Do Not Contact . . .

5 August 2005

New spam policies in two U.S. states could pose challenges to e-marketers.

The legislatures in Michigan and Utah this summer passed bills that fine spammers and other companies that send objectionable material to minors. Both laws create frameworks for "Do Not Contact" lists.

The Michigan law, which became law Aug. 1, directly addresses gambling-related ads; it bans sending advertisements related to gambling, pornography, tobacco, alcohol, drugs (illegal and prescription), firearms or fireworks to addresses registered with the state's "Do Not Send" list. Registration is free and has been available to parents since July 1. Marketers have 30 days from the time of registration to remove children from distribution lists. Failure to do so will result in fines and/or jail time. The state also plans to have lists for instant message ID, mobile phone, fax and pager numbers by the end of the year.

The Michigan Public Service Commission, the agency handling the list, reports that 2,795 e-mail addresses have been entered into the database and that many more are expected to flood in when the school year resumes.

The commission cautions, however, that it's not a perfect remedy.

"We've always been clear that this will reduce spam but not eliminate it," said Judy Palnau, a spokeswoman for the commission.

The Utah law, meanwhile, will go into effect Aug. 15.

Legal experts agree the states have to take this approach because the recently passed U.S. CAN-SPAM Act prohibits individual states from regulating spam.

Under the state laws, any resident on a registry can sue--even if the recipient personally subscribed to an effected company's e-mail newsletter--so legitimate companies must now purge their systems every month of registered e-mail addresses from each state.

The other option, of course, would be to eliminate all e-mail addresses from these states, but Mark Grossman, a lawyer who specializes in technology, said this would be a little extreme.

"I think that would be a gross overreaction," Grossman said. "You don't want to get into the gun sights of a regulator who wants to make your life miserable, but saying you will wipe your list clean of anyone from that state would be a drastic overreaction in my opinion."

Marketers who opt to match their list with the states' registries will be assessed fees for doing so. Michigan, for example, is charging $7 per month per 1,000 addresses.

One analyst pointed out that if 12 other states had similar systems, a marketer could end up paying more than $1 a year for each subscriber to a "free" e-mail newsletter.

Rob Bossart, an attorney who specializes in international taxation and offshore business, pointed out that prosecuting the violators could be problematic.

"Who is going to decide what 'objectionable material' is?" Bossart asked. "And even if you want to go after, who are you going to go after? You can't just enforce it against one part. The company will more than likely hire out someone to send the e-mail, and then maybe they contact someone to include the ad on their monthly newsletter. Are they going to go after all three companies?"

He added that prosecutors would have a hard time going after marketers with no servers or bank accounts set up within the state.

Then there's the dot-net advertising model in which online gaming operators advertise only their ".net" sites, which don't feature real-money gambling.

"They can't put any restrictions on those sites because they are deemed as 'educational' in that they can teach people how to play poker, blackjack or whatever," Bossart said.

Grossman agrees that enforceability could be an issue.

"I am not a constitutional law expert, but I doubt the standard of 'objectionable material' would hold up in court," he said. "I don't know how many online gambling operators are even aware of the law yet, but as of right now, it doesn't appear to be getting anyone's attention."

That might be the case in the online gambling industry, but Palnau says major online marketing companies are taking heed.

"They're contacting [the commission] from all over the place to make sure that they in fact are following this properly," she said.

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