BILL ANALYSIS
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|Hearing Date:August 5, |Bill No:AB |
|2002 |2820 |
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SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
Senator Liz Figueroa, Chair
Bill No: AB 2820Author:Cardenas
As Amended: June 20, 2002 Fiscal: Yes
SUBJECT: Unsolicited facsimiles.
SUMMARY: Permits unsolicited advertising faxes to be sent
to individuals and businesses unless the individual or
business places their phone number on the Attorney
General's "Do Not Call" list.
Existing state law (regarding unsolicited faxes):
1)Regulates false and misleading advertising and business
practices and subjects violators to both civil and
criminal penalties.
2)Prohibits unsolicited fax advertisements unless the
person sending the fax meets specified requirements.
3)Specifies that no person or entity conducting business in
this state shall fax documents consisting of
unsolicited advertising material promoting specified
services unless that person or entity establishes a
toll-free telephone number. Recipients of unsolicited fax
material may call the toll-free telephone number to
advise the sender to discontinue the unsolicited faxes.
4)Specifies that all unsolicited fax documents shall
include a statement informing the recipient of an
established toll-free telephone number, or valid return
address that can be used to call or write to notify the
sender to discontinue the unsolicited documents. The
statement shall be located in the opening text of the
message and shall be displayed in the same size font as
the rest of the text in the message.
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5)Provides that upon notification by a recipient of his or
her request not to receive any further unsolicited faxed
documents, no person or entity conducting business in
this state shall fax any unsolicited documents to that
recipient.
Existing state law (regarding the "Do Not Call" Program):
1)Prohibits telephone solicitors from calling phone numbers
placed by a consumer on a "Do Not Call" list maintained
by the Attorney General.
2)Only permits home and cell phone numbers to be included
on the "Do Not Call" list. Business phone numbers are
not included.
3)Requires telephone solicitors to purchase the "Do Not
Call" list by paying a fee to the Attorney General.
4)Provides the fee shall be established on a sliding scale,
depending upon the size of the business, with small
businesses able to obtain the "Do Not Call" list free of
charge.
5)Provides these fees shall be used to defray the cost of
the "Do Not Call" program.
6)Requires the Attorney General to triennially charge
subscribers to the "Do Not Call" list (i.e. consumers) a
fee not to exceed .33 cents per year for three years
($1.00 for three years).
7)Contains certain exemptions, including an exemption for
established business relationships.
8) Requires the "Do Not Call" program to be operational
by January 1, 2003.
Existing federal law, the Telephone Consumer Protection Act
of 1991 (TCPA), prohibits the transmission of unsolicited
advertisements by telephone facsimile machines and provides
various remedies.
This bill:
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1)Expands existing law that sets up the state telemarketer
"Do Not Call" list, administered by the Attorney General,
by allowing Californians to place their home and business
fax numbers on that list.
2)Specifies that any sender of unsolicited fax material
violating the specified provisions shall be subject to
the same penalties and civil liabilities that apply to
telemarketers.
3)Specifies that fax transmissions subject to existing law
must include a statement informing the recipient of the
state-designated Internet Web site and toll-free number
for the "Do Not Call" list in at least twelve-point font.
4)States various findings and declarations.
FISCAL EFFECT: According to the May 15, 2002, Assembly
Appropriations Committee analysis: this bill would
generate "annual net General Fund costs of about $250,000."
COMMENTS:
1.Purpose. According to the Author and the sponsor,
Fax.com, in order to stop unsolicited fax advertisements
under current California law, recipients must notify each
soliciting company individually. Under this bill,
consumers would be able to block unsolicited faxes more
conveniently than under the current California law.
2.Background.
a) Recent concerns with unsolicited fax advertisements
("junk faxes"). The expanded use of broadcast or
"blast" junk faxes has prompted this and other recent
junk fax bills. More than ten years ago, in 1991, the
California Public Utilities Commission reported that
receiving unsolicited faxes cost California consumers
and businesses an estimated $17 million a year. In
the subsequent decade, the volume of complaints about
junk faxes received at California homes and businesses
has grown dramatically as blast fax technology has
improved and blast fax companies have proliferated.
