BILL ANALYSIS
SB 186
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Date of Hearing: June 26, 2003
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
SB 186 (Murray) - As Amended: June 26, 2003
SENATE VOTE : 24-12
SUBJECT : UNSOLICITED E-MAIL ADVERTISING: SPAM
KEY ISSUES :
1)SHOULD CALIFORNIA BUSINESSES BE PROHIBITED FROM ADVERTISING TO
IN-STATE OR OUT-OF-STATE CONSUMERS USING UNSOLICITED
COMMERCIAL E-MAIL ADVERTISEMENTS?
2)SHOULD BOTH IN-STATE AND OUT-OF-STATE BUSINESSES BE PROHIBITED
FROM ADVERTISING TO CALIFORNIA CONSUMERS USING UNSOLICITED
COMMERCIAL E-MAIL ADVERTISEMENTS?
3)HOW BROADLY SHOULD THE PROHIBITION ON UNSOLICITED E-MAIL
ADVERTISEMENTS APPLY?
4)SHOULD THERE BE A CAP ON THE LIQUIDATED DAMAGES AVAILABLE FOR
VIOLATIONS OF THE PROPOSED PROHIBITION ON UNSOLICITED E-MAIL
ADVERTISEMENTS?
SYNOPSIS
This bill is intended to address a problem familiar to all
computer users: unsolicited e-mail advertisements, commonly
known as spam. The bill prohibits all unsolicited commercial
e-mail advertisements, as defined, from California businesses or
to California e-mail addresses, except that as to advertisements
to consumers who have expressly consented to receive the
message, or to consumers who have had any previous relationship
with the advertiser, are not prohibited. The bill permits a
consumer, an e-mail service provider, or the Attorney General to
bring suit based on a violation of the prohibition, and to seek
liquidated damages of one thousand dollars for each
advertisement sent in violation of the prohibition, up to one
million dollars per incident (defined as a single transmission),
with lower liquidated damages where the defendant followed
certain practices.
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SB 186 is similar to another bill currently pending in the
Assembly Business and Professions Committee, SB 12 (Bowen),
which is referred to this Committee after Business and
Professions. The prohibitions in SB 186 apply more narrowly
than those in SB 12. For example, SB 186 applies only to
advertisers, the businesses whose products are advertised in
unsolicited commercial e-mail advertisements. SB 12 applies
more broadly to prohibit anyone from sending such an
advertisement - creating liability on the part of a sender who
sends such e-mail advertising another entity's products or
services. SB 186 only bars advertisements by out-of-state
senders if the sender knew or should have reasonably foreseen
that the ad was being sent to a California e-mail address; SB 12
prohibits the sending of an unsolicited ad to a California
e-mail address whether or not the sender knew it was a
California e-mail address. In addition, SB 12 does not cap the
total amount recoverable per incident but allows recovery based
on the number of advertisements transmitted.
The analysis suggests an amendment to clarify that there may be
a cause of action against an
e-mail service provider if the provider is the sender of
unsolicited commercial e-mail advertisements and other
amendments to clarify some of the definitions used in the bill.
Because this bill is scheduled to be heard by the Business and
Professions Committee on July 1, any amendments taken will be
formally adopted in that committee, pursuant to an agreement.
SUMMARY : Creates new restrictions on unsolicited e-mail
advertisements. Specifically, this bill :
1)Defines various terms used in the bill, including the
following:
i) "Advertiser" means a person or entity that advertises
through the use of unsolicited e-mail advertisements.
ii) "California electronic mail address" or "California e-mail
address" means an e-mail address furnished by an electronic
mail service provider that sends bills for furnishing and
maintaining that e-mail address to a mailing address in this
state, or an e-mail address ordinarily accessed from a
computer in this state, or an e-mail address furnished to a
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resident of this state.
iii) "Commercial e-mail advertisement" means any electronic
mail message initiated for the purpose of advertising or
promoting the lease, sale, rental, gift offer, or other
disposition of any property, goods, services, or extension of
credit.
iv) "Incident" means a single transmission of substantially
similar content.
v) "Preexisting or current business relationship" as used in
connection with the sending of a commercial e-mail
advertisement means that the recipient has made an inquiry,
application, purchase, or transaction regarding products or
services offered by the sender.
vi) "Unsolicited commercial e-mail advertisement" means a
commercial e-mail advertisement sent to a recipient who has
not provided direct consent to receive the commercial e-mail
advertisement and who does not have a preexisting or current
business relationship with the advertiser of the realty,
goods, services, or extension of credit.
