<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:25874.wais]
S. Hrg. 109-278
S. 714, THE JUNK FAX PREVENTION ACT OF 2005
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 13, 2005
__________
Printed for the use of the Committee on Commerce, Science, and
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMint, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
David Russell, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director
------
SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT
GORDON H. SMITH, Oregon, Chairman
TED STEVENS, Alaska BYRON L. DORGAN, North Dakota,
JOHN McCAIN, Arizona Ranking
CONRAD BURNS, Montana DANIEL K. INOUYE, Hawaii
JOHN ENSIGN, Nevada JOHN D. ROCKEFELLER IV, West
GEORGE ALLEN, Virginia Virginia
JOHN E. SUNUNU, New Hampshire JOHN F. KERRY, Massachusetts
JIM DeMint, South Carolina MARIA CANTWELL, Washington
DAVID VITTER, Louisiana FRANK R. LAUTENBERG, New Jersey
BILL NELSON, Florida
E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
C O N T E N T S
----------
Page
Hearing held on April 13, 2005................................... 1
Statement of Senator Boxer....................................... 2
Statement of Senator Lautenberg.................................. 4
Statement of Senator Smith....................................... 1
Witnesses
Bladine, Jon E., President/Publisher, News-Register Publishing
Company........................................................ 5
Prepared statement........................................... 7
Feeken, Dave, Broker, RE/MAX; on behalf of the National
Association of REALTORS <SUP>'</SUP> (NAR)..................... 11
Prepared statement........................................... 13
Kirsch, Steven T., Founder/Chairman, Propel Software Corporation. 19
Prepared statement........................................... 21
S. 714, THE JUNK FAX PREVENTION ACT OF 2005
----------
WEDNESDAY, APRIL 13, 2005
U.S. Senate,
Subcommittee on Trade, Tourism, and Economic
Development,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:45 p.m. in
room SR-253, Russell Senate Office Building, Hon. Gordon H.
Smith, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. GORDON H. SMITH,
U.S. SENATOR FROM OREGON
Senator Smith. We'll call to order this hearing of the
Trade, Tourism, and Economic Development Subcommittee of the
full Commerce Committee. The hearing is on S. 714, The Junk Fax
Prevention Act of 2005. I apologize to those present that we've
had votes get in the way of our starting at 2:30, but let's
begin.
I thank the witnesses for being here today. Today's hearing
will focus on The Junk Fax Prevention Act of 2005. I thank my
colleagues on the Senate Commerce Committee, Senators Inouye,
Burns, Stevens, Dorgan, Lautenberg, Snowe, and Sununu, a broad
bipartisan coalition, for co-sponsoring this legislation with
me.
S. 714 would create a statutory exemption to the current
communications law prohibiting the faxing of unsolicited
advertisements to individuals without their prior written
invitation or permission. This bill would not legalize the
sending of junk faxes or blast faxes, which have been
prohibited for 13 years and will continue to be prohibited
under this bill. This bill is about continuing legitimate fax
communications between businesses and customers.
S. 714 will strengthen existing laws by providing consumers
the ability to prevent unsolicited fax advertisements and
provide greater congressional oversight of enforcement efforts
by the Federal Communications Commission. This bill will also
help businesses by allowing them to continue to send faxes to
their customers in a manner that has proven successful with
both businesses and consumers.
In July of 2003, the FCC reconsidered its Telephone
Consumer Protection Act rules, and elected to eliminate the
ability for businesses to contact their customers even where
there exists an established business relationship. The effect
of the FCC rule would be to prevent a business from sending a
fax, fax solicitation, to any person, whether it is a supplier
or a customer, without first obtaining prior written consent.
This approach, while seemingly sensible, would impose
significant costs on businesses in the form of extensive
recordkeeping.
Recognizing the problems created by this rule, the
Commission has twice delayed the effective date of its
implementation, with the current extension of its stay expiring
on June 30, 2005.
The purpose of this legislation is to preserve the
established business relationship exemption currently
recognized under TCPA. In addition, this bill will allow
consumers to opt out of receiving further unsolicited faxes.
This is a new consumer protection that does not exist under the
TCPA today.
We believe that this bipartisan bill strikes the
appropriate balance in providing significant protections to
consumers from unwanted, unsolicited fax advertisements, and
preserves the many benefits that result from legitimate fax
communications.
We have heard from hundreds of associations, representing
tens of thousands of large and small businesses, on the
importance of swiftly passing this legislation to avoid
interfering with legitimate communications. In the 108th
Congress, this legislation passed both the Senate and the
House, but was not signed into law prior to adjournment of
Congress. We hope that both the Senate and the House can pass
S. 714 in a timely manner prior to June 30, 2005, when the FCC
stay expires.
I want to publicly welcome and thank one of my
constituents, Mr. Jeb Bladine, the publisher and editor of the
News-Register, in McMinnville, Oregon, who is here to testify
about how this bill will affect small businesses like him.
I'm pleased to be joined by my colleague and my neighbor
from California, Senator Barbara Boxer, who has a slightly
different view of this bill, I think.
STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM CALIFORNIA
Senator Boxer. Thank you, Mr. Chairman, so very much. And,
Senator Smith, thank you for the cooperative manner in which we
have worked since the last session on this legislation.
I expressed my objections then, and I was able to negotiate
greater protections for consumers in the final bill that passed
the Senate on December 8, 2004. A lot of it had to do with the
fact that you were willing to work with me, and I so appreciate
it now. These improvements included important protections for
consumers, as well as for small business; however, S. 714, the
legislation before us today, includes none of these protections
and is a huge step backwards. This is clear to me that, instead
of a Junk Fax Prevention Act, which is its title, I think it
should be called The Junk Fax Promotion Act, because, at the
end of the day, that's what we're doing.
Let me begin by stating the facts. To clarify, if we do
nothing here, junk faxes will end on July 1st. This legislation
that's before us does not ban junk faxes, it lets them
continue. It's important that this fact is on the record and
that everyone understands it, because when you read a bill
that's called The Junk Fax Prevention Act, you think that
you're doing a good thing; but, in essence, you're promoting
junk faxes.
Let me explain in more detail. The FCC regulations
scheduled to take effect on July 1 says that someone sending a
junk fax needs written consent from the recipient. Pretty tough
rule. You can't send a fax unless you get permission. On the
other hand, the bill before us will allow any business with,
``an established business relationship with the consumer to
send unrequested faxes to that consumer's machine.'' Now, I'm
sure you've gotten some of those Senator Smith. I certainly
have. And it makes me crazy, using up my paper, my electricity,
to come into my house, and I don't want another mortgage. You
know? I've got a good one. And if I want a better one, I'll
take action. And these people are sending me things. I'm
getting them every day. And what I should have done is
collected them, since December, but I didn't. Maybe I'll start
today, and we'll see how many we'll have when we get this to
the floor.
Consumers interact with hundreds, if not thousands of
businesses, each year. To say that all those businesses should
then be allowed to indiscriminately flood individuals with
faxes in perpetuity does not put a stop to a lot of our junk
faxes. In fact, I believe it will open up the flood gates.
One expert estimates--listen to this--that 2 billion faxes
are sent every year, and that this language, the language in
this bill, will allow for 4 billion faxes in the near future.
Think of it. Under the bill that my colleague supports, which I
hope we're going to be able to amend, any restaurant, drug
store, or gas station that a consumer has visited will be able
to send junk faxes to their home or business fax machines.
Junk faxes tie up machines of individuals and businesses,
rendering them unusable to their owners. It is not a trivial
matter. It can be quite serious. For example, the University of
Washington Medical Center in Seattle had to go to court to stop
a sender of junk faxes who was crippling its machines, and,
therefore, compromising patient care.
Under this bill, the University of Washington Medical
Center, or any other hospital, could be contacted by any drug
or medical supply company, janitorial service, cleaning
product, telephone system, or courier they had ever used, and
have junk faxes sent to them. So we are opening the door to
junk faxes wide open. I never thought that's what Senator Smith
intended to do. But, in essence, that's what your bill does.
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 never asked for.''
Now, I acknowledge that the Federal Communications rule
went too far. I think it's too burdensome to have to get a
written consent for a business. And requiring such consent from
every fax recipient, it is too burdensome, and it's too
expensive for small businesses and others. But I disagree that
an established business relationship should constitute consent
for businesses to send faxes to homes and business just because
I walk into a store and buy a product in that store. Part of
the deal was, I gave my money, and I got the product, and
that's the end of the deal. The deal doesn't mean that they can
fax me forever. As much as I might love that store, I'm not
inviting them into my home.
So here's what I think we should do. Instead of written
consent, I would support allowing verbal consent to suffice
before a fax is sent. I think that's a pretty fair deal. You
want to send a fax? Get verbal consent. That's important. Get
consent. There must be consent. Because I buy toothpaste at
Wal-Mart or I order pizza from Domino's doesn't mean that Wal-
Mart or Domino's should have the right to fax me, at will, with
anything they want.
So, in closing, the bill before us cancels the FCC's
regulation, and it goes too far in the opposite direction. We
shouldn't let it become law without provisions to protect
consumers. Surely we can pass more reasonable legislation.
We've done it on the Do Not Call List. That's one of our most
popular pieces of legislation.
So now we have a bill before us. It's misnamed The Junk Fax
Prevention Act, when, in fact, it weakens, by miles, an FCC
rule that I admit has gone too far. This takes us in the other
direction, and it sanctions probably 4 billion faxes a year.
We, as policymakers, should protect consumers from junk faxes,
and I want to find this middle ground. And I'm hopeful that
this panel will help us toward that middle ground.
Thank you, Mr. Chairman.
Senator Smith. Thank you, Senator Boxer. And there will be
a mark-up tomorrow, and we'll certainly consider your ideas for
finding that right middle ground. I think that is all of our
motives.
We've been joined by Senator Lautenberg, of New Jersey.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Thank you very much, Mr. Chairman. I
commend you for holding this hearing.
People are weary of hearing the fax machine beckon your
attention and finding out that you got another chance to buy
stocks you didn't need. But it is, unfortunately, a good way to
curtail the invasion of privacy, as Senator Boxer just said.
You know, we did it on telephone calls; why shouldn't we be
able to do the same thing concerning the unwanted faxes? The
issue of unsolicited fax advertisements dates back to 1991,
when we passed the Telephone Consumer Protection Act. Now, that
law, still in effect, generally prohibits anyone from faxing
unsolicited advertisements without, ``prior expression--express
invitation or permission from the recipient.''
In October 1992, the FCC released its original order
interpreting the ban on unsolicited faxes. That order contained
a footnote 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.
Now, this interpretation was followed for more than a
decade, but in July 2003 the Commission reversed its position.
As a result, many businesses and nonprofit organizations are
confused about what is and is not permissible, and we need to
clear up this confusion, while still protecting consumers from
faxes that they don't want and allowing them to receive those
they do.
