Intellectual Property and Technology Client Alerts

On May 12, 2008, three years to the day after its Notice of Proposed Rulemaking ("NPRM") on the same topics, the Federal Trade Commission ("FTC") issued its long-anticipated Final Rule approving four new provisions under the CAN-SPAM Act and clarifying prior rules promulgated under the Act.  The new provisions address the multiple sender rule and definitions of "person" and "valid physical postal address" under the Act, and also delineate the process by which senders must allow recipients to "opt-out" from receiving future e-mails from that sender.  Under the new provisions regarding multiple senders, the FTC has adopted a more flexible/practical approach, with an increased focus on which entity is "identified in the 'from' line as the sole sender of the message."

In addition to the new rules, the FTC also provided guidance on the definition of "transactional or relationship messages," forward-to-a-friend e-mail marketing campaigns, the statutory grace period for honoring opt-out requests, and other ancillary questions.  Among this guidance, the FTC decided to retain the current 10 business day statutory period for honoring opt-out requests, rather than shorten it to the three business days under consideration.  In addition, the FTC clarified that unless the sender is offering consideration for the sending of a forward-to-a-friend message, the CAN-SPAM requirements are not triggered.

Although the new rules will not take effect for at least 45 days from the date of this e-Alert, companies should begin to evaluate the impact they will have on current and future e-mail marketing practices.

Definitions

The FTC made the following definitional changes to the CAN-SPAM Act regulations:

• Modified the definition of "sender" as it relates to multi-marketers to make it easier for marketers to determine which single party is solely responsible for complying with opt-out requirements in cases where multiple parties include advertisements in a single e-mail message.  Under the new rules, when an e-mail contains messages from multiple marketers, a single "sender" may be designated for purposes of CAN-SPAM compliance if (1) that person meets the definition of a sender (i.e., such person initiates a commercial electronic mail message in which it advertises or promotes its own goods, services, or Internet Web site) (2) that sender's name appears in the "from" line of the message and (3) the sender complies with certain provisions of the Act applicable to initiators (such as the requirements for non-deceptive headers and subject lines and an opt-out mechanism).
  
  This marks a substantial change from the NPRM, in which the FTC proposed allowing the use of a single sender only in much narrower circumstances, where, in addition to being the only person identified in the from line, the single sender also had to control the content of the message and determine the universe of recipients, and no other person could satisfy any of the other criteria.  That guidance is no longer applicable.
  
  The final rule reflects a more practical approach than the proposed rule, addressing the realities of e-mail marketing campaigns and providing marketers with more flexibility with respect to structuring their campaigns.  Also, by placing the focus on the "from" line instead of other, hidden factors, the new approach is more consistent with consumer expectations.
  
  However, under the final rule, if the designated "sender" does not comply with the requirements applicable to initiators, all marketers in the message will be liable as senders.  Further, while the designated "sender" will be responsible for identifying the message as an advertisement or solicitation, processing opt-outs and including its physical or postal address, other marketers using the single e-mail message will still be considered "initiators" and thus responsible for complying with requirements applicable to initiators.
  
  
• Added a new definition of "person," defined as "an individual, group, unincorporated association, limited or general partnership, corporation, or business entity."
  
  
• Modified the definition of "valid physical postal address" to allow senders to use Post Office or private mailboxes, as long as the senders ensure that the mailboxes are "accurately" registered pursuant to U.S. Postal Service regulations.

"Transactional or Relationship Messages"

Although the FTC declined to create new categories of transactional or relationship messages, the FTC provided some guidance with respect to applying the definition of transactional and relationship messages to some particular types of messages about which commentators had requested guidance:

• E-mails sent to facilitate, complete, or confirm registration for a free Internet service are likely to be considered "transactional or relationship messages," as the term "commercial transaction" could apply in certain situations where there has been no exchange of consideration between the sender and the recipient.
  
  
• In situations where a recipient subscribes to a newsletter or other periodical to be delivered via e-mail, the FTC noted that if the periodical mainly comprises informational content or combines informational and commercial content, the message would fall in the "transactional or relationship" category.  However, the FTC maintained its position that if the content is entirely commercial (like a catalog), the message cannot be a transactional or relationship message.  Messages delivering unsolicited newsletters or periodicals to which the recipient has not subscribed would also likely not be "transactional or relationship" messages.
  
  
• E-mails containing opinion and research surveys may fall outside the scope of CAN-SPAM, but if any such message contains advertising or promotes a company, product, or service, it may be primarily commercial and thus subject to CAN-SPAM requirements.
  
  
• E-mails sent to complete a negotiation would likely be considered "transactional or relationship messages" if the negotiation was related to a "commercial transaction."  However, unsolicited e-mails attempting to get a party to enter into negotiations for goods or services or e-mails from one party attempting to get the other party to restart a terminated negotiation would not be considered "transactional or relationship messages."
  
  
• Messages containing only legally mandated notices will likely be considered "transactional or relationship messages;" however, determinations will be made on a case by case basis.
  
  
• Debt collection e-mails are likely to be considered "transactional or relationship messages" because they are not advertising a service or product.

"Forward-to-a-Friend" Messages

Reversing position from the prior NPRM, the FTC stated that even if a seller strongly urged recipients of a commercial e-mail message to forward the message to others, the seller would have no liability under CAN-SPAM for the forwarding unless the seller "initiated" forwarding of the message by offering consideration to someone in exchange for forwarding the message.  The amount of consideration is irrelevant - coupons, discounts, sweepstakes entries are all considered sufficient for "procurement" of the forwarded message.  Thus, in adopting a bright line requirement that considers the presence or absence of consideration, the final rule provides marketers with clear guidance regarding when forward-to-a-friend messages are subject to the CAN-SPAM requirements.

Also of note, the FTC rejected the notion that ordinary consumers who forward commercial messages of their own accord be regulated under CAN-SPAM.

"Opt-Out" Requirements

The Commission adopted Rule 316.5, which prohibits senders from imposing a fee, requiring recipients to provide any personal information other than an e-mail address, or requiring recipients to do anything other than send a reply e-mail or visit a single Web site to opt-out of receiving future e-mails from a sender.

Other Issues:

The FTC also declined to do the following:

• Reduce the statutory grace period for senders to honor opt-out requests from 10 business days to three business days.
  
  
• Create a "safe harbor" for companies whose products and services were advertised by affiliates or other parties.
  
  
• Exempt online groups (such as listservs) from compliance with CAN-SPAM.
  
  
• Create a safe harbor for non-profits, but noted that the FTC lacks jurisdiction to enforce CAN-SPAM against non-profit entities.

A copy of the FTC's press release and the Federal Register Notice can be found on the FTC's Web site at www.ftc.gov.  While the new rules provide some clarity for entities using e-mail to market their products and services, navigating the maze of CAN-SPAM regulations is still complicated.  If you would like more information on how these new rules affect your company, please feel free to contact your regular Sonnenschein attorney.

Click here to view a PDF copy of the e-Alert.

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