;
  • Concealing IP addresses;
  • Re-transmitting e-mails for the purpose of concealing their origin;
  • Falsifying header information; and
  • Using open relays to transmit commercial e-mail.

Recipients Must be Allowed to Opt Out of Future Mailings

Unlike some of the more stringent state statutes pre-empted by the new federal law, the Act does not require that recipients agree to receive mailings and/or have a preexisting or current business relationship with the sender. The new law does require that senders provide a clear opt-out mechanism that complies with the following:

  • Recipients must be able to opt-out of receiving future e-mail ads from the sender by sending a reply message or other “Internet-based communication;”
  • The opportunity to opt-out must be available to the recipient for at least 30 days after the original message was sent;
  • If a recipient opts-out of future commercial e-mail, the sender must cease such transmissions within 10 business days from the date of receipt of the opt-out request; and
  • The sale, lease or transfer of e-mail addresses of persons who have opted out of future mailings is generally prohibited.

Transactional and Relationship Messages

One of the common feature of state anti-spam laws was an exception under which businesses did not have to comply with all of the statutory requirements if they were contacting customers with whom they had a pre-existing business relationship. Congress did not include a similar broad exemption in the CAN-SPAM Act, and instead created a more narrow category of messages that are not subject to certain provisions of the Act. This category is called “transactional or relationship messages” and include any electronic mail message that has as its primary purpose to:

  • Facilitate, complete, or confirm a transaction that the parties have already agreed to (such as an e-mail sending a confirmation number for an e-commerce transaction);
  • Provide warranty, safety or recall information about a product used or purchased by the recipient;
  • Notify the recipient of changes in terms, features or account status in connection with an ongoing commercial relationship such as a subscription, account or loan;
  • Provide information to employees or enrollees in a benefit plan about the relationship; and
  • Deliver goods or services, including updates or upgrades, that the recipient is entitled to receive under a prior agreement.

Enforcement and Penalties

Unlike several of the state anti-spam laws, the new Act does not include a private right of action under which recipients of commercial e-mails can sue the senders for violations. Instead, the Act is designed to be enforced by a combination of FTC proceedings, criminal prosecutions, state attorney general actions and private suits brought by Internet service providers.

The Act contains a variety of penalties, ranging from civil fines, asset forfeiture, and imprisonment. Violators may be subject, for example, to statutory damages in the amount of $250 per e-mail up to $2,000 as well as imprisonment for up to five years for certain violations.

Sentences can be increased by “aggravating” factors, which include harvesting of e-mails, automated generation of e-mail addresses, fraud, or identify theft. In addition, where a violator’s acts are “knowing” and “willful” or involving aggravated conduct, the Act also permits the recovery up to three times the amount otherwise available in addition to reasonable costs and attorneys’ fees.

FTC Rulemaking

The Act confers substantial authority, as well as responsibility, on the FTC in enforcing and interpreting the Act. The Act expressly requires the FTC to consider, for example, a national “do not spam” list similar to the “do not call” registry that now exists for telemarketing. Significantly, while the FTC has been ordered to study the feasibility of a “do not spam” list, the Act does not require the FTC to actually implement such a program. The FTC is also charged with promulgating regulations and recommendations on the Act such as labeling requirements for sexually oriented material proposing a system for rewarding those who provide information about violations of the Act.

Not an Immediate Cure But a Uniform Statute With Which Business Must Comply

Whether the CAN-SPAM Act has a material impact on unethical businesses that engage in fraud and misleading practices through the use of e-mail remains to be seen. Many of such entities are located offshore and have taken measures to avoid prosecution. Moreover, since the Act provides no private right of action, enforcement is limited to federal and state agencies with limited resources.

Legitimate business that rely on e-mail to market and promote their business will need to consider the requirements of the new Act to ensure that they comply adequately. It will be important to develop standard policies and educate employees so that how to identify and handle commercial e-mails or “transactional or relationship” messages. Businesses must also develop administrative and technical measures to facilitate, where appropriate, an opt-out process and honor opt-out requests. Finally, businesses that particularly rely on e-mail marketing may want to lobby the FTC in an effort to help define what it means for an e-mail to have “advertisement” or “solicitation” as its “primary purpose.”


© 2004 Greenberg Traurig

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This GT ALERT is issued for informational purposes only and is not intended to be construed or used as general legal advice. Greenberg Traurig attorneys provide practical, result-oriented strategies and solutions tailored to meet our clients’ individual legal needs.