I'm an original co-sponsor of the Junk Fax bill. It is a
sensible compromise. It balances the need for businesses,
nonprofit organizations, and trade groups to continue to
communicate with their consumers and members, while recognizing
the right of the consumer to say ``no thanks'' to unsolicited
faxes. The bill gives consumers an easy way to opt out of
receiving unsolicited faxes, at no cost to themselves. And,
finally, it requires the FCC to report annually on the
enforcement of the junk fax provision, so we'll know how well
these protections are working. And with effective enforcement
and oversight, I believe that this bill will serve the public
well.
I thank you, again, Mr. Chairman, and I look forward to the
testimony of the witnesses and the opportunity to ask
questions. And, Mr. Chairman, I have a briefing, a sensitive
briefing that I must go to. I assume the record will be kept
open so that we can submit questions.
Senator Smith. We'll keep the record open, Senator, so you
can ask, in writing, any questions you like.
Senator Lautenberg. Thank you very much.
Senator Smith. Thank you.
Our witnesses will go in this order: Mr. Jon Bladine,
President and Publisher of the News-Register Publishing
Company, in McMinnville, Oregon; Mr. Dave Feeken, Broker of RE/
MAX of the Peninsula, Kenai, Alaska--you've come a long way,
and we thank you for that; and Mr. Steve Kirsch, Founder and
Chairman of Propel Software Corporation, in San Jose,
California. We thank you for being here.
So, Jon, the mike's yours. We invite your testimony now.
STATEMENT OF JON E. BLADINE, PRESIDENT/PUBLISHER, NEWS-REGISTER
PUBLISHING COMPANY
Mr. Bladine. Thank you, Senator.
Good afternoon, Mr. Chairman, Members of the Committee. My
name is Jon Bladine, better known in my community as Jeb
Bladine. I'm here to testify in support of S. 714.
I'd like to summarize my testimony and provide a longer
statement for the record, if I may.
Senator Smith. Yes, we'll accept that. And you can shorten
your statements, if you want, if you have longer ones, all of
you. We will include them in the record.
Mr. Bladine. Thank you.
I am president and publisher of the News-Register in
McMinnville. Our family business spans four generations, since
1928, with business interests that include the newspaper,
commercial printing, Internet access, and Internet software
development. I'm here today, though, in my role as regional
director of the National Newspaper Association, a board on
which I represent community newspapers from Alaska, Idaho,
Montana, Oregon, and Washington.
The National Newspaper Association has nearly 2,500 members
across America, and all of them are alarmed at the prospects of
a signed-consent rule for commercial faxes. The FCC order
eliminated the exemption for established business relationship,
and would now require that we get written and signed permission
before sending any advertising-related fax.
The established business relationship was sufficient
before. With this order, we would have to maintain a costly
database and compliance system or abandon fax communications
altogether. But the true faxers, those whose practices are
already illegal, would continue. So, with that order, the
guilty would proceed, and this order would punish the innocent.
We were grateful that that deadline was extended. But now
we are facing a July 1 compliance date. Unless Congress acts
now, the cost of compliance with the FCC order will start to
hit our balance sheets in a matter of days.
Junk faxes waste resources at our business, too. But that
blitz of anonymous ads does not come from the newspapers that I
represent, and they don't come from the small businesses across
America. We use the fax machine as an efficient and urgent tool
to communicate information to people who want it. S. 714 would
allow us to continue that responsible use of fax machines.
I'd like to give a brief sense of how we use the facsimile
machine. We send rate cards and market information to people
who request it. We send information about advertising,
circulation, distribution zones. The signed-consent rule would
stop our advertising department in its tracks every day, maybe
every hour. That department generates more than 80 percent of
our newspaper revenue, so that's a pretty important thing.
My newspaper has more than 5,000 current advertising
clients, and many more who call for information. They call from
local, regional, and national offices. To comply with the
signed-consent rule, we would need a fax approval file that
might reach 20,000 numbers.
Many of our customers advertise only in special sections.
For example, a wedding shop might miss the announcement about
the bridal guide, and miss the single best marketing week of
the season. We fax those announcements, because the advertisers
prefer it, quickly, with the information that they want to get.
Our clients want to see their ads in advance, and the fax
machine often is the only realistic way to deliver them. E-mail
has many problems with software and file attachments. In-person
delivery is very expensive. So we use the fax machine.
The FCC order would require that we interfere with our
customers' lives to get signed consent forms. My colleague,
Cheryl Kaechele, of Michigan, described this burden last
summer, when she testified before the House of Representatives.
She described that, ``We would have to deliver thousands of
consent forms, try to convince clients that we need them, send
staff out again and again to collect them, apologize for
bothering them, hire staff to manage the process. Our newspaper
members say that they would need the equivalent of a half-time
person to comply with that rule.''
And, even then, even if we were 99 percent compliant, still
fax numbers change, people make mistakes. We worry that people
might change their mind overnight about us, because of
something we write. An angry reader might spot a fax that falls
within that 1 percent margin of error, and, aha, a lawsuit. We
would pay, even if the real conflict had nothing to do with the
fax.
This bill restores a sensible flow of commerce on fax
machines. It recognizes established business relationships.
Most importantly, it tells regulators to consider the true
problem. Real junk fax doesn't come from newspapers or other
business that have solid customer relationships. It comes from
people trying to make a buck without building a business around
respectable business practices.
The solution is sound enforcement of laws against fax
abusers, not punishing innocent small businesses. Congress can
improve enforcement, and S. 714 takes a sound step in that
direction. Our association, the National Newspaper Association,
looks forward to working with this Committee for quick passage
of this legislation.
Senator Smith. Thank you very much.
Mr. Bladine. Thank you, Senator.
[The prepared statement of Mr. Bladine follows:]
Prepared Statement of Jon E. Bladine, President/Publisher,
News-Register Publishing Company
Good afternoon. My name is Jon E. (Jeb) Bladine. My purpose here
today is to testify in support of S. 714, The Junk Fax Prevention Act
of 2005. Junk faxes are the bane of many small businesses, including
mine, and I want to congratulate Senator Smith and his co-sponsors for
introducing a reasonable way to address them while trying to avoid
undue burdens on businesses that use the fax machine responsibly.
1. Introduction and Biography
I am Publisher and Editor of the News-Register Publishing Company
in McMinnville, Oregon. I am president of Oregon Lithoprint, Inc., a
partner in McMinnville Access Company and Pacific Wave Communications,
and chairman of the board of Oregon Interactive Corporation. Those
titles are the long version of what I really do, which is to deliver
information in print and electronically to my community in Northwest
Oregon, and through the Internet, worldwide.
My newspaper, the News-Register, has been in our family since my
grandfather purchased it in 1928 and moved to Oregon from Iowa. Our
family business spans four generations, and I am the fourth family
member to serve as publisher. Our business interests include the
newspaper, commercial printing, Internet access and Internet software
development.
I have served in local and statewide civic organizations, including
the McMinnville Jaycees, McMinnville and Oregon downtown development
associations, Oregon Children's Services and the Oregon Heritage
Commission. I have been a board member, legislative chairman and
president of the Oregon Newspaper Publishers Association.
I am here today in my role as a regional director of the National
Newspaper Association, a 120-year-old organization of community
newspapers. NNA maintains a headquarters co-located with the University
of Missouri, Columbia, MO, and a small office in Arlington, Virginia,
to carry out our public affairs work. My job on the board, among other
things, is to speak for community newspapers in my five states: Alaska,
Idaho, Montana, Oregon and Washington.
2. Background of the Junk Fax Issue
The National Newspaper Association has nearly 2,500 members. It is
no understatement to say that our members are quite alarmed about the
prospect that the Federal Communications Commission signed consent rule
for commercial faxes goes into effect July 1.
The Federal Communications Commission delivered quite a jolt to our
industry with its Report and Order In the Matter of Rules and
Regulations Implementing the Telephone Consumer Protection Act of 1991.
That order, adopted June 26, 2003, and released July 3, 2003, turned
our world upside down by reversing the Commission's long-standing
recognition that faxes from our newspapers to our established business
customers are not, in fact, unsolicited faxes in the meaning of the
TCPA. In discussion of its Report and Order, the Commission said
consumers feel ``besieged'' by unsolicited faxes, despite the fact that
the law prohibited them before 2003 and continues to do so. It
announced:
``The Commission has determined that the TCPA requires a person
or entity to obtain the prior express invitation or permission
of the recipient before transmitting an unsolicited fax
advertisement. This express invitation or permission must be in
writing and include the recipient's signature. The recipient
must clearly indicate that he or she consents to receiving such
faxed advertisements from the company to which permission is
given, and provide the individual or business's fax number to
which faxes may be sent.''
The Commission expressly reversed its decision that an established
business relationship (EBR) would be sufficient to show that an
individual or business had given consent to receive a fax. This new
rule was even more draconian than the procedures for compliance with
the new Do Not Call rules, which were the principal subject of this
Report and Order. At least in those rules, businesses were permitted to
maintain relationships with their customers. Here, barring the creation
of a costly database and compliance system, we will have to halt our
recognized and traditional means of conveying information to people who
want to receive faxes.
To add to our consternation, the Commission initially permitted our
businesses only about six weeks to come into compliance. I know
concerned and agitated business owners and staffers all over the
country besieged the Commission and this Committee about that short
deadline. I know staffers besieged most of our publishers' offices as
our marketing departments envisioned their summer turning into a futile
scramble to obtain these consent forms in time. Fortunately, the
Commission relented and extended the deadline, and then extended it
again.
Now we are staring down the barrel of a July 1 compliance date. And
again, unless we set up costly database and compliance systems, we will
see our use of the fax come to a halt this summer.
This is why we need Congress to pass S. 714--and to move as
urgently as possible. The expense will settle on our balance sheets
this spring, within a matter of days, if action is not taken.
3. The Truth About Junk Fax
All of us have seen our paper and ink go to waste from junk fax,
for things ranging from cruises to low rate mortgages to health
regimens for body parts that we don't all necessarily have. None of us
like it. We may differ in our tolerance for other people using our
machines to convey their commercial messages. But I hear complaints,
and I complain myself from time to time.
However, it is important to remember that the newspapers I
represent, and most of America's small businesses, are not producing
this blitz of fax ads that so irritate us. We use the fax machine as a
convenience and an efficient and urgent tool to communicate information
to people who want it. The FCC's signed consent rule trips us up
without presenting much of a barrier to those irritating blast faxers.
I assume that most of what we are complaining about already falls
into the category of illegal faxes. Certainly, most of what I get comes
from places I never heard of, and certainly not from companies with
which I have an established business relationship. They were illegal
before the FCC acted. They will be illegal after July 1. And they will
continue to flow illegally after July 1, while legitimate commerce
either abandons fax communication or absorbs a major and wasteful cost.
