Effective January 1, 2004, California’s new anti Spam legislation (SB 186 2003 Cal. Statutes. Chapter 487) will become law within the State, replacing previous attempts by California to deal with Spam problems. The scope of the new law is remarkable, both in terms of the type of e mail communication it prohibits and the breadth of the jurisdictions it seeks to encompass, namely any e mail advertisement either “from California” or “to a California electronic mail address.” Effectively and practically, it will seek to control almost all e mail in the United States unless overruled by the Federal Courts.

Many commentators consider it one of the most, “sweeping and poorly drafted legislation in the country concerning unsolicited commercial e mail advertisements,” and this article shall both describe and consider the benefits and detriments of this remarkable new law. Put simply, while relief from Spam is sought by all, this particular legislation creates liability problems for legitimate businesses that may become catastrophic if actually enforced.


The Basic Provisions:

With the few exceptions noted below, the new law bans most unsolicited commercial e mail advertisements in total. No person may (a) “..initiate or advertise” in an unsolicited commercial e mail advertisement “from California” or “to a California electronic mail address” or (b) “advertise” in an unsolicited commercial e mail advertisement “sent from California” or “sent to a California electronic mail address.” Business and Professions Code Section 17529.2.

The law also prohibits companies from collecting e mail addresses posted on the Internet, from using e mail addresses obtained by using automatic means based on a combination of names, letters or numbers, or from using “scripts or other automated means” to register for multiple e mail accounts and engage in the same type of activities noted in the above law. See Bus and Prof Code Section 17529.4.

It is vital to note that the law holds advertisers, not just Spammers, liable for violation of the law.


The penalties are significant.


1. Private parties receiving such e mail may sue for damages, attorneys fees and costs.


2. If the advertisement violates the above provisions, liquidated damages of one thousand dollars per advertisement (with a cap of one million dollars per incident) are available. The Court has discretion to reduce the liquidated damages to one hundred dollars per advertisement (and one hundred thousand dollars per incident) if the court finds that the advertiser “established and implemented with due care practices and procedures reasonably designed to effectively prevent” violations of the law. Cal. Bus and Prof Code Section 17529.8.


3. The new law also grants California electronic mail service provides (including ISPs) the right to bring their own civil actions, including liquidated damages of up to twenty five thousand dollars per day against advertisers that violate the provider’s policies of unsolicited electronic mail advertisements.


As any expert can advise, the limits described above will almost automatically be reached in any e mail solicitation since the essence of e mail Spam is massive distribution to hundreds of thousands of e mail addresses.

There are some limited exceptions to the above broad damages. For instance, in the case of ISPs, the plaintiff must show the Spammer had “actual notice” of the ISP’s Spam policy. Legal advice should be sought concerning these various details.


The Basic Problems With the New Law

Most everyone hates Spam which has now clogged most e mail accounts. Relief from it is essential for the continued viability of the internet and e mail. However, the California legislature has done a poor job of seeking to resolve the problem and has probably made the situation both more complex and a danger to legitimate businesses seeking to advertise in an ethical manner. Further, given the interstate and, indeed, international aspect of the internet, it is unlikely in the extreme if the present law will be practical to enforce or even upheld by other courts. Until that is decided, a matter of some years, each business faces the problem that it may or may not be exposing itself to significant liability if it does not take immediate steps to seek to comply with the law.


Let us consider some of the more glaring problems:


1. Note that it is the advertisers, not just the Spammers, who are liable. Any business which uses e mails to contact customers or potential customers thus faces this liability. An “advertiser” is defined as an “entity that advertises through the use of commercial e mail advertisements” (Section 175291 (a)). The most important term, of course, is what is “Spam.” It is defined at 17529.1(o) as “unsolicited commercial e mail advertisements” and does NOT include e mail advertisements sent to recipients who (a) have been given ”direct consent to receive advertisements from the advertiser” or (b) who have “a preexisting or current business relationship” with the advertiser.

The definition of a preexisting or current business relationship is narrow: It relates only to recipients who have “made inquiry and…provided his or her e mail address or has made an application, purchase, or transaction…regarding products or services offered by the advertiser.” Section 17529.1 (l). The “advertiser” is defined as an “entity that advertises through the use of commercial e mail advertisements” and would not necessarily encompass that entity’s parent, subsidiaries, affiliates or personnel. What occurs in the event of merger or acquisition of that entity to that classification is unclear and could depend on the nature of the transaction. Thus a new due diligence issue becomes involved in each and every sale or merger transaction or, indeed, in the creation of any joint venture or restructuring of an existing business entity.


2. It is almost impossible to determine what e mails emanate either from or to California. That language was necessary in the law to allow the California legislature to pass the law for their jurisdiction is limited to within the State: but the fact of the matter is that almost no e mail solicitation is limited to within a single state. (One can imagine e mails to an individual or to a local net (e.g. Mendocino.net) to obviously be within the State but consider use of yahoo or MSF or the like…all not only interstate but international.) And since the advertiser, not merely the service provider, is liable, it means that each and every business that uses e mail to advertise faces the danger of suddenly becoming subject to local jurisdiction. Put simply, an advertiser in Bulgaria can find that they violated California law!

This, in turn, will necessarily mean that each jurisdiction world wide will soon reciprocate (or already have) and this could spell the doom for the use of the internet to advertise. Consider: you sell wine. Such sales are illegal in Saudi Arabia.

You hire an entity to send e mails only to New York who may not have an anti Spam law but since Yahoo is used, thousands eventually end up in Saudi Arabia, perhaps unknown to both you and the service since these are merely yahoo accounts. Have you violated felony laws in Saudi Arabia? Can they sue you there: indeed, can they bring criminal action there?

Practically speaking, these laws are probably unenforceable. If I am a Spammer, I will simply move my operation to Russia or China or Nigeria. Your California judgment will be useless against me. At best, this new law will simply force such organizations off shore to locations beyond the control of any legislation.

Cleary an international approach is needed and clearly the California legislature has done nothing to really help the matter. The ones who will be subject to penalty are the honest and ethical advertisers located within the State who find, probably without intent, that several thousand people in Modesto or Stockton received the e mail by error and now face hundreds of thousands of dollars in liability and hundreds of thousands of dollars in attorneys fees to contest the claim.


What the Business Can Do?


1. Either forgo all e mail solicitations or obtain very good advice as to both selection of service providers and legal review of all such service provider contracts to ensure adequate legal protection from the possible liabilities.


2. E mails solicitations should only be to customers already existing or those making inquiries and records of such prior transactions or inquiries must be stored safely for at least five years.


3. Create a fully documented system of how your company selects and uses e mail lists. Train all personnel as to how to use the list. When in doubt: do NOT send the e mail. Be on guard for persons asking for solicitation in ways that do not constitute “direct” inquiries and who may be seeking to “set you up.” The trouble your entity takes to use such lists correctly can be a major factor in determining your liability, as explained above.


4. Carefully check into the background (and resources) of any entity seeking to assist you in creating e mail lists. Make sure they are both reputable and solvent: and located within the United States.


5. And assume that the instant California law will soon be challenged in Federal Courts and likely to be overturned…but until it is…it is the law and your company faces liability if the law is violated.


6. Check with legal counsel before launching any e mail campaign for, remember, many other jurisdictions exist and all may have their own laws, often more draconian and poorly written than that of California.


7. In any restructure or purchase of any business, carefully discuss with legal counsel as to whether the e mail lists the entity has will be made useless by the restructure and how that can be avoided.


And realize that while Spam may eventually be stopped by such poorly drafted legislation, so will legitimate use of e mail to advertise if the law is not better honed and effective enforcement against the real culprits somehow maintained.