"Advertising by theft" is what many call the practice
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of sending junk faxes to people's home and business
fax machines because unlike billboard, radio, TV,
newspaper, magazine, telemarketing or junk mail -
where the advertiser pays for the ad - junk faxes
force each and every recipient to pay for part of the
ad by paying for paper and toner.
b) State Law - Business and Professions Code Section
17538.4. In 1992, the Legislature passed and the
Governor signed AB 2438 (Katz, Chap. 564, statutes of
1992). Section 17538.4 prohibits unsolicited faxes
unless the sender meets certain requirements, such as
providing an 800 number so that the recipient can call
to have his/her name removed.
An argument could be made that AB 2438 was established
for the purpose of protecting Californians during the
estimated two-year interim between the passage of the
federal ban and the time when the Federal
Communications Commission's (FCC) regulations
implementing the federal ban would become effective.
Evidence to support this view can be found in letters
from the Department of Consumer Affairs (DCA) to both
Assemblyman Katz and Governor Wilson. For example, in
DCA's enrolled bill report to Governor Wilson, they
note that the federal law (which would prohibit
unsolicited faxes altogether) goes into effect on
December 20, 1992 (but the prohibition will have no
effect until the implementing regulations are in
place), which could take a couple of years. The
enrolled bill report also states that assuming that
any definitions the FCC adopts do not undermine the
prohibition, once the FCC's regulations are in place
the federal law and regulations will supercede AB 2438
since they will be more protective. But until that
time, the report states, AB 2348 would give California
fax machine owners more protection than they currently
have against unsolicited faxes.
c) Federal Law -- The TCPA. On December 20, 1991, the
U.S. Congress enacted the TCPA. The TCPA mandated
that the FCC implement regulations to protect the
privacy rights of citizens by restricting the use of
the telephone network for unsolicited advertising. On
September 17, 1992, the FCC adopted a Report and Order
which established rules governing unwanted telephone
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solicitations and regulated the use of automatic
telephone dialing systems, prerecorded or artificial
voice messages, and telephone facsimile machines.
Among other things, these regulations prohibit the
transmission of unsolicited advertisements by
telephone facsimile machines.
The TCPA provides consumers with several options to
enforce limitations against unsolicited telemarketing
contacts. Absent state law to the contrary, the TCPA
permits consumers to file suit in state court if an
entity violates the TCPA prohibitions on the use of
facsimile machines, automatic telephone dialing
systems, and artificial or prerecorded voice messages
and telephone solicitation. Consumers may also bring
their complaints regarding TCPA violations to the
attention of the state attorney general or an official
designated by the state. This state entity may bring
a civil action on behalf of its residents to enjoin a
person or entity engaged in a pattern of telephone
calls or other transmissions in violation of the TCPA.
Additionally, a consumer may request that the FCC
take enforcement actions regarding violations of TCPA
and the regulations adopted to enforce it.
3.Does the TCPA Preempt California Law Regarding
Unsolicited Faxes? The TCPA states that it does not
preempt "more restrictive intrastate requirements."
California law is not considered as more restrictive and
it is instead less restrictive as it pertains to
requirements regarding unsolicited faxes. The
Legislative Counsel believes that the TCPA preempts
California's current law and any law that is less
restrictive than the TCPA. The Legislative Counsel
Opinion, dated December 7, 2001, notes that it is a
well-established principle that the supremacy clause
invalidates state laws that interfere with, or are
contrary to, federal law. State law is preempted by
federal law where state law actually conflicts with
federal law. A conflict occurs between state and federal
law when state law stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress. The intention of Congress in
prohibiting the faxing of unsolicited advertising
materials (junk faxes) was twofold. First, the TCPA is
intended to help remedy the problem of fax advertisers
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sending advertisements to available fax numbers with the
knowledge and intention that they be received and printed
by the recipient's machine, thereby shifting the
advertising cost in part onto the recipient. Secondly,
the TCPA is intended to stop the problem of recipient's
fax machines being unavailable for legitimate business
messages while processing and printing junk faxes. In
Counsel's view, the exemption in current state law
allowing junk faxes if an 800 number is established,
hinders the intent of Congress to stop the cost and
inconvenience of junk faxes to recipients.