Meanwhile, the junk faxers will continue to pursue their trade.
4. How Newspapers use Faxes
I would like to give this Committee a better sense of how we use
the facsimile machine.
A. Rate Cards and Market Information Requests
We send information about the newspaper and website ad rates to
those who request them every day. These are business requests for
information about our newspaper and website advertising rates,
information about upcoming special sections, market information about
circulation numbers and distribution zones, and more. The signed
consent fax rule would stop our advertising department in its tracks
every day. Maybe every hour. Since more than 80 percent of our revenue
is generated by that department, it's pretty important.
In the past year we ran advertisements for 5,225 different
customers. Some ran only one ad in that year; some ran several each
week. Many times that number of potential customers telephone for
information because they are considering running ads in our market.
Also, many of our customers have multiple decision makers from a local
store, regional headquarters, national headquarters, buying service,
advertising agency, etc. It is no exaggeration to suggest that our
small company would be required to maintain a FAX approval file with
nearly 20,000 FAX numbers if we had to comply with this rule.
These requests require the fax machine. Most advertising decisions
are very time-sensitive. Since customers and potential customers need
information quickly, they routinely ask us to FAX information to them
rather than mail it. That information might be a rate card, information
on a special edition, market demographics, deadline reminders or credit
forms. E-mails sometimes are a nice substitute, but there are many
problems with e-mail attachments. Many businesses still don't have e-
mail, but they all have fax machines. When people request information,
they want a hard copy now, without having to figure out e-mail
attachments.
B. Special Sections
The bread and butter of a community newspaper is its special
section calendar. In that sense, we may be a little like magazines. We
cover the routine city council and school board news, but we also
publish special sections that interest particular segments of our
advertising clients and our subscribers. Our subjects range from bridal
guides to sports reviews, from back-to-school to holiday gifts, from
health and fitness to home and gardens, from economic development to
community heritage.
Among our 5,000-plus customers, many advertise with us only when
one of these sections is available. A bridal shop, for example, could
miss the single best marketing week of the season if it misses out on
our special section announcement. Why do we fax it? Because the
advertisers prefer to receive it that way. They don't have time to
scroll through a hundred e-mails a day, and the mailbox contains a
similar amount of material they don't want. The fax gets to them
quickly and gives them what they need.
C. Advertising Proofs
I know that in Washington, DC, most advertising is created by fancy
agencies that do the work for a fee. In McMinnville, the advertising
agency for most small businesses is the News-Register. A business may
phone and talk out an ad concept by phone, but the owner wants to see
it before it is published--to make changes, sign off, have time to
prepare point of purchase materials that may be integrated with the
newspaper piece.
The fax machine is the only realistic way to get that proof to a
small business. The e-mail route creates many problems with
applications and attachments. We use a sophisticated design program
that few non-advertising businesses keep on their own machines. If we
send them the proof in the native application, they can't open it. If
we send it in Adobe Acrobat, they usually can't edit it, and sometimes
they can't even open it. If they don't have a computer, or their
computer is on the blink, or the guy who usually runs it is gone that
day, they are sunk. So they want a fax. The other choice is for someone
to drive the proof to a customer, but that creates tremendous costs in
manpower and fuel, as in pre-FAX days.
D. Invoices and Bookkeeping
We send monthly statements to our advertisers. Those travel by
mail. Often, however, advertisers call with questions, requests for
adjustments, extra copies and so forth. Those often travel by fax. And
since they concern advertising, I would assume the Commission would
expect us to have consent forms before we sent them.
E. Other Uses
A host of other creative ways are used in small towns to keep
people informed. For example, NNA's member, the semi-weekly Wise County
Messenger in Decatur, TX, has a daily fax newspaper ``Update'' that is
distributed to about 1,000 of its business and residential subscribers,
with news and advertising promotions that break between weekly
editions.
Finally, many of our members provide a public fax service. By that
I mean that they may own the only fax machine in town that is available
for public use. That is critical, particularly for senior citizens who
may not have an office where a fax machine is available. These
newspapers--usually in small towns--permit citizens to come in and use
it as needed. This is a practice that would surely come to an end under
the FCC rule because citizens would not commonly possess the signed
consent forms. The publishers could not risk the liability of improper
use, and they would not want to generate ill will with their customers
by trying to explain all the new rules of faxing.
5. The Compliance Cost
The principal concern with the signed consent rule is the
Compliance cost. I mentioned the size of database we would need to set
up as a tracking system for our group of businesses. While my company
is among the larger ones in the community newspaper industry with about
120 employees, many of NNA's members have fewer than 10 employees.
The Commission has asked us to set up an entire system to interfere
with our busy customers' lives so we can get these forms, and to
repeatedly bother them to keep the forms up to date. I'm going to
borrow from my colleague, Cheryl Kaechele, who described the burden of
compliance last summer when she testified before the House of
Representatives about this rule.
``Here is what I believe most of my publisher colleagues would
have to do, in order to comply with this rule:
1) Acquire or upgrade a database program;
2) Mail out, or hand carry, several thousand consent forms;
3) Explain over and over, at the post office, at the golf
course, at church, standing in the school parking lot, that,
yes, we really must have these forms back;
4) Send someone out again to get some of them back;
5) Send someone out yet again to get some of them back;
6) Explain over and over on the phone, `no, we can't fax you
the ad rates, because you forgot to send your form back;'
7) Apologize to an irate customer, while standing in the post
office or in the school parking lot;
8) Send someone out still again to get some of them back;
9) Hire someone to file them, make a note of them in the
database, and remember to check them periodically to make sure
nothing has changed; and then . . .
10) Send someone out again to get new forms back.
``You get the picture. It is going to require, in all
probability, hiring someone to do this work. Or it will require
shifting someone from selling ads or writing stories to take on
this new task.'' (Testimony of Cheryl Kaechele, Publisher of
Allegan County (MI) News, before the House Subcommittee on
Telecommunications and the Internet, June 15, 2004.)
Really, what Cheryl is saying, is that the FCC is requiring us to
spend a lot of time and money, and our customers' time and money,
getting customers to do what they don't want to do--drop everything to
sign yet another form. And for what? To stop junk fax? It won't stop
junk fax. But it would hurt a lot of small businesses.
NNA doesn't do a lot of survey work. Our association is small, and
surveys can be quite costly. But we did ask members to give us a sense
in 2003 of the cost they anticipated for compliance. Most of them told
us they would be spending the equivalent of a half-time staff position
to comply. This is a cost, for many small weeklies, that makes the
difference between a profitable year and a loss.
6. The Threat of Litigation
One of the most awesome and harmful aspects of the signed consent
rule is the obvious threat that it leaves hanging over every small
business. Fax numbers change. We may forget to file a form, or lose it.
Someone with apparent authority to sign a form might never tell the
boss, and then resign without our knowing the situation has changed.
What is probably most worrisome to those of us in the journalism
business is that people can change their minds about us overnight
because of something we wrote.
Certainly, we comply today with do-not-call and do-not-send
requests. We get very few. And 99 percent of the time, we know for a
fact that the faxes we send are going to people who want them. But in
that troubling 1 percent margin of error may lurk the angry politician
or community activist who disagreed with something I wrote in an
editorial--and suddenly spies a fax from our marketing department on
the table. Aha! Maybe we don't have the signed consent form. And here
comes a lawsuit. Will we have the form? Will we find it in time? Will I
have to pull Marketing off their campaign of the week to prepare a
defense? And if we've messed up that time, will we pay, even though we
know--and the recipient in all honesty knows--the issue isn't about the
fax at all? If you think that doesn't happen to newspapers, come sit in
my office for a day when there is a local zoning dispute or
controversial referendum on the table.
7. S. 714 Takes a Sensible Approach.
This bill gives us some breathing room and restores the sensible
flow of commerce on the fax machine.
It recognizes the importance of established business relationships.
It requires us to tell customers how to stop future faxes from
coming.
It makes us responsible to demonstrate that we had the consent to
send, should a dispute arise--as we have that responsibility today.
It tasks the regulators with looking closely at where the real
problem comes from. I don't think the FCC will decide, if it looks
closely, that most of the junk fax is coming from us, or any other
business that expects to maintain a solid relationship with its
customers. Like spam, it comes from those who use the new technologies
of our age to latch onto the low barriers to entry in business. They
are trying to make a buck without going to the trouble of building a
respectable business around respectable business practices.
As an Internet company owner, I can assure you that efforts to stop
spam by regulating our responsible use haven't made a dent in that
practice. The signed consent rule will do no better with faxes. The
solutions are found in transparency, sound enforcement, and education
of consumers on how to do business with people they can trust. When
spam and junk fax cease to be profitable, they will cease to exist.
Congress can do a lot to improve the transparency and sound
enforcement. S. 714 takes a solid and sound step in that direction, and
I am delighted to declare the support of our organization for it. We
look forward to working with this Committee for quick passage of this
legislation.
Senator Smith. Thank you.
I notice that a vote has started, so we can either try and
finish with our witnesses----
Senator Boxer. Let's try to finish.
Senator Smith. OK.
Mr. ``Fakeen''--did I pronounce that correctly?
Mr. Feeken. ``Feeken.''
Senator Smith. ``Feeken,'' I'm sorry.
STATEMENT OF DAVE FEEKEN, BROKER, RE/MAX; ON BEHALF OF THE
NATIONAL ASSOCIATION OF REALTORS <SUP>'</SUP> (NAR)
Mr. Feeken. Thank you.
Senator Smith and Members of the Committee, my name is Dave
Feeken. I'm a broker of a RE/MAX real-estate office in Kenai,
Alaska. Our office is both a residential and commercial office.
I am here representing the National Association of Realtors.
NAR is the Nation's largest trade association, with 1.2
million members. Our members include brokers, sales people,
property managers, and other professionals engaged in every
aspect of the real-estate industry.
I appreciate the opportunity to share our thoughts
regarding The Junk Fax Prevention Act of 2005, and commend the
Committee for its leadership in recognizing that the Federal
Communications Commission's revised rules governing the use of
facsimile transmissions are a radical departure from current
practices, and would significantly interfere with day-to-day
business activities.
First, let me say that NAR's members understand and
strongly support the goals of the Telephone Consumer Protection
Act. Realtors, themselves, are the recipient of unsolicited
faxes that tie up our business fax machines. We understand the
problem this legislation is intending to address. NAR does,
however, question the need for the change that the FCC has made
to the TCPA rules.
The prior rules, with its established business relationship
exception, has worked well over the past 12 years. In reversing
its rule, the Commission could not measure the extent to which
consumer complaints received were, in fact, the result of faxes
sent as the result of the established business relationship,
except as opposed to those sent in violation of the underlying
ban on faxes sent outside of an EBR. However, it is clear that
the Commission's revised rules to address unsolicited faxes
would have the unintended consequences of interfering with
solicited faxes.
