On January 1, 2006, it will be a criminal offense to send facsimile advertisements to Californians without their prior consent.[fn1] Unlike a recently enacted federal law, the California statute contains no exception for faxes sent to persons with whom
the sender has an established business relationship ("EBR").[fn2] California’s new law challenges federal jurisdiction over interstate fax advertising, and two actions for relief–one before
the Federal Communications Commission ("FCC"), the other in federal court–have been brought on the grounds that the new statute
is preempted by federal law.
The California Statute
California’s new statute makes it unlawful "for a person or entity, if either the person or entity or the recipient is located
within California, to use any telephone facsimile machine, computer, or other device to send, or cause another person or entity
to use such a device to send, an unsolicited advertisement to a telephone facsimile machine."[fn3] An unsolicited advertisement, in turn, is defined as "any material advertising the commercial availability or quality of
any property, goods, or services that is transmitted to any entity without that person’s or entity’s prior express invitation
or permission."[fn4]
The new statute also requires the senders of faxes to provide certain information "in a margin at the top or bottom of each
transmitted page or on the first page of each transmission . . . ."[fn5] Specifically, senders of fax messages must furnish "the date and time sent, an identification of the business, other entity,
or individual sending the message, and the telephone number of the sending machine or of the business, other entity, or individual."[fn6]
The California statute contains an exception for tax-exempt nonprofit organizations, which may send noncommercial faxes to
recipients who have voluntarily furnished their fax numbers and have not asked the organization to discontinue sending faxes
to the recipient.[fn7]
Besides criminal penalties, California’s new law permits aggrieved recipients of fax advertisements to obtain civil relief,
including injunctions, and actual damages or statutory damages of $500 per violation, whichever is greater.[fn8] If a defendant’s violation of the law was willful, a court may award treble damages to the recipient.[fn9]
The Conflict with Federal Law
California’s new statute poses a direct challenge to the effectiveness of recent congressional legislation aimed at fax-based
marketing. Specifically, the Junk Fax Prevention Act of 2005 amends the Telephone Consumer Protection Act ("TCPA") to prohibit
the sending of unsolicited commercial faxes.[fn10] Among other provisions, the federal Junk Fax Act permits faxes to be sent to recipients with whom the sender has an EBR.
The EBR exception contained in the Junk Fax Act is the result of a hard-fought battle before the Congress and the Federal
Communications Commission. In 2003, the FCC revised the fax advertising rules it had adopted in 1992, which had included
an EBR exception. The new rules eliminated the federal EBR exception and declared that "a business may advertise by fax [only]
with the prior express permission of the fax recipient, which must be in writing."[fn11] The new rules were scheduled to take effect January 1, 2005, but the FCC delayed their effectiveness while opponents of
the new rules lobbied Congress for legislative relief.[fn12] With its enactment of the Junk Fax Act of 2005, Congress partially restored the regulatory status quo as established by
the FCC in 1992, including the EBR exception. However, Congress furnished additional protection to fax recipients by requiring
senders to provide an opt out mechanism, even for recipients with which the sender has an EBR.
California’s new law effectively nullifies Congress’s decision to retain the EBR exception to the federal law regulating commercial
fax messages. The California statute is not restricted to intrastate faxes — that is, to messages that both originate and
terminate in California.[fn13] Accordingly, any fax advertiser, no matter where it is located, must avoid sending fax advertisements to California residents
with whom the sender has an EBR. Similarly, advertisers located in California must avoid sending commercial faxes to persons
outside the state. Because California is the largest domestic market for most companies that sell their products nationwide,
the impact of California’s law is substantial.
The Challenges to the California Law
In an effort to blunt the adverse impact of the California statute, various business interests have asked that the statute
be preempted as applied to faxes to California residents that originate outside the state, and as to faxes sent from California
to out-of-state recipients. One such challenge, brought by a group called the Fax Ban Coalition, has been filed with the
FCC;[fn14] another challenge, brought by the U.S. Chamber of Commerce and other plaintiffs, is pending before the U.S. District Court
for the Eastern District of California.[fn15]
The pending preemption requests are only the latest in a long line of attempts to secure preemption of state regulations that
restrict interstate marketing by means of electronic communications. Beginning in 2003, a number of companies and organizations
have asked the FCC to preempt state telemarketing laws that impose stronger restrictions than those set out in the TCPA and
the Commission’s rules.[fn16] Those petitions responded to the FCC’s express invitation to aggrieved parties to seek the Commission’s aid in the event
that state law undermined "the clear intent of Congress generally to promote a uniform regulatory scheme under which telemarketers
would not be subject to multiple, conflicting regulations."[fn17] Unfortunately, the Commission has not yet ruled on those petitions.