2)Prohibits an advertiser located in California from advertising
using an unsolicited commercial e-mail advertisement.
3)Prohibits an advertiser that is not located within California
from advertising using an unsolicited commercial e-mail
advertisement that is sent to a California e-mail address if
the advertiser knows or should reasonably foresee that the
e-mail address is a California e-mail address.
4)Provides that the provisions of the section barring
unsolicited commercial e-mail advertisements are severable.
5)Provides that in addition to any other remedies provided by
the newly created provisions or any other provisions of law,
the recipient of an unsolicited commercial e-mail
advertisement transmitted in violation of the provisions
described above, an e-mail service provider, or the Attorney
General (AG) may bring an action to recover, in addition to
actual damages, liquidated damages of one thousand dollars for
each unsolicited commercial e-mail advertisement transmitted
in violation of the newly created provisions, or one million
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dollars per incident, whichever is less, and may also recover
attorney's fees and costs.
6)States that there is no cause of action under (5), above,
against an electronic mail service provider that transmits the
unsolicited commercial e-mail advertisement over its computer
network.
7)Provides that if the court finds that the defendant
established and implemented, with due care, practices and
procedures designed to effectively prevent unsolicited
commercial e-mail advertisements in violation of the newly
created provisions, the court shall reduce the liquidated
damages recoverable to one hundred dollars for each
unsolicited e-mail advertisement or one hundred thousand
dollars per incident, whichever is less.
8)Permits the court, at the request of any party to an action
brought pursuant to the newly created article, to conduct all
legal proceedings in a manner as to protect the secrecy and
security of the computer, computer network, data, program and
software involved in order to prevent possible reoccurrence of
the same or a similar act and to protect the trade secrets of
any party.
9)Provides that nothing in the newly created article shall be
construed to have any effect on the lawfulness or unlawfulness
under any other provision of law of the adoption,
implementation, or enforcement by a provider of Internet
access service of a policy of declining to transmit, route,
relay, handle, or store certain types of electronic mail
messages.
10)States that a cause of action that is in existence before the
effective date of the bill shall not be affected by it but
shall be governed by the law in effect at the time the cause
of action arose.
EXISTING LAW :
1)Prohibits unsolicited advertising by e-mail unless that e-mail
contains either a toll free phone number or return e-mail
address which the recipient can use to notify the sender not
to electronically send any further unsolicited ads. (Business
and Professions Code section 17538.4 (b). All further
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references are to the Business and Professions Code unless
otherwise noted.)
2)Prohibits sending unsolicited e-mail ads to any recipient who
has notified the sender to stop sending unsolicited e-mails.
(Section 17538.4 (c).)
3)Requires unsolicited e-mail ads to contain a heading of "ADV:"
or "ADV:ADLT," as specified. (Section 17538.4 (g).)
4)Prohibits the unauthorized use of e-mail networks to send
unsolicited e-mail ads and authorizes any e-mail service
provider whose policy on unsolicited e-mail ads is violated to
bring a civil action to recover the actual monetary loss
suffered by that provider by reason of that violation, or
liquidated damages of $50 for each e-mail message initiated or
delivered, up to a maximum of $25,000 per day, whichever
amount is greater. (Section 17538.45.)
FISCAL EFFECT : The bill as currently in print is keyed fiscal.
COMMENTS : This bill is intended to address a problem well known
to all e-mail users: the proliferation of unsolicited e-mail
advertisements, or spam. The author states:
This bill will get at the real solution to unsolicited
e-mails by allowing people to sue the advertisers of
unsolicited e-mails. SB 186 seeks to get to the heart of
the matter by penalizing the actual advertiser of the spam
e-mails. ? We need to go after the companies that are
profiting by these e-mails and allow recipients to hold the
advertisers financially responsible.