Despite all the advances in technology, the process of
buying and selling real estate is still dependent upon faxes.
And while faxes most commonly used today are to facilitate the
paperwork associated with a home sale, faxes are also used in
ways that could be construed as advertisement or solicitation,
and would, therefore, meet the FCC's definition of an
unsolicited fax.
Let me give you an example or two. Real-estate
professionals use faxes to communicate quickly and
inexpensively with consumers who have contacted them. Take the
case of a homeowner looking for an agent to help them sell
their home. After an initial phone call, an agent could offer
to prepare a comparative market analysis for a seller's review.
This CMA provides comparative listing data on other homes on
the market, describes what the agent will do to market the
home, and proactively solicits the listing. These CMAs are most
often faxed prior to a face-to-face meeting. Under the revised
rules, faxing this presentation would not be permissible
without prior signed permission.
Real-estate brokers and agents also use faxes to send home
listing information directly to potential buyers who request
it. Under the revised rules, the real-estate agent could no
longer followup on callers' requests for information on homes
on the market with a fax of available properties. In a tight
housing market, and those of you who live in this market know
what a tight housing market is, the delay caused could have--in
obtaining the written permission or mailing the information,
could mean the difference between a buyer successfully
purchasing a home, or not.
Consider, too, how awkward this scenario would be when a
potential customer calls and asks for information on a home for
sale. As I've said, under the revised rules the agent would not
be able to fax the information requested. Instead, the agent
would have to explain why they can't fax the info, direct the
consumer to a Website where they can provide there required
written consent, or ask for an address so the agent can mail or
courier the information, along with the consent form for future
use. This will create frustration, suspicion, and, in some
cases, ill will. This will be a giant step backwards in a
business where good customer service depends on quick
turnaround.
And while I was asked to speak to the use of faxes in
communications with consumers, I also must point out that
organizations like NAR and its state and local associations
routinely use faxes to communicate with members. Those faxes
inform members about classes, products and services available
to them, often at the member's preferred price. Once again,
since these opportunities are available for a fee, these faxes
would meet the definition of an unsolicited fax.
The FCC has argued that obtaining written permission to
faxes is not difficult. We disagree. Each of the means provided
by the FCC for obtaining written permission--face-to-face
meetings, direct mail, and e-mail with electronic signature--
presents a challenge for the consumers and the real-estate
professionals. Interestingly enough, the one technology which
is fast, inexpensive, and widely available is not an allowed
means of distributing or returning permission forms. That
technology is fax. In discussing the FCC, staff has indicated
that faxing the permission form would not be allowed, since the
form could be construed as a solicitation for which written
permission is needed.
Finally, we would like to have been able to quantify for
you the likely cost of compliance with the revised FCC rule.
Unfortunately, though, we are unable to predict how more than
1.2 million Realtors, approximately 12 million home sellers and
home buyers, would have interacted if the revised rules had
been in place last year. In our written testimony, however, we
presented some conservative, simple assumptions. We estimate
that a minimum of over 66 million written permissions would
have been required to sustain last year's roughly six million
home sales, 66 million forms that would have had to have been
printed, sent, collected, and stored on the residential side of
the real-estate business, alone. Obviously, the dollar costs
involved in the preparation, distribution, and management of 66
million forms would be sizable. As a result, NAR believes that
it is critical that the established business-relationship
exemption, which has functioned well since the FCC first issued
rulings to implement the TCPA some 12 years ago, be
reestablished, and that alternative means of giving consent be
allowed. We believe that narrowly crafted technical-correction
language of The Junk Fax Act can rectify the problems created
by the new rules and continue protecting consumers from
unwanted faxes that are already prohibited by the TCPA.
We look forward to working with you and achieving this end
and thank you for the opportunity to testify.
[The prepared statement of Mr. Feeken follows:]
Prepared Statement of Dave Feeken, Broker, RE/MAX; on Behalf of the
National Association of REALTORS <SUP>'</SUP> (NAR)
Chairman Stevens, Ranking Member Inouye, Senator Smith and Members
of the Committee, the National Association of REALTORS <SUP>'</SUP>
(NAR) appreciates the opportunity to share its thoughts regarding S.
714, the Junk Fax Prevention Act of 2005. NAR is the Nation's largest
professional trade association with over a million members who belong
to over 1,500 REALTOR <SUP>'</SUP> associations and boards at the state
and local levels. NAR membership includes brokers, salespeople,
property managers, appraisers and counselors as well as others engaged
in every aspect of the real estate industry.
NAR commends the Committee for its leadership in recognizing that
the Federal Communication Commission's (FCC) revised rules governing
the use of facsimile transmissions are a radical departure from current
practice and would significantly interfere with day-to-day businesses'
activities and impose a costly new compliance burden on business of all
types.
NAR understands the goal of Congress in enacting the Telephone
Consumer Protection Act (TCPA) was to protect consumers' privacy
expectations to not be bothered by unwanted faxes. As business people
and consumers, REALTORS <SUP>'</SUP> are often the recipients of
unsolicited faxes that tie up the fax machines vital to their real
estate practices. We strongly support, therefore, the goals of the TCPA
and believe that the law's provisions banning unsolicited faxes are
appropriate. We also appreciate the FCC's efforts to craft rules to
effectively implement the law and the Commission's willingness to meet
with NAR leaders as we have worked to understand the new fax
requirements.
We do, however, question the need for the changes that the FCC has
made to the rules governing the fax provisions of the law. The prior
rules, with an established business relationship (EBR) exception for
faxes sent by firms to established clients and allowances for
alternative forms of permission, have worked well over the past 12
years since implementation. The prior ruling created settled
expectations among consumers and businesses alike.
Now, however, it is also very clear to us that the Commission's new
rules intended to stop unsolicited junk faxes will have the unintended
consequences of interfering with solicited faxes. In the case of the
real estate industry, for example, faxes sent in response to a consumer
inquiry or in the course of normal business and desired by the
recipient (consumer, agent or firm) will no longer be allowed. In
addition, these new rules will also interfere with the NAR's and its
state and local associations' abilities to satisfy members'
expectations regarding communications and service.
As a result, we believe that it is critical that (1) the
established business relationship (EBR) exception which has functioned
well since the FCC first issued rules to implement of the TCPA some 12
years ago be reestablished and (2) alternative means of giving consent
be allowed. These two actions are necessary so that communication with
existing clients and those who have inquired about a good or service is
not subject to overly burdensome and disruptive regulation.
We believe that narrowly crafted, technical correction language
such as is being considered by the Committee in the Junk Fax Prevention
Act of 2005, can rectify the problems created by the new FCC rules
while at the same time continuing to protect consumers and businesses
from unwanted faxes that are already prohibited by the TCPA.
Background
The Telephone Consumer Protection Act (TCPA) of 1991 prohibits the
use of any telephone facsimile machine, computer or other device to
send an ``unsolicited advertisement'' to a telephone facsimile machine.
An unsolicited advertisement is defined ``as 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.'' \1\
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\1\ 47 CFR Sec. 64.1200(f)(10).
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When first implementing the new law in 1992, the Federal
Communications Commission determined that an established business
relationship constituted express invitation or permission to receive an
unsolicited fax. As part of its July 2003 Do-Not-Call (DNC) rulemaking,
the FCC revised that interpretation.
In reversing its long-standing rule, the FCC determined that the
TCPA requires a person or entity to obtain the express invitation or
permission from the recipient before transmitting any unsolicited fax
advertisement. This express invitation or permission must be in writing
and include the recipient's signature. The recipient must clearly
indicate that he or she consents to receiving such faxed advertisements
from the company and the individual within the company to which
permission is given. Furthermore, the consent form must specify the
individual and the fax number to which faxes may be sent. The
permission form cannot be faxed to the recipient or submitted via fax
to the entity to whom permission to fax is granted. \2\
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\2\ 2003 Report and Order, In the Matter of Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, CG Docket
No. 02-278 para.191 (rel. July 3, 2003) (``2003 Report and Order'').
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The Importance of Faxed Information to the Real Estate Industry
Despite all the advances in communication technology, the process
of buying and selling a home is still heavily dependent on the ability
to send and receive faxed information. Consequently, real estate
brokers and agents use facsimiles regularly to communicate with other
real estate professionals, settlement and other service firms, as well
as with both home buyers and sellers.
The most common use of fax by the real estate sales industry today
is to facilitate the completion of the paperwork associated with the
sales transaction, i.e. offers to purchase, counteroffers, disclosure
forms, etc. While these transactional faxes seemingly would be exempt
from the new rules, faxes are also routinely used for purposes that
would unfortunately meet the current definition of an ``unsolicited''
fax.
Business to Business Faxes. Real estate sales agents and brokers
commonly use facsimiles to quickly share new property listings with
other real estate professionals who are active in a given market and
may have clients interested in purchasing a newly listed property. In a
survey of members of NAR, REALTORS <SUP>'</SUP> also indicated that
faxes are commonly used to inform other real estate professionals of
price reductions on a property that had been viewed by that agent's
clients or the time and date of open houses for newly listed homes.
Such faxes communicate valuable market information that benefits
recipients and their clients in a manner that is both timely and cost-
effective.
Business to Consumer Faxes. Real estate sales professionals also
use faxes to communicate in a quick and cost-effective manner with
consumers who are looking to sell or buy a home.
When selling their home, most homeowners contact a real estate
professional or a number of agents about listing the house. In response
to the inquiry, an agent will typically prepare a comparative market
analysis which (1) describes what the agent would do to market the
home, (2) provides comparable listing data on homes currently on the
market so as to begin discussion about a possible listing price and (3)
proactively solicits the listing.
In those situations where time is of the essence, this comparative
analysis is faxed to the seller for review prior to any face-to-face
meeting. In some cases, such as the sale of a resort or inherited
property, a face-to-face meeting may not even occur due to time or
distance constraints. In all cases, this informational exchange takes
place prior to any formal business agreement, i.e. listing agreement,
which could provide a vehicle for the necessary written permission to
fax. Under the new rules, faxing this listing presentation or even
comparative listing information would not be permissible without prior
signed permission.
Real estate brokers and agents also routinely use faxes to send
house listing information directly to potential buyers who may request
it by telephone, but with whom the agent has not yet entered into a
formal representation agreement. Under the new rules, a real estate
professional could no longer share new listings or follow-up a
telephone, personal or even Internet-delivered inquiry with targeted
research via fax. Consequently, the new rules meant to deal with
unsolicited faxes would have the unintended effect of interfering with
solicited faxes.
In a tight housing market, the delay caused by having to obtain
written permission from a potential client or another real estate
professional before the relevant house listing information is sent
could mean the difference between a buyer getting a house they want or
losing it.