The letter of opposition from the Office of the Attorney
General (AG) indicates agreement with Legislative
Counsel's analysis, calling its conclusion "sound."
Committee staff spoke to Senior Counsel for the FCC, Lynn
Vermillera, representing the FCC's position, who agrees
that the TCPA preempts less protective junk fax laws.
However, according to information provided by Fax.com, a
Los Angeles Superior Court judge ruled in December of
2001 that the federal TCPA does not preempt California's
current regulation of unsolicited fax advertising.
Fax.com states that this is the only California court to
address that issue, and that decision is now on appeal.
(It should be noted that Superior Court cases are not
binding precedent.)
4.The FCC Is Enforcing the TCPA in California and
Elsewhere. State and federal regulators have in recent
years moved to enforce the federal law. For example, in
March of 2001, the sponsor of AB 2820 - Fax.com - signed
a Consent Decree with the state of Washington which
effectively barred the company from ever again doing
business in the state. The Washington Attorney General
alleged that Fax.com repeatedly violated the federal law,
including an allegation that Fax.com tied up a hospital's
phone lines with automated dialing. The Decree
specifically forbids Fax.com from using such equipment to
call emergency rooms or hospital patient rooms. Fax.com
denied all allegations.
The "question" of whether the TCPA is or is not
preemptive in California has not prevented the FCC from
enforcing the TCPA in California because the FCC believes
it is preempted. The FCC has cited and continues to cite
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many California businesses for sending junk faxes in
violation of the federal law.
For example, the California-based sponsor of this bill --
Fax.com -- has been fined by the agency six times in the
last eighteen months for violations of the federal law.
The May 31, 2001 fine was based upon Fax.com allegedly
sending an unsolicited fax to the FCC. ("It has come to
our attention that your company recently transmitted to a
telephone facsimile machine at the Federal Communications
Commission an unsolicited advertisement for products,
goods, or services offered by Advanced Cellular
Communications, Inc.")
It is actually a blast fax company's client - the
business who's ad gets printed on a fax machine - that
is often held liable by the FCC under the federal junk
fax ban. Such businesses may erroneously believe that
compliance with California law is sufficient and that the
federal law is non-binding, when the FCC believes
otherwise.
5.Is it Appropriate for the Do Not Call Program to Include
Fax Numbers? According to the letter of opposition from
the AG, they oppose this bill because the existing TCPA
currently prohibits persons and business entities from
faxing any unsolicited advertisements. According to the
AG, this bill will also increase the cost of the "Do Not
Call" program, thus requiring an increase in the fees
charged to consumers and businesses.
The AG argues this bill will delay the expeditious
implementation of the current "Do Not Call" program,
where regulatory and out-sourcing processes are already
well under way. ("There is no question that this bill
would substantially increase program workload, change
program business requirements, and consequently disrupt
the existing procurement process.")
The AG states that it is currently in negotiations with a
possible contractor based on the program as it is now and
that its regulations interpreting and implementing the
current program have already been drafted, published, and
been subject to public comment.
The AG also observes that, under the current "Do Not
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Call" law, businesses are permitted to buy just part of
the list, tailored by area code to their location.
Because the current "Do Not Call" program does not
include fax numbers or business phone numbers, and
because the difference between these numbers cannot be
seen on their face, this bill will require either an
entirely separate database and sign-up system, or require
the AG to somehow differentiate fax and business numbers
in the overall "Do Not Call" database.
Finally, the AG argues that the bill will significantly
add to the cost of the program: "[T]he addition of
residential and commercial fax machine lines to the
Department of Justice Do Not Call program changes the
complexion, and cost estimates of the Do Not Call
Program. This bill will significantly increase the cost
of setting up, regulating and enforcing this new 'do not
fax' statutory scheme.