SB 186 prohibits a California advertiser from sending
unsolicited e-mail advertisements, and prohibits any advertiser
from sending unsolicited commercial e-mail advertisements to a
California e-mail address, as defined, if the advertiser knows
or should reasonably foresee that the e-mail address is a
California e-mail address. The bill creates a cause of action
for the consumer, the e-mail service provider, or the AG, to sue
for violation of the prohibition. In addition to actual damages
(likely to be small in many such suits) the bill permits the
plaintiff to seek liquidated damages of one thousand dollars per
advertisement, up to one million dollars per incident, defined
as a single transmission of substantially similar content. Thus
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the liquidated damages in a case involving transmission of a
single advertisement to many thousands of consumers would be
capped at one million dollars. Where a defendant could show
that it implemented practices designed to effectively prevent
unsolicited commercial e-mail advertisements, the liquidated
damages available would be one hundred dollars per
advertisement, capped at one hundred thousand dollars per
incident.
Comparison with SB 12 : SB 186 is similar to some of the
provisions contained in SB 12 (Bowen), currently pending in the
Assembly Business and Professions Committee. (In addition to
the provisions paralleling those of SB 186, SB 12 contains other
provisions beyond the scope of SB 186. Those provisions
address, among other things, e-mail advertisements with
misleading or falsified header information, e-mail
advertisements that contain a third party's domain name used
without permission, and the collection of or automatic
generation of e-mail addresses in order to send unsolicited
commercial e-mail advertisements.) SB 186 is narrower than SB
12 as to what is prohibited, in several ways.
What action is prohibited ? SB 186 prohibits advertisers - the
entities whose products or services are advertised in the e-mail
- from advertising using unsolicited commercial e-mail
advertisements. SB 12 instead prohibits any entity from
initiating the transmission of an unsolicited commercial e-mail
advertisement, as specified. Thus under SB 186, there would be
no cause of action against a sender of spam who sent it on
behalf of another company (e.g. Fax.com); only the company
advertising in the spam would be liable. Under SB 12, the
sender or the advertiser or both could be sued. The committee
may wish to discuss with the author amending the bill to
prohibit unsolicited advertisements from both senders and
advertisers.
What constitutes an unsolicited commercial e-mail advertisement ?
Both SB 12 and SB 186 exclude from the definition of an
unsolicited e-mail advertisement a message that is sent with the
direct consent of the recipient, or where the recipient has a
preexisting business relationship with the sender. Direct
consent has the same definition in both bills: it means that
the recipient has expressly consented to receive the message,
either in response to a clear and conspicuous request for the
consent or at the recipient's own initiative.
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SB 12, however, uses a narrower definition of "preexisting
business relationship" than does
SB 186, thus more strictly limiting the circumstances under
which a company may send an unsolicited e-mail to someone.
Under SB 12, "preexisting business relationship" is defined to
mean either of the following: that within the three years
ending upon receipt of the advertisement, the recipient has made
an inquiry, application, purchase or transaction regarding
products or services offered by the sender, or, that the
recipient has made an inquiry, application, purchase, or
transaction regarding products or services offered by the
sender, and the sender maintains a written or electronic record
of the inquiry, application, purchase or transaction.
Under SB 186, there is no time requirement or requirement that a
record be kept of the inquiry, application, purchase or
transaction. Proponents of the bill argue that this approach
protects legitimate businesses who wish to be able to contact
their customers without facing burdensome record-keeping
requirements. However, this does create a large exception to
the prohibition on unsolicited e-mails under SB 186: a business
that has been contacted once by a consumer with an inquiry would
be able to send that consumer unsolicited e-mail advertisements
forever. Moreover, a business sued under the provisions of SB
186 for sending unsolicited e-mails might argue that the e-mails
were sent to consumers with whom the business had a preexisting
relationship, but that the business had not kept records of the
previous contact. Such a defense might be difficult to counter.