Consider too how awkward this scenario would be when a potential
customer calls and asks for information on a home for sale. Under the
new rule, the real estate professional would not be able to fax the
information requested. Instead the agent or broker will have to explain
why they can't fax the information, direct the consumer to a website
where they can obtain a form to provide the required written consent or
ask for an address so the real estate professional can mail or courier
the information along with a consent form for future use. This will
create frustration, suspicion and, in some cases, ill-will. This would
be a giant step backwards in a business where good customer service
depends on quick turnaround.
REALTOR <SUP>'</SUP> Association to Member Fax. Similarly, NAR and
its state and local associations routinely use facsimiles to
communicate quickly and efficiently with members. These faxes inform
members about upcoming continuing education classes, meetings,
seminars, products, services, and membership renewal. This is
information that members not only expect, but for which they have paid
NAR, state and local associations dues to receive. Once again, many of
these faxes will meet the definition of unsolicited fax advertisements
and could not be sent under the new FCC rules.
The Feasibility of FCC-Suggested Means of Obtaining Permission
The FCC has argued that obtaining written permission is not a
difficult thing to do. We disagree. A close examination of the methods
proposed by the FCC for business to obtain consent--``direct mail,
websites and interaction with their customers in their stores''--points
out the hurdles unanticipated by the FCC that will be encountered by
the real estate professional.
Face-to-Face Meetings. As our previous examples indicate, face-to-
face meetings are not the norm and are sometimes impracticable prior to
the need/desire to fax. Unlike the corner grocery or neighborhood
restaurant, consumers do not regularly visit their local real estate
firms' offices. (Most consumers engage in a real estate transaction
every 7 years.) Consequently, most real estate practitioners will not
have a consumer's permission to fax on file when a request for
information is received.
A face-to-face meeting will require a special trip that takes time
and incurs some travel expenses. At a minimum, these costs will
increase the cost of a transaction that will be absorbed by the agent,
real estate firm or consumer. At its worst, a face-to-face meeting will
be impossible, e.g. where an owner lives out of the area as is commonly
the case in a resort market or when property is inherited.
Courier. A permission form could be hand-delivered to a potential
fax recipient via courier or messenger service. This is an expensive
means of delivery and would be impracticable from a cost perspective
for all but a very small number of transactions or those transactions
with an assured outcome. Real estate professionals commonly respond to
large numbers of customer requests for information--only one in twelve
contacts eventually results in a home sale and compensation. Delivering
and collecting permission via courier or messenger would be cost
prohibitive for most real estate practitioners.
Mail/Overnight Delivery. Using an overnight service will have the
same cost drawbacks as a courier service. Both regular and overnight
mail will suffer from the additional problem that an interested
customer will have to wait 24 hours or more before the information that
they requested can be delivered. In our ``instant gratification''
world--and an industry where quick customer service can be the
difference between gaining a new customer or not--the inherent delayed
delivery of materials would make this a very unattractive approach.
Internet/E-Mail/Electronic Signature. Despite the rapid adoption of
the Internet and e-mail, there are still significant numbers of
households--including underserved minority, immigrant and low-income
populations, etc.--with limited or no access to the Internet, e-mail or
the technology which would allow them to access, let alone sign, an
electronic document. Additionally, not all states have enacted
legislation that allows for the electronic signature of documents.
Electronic delivery, therefore, is seriously limited in those markets
where real estate professionals serve a population with limited access
to this means of access or without the appropriate state enabling
legislation.
Fax. We would point out that faxing a permission form to a consumer
would be a quick and inexpensive way to disseminate the form and
receive permission. However, in discussions held with the FCC staff on
this matter and in its written guidance, the FCC has indicated that
faxing a permission form would not be allowed since the form itself
could be construed as a solicitation or advertisement. \3\ Likewise, a
faxed permission form with a signature would not provide the necessary
written permission because the signature is not considered a valid,
original signature in some jurisdictions.
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\3\ 2003 Report and Order, para. 191.
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Faxes have been used by the real estate industry to deliver
information to consumers and other real estate professionals because of
(1) the speed of delivery and (2) the minimal cost associated with that
speedy transmission. While it is possible to use one of the FCC
recommended means to obtain written permission, doing so will result in
delay, increased costs and the very real possibility that the window of
opportunity to purchase a given property will be lost. It is hard to
imagine that these new rules will not impede the ability of real estate
professionals to quickly and efficiently help homebuyers and seller
complete a real estate transaction.
The Magnitude of the Resources Needed for Compliance Purposes
While the cost of obtaining a signed permission in any one instance
may not seem significant, in the aggregate, the magnitude of the new
paperwork required to obtain written permission and the cost of
delivery (e.g. courier, overnight, or mail) required by the new rules
are sizable. For example, if the new rules had been in place for 2004,
NAR estimates that roughly 66 million permission forms would have to be
printed, circulated, processed and stored in the first year by the real
estate sales industry in order to comply with the new written
permission requirements. This total breaks down as follows:
Agent to a Consumer. Last year, approximately 6 million homes
changed hands. If we make a conservative assumption that each seller
requested information from two potential listing agents that would
typically be faxed today and each buyer received two faxes from two
different agents during their home search that were subject to the new
rules, then approximately 24 million faxes would have been sent and 24
million signed permission forms would have been required before those
faxes could be sent. Those 24 million permission forms would have to be
printed, delivered to the consumer by some means at a cost, returned to
the agent also at a cost, filed and stored.
This estimate does not account for the fact that many families shop
for a new home each year without purchasing a home. Consequently, the
estimate of 24 million permissions required is a significant
underestimate of the volume of permission forms that would in fact be
generated by the industry acting to comply with the new rules.
Agent to Agent/Real Estate Firms. According to our surveys, faxes
are typically used by real estate professionals to advertise open
houses, announce new property listings and changes in asking prices for
listed homes. To estimate the number of permissions needed to
facilitate faxes for these purposes, we can conservatively assume that
each of our 1.2 million, self-employed members will want to fax, at one
time or another, to at least ten real estate firms/offices, ten
individual agents home offices, five settlement service providers and
five general business service providers. Thirty million six hundred
thousand permissions, therefore, would need to be gathered to allow for
unfettered faxing between real estate professionals and the other real
estate professionals and firms with which they work.
Given that the real estate sales population changes significantly
from year to year as new agents enter the industry, others leave the
business, and fax numbers are changed and added, the need to seek
permissions will be an ongoing yearly effort. Consequently, the 30.6
million estimate will be a first year figure that will be added to each
year as new permissions are needed to stay current of all the changes
that have ensued.
Real Estate Firms to Agents/Other Firms. In addition, the Nation's
93,000 real estate firms, as legal entities distinct from their
independent contractor agent sales force, would also need to obtain
permission to fax to real estate professionals and other firms.
Assuming that each firm will have the need to fax to ten other real
estate firms, thirty agents, twenty settlement service providers and
twenty other general business service firms, the number of permissions
required to support the current level of fax activity that is accepted
as common practice would total 7,440,000. Again, this figure is a first
year estimate that will need constant updating to account for changes
in the industry players and fax numbers.
REALTOR <SUP>'</SUP> Association to Member. In order for NAR and
its state and local associations to continue to fax their 1.2 million
members, an additional 3,600,000 signed written permission forms would
be generated. REALTORS <SUP>'</SUP> do not join just the national
association but join their state associations as well as their local
associations. Hence, the need for 3.6 million separate permission forms
to be circulated, complied, maintained and checked prior to any
communications via fax would be created. We would anticipate that this
would be an annual exercise in which each of our associations would
engage.
A Final Thought. It is important to recognize that each of the
forgoing estimates of numbers of permissions to fax that would be
required to comply with the FCC's new fax rules are only one part of
the cost equation. We have not attempted to estimate the dollar cost of
obtaining each of these permissions and maintaining the resulting
records since to do so would require a level of detail that we do not
have available to us. However, it is clear that given the shear
magnitude of the numbers involved and the costs of preparation,
distribution, and management of the resulting paperwork that the costs
will be substantial.
Compliance Cost vs. Benefits Achieved
As we have illustrated, the costs associated with the elimination
of the EBR and alternative means of granting permission to fax are
enormous. This new burden is created despite the fact that the
Commission's do-not-fax rules have worked for over a decade. In
reversing the 1992 decision, the Commission did not note any consumer
complaints that were a result of the established business relationship
rule. Indeed, there is scant evidence of harm to justify the
Commission's abrupt change.
Though there is not evidence of harm that needed to be fixed by
eliminating the EBR exception or alternative means of giving permission
to fax, there is evidence of over 10 years of business expectations in
reliance on that exception. NAR, real estate professionals, and
entities in countless other industries implemented a practice of
routinely faxing information regarding products and services to other
entities with which they have an established business relationship.
Accordingly, while the compliance costs of the new rule in the
aggregate would be quite high, the benefits would be minimal. The faxes
sent by and received by real estate agents are faxes which facilitate a
business transaction. These are not the type of ``junk'' faxes that the
TCPA and Commission rule were designed to prohibit. But the
Commissions' revised rule for the first time covers all faxes,
including those integral to existing and new business relationships in
the real estate market.
A Solution to the Problems Created by the New Fax Rules
NAR believes that the established business relationship exception
to the TCPA rules should be reestablished and that other forms of
consent should be allowed.
In the matter of the EBR exception, NAR believes that the
Commission correctly analyzed consumer expectations and the affect
privacy interests in its 1992 rulemaking: ``a solicitation to someone
with whom a prior business relationship exists does not adversely
affect subscriber privacy interests.'' \4\ Also, the Commission
prudently found that the standards for a telephone solicitation and
faxed advertisement should be the same and thus exempted established
business relationships from both sets of rules.
---------------------------------------------------------------------------
\4\ 1992 Report and Order, In the Matter of Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, 7 FCC Rcd
8752, para. 34 (rel. Oct. 16, 1992)(CC Docket No. 92-90) (``1992
Report'')
---------------------------------------------------------------------------
With respect to the allowance for means of permission beyond
express written permission, NAR believes that consent should be allowed
that is:
<bullet> faxed;
<bullet> provided electronically (whether by a web-based ``click-
through'': or in an e-mail);
<bullet> orally (in person, by telephone, or in a telephone message);
or
<bullet> by automated means (in response to an automated fax-on-
demand phone system by which the caller can request faxed
information).
Written signed consent is unnecessary and imposes a requirement far
out of proportion to the harm it seeks to address, and thus contradicts
the intent of Congress in adopting the TCPA. The legislative history
shows that Congress considered imposing a written requirement and
decided against that high threshold of consent. The House Report
accompanying the TCPA states that Congress ``did not see a compelling
need for consent to be in written form. Requiring written consent
would, in the Committee's view, unreasonably restrict the subscriber's
rights to accept solicitations of interest and unfairly expose
businesses to unwarranted risk from accepting permissions or
invitations from subscribers.'' \5\
---------------------------------------------------------------------------
\5\ H.R. 102-317, at 13 (1991). Though this statement was made in
the context of telephone solicitations, the same rationale applies
equally to the fax context.
