June 2008 - Channel Crossing: Legal

FTC Approves New Rule Provisions Under the CAN-SPAM Act

By Linda A. Goldstein

The FTC has approved several new rule provisions under the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act) that will have a significant impact on the conduct of certain e-mail marketing campaigns. The new rule provisions come after years of confusion regarding the implementation of certain provisions of the CAN-SPAM Act, and are based on numerous comments and suggestions from marketers, trade associations and consumer and privacy advocates. The new rule provisions and the accompanying clarification provide much needed guidance particularly for marketers who conduct joint marketing campaigns and the increasingly popular “refer-a-friend” programs.

One of the primary areas of confusion for marketers attempting to comply with CAN-SPAM has beendetermining who constitutes the “sender” for purposes of CAN-SPAM compliance in cases where multiple parties are advertising their products or services in a single e-mail message. Determining who constitutes the sender is critical because it is the sender whose physical address must appear in the e-mail and it is the sender who is responsible for honoring all opt-out requests. Under the originally proposed rule, all parties advertising their goods or services in a single e-mail message could be considered “senders” and responsible for complying with all obligations imposed upon senders under CAN-SPAM.

The originally proposed rule contained a limited exception under which only one marketer would be considered the sender if: (1) that marketer initiated the message; (2) was the only person or entity who controlled the content of the message; and (3) was the only person or entity who determined the e-mail addresses to which the message would be sent. This limited exception was not particularly helpful to marketers seeking to conduct joint marketing promotions because in most such joint marketing campaigns, each advertiser controls the content of its own message. Thus, under the originally proposed rule, it was unlikely that any single advertiser would meet all of the requirements necessary to be deemed the “single sender.” This meant that in virtually all joint marketing campaigns, all advertisers were required to scrub the e-mail recipient list against their own internal opt-out list and honor all opt-out requests received in response to the e-mail campaign. These requirements made it difficult to construct and administer joint marketing campaigns and increased the risk that consumers’ personal information might be exposed to hackers or other inappropriate parties while being shared between partiescomparing multiple opt-out lists.

Under the new rule provisions, the definition of sender has been substantially modified to permit multiple advertisers in a single e-mail marketing message to designate which party will be deemed to be the sender and responsible for compliance with the CAN-SPAM requirements. Specifically, under the proposed rule, multiple advertisers in a single e-mail message may identify a “designated sender” who will be deemed the sole sender. The designated sender must: (1) meet the statutory definition of sender (i.e., a person who initiates a commercial e-mail message in which he advertises or promotes his own goods, services or website); (2) be identified in the “from” line; and (3) comply with CAN-SPAM requirements. The designated sender would be the only party that would have to implement an opt-out mechanism, honor opt-out requests and include its physical address in the e-mail.

The FTC has tried to create a bright-line rule with this new rule provision: as long as only one sender is listed in the “from” line, and that party is otherwise in compliance with the provisions of CAN-SPAM, it is irrelevant which party controls the content of the e-mail message or the list of e-mail addresses to which the e-mail message is sent. The party listed in the “from” line will be the designated sender.

This ability to select a designated sender as the sole sender to comply with CAN-SPAM requirements in multiple-marketer e-mails should make the process easier and more desirable for marketers. Marketers should be aware, however, that if the “designated sender” fails to comply with the CAN-SPAM provisions, then all other senders of that e-mail will be deemed senders for purposes of CAN-SPAM compliance.

As a practical matter, this means that marketers who participate in joint marketing campaigns should have a written contract with the designated sender expressly requiring that designated sender to comply with the CAN-SPAM provisions. Marketers would also be well advised to monitor activities of the designated sender to ensure that this person or entity is, in fact, complying with CAN-SPAM.

The final rule also clarifies the circumstances under which the sponsor of a refer-a-friend campaign, and the consumer who forwards the sponsor’s e-mail message, will be subject to CAN-SPAM. Under the provisions of CAN-SPAM, the sender is defined as the person or entity that initiates the message and whose products and services are promoted in the e-mail. Typically in a refer-a-friend campaign, the seller’s products or services are promoted in the e-mail message. Therefore, the applicability of CAN-SPAM to the sponsor of the refer-a-friend program typically depends on whether the seller has “initiated” the e-mail message. CAN-SPAM further defines “initiate” to mean “originate or transmit” or “procure the origination or transmission” of the e-mail. Initiate, does not, however, include the routine conveyance of an e-mail. Under the originally proposed rule, the FTC indicated that the seller would be deemed to have “initiated” or “procured the initiation” of the e-mail transmission if it provided any form of consideration or other incentive to the consumer to forward the e-mail or if the seller used forceful language “exhorting” the consumer to forward the e-mail.

Thus, under the originally proposed rule, the seller would be deemed to be the sender of the forwarded e-mail message and subject to CAN-SPAM’s requirements for senders if it provided any incentive to the consumer to forward the e-mail or if it even used strong language encouraging or influencing the consumer to forward the e-mail to family or friends. This in turn meant that the sender’s physical address would have to be included on the forwarded e-mail and that an opt-out mechanism operated by the seller would have to be included on the forwarded e-mail message.

In this final rule, the FTC has retained the view that the seller will be deemed the sender of the forwarded message if it provides any consideration or other incentive to the consumer to forward the e-mail, no matter how small the incentive. The FTC has, however, retreated from its position that strong language exhorting the consumer to forward the e-mail will result in the seller being deemed the sender of the e-mail.

As a practical matter, the revised rule provides the advertiser with a little more flexibility in conducting refer-a-friend programs. If the advertiser provides any incentive to the consumer to forward the e-mail message, no matter how small, then the advertiser will continue to be deemed to be the sender of that forwarded e-mail message and will have to comply with CAN-SPAM. If the advertiser does not provide an incentive, however, the advertiser will have more flexibility with regard to the language that may be used in connection with refer-a-friend programs and in particular, will be able to encourage consumers to forward the e-mail to their family and friends without triggering the sender requirements of CAN-SPAM.

The revised rule also clarifies that the consumer who forwards the e-mail will not be considered the initiator of the e-mail for purposes of CAN-SPAM. Fortunately, the FTC realized that imposing CAN-SPAM requirements on individual consumers would not serve the purposes contemplated by Congress when CAN-SPAM was enacted.

The revised rule provides much needed clarification and guidance to the industry regarding compliance with CAN-SPAM. While this guidance is a welcome development, marketers should be aware that with greater clarity, increased FTC enforcement is likely to follow. Marketers should be sure to review their current e-mail marketing campaigns to ensure that they are compliant with CAN-SPAM in light of these recent clarifications.

Linda A. Goldstein is a partner and chair of the advertising, marketing and media division at Manatt Phelps & Phillips LLP in New York. She can be reached at (212) 790-4544.


No Comments

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a comment