Requirement of knowledge that the recipient has a California
e-mail address . SB 186 prohibits an advertiser located outside
of California from sending an unsolicited commercial e-mail if
the advertiser knows or should reasonably foresee that the
e-mail address is a California e-mail address. SB 12, by
contrast, prohibits the initiation of any unsolicited commercial
e-mail advertisement to a California e-mail address - whether or
not the sender had some reason to know that the address was in
California.
The requirement under SB 186 that the sender must know or should
reasonably foresee that the recipient has a California e-mail
address is likely to leave many senders of spam beyond the reach
of the proposed law. An out-of-state company with a list of
e-mail addresses in most cases would have no way to know which
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of the addresses are California e-mail addresses, as defined.
Therefore, it would be difficult for Californians to sue such
companies - leaving Californians open to a world of spam from
out of state. The committee may wish to discuss with the author
amending the bill to delete the requirement that the advertiser
knew or should reasonably have foreseen that it was transmitting
to a California e-mail address.
Damages for violations . Both SB 186 and SB 12 create new
remedies for violations of their prohibitions, in addition to
other remedies available under law. Under SB 12, a recipient of
an unsolicited commercial e-mail advertisement would be able to
recover actual damages or $500 for each individual violation,
whichever is greater, and reasonable costs and attorney's fees.
The court could triple the amount to be recovered where it found
that the violation was willful or knowing. In addition, a civil
penalty of $250 would be imposed for each individual violation
with the money going to the High Technology Theft Apprehension
and Prosecution Program Trust Fund.
Under SB 186, $1000 in liquidated damages, in addition to actual
damages, would be available for each unsolicited commercial
e-mail advertisement transmitted in violation of the bill's
prohibitions. SB 186 creates a cap of one million dollars per
incident, defined as a single transmission of substantially
similar content. Thus where an unsolicited e-mail ad went out
to a million recipients, only one million dollars in liquidated
damages would be available. (See Author's Amendments, below,
regarding clarification of this definition.) Where a court
finds that the defendant implemented practices reasonably
designed to effectively prevent the transmission of unsolicited
e-mail ads, the liquidated damages would be $100 per
advertisement with a cap of $100,000 per incident. SB 12, by
contrast, would make implementation of such practices an
affirmative defense.
SB 186 permits the recipient, the e-mail service provider, or
the AG to bring suit.
Protection for trade secrets . SB 186 contains a provision
permitting the court to conduct legal proceedings in a manner so
as to protect the secrecy and security of specified information
relating to the computer systems involved, to prevent a
reoccurrence of the violation and to protect the trade secrets
of any party. It is unclear why this provision is necessary.
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Existing law provides procedures for a court to protect
sensitive information that may be revealed in the course of
litigation. ( See , e.g. , Code of Civil Procedure section 2031
(f), permitting a court to craft a protective order regarding
information obtained through discovery.) Creating a new
provision for secrecy in one specific type of case puts at risk
the general rule in California law that court proceedings are
public, and denies the public information about this type of
case. The committee may wish to discuss with the author the
potential benefits of amending the bill to delete this
paragraph.
Author's Technical Amendments . The author has agreed to take
two technical amendments in the Business and Professions
Committee to clarify the provisions of the bill and to better
focus some of its provisions, as follows:
1.Where the bill states that the recipient, e-mail service
provider, or AG, if the prevailing party, may recover
attorney's fees and costs, the author has agreed to amend the
bill to permit instead an award of attorney's fees and costs
to a prevailing plaintiff.
2.Where the bill currently states that there shall not be a
cause of action against an electronic mail service provider
that transmits the unsolicited ad over its network, the author
has agreed to amend this instead to provide that there is no
cause of action under the bill against an electronic mail
service provider only involved in the routine transmission of
the advertisement. The bill will define routine transmission
as "the transmission, routing, relaying, handling, or storing
of an electronic mail message through an automatic technical
process."
REGISTERED SUPPORT / OPPOSITION :
Support
Microsoft Corporation
Opposition
None on file
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Analysis Prepared by : Kathy Sher / JUD. / (916) 319-2334