---------------------------------------------------------------------------
The Senate Report is equally on point. The Senate bill as
introduced contained the phase ``express written consent'' in the
context of telemarketing, but dropping the requirement that consent be
written was one of three changes the Senate Committee made before
favorably reporting the bill. The Committee justified its decision to
drop the written requirement because the Committee found that mandatory
written consent was ill-suited to the interests of consumers and
sellers. \6\
---------------------------------------------------------------------------
\6\ S.R. 102-178, at 5 (1991).
---------------------------------------------------------------------------
A written consent requirement also is contrary to the Commission's
telemarketing rules. Those regulations exclude from the definition of a
telephone solicitation any call concerning the sale of goods or
services in response to an individual's inquiry, when the individual
would be expecting such a call. \7\ In contrast, the fax advertising
rules not only specify that a fax sent in the same situation is an
``unsolicited advertisement,'' but actually prohibit such a fax.
---------------------------------------------------------------------------
\7\ 2003 Report and Order para. 114.
---------------------------------------------------------------------------
This is problematic for two reasons. First, classifying a telephone
call made in response to an inquiry as not a solicitation, but a fax
sent in exactly the same circumstances as an unsolicited advertisement
is confusing, contradictory, and arbitrary since the terms
``solicitation'' and ``advertisement'' have the same meaning. This is
particularly the case since, under the plain meaning of the term, a fax
is not unsolicited if the recipient has made a request for the
information and there are numerous other ways to invite or permit a fax
other than by providing prior written and signed consent.
Conclusion
In conclusion, we want to thank the leadership of the Commerce
Committee for the opportunity to share the views of the National
Association of REALTORS <SUP>'</SUP> on the need for Congressional
attention to the problems faced by the real estate industry as the
result of the new fax regulations that will take effect January 1,
2005. We strongly believe that consumers looking for new homes and
rental units will be disadvantaged by the new regime as will real
estate professionals and firms. We urge you to take action to create
the statutory authority for an established business relationship
exception needed by the FCC to allow the EBR exception that has served
consumers and businesses well for over a decade and clarify once again
that permission can and should be allowed to be granted by means other
than express written permission.
Senator Smith. Thank you, Mr. Feeken.
Steven Kirsch?
STATEMENT OF STEVEN T. KIRSCH, FOUNDER/CHAIRMAN, PROPEL
SOFTWARE CORPORATION
Mr. Kirsch. Thank you, Mr. Chairman, for allowing me to
speak with the Committee on my perspective on this very
important piece of legislation.
I'm here representing the people who hate junk faxes, and
there are over 200 million of us. There's only one real point
of contention here, and that's whether to add an EBR exemption
to the junk fax statute. The other witnesses have testified on
the written consent issues, and we totally agree, that's not a
problem, we should do that. But I'm here to talk about that
EBR. And I'd like to give you compelling evidence, contrary to
what you've heard from others, that adding an EBR exemption for
junk faxes is something that should not, and must not, be done;
not for my sake, but for everyone's sake, including the
sponsors and including the gentlemen here.
For example, I get a ton of unwanted junk mail in my
mailbox every day from companies I've done business with in the
past. You probably do, too. You know, suppose you write a law
that forced me to pay both postage and printing costs for this
advertising until such time as I notified each one of these
businesses to stop? That way, all of these businesses could
send me stuff that I don't want at virtually no cost to them,
and force me to pay for it until such time as I got mad enough
to write them each a letter to stop. How many of you would vote
for such a bill? Well, I hope that nobody would, but that's
exactly what you're being asked to do here today.
Never before in the history of this country has it been
legal to use another man's printing press and ink to print your
advertising at the other man's expense and without his
permission. But that is exactly what this bill proposes to do.
The sponsors have proposed putting the EBR exception,
``back into the TCPA'' in order to, ``restore the status quo,''
and, ``avoid a harsh impact on business communication without
providing any tangible benefit to consumers.'' That's plain
nonsense. It's utterly false. And the facts unambiguously show
that exactly the opposite is true. An EBR exemption is
completely unnecessary. And if you do put an EBR exemption in,
you will impose a harsh impact without any benefit.
The facts and the record show the following. Number 1,
there never was, and there never has been, an EBR exemption for
junk faxes. The EBR was deliberately removed from the TCPA
before its passage in 1991. Number 2, there are no court cases
that I'm aware of that have determined that there ever was a
legal EBR exemption. Number 3, it's an undisputed fact that
there never was, and never has been, an FCC regulation
authorizing EBR for junk faxes. It's simply ain't there, folks.
It's a matter of public record.
There is no evidence that the TCPA, which never had an EBR,
is not working well. This was admitted by the Fax Ban Coalition
and in the testimony of NAR given today. For example, NAR has
over one million members. They admit that they fax their
members all the time. Their members fax other members. Their
members fax their clients. Yet there are no known cases of the
NAR or a real-estate agent having been sued for any legitimate
business-related faxes.
So your primary witnesses, the country's leading trade
organization, which extensively uses faxes, is telling you it
hasn't been a problem. It's only the written part that's been a
problem. So if it hasn't been a problem, why do we need to fix
it? In fact, we know the EBR exemption has never been necessary
for the smooth functioning of business, because it's been there
for 14 years, and nobody ever complained. In fact, hardly
anybody even noticed. Furthermore, there's not a single company
in the world that requires an EBR exemption to do legitimate
business. Can you name one?
The only use of an EBR exemption is to allow advertisers to
send junk mail that people don't ask for. For example, NFIB has
never been sued for sending legislative updates to their
members by fax. That's why their members joined. But then NFIB
faxed a five-page unsolicited ad to sell insurance to their
members, they were sued, and they had to pay a whole $575 fee.
The court said, in no uncertain terms, that there was no EBR
for faxes. NFIB broke the law, because they broke their
covenant with their members, who wanted legislative updates and
not advertising. They can still fax their legislative updates
to their members. That has never been regulated under the TCPA.
Mr. Bladine's communications have not been regulated. Mr.
Feeken, his--faxing of his presentation would not be permitted?
That's not true. It's not even regulated under the TCPA. The
point is--I mean, they just can't send ads by fax without
asking first. It's simply good business practice. And it's also
something that's very easy to do.
Let me give you another scenario. I can call a RE/MAX
realty office and ask for information on listings and other
services. That creates an EBR with me and RE/MAX. If this bill
passes, I would legally be able to send junk faxes to every RE/
MAX fax machine in the country advertising my anti-spam
products, or anything else, for that matter. And I'd do so
until each individual RE/MAX office tells me to stop. That's
not cost free. That's not opt out at no cost. There's a lot of
effort involved in opting out. That is what this EBR exemption
in this bill will permit.
In addition, if you institute an EBR you're going to cause
everyone a lot of work for no benefit, and you're going to open
the flood gates for adverse consequences. I've surveyed many
people, and every single one of them would opt out of virtually
all unsolicited advertising sent to them by fax, whether it is
from businesses they know or don't know. And I would encourage
you all to go do the survey yourself. Why force everyone to
jump through a hoop to get rid of something that they never
wanted in the first place? I mean, why force businesses to have
to create 800-numbers and data bases and all those opt-outs
that they don't have to do today? What's the point of that?
In conclusion, everyone agrees that TCPA has generally been
an extremely fine piece of legislation, because it succeeded in
striking a reasonable balance between the wanted content and
allowing that, or restricting the unwanted content. We all
recognize the need to relax the in-writing requirement that the
FCC has attempted to add to the regulations, and I agree with
my fellow witnesses here, but there is no need for a new EBR
exemption to be added. Any changes that you do to the TCPA
should be done very carefully, and only if they're absolutely
necessary. No company in the world needs an EBR exemption to
send legitimate faxes to do business; however, it is
reasonable, but it is not required, to add a special opt-out
for membership organizations to send faxes to their members.
And I have suggested suitable language in my written comments.
Thank you, and I would be delighted to take any questions.
[The prepared statement of Mr. Kirsch follows:]
Prepared Statement of Steven T. Kirsch, Founder/Chairman, Propel
Software Corporation
Thank you Mr. Chairman for allowing me to speak with the Committee
on my perspective on this very important piece of legislation.
Everyone recognizes the need for legitimate businesses to send
legitimate business communications to their customers without fear of
being sued. With recent contemplated rule changes by the FCC, this
ability has been placed in jeopardy and needs to be fixed.
This bill seeks to solve that problem by doing two things: (1)
clarifying that permission to send unsolicited advertisements can be
granted verbally and (2) adding a new exemption to the law to allow
businesses that I have an Established Business Relationship (EBR) with
to send me junk faxes without my consent until I tell them to stop.
The first thing is an excellent solution. The second is not.
Unfortunately, adding an EBR exemption, while well intentioned and
while solving one aspect of the problem, is completely unnecessary. It
will actually hurt legitimate use of the fax machine for businesses
because as written, the bill is so broad that it permits fax
advertising practices that legitimate businesses don't use and thus
permits abuses that will make legitimate faxes less useful the way spam
e-mail makes legitimate e-mail less attractive. It creates a whole host
of new problems and adds new burdens and costs. It's like ``whack-a-
mole''. . . solve one problem, create 10 or 20 more. Congress has
better things to do than solve the same problem over and over and over
again.
A better approach is simply to clarify the terms in the TCPA to
reflect the original intent and current business practice. This solves
the problem and restores the status quo without imposing new burdens or
introducing any unintended consequences.
Adding a new EBR Exemption Solves one Problem but Creates Many More
Contrary to popular belief, there has never been an EBR exemption
to the TCPA.
Although the FCC did erroneously interpret the law this way, the
courts have never adopted this interpretation and Congress never
intended such an exemption. Since the enactment of the TCPA, I have not
been able to locate a single court case where such an exemption has
been upheld. In addition, businesses have been acting consistent with
Congress' intent and the court's interpretation as well. For example,
there is not a single public company that I am aware of that sends junk
faxes to their customer base. And there is certainly no company in the
United States that needs to have an EBR exemption to send junk faxes in
order to conduct business.
Therefore, adding a new EBR exemption to the TCPA as currently
proposed in this bill, is not only completely unnecessary, but it is
also counterproductive for the following reasons:
<bullet> It would dramatically increase the amount of junk faxes I
get by an unpredictable amount. NOBODY I know wants to get more
junk faxes.
<bullet> It would increase my costs since I would bear the cost
having to opt out of each and every junk fax and keep records
and receipts of each request. In short, Congress would be
imposing a huge, unwanted cost burden on all recipients of this
advertising. All the recipients would be forced to incur costs
for something that they never wanted in the first place.
