Anyone who uses e-mail is familiar with "spam." E-mail boxes are flooded every day with unsolicited offers to take out a mortgage, refinance a debt, or transfer funds for a mysterious foreign millionaire. While Congress debates legislation that would regulate spam, an established law that prohibits a more old-fashioned method of sending unsolicited advertisements deserves attention. Unsolicited advertisements sent to facsimile machines have been illegal under federal law since 1991. A recently passed Arizona law also regulates such advertising. The laws aim to protect targets of unsolicited advertising, but may result in severe penalties to those who are unwittingly in violation and unaware of the consequences.
The Telephone Consumer Protection Act of 1991 Congress passed the Telephone Consumer Protection Act (TCPA) in 1991. 47 U.S.C.A. § 227 (2003). The TCPA regulates the use of automatic dialing machines and prerecorded voice messages. The TCPA also prohibits using fax machines, computers, or other devices to send unsolicited advertisements to a fax machine." An "unsolicited advertisement" under the TCPA is "any material advertising the commercial availability of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission." The TCPA has survived several constitutional challenges.
The penalties for violating the TCPA are substantial. The Federal Communications Commission (FCC) enforces the TCPA and may fine the fax senders. In 2002, the FCC fined one business over $1 million for sending 152 unsolicited faxes. There is also the potential for civil lawsuits. The TCPA allows recipients of unsolicited fax advertisements to recover either their actual monetary loss or $500 per occurrence. This amount may triple if a court finds that the sender willfully or knowingly violated the TCPA. In other words, the sender of unsolicited fax advertisements may be held civilly liable for $1,500 per fax. While this alone is a shocking amount, consider that unsolicited fax advertisements are likely sent en masse. Senders may potentially incur enormous civil damages at the touch of a button. For example, a class action lawsuit against Hooters Restaurants of Augusta, Georgia for sending 7,926 unsolicited fax advertisements resulted in a judgment of nearly $12 million - $1,500 for each fax sent.
In addition to the Telephone Consumer Protection Act, Arizona now has its own statute governing unsolicited fax advertisements. H.B. 2346, 46th Leg., 1st Reg. Sess. (Ariz. 2003). On May 12, 2003, Governor Napolitano signed a bill requiring senders of unsolicited commercial fax advertisements to include their name, address, fax number, and local or toll-free telephone number on the fax. Anyone who receives an unsolicited fax may contact the sender and request that no further faxes be sent. If, after three business days, the recipient receives another fax from that sender, the recipient may charge the sender $5 for each page received. Collection is up to the recipient.
The Arizona bill was intended to augment the TCPA, but the TCPA is far more restrictive. For example, under the Arizona bill, the $5 per page penalty is available only when more faxes are sent after the recipient notifies the sender. The collection of the penalty is up to the recipient, but may not be a worthwhile pursuit. Many unsolicited faxes must be received just to cover collection costs. Under the TCPA, however, the sender of unsolicited fax advertisements is liable for the $500 per fax penalty when the fax is sent. There is no need for the recipient to first notify the sender before the sender incurs liability. Also, the available damages make collection a potentially lucrative activity.
Fax advertising is an inexpensive way to distribute information about products or services. However, it can become very expensive when the advertisements are sent without prior authorization. The federal and state laws give rights to recipients of unsolicited fax advertisements. These rights must be recognized and respected. Ideally, a sender would attempt to get express permission from a recipient. At the least, a sender should comply with the federal and state identification requirements and respond promptly to recipients' requests to be removed. Otherwise, a sender may be found liable for far more than the paper and ink costs incurred by the recipient, and a seemingly innocuous activity can severely affect a business.
For more information about this topic, please contact John. G. (Jack) Sestak, Jr., at 602.262.5827 or email@example.com. Research assistance for this article was contributed by summer associate Christopher M. Goodman, who is attending the University of Arizona College of Law.
About the Author . . .
John G. (Jack) Sestak, Jr. has practiced for 30 years in the areas of business and commercial litigation and transactions. In his litigation practice, he has represented companies of all sizes in matters such as contract disputes, securities litigation and arbitration proceedings. He has represented owners and contractors in construction disputes and lawsuits, and has represented employers in employment and employment termination matters. He has represented professionals, including law firms, accounting firms, engineers and architects, in negligence actions.
In addition to his litigation practice, Mr. Sestak handles business and commercial transactions of all kinds, providing counsel and advice to a variety of clients in connection with business planning as well as dispute avoidance and resolution.