For example, there are approximately 2.5 million small
businesses in California. Conservatively assuming a 30%
sign up rate for these small businesses and an average
of 1.5 lines to be signed up per subscriber, that would
mean an additional 1,125,000 fax subscribers over 3
years. We presently do not have an accurate estimate of
the number of large businesses and governmental entities
who will sign up or the average number of lines per large
business or governmental entity we should expect to
process.
In addition, the AG estimates residential fax sign ups to
total 5% of total residential phone sign-ups which adds
80,000 additional residential fax subscribers. The AG
states that this will also increase the costs of the Do
Not Call Program."
5.Problems with the Findings and Declarations Provisions of
the Bill. Section 1 states various findings and
declarations, a portion of which contain intent language.
Committee staffs' internal policy on findings and
declarations is to require that they be backed by a
recognized study. The findings and declarations appear
to be either restatements of existing law,
interpretations of existing law or statements of intent.
Committee staff recommends that this section be deleted
from the bill .
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1.Arguments in Support. Typically, under current
California law, a recipient of an unsolicited fax
advertisement notifies a sender and instructs the sender
to stop faxing the unsolicited advertisements. However,
the Author contends that there are hundreds of California
companies that want to or do send unsolicited fax
advertisements. Consumers soon become frustrated with
having to contact each sender individually and conclude
that current California law does not effectively protect
them. The Author asserts that this bill will help
eliminate confusion by allowing Californians to put their
fax numbers on the state's "Do Not Call" list for
telemarketers.
Additionally, the Author argues that this bill strikes a
reasonable balance between privacy rights of consumers,
the rights of consumers who may want to receive
unsolicited faxes, and commercial free speech rights of
businesses to advertise their products or services to
interested consumers.
2.Arguments in Opposition. The Privacy Rights
Clearinghouse, while observing that it does not often
oppose privacy legislation, argues in opposition to this
bill that "The Privacy Rights Clearinghouse receives many
complaints about junk faxes, both from consumers and from
business owners. It should not be incumbent upon the
recipient to take the initiative to say 'no' to junk
faxes, especially when they are already prohibited by
federal law, and when the recipient in essence has to pay
to receive them."
3.Related Legislation.
a) AB 839 (Lowenthal) as initially heard by this
Committee, would have created a new junk fax ban in
California law, modeled after the TCPA. Additionally,
it would have created a new private right of action
and penalties on top of the remedies available under
the federal ban. AB 839 received two hearings by this
Committee last year. Fax.com opposed the measure and
offered an alternative proposal. The proposal
basically would have created a "do not fax" database.
Ultimately, Fax.com was able to convince a majority of
the Members of this Committee to support their
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proposed provisions in place of AB 839's provisions.
Rather than move his bill forward with those
amendments, the author decided not to pursue his
measure at that time.
b) AB 2568 (J. Campbell) deletes the existing
prohibition relative to faxing unsolicited advertising
material and would instead enact new provisions
prohibiting a person from using any telephone
facsimile machine, computer, or other device to send
an unsolicited advertisement to a telephone facsimile
machine. This bill imposes specified fines for
violations of these provisions. AB 2568 failed in
Assembly Business and Professions Committee 3-1 (7 not
voting).
c) SB 1358 (Bowen) repeals California's current junk
fax law permitting the federal law to apply
unambiguously. This bill is supported by California
Chamber of Commerce, fifteen local chambers,
California Retailers Association, Silicon Valley
Manufacturers Group, Privacy Rights Clearinghouse, the
Attorney General, the California District Attorneys
Association and 21 businesses. This bill is opposed
by Fax.com and 47 businesses. Status: passed the
Senate 37-0. Failed Assembly Business & Professions
4-2 (5 not voting).
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SUPPORT AND OPPOSITION:
Support :Fax.com
117 businesses
Opposition :Attorney General
Privacy Rights Clearinghouse
Consumer Action
CalPIRG
Consumer Federation of California
Consultant:Ed Howard