<bullet> It would also increase the burden on every sender who would
then be responsible for setting up a toll free opt out number
and keeping track of all opt out requests. The record keeping
burden of the advertiser would actually increase under this
proposal as the sender would now have to track both opt in and
opt out requests.
<bullet> It would increase the legal liability of the sender since
the database of opt out numbers would be close to 100 times
larger than having to maintain an opt in database. Any typo,
omission, or mistake in the opt out database required by this
law could generate a lawsuit. So lawsuits against businesses
are 100 times more likely under the opt out rules required by
this legislation. That's not a guess; it's a mathematical
certainty.
<bullet> It opens up the door for legalized abuse via the
``unintentional EBR'' that I describe below creating an
unpredictable torrent of junk faxes that would then be legal
but completely unexpected and unwanted.
<bullet> I've surveyed many people chosen at random and every single
one of them would opt-out of virtually all unsolicited
advertising, whether it is from businesses they know or do not
know.
The bottom line is this: adding a new EBR exemption to the TCPA
would create needless amounts of work for both sender and recipient,
impose new costs on the recipients without their consent, and
accomplish NOTHING of any economic value.
Huge burden on everyone, no value. What's the point of that?
But there is a better way.
A Better Approach: Clarify the Original Intent
I spoke with Jeb Bladine who is testifying here today. In the 30
years he's been in business, his firm has never been sued for the
business communications he's sent via fax. Nor is he aware of anyone in
his local community that has been sued for sending junk faxes. They all
use faxes responsibly and the existing law has worked for them as
written and interpreted by the courts.
Because the law has been working to everyone's satisfaction until
the recent rule changes, it is clear that the best way to fix the
problem without introducing new ones is to clarify the existing law as
it has been interpreted by the courts over the last 14 years since the
TCPA was enacted.
The best way to restore the status quo is by doing two simple
things:
<bullet> Clarify that permission does not need to be in writing.
<bullet> Modify the definition of ``unsolicited advertisement'' so
that all requested business communications are clearly
permitted.
Normal request-response business communication then works as
expected without fear of litigation. All such communication, such as
asking your favorite restaurant to fax a menu or asking your real
estate agent to send you house information, a purchase contract, or
counter-offer, etc., would be exempt. These are normal business
communications where the recipient has requested the material being
transmitted and should not be considered ``unsolicited advertisements''
that should be regulated by the TCPA.
Even if no records of the request whatsoever are kept by the
sender, the very nature of the material being sent and the number of
telephone calls made to fax machines by the sender are evidence that
would provide an affirmative defense available to any business that
might be sued by an unscrupulous recipient. For example, a restaurant
that faxes an occasional menu to people who call in requesting it is a
legitimate purpose. It is far different than a restaurant who blindly
sends out their menu to every fax number in the local Chamber of
Commerce directory.
In short, judges determine whether the material in question
constitutes an unsolicited advertisement or legitimate business
communication by looking at a number of factors in order to determine
whether express consent was given or not:
<bullet> examination of the material being faxed,
<bullet> the past behavior of the sender (including phone records),
<bullet> the nature of the relationship between the sender and the
recipient.
Non-profit membership organizations such as the National Federation
of Independent Businesses (NFIB) or the local Chamber of Commerce can
still communicate by fax with their members under this proposal. They
should just include a statement in their membership forms that by
joining and providing your fax number, that you are allowing broadcast
communications related to the organization to be sent to you via fax.
Or even better, they could have a check box as to whether the member
wants to receive official communications by fax, e-mail, etc. This is
simply good business practice and any legitimate business already does
this.
Further Protections
If Congress wishes to further protect the fax communications of
non-profit business to communicate with their membership, then it is
reasonable to authorize the FCC to add a special carve out for non-
profit membership organizations communicating to their membership based
on subjects that are consistent with the mission of the organization,
e.g., the Chamber of Commerce could fax a notice about a small business
seminar the Chamber is putting on, but could not fax discount coupons
to the local cash wash to members without their consent.
Another important change to protect recipients would be to require
that professional ``fax broadcasting'' companies always identify
themselves on the fax regardless of whether they have a high level of
involvement or not in the sending of the fax. This would expose the
identity of a small handful of illegal fax broadcasters who are
responsible for a large portion of the junk faxes sent today.
Summary
Because the recipient bears the brunt of the costs on a fax
transmission, fax machines always have to be a request/response
mechanism for business communications, not a low-cost mass advertising
medium for businesses. We need to keep it that way.
The proposed clarifications to the definitions would maintain the
status quo; ensuring that legitimate communications are protected
without opening the door to abuse. That benefits everyone: consumers,
big business, and small business, whether they are recipients or
senders.
If these clarifications are not acceptable, a widely accepted
alternative is for Congress to remove the written permission
requirements and order the GAO study. That way, any additional changes
can be reviewed with the benefit of the GAO study results for guidance.
The following sections provide more detail to the concepts
presented above.
Adding a New EBR Exemption to the TCPA Would Be Unprecedented
When the original TCPA was debated in 1989, unsolicited faxes were
recognized as the equivalent of ``getting junk mail with the postage
due''--except that you have no chance to decline the charges.
Telemarketing Practices: Hearings on H.R. 628, 2131, and 2184 Before
the Subcommittee on Telecommunications and Finance of the House
Committee on Energy and Commerce, 101st Congress, 1st Session (1989)
Sup. Docs. No. Y4.En2/3:101-43 (U.S. Government Printing Office).
Unsolicited faxes are no different that using another man's printing
press and ink to print your advertising, at the other man's expense and
without his permission. This conduct has never been legal--even before
the TCPA was enacted, common law cases recognized this as trespass to
chattels and some brave souls actually brought junk faxers to court and
won. See Fax Weighed, 22 Cents Won in ``Junk Mail'' Suit, L.A. Times,
July 4, 1991, p. 4.
Let me give you an example. I get a ton of unwanted mail every day
from companies I've done business with in the past. How about you?
Suppose we create a law that forced recipients to pay both postage
and printing costs for this advertising until such time as they
notified each business to stop sending the ads? That way, all of these
businesses could send me stuff that I don't want at virtually no cost
to them and force me to pay for it. How many of you would vote for such
a bill?
I hope no one would.
And ironically, the same business that would love to do that to
their customers would oppose having their customers do it back to them!
In short, it'd be great if I could do it to others, but I'd sure hate
it if someone did it to me.
Let me ask you another question. How about we pass a law that would
permit these same business to send me all this stuff that I now get in
the mail to my fax machine?
Businesses would LOVE that because it would reduce their
advertising costs. Virtually every single one of these pieces could be
sent via fax at a much lower cost than mailing it because faxing shifts
virtually all of the costs of the advertising on to the recipient.
Should we do that? Should we legalize it so advertisers can send
you ads you never asked for at your expense until you tell them to
stop?
I don't think you should. But that's exactly what you're being
asked to do here!
It would be like telling Mr. Bladine that anyone who calls his
newspaper is entitled to a full page ad in his paper for free, until he
explicitly asks them to stop.
Some people dismiss junk faxes as a de minimus part of owning a fax
machine. But ask yourself who is more harmful to society--a man who
steals one dollar from a million people, or a man who steals a million
dollars from one person? In both cases a million dollars is stolen. But
the former miscreant is more harmful because he can fly under the radar
and the million dollars is never recovered because it isn't worth it to
any single victim. That's true with junk faxes. According to experts
and published reports, there are over 2 billion junk faxes sent each
year and that number is growing. That practice steals hundreds of
millions of dollars from American's pockets--a few cents at a time.
In 1991, Congress considered and explicitly rejected allowing a
business to send faxes to someone with whom it had an ``established
business relationship.'' The FCC admits that it was in error in 1995 to
pencil back in what Congress took out, and now has taken steps to
correct that error.
Before rushing to do this however, we must remember--you are
creating a legal right for one person to use another person's property
and to take the other person's paper and ink for their own use, all
without consent. No one would argue that a merchant has the right to
come into my house or office (at any time of the day or night), drop
off an advertisement, and take three to forty cents off of my night
stand in order to offset his advertising costs. Yet that is precisely
what you will do if you create any exemptions to the junk fax
prohibitions in the TCPA.
So even if we disagree in the details or scope of any exemptions to
be added to the TCPA, we all have to agree that because we are shifting
the costs for billions of unsolicited faxes onto recipients, we must
craft such exemptions carefully and conservatively.
Several portions of this bill are not controversial. The annual
report and GAO study are certainly in that category. Relaxing the FCC's
proposed new rule requiring express consent for junk faxes to be in
writing is also not controversial. The sticking point is whether or not
to create an exemption in the statute for anyone you have an
``established business relationship'' with to send you junk faxes until
you tell them to stop.
There is only one major point of contention on this bill: whether
or not to add new language to the TCPA to allow any business that you
have a relationship with to send advertising to your fax machine
without your consent until you tell them to stop.
I'd like to explain why this is a bad idea and suggest a more
appropriate alternative that accomplishes all the stated objectives of
the author and sponsors of this bill and does so without any unintended
consequences.
The ``Unintentional EBR''
I'd like to give you two examples. Suppose Joe's Office Supply
decides to take it's in-house customer list, and for those customers
who have provided Joe a fax number and bought something in the last
year Joe wants to send them an advertising flyer by fax. Now suppose
Bill's Office Supply wants to send advertising faxes, so he buys the
list of local fax numbers from the Chamber of Commerce and sends out
fax ads.
In this example, I have received both faxes, and in the past, I
have bought something from both Bill and Joe. But I gave Joe my fax
numbers, and intentionally withheld it from Bill since I suspected he
might misuse it. What Joe did, was what I think most people think of
when they talk about sending fax ads within an ``established business
relationship'' exemption. That is an example of a ``legitimate''
established business relationship fax. But Bill's example is not. No
one thinks that indiscriminate junk faxing should be permitted or
rewarded. Yet in the above example, using the language of the bill as
it stands today, the indiscriminate junk fax I received from Bill, at a
fax number I did not give to Bill, will be exempted from the statute.
How do we create an ``established business relationship'' exemption for
``legitimate'' fax uses, but not create a loophole for exploiting by
illegitimate uses?
This problem is exacerbated by how broadly the term ``established
business relationship'' is defined. Merely making an inquiry of a
business, such as calling and asking the price of an item or if they
carry a particular brand will create an ``established business
relationship'' as that term is defined. Using that definition, who does
not have an ``established business relationship'' with large retailers
like Wal-Mart or Staples? And before you think that ``legitimate''
businesses such as these would not do junk faxing in violation of the
TCPA, both of them have in recent years.