If the recent requests to preempt California’s new statute succeed, the impact will be far-reaching. According to the Fax
Ban Coalition petition, "thirteen . . . States have statutes that are more restrictive as to interstate communications than
federal law and do not include EBR exceptions."[fn18] A ruling in favor of the parties seeking preemption, if sustained upon appeal, would confine the effect of the laws of these
thirteen states to communications made between parties located within the borders of those states.
Footnotes:
1: Cal. S.B. 833, to be codified as section 17538.43 of the California Business and Professions Code (hereinafter "SB 833"
or "California Act").
2: The federal statute, the Junk Fax Prevention Act of 2005, is Pub. L. No. 109-21, 119 Stat. 359 (2005) ("Junk Fax Act").
3: SB 833, Cal. Bus. & Prof. Code § 17538.43(b)(1).
4: Id. § 17538.43(a)(2). Prior express invitation or permission "may be obtained for a specific or unlimited number of advertisements
and may be obtained for a specific or unlimited period of time." Id. Unfortunately, the California law does not specify the form that the required invitation or permission must take.
5: Id. § 17538.43(c).
6: Id. § 17538.43(c)(1)-(2). The precise language of this requirement differs slightly between subsection 1, which concerns messages
sent "using a telephone facsimile machine," and subsection 2, which concerns messages sent using "a computer or other electronic
device to send any message via a telephone facsimile machine . . . ."
7: Id. § 17538.43(d).
8: Id. § 17538.43(b)(2).
9: Id.
10: Junk Fax Act, supra, n.2; the TCPA is codified at 47 U.S.C. § 227.
11: Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 68 Fed. Reg. 44,144 44,176, 195 (July 25, 2003).
12: The first extension delayed the effective date of the rules to June 30, 2005. 69 Fed. Reg. 62,816 (2004). The second extension
delayed the effective date until January 9, 2006. 70 Fed. Reg. 37,705 (2005).
13: The legislative history of SB 833 confirms the legislature’s intention to regulate interstate communications. See Cal. Sen. Comm. Bus., Profs and Econ. Development, Analysis of Sen. Bill 833 (2005 2006 Reg. Sess.) at 8 (Apr. 12, 2005).
14: Fax Ban Coalition Petition for Declaratory Ruling, CG Docket No. 02 278 (Nov. 7, 2005) ("Fax Ban Petition").
15: Chamber of Commerce of the United States of America, et al. v. Bill Lockyer, Attorney General of California, et al., Complaint filed with U.S. District Court for Eastern District of California (Nov. 7, 2005).
16: See Mark Boling, Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Mar. 11, 2003) (California); Express Consolidation, Inc., Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Jul. 13, 2004) (Florida; subsequently dismissed); FreeEats.com, Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Sep. 13, 2004) (North Dakota); American Teleservices Ass’n, Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Oct. 2004) (New Jersey); Consumer Bankers Ass’n, Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Nov. 19, 2004) (Wisconsin); Consumer Bankers Ass’n, Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Nov. 19, 2004) (Indiana); Nat’l City Mortgage Co., Petition for Declaratory Ruling, CG Docket No 02 278 (filed Nov. 22, 2004) (Florida); TSA Stores, Inc., Petition for Declaratory Ruling, CG Docket No. 02 278 (filed Feb. 1, 2005) (Florida); Alliance Contract Servs., Joint Petition for Declaratory Ruling That The FCC Has Exclusive Regulatory Jurisdiction Over Interstate Telemarketing,
CG Docket No. 02 278 (filed Apr. 29, 2005) ("Joint Petition").
17: Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02 278, 18 FCC Rcd 14014 (2003) at 83.
18: Fax Ban Petition at 19.