In the last session of Congress, this problem was addressed with
compromise language that stated the ``established business
relationship'' exemption only was available as a defense if the faxes
were sent ``based on'' an existing ``established business
relationship.'' In the example above, this would permit Joe's faxes,
but prohibit Bill's faxes. This way, faxes sent when a business was
legitimately trying to send faxes to people it knew were its bona fide
customers would qualify for the exemption, but faxes ``blasted'' out
indiscriminately would not be permitted, even if they ``accidentally''
were received by someone who had done business with the sender.
I share the same goals as the author and sponsors of this bill: we
all want to allow legitimate faxes and stop the junk faxes.
I also share the same approach to address some unintended
consequences of recent FCC rule changes. We certainly do not want to
turn back the clock on a wholesale basis.
Many of the rule changes were clearly needed due to continued
evasions of illegitimate telemarketers and fax advertisers. Reasonable
businesses who send legitimate faxes do not want to create loopholes
that will be exploited by other businesses that are not so legitimate.
Those businesses who want to make legitimate use of fax as a
communications medium are certainly in favor of protecting that medium
from abuse. If they don't their legitimate use of faxes gets tarred and
feathered with the illegitimate uses.
The current bill attempts to do two things:
<bullet> that express consent may be given in any manner;
<bullet> that an EBR should be interpreted as providing express
consent.
The first change is not controversial. While many people still
believe that in some circumstances requiring written permission is an
appropriate safeguard, there is also a consensus that there are many
situations where verbal permission is acceptable. However, we know the
use of alleged ``verbal'' permission has been abused by miscreants in
the past, so future abuses in this are a need to be closely watched.
But I disagree with the second change because there never has been
an EBR for fax advertisements, not legally and not in reality. I have
reviewed literally hundreds of TCPA cases, particularly those reported
by the TCPA slip service TCPALaw.com, and I have not located a single
court decision where the court agreed with the FCC's original
interpretation.
Adding an EBR Would Change the Status Quo, Not Restore It
Therefore, restoring what was never there in the first place, is
not restoring the status quo. It is changing the status quo!!! In this
particular case, it creates a large number of very bad, unintended
consequences that I've documented in my written materials.
Legitimate fax advertising is sending what someone requested to be
sent to them, and sending it to them at the phone number they have
provided to you. It does not include ``mining'' for fax numbers or
sending a fax to any indiscriminate fax number you can buy or find. It
does not include sending 5 pages of ads for life insurance to someone
who merely asked for a quote on car insurance and nothing else. It does
not mean giving carte blanche to any business you have made an inquiry
to, for them to send you junk mail that you have to pay for.
Changing the Definitions of the Terms Solves the Problem Without
Unintended Consequences
The right way to restore balance and permit legitimate fax
advertisements without burdening legitimate senders, is simple: just
replace Section 2a of this bill so that instead of creating a new
Established Business Relationship (EBR) exemption we simply redefine
the meaning of ``unsolicited advertisement'' so that all legitimate
faxed communications are exempted from regulation.
That is easy:
The term `'unsolicited advertisement'' means any material
advertising the commercial availability or quality of any
property, goods, or services, but does not include material
which is: (a) expressly requested, in writing or otherwise, by
the recipient; and (b) transmitted to a telephone number
voluntarily provided to the sender by the recipient.
Other Improvements
There is one simple improvement to the law that affects only
companies that send faxes for others (such as Vision Lab, Protus IP
Solutions, etc.):
Require that these professional ``fax broadcasting'' companies
ALWAYS identify themselves on the fax REGARDLESS of whether
they have a high level of involvement or not in the sending of
the fax.
Currently, they are only required to do this if they have a ``high
level of involvement'' in the transmission. Of course, all the illegal
broadcasters I know of claim in court they do not have a high level of
involvement. This makes suing the illegal junk fax broadcaster
difficult since it is virtually impossible to tell where the fax was
sent from.
Conclusion
Junk faxes are a major problem for businesses and consumers.
Everyone hates junk faxes.
The FCC rulemaking has caused a great deal of consternation in the
business community. We all agree that we need to turn the clock back.
I'd urge this Committee not to overreact to the problem by creating
a new EBR exemption which would generate a host of new, unanticipated
problems.
I'd encourage each and every one of you to poll your constituents
and ask them how many businesses that they would like to receive
unsolicited advertisements from via fax. I've done it and the answer is
the same for consumers, big business, and small business: none want
advertisements from businesses they do business with unless they
expressly ask for it. That is consistent with the FCC findings and
precisely why the FCC attempted to strengthen the junk fax protections.
The good news is that there is a simple solution: clarify the
definition of an unsolicited advertisement. This will keep the junk
faxes at bay while permitting legitimate business communication.
I hope that you will adopt this approach. It's the right thing to
do as it benefits both senders and recipients without the danger of
imposing new burdens and new legal liabilities.
Thank you and I would be delighted to take any questions you have.
Senator Smith. Thank you very much, Steve.
Let me indicate, they're barely going to hold this vote
open for Senator Boxer and myself. But, Steve, my understanding
of the law--and I want to do this right, but--that it's already
prohibited by law to send all the things we're talking about. I
still get them. They're unlawful. I've got to take action, I
guess, to stop them. I worry about the verbal consent, whether
it will work for companies, that they'll want a legal defense
to claims against them. And I believe our bill allows for an
opt-out provision that is, in fact, new. So I just want to put
that on the record.
And, Senator Boxer, if you have a comment or a question----
Senator Boxer. Yes, and I know we are rushing through this,
but I think the importance was to hear from the three of you,
and I just want to thank the three of you very much.
Senator Smith. I join in those thanks.
Senator Boxer. Yes, because you all presented the best
case. And so, I want to sum up the way I feel about this. And
since we're marking up this bill tomorrow, it's tough as we
have to work quickly.
But, Mr. Kirsch, my understanding is, if I were to ask you
today, What does your business do?
Mr. Kirsch. We make software for speeding up Internet
access and also eliminating spam.
Senator Boxer. OK. I think, under the Smith bill--and I
have a lot of friends who are on it--we now have a business
relationship.
Mr. Kirsch. That's----
Senator Boxer. Is that correct?
Mr. Kirsch.--that's correct, Senator.
Senator Boxer. So now you have the right to go to the Hill,
to all the offices in the Hill, and get all of our fax numbers,
and fax us.
Mr. Kirsch. Well, actually, Senator, it goes beyond that.
You've just given--thank you very much for asking me that
question, because you've just given me the right to send my
advertising for any product--not only my own products, but for
someone else's product--to every single fax machine in the
Federal Government.
Senator Boxer. OK.
Mr. Kirsch. Until they opt out.
Senator Boxer. Right, exactly.
Mr. Kirsch. But----
Senator Boxer. I understand.
Mr. Kirsch.--they'll probably have to opt out one fax
machine at a time.
Senator Boxer. I understand.
Mr. Kirsch. Because if they opt out--if they just send me a
list of all the fax machines, and say, ``Hey, opt me out,'' I'm
going to take--you know, some--I wouldn't do this, but someone
is going to take that list of all of the fax machines that the
Federal Government has just given me----
Senator Boxer. And sell them.
Mr. Kirsch.--and sell it.
Senator Boxer. Sure.
Mr. Kirsch. Sell it to a fax broadcaster, who will then
add--you know, get into a conversation with you and----
Senator Boxer. Right.
Mr. Kirsch.--they'll fax every machine----
Senator Boxer. Right.
Mr. Kirsch.--until each individual machine opts out.
Senator Boxer. I understand. My point is made. This bill,
just leans too far in the other direction. I don't like what
the FCC did, and I want to say, as I did today--if I'm doing
business with someone, Mr. Feeken, you or Mr. Bladine or Mr.
Kirsch, and you say, ``Barbara, I think if I faxed you
something, you'll get a better picture of it,'' and I say,
``Absolutely fax it, fine,'' and then I get it and I'm a happy
person. I've given you my verbal consent, and we're done. And
you make a quick note, ``She gave a verbal consent,'' and
that's the bottom line.
I'll even go a little further than that, if we have to. But
the way this bill is set up--it has serious unintended
consequence. I mean, Senator Smith wants to cure the problem of
junk faxes, I just think the consumer groups that are working
with me on this thing, the people who drafted this bill missed
the mark. And the scenario, Mr. Kirsch, that you laid out here
is a nightmare scenario. And I don't think that it's that easy
to opt out. I get these faxes sometimes, Gordon, and they say,
``Call 1-800 yadda-dadda-dah if you don't want any more
faxes.'' And I do it, and I can't get anyone. They say, ``Do
not call now.'' And matter of fact, in your bill it says,
``during business hours.'' It's not like you're requiring a 24-
hour hotline. That would be better. So I think there are ways
we can work together.
Now, the last point I'd make is, in your bill you say to
the FCC--FTC ?
Senator Smith. FCC.
Senator Boxer. FCC. I've got FTC on the brain, with oil
prices. You say to the FCC, ``You have 18 months to establish
what the business relationship is.'' In the meantime, if I did
business with someone 40 years ago, that's an established
business relationship, under the way the bill is written now.
So people who did business with me in another world, still will
be able to fax me. So I think the FCC went too far, and I think
we've got to rein them in. I think a verbal consent would be my
preference, because I think what Steve Kirsch points out is the
current situation has been working OK. You, yourself, said
that, Mr. Feeken. You, yourself, were nodding. It works OK.
What do we need this bill for, that goes so far the other way
that we're going to take 2 billion faxes and turn them into 4
billion faxes?
So we've got a lot of work to do, because, unfortunately,
we have the mark-up tomorrow. It's only because Senator Smith
is such a dear friend and a fair person that we got a chance to
hear from you today.
Our time is short. I don't have any other questions. I just
think there are a few things we could fix. I hope, maybe over
the course of these next 12 hours----
Senator Smith. Well----
Senator Boxer.--you and I can come to some agreements here
and----
Senator Smith.--we've got some time, and, obviously, even
after tomorrow on the floor----
Senator Boxer. Right.
Senator Smith.--we can keep working this----
Senator Boxer. Good.
Senator Smith. We want to get it right. It's a bedeviling
problem to manage all of the consequences. When we grab here,
it blows up over there. But we'll keep trying, because we
really do need, and we will get ahead of the expiration of this
FCC deadline.
So, thank you all. We apologize for the truncated schedule,
but, unfortunately, the Majority Leader does not schedule the
Senate business around this Subcommittee.
[Laughter.]
Senator Boxer. Which is not fair.
Senator Smith. Which is not right. But, anyway, that's what
it is.
Senator Boxer. But I think this hearing did what it had to
do.
Senator Smith. It did.
Senator Boxer. We got out every point of view, and we so
appreciate it.
Senator Smith. You've contributed to the public record.
We're grateful to each of you. We're adjourned.
[Whereupon, at 3:25 p.m., the hearing was adjourned.]
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