California shuts golden gates to spam

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Critics of California’s new spam law, which becomes effective Jan. 1, 2004, say the legislation has serious implications for online publishers, marketers and advertisers, and could have a dramatic impact on the e-mail marketing industry nationwide.

A major concern is that the new law—the toughest state legislation to date—could expand liability to advertisers whose messages are carried in e-mail. Both e-mailer and advertiser could be fined $1,000 for each e-mail, and up to $1 million for a campaign. Violations would occur when e-mail is sent to recipients with whom the sender has no prior relationship.

"It requires that the relationship not only be with the publisher but also with the advertiser," said David Straus, American Business Media’s postal counsel in Washington, D.C. "I can’t believe that the California legislature intended that result."

For purposes of the California law, Straus said, a "relationship" is defined as existing when someone has "made an inquiry" and provided an e-mail address, or has made an "application, purchase or transaction, with or without consideration, regarding products or services offered by the advertiser."

Nationwide concern

E-mail marketers in other states are focusing on California’s law, too. And the legislation is on the docket for discussion at this week’s Direct Marketing Association annual conference in Orlando, Fla.

"I think it’s going to be dramatic," said Jay Schwedelson, corporate VP at list company Worldata. "Everyone I touch in this industry is concerned about it. I can’t tell you how many clients, competitors, agencies and mailers I’ve talked to about this in the last few days."

"I’m certainly concerned about how it affects my business," said William Barron, VP-Webcasting for CMP Media’s Net Seminar Services. Barron is responsible for the company’s online seminars and uses e-mail to promote them to its in-house database.

One troubling aspect of the California law is that it is difficult to determine whether an e-mail is being sent to a California address, and therefore might run afoul of the law.

"If you can’t e-mail to California, you really can’t e-mail anyplace unless you have street addresses for your e-mails," said DMA’s Straus.

Others agreed. "List owners will have to do suppression for the state of California," said Alfred DiBlasi, VP of e-mail list manager MetaResponse Group, Deerfield Beach, Fla. "But one of the problems with that is that not all list owners have state or zip data married to the e-mail record. It’s a logistical nightmare."

That’s certainly the case for Worldata’s Schwedelson, who said 20% of all e-mail addresses he manages originate from California, but many others in his file have no geographic information.

Worldata plans to take an "ultra-conservative" approach, Schwedelson said. It is developing new technologies to work within the law, he said. "We’ll work incredibly hard to have lists that cater to this environment."

In addition to affecting marketers, the law could have ramifications for online publishers, whose business model for e-mail newsletters is based on advertising revenues. Barron said just one of CMP’s publications, EE Times, has 13 newsletters.

The hope among many e-mail industry executives is that a federal law will be passed before Jan. 1 that could pre-empt state laws and nullify the California’s law. Many agree the industry would prefer one tough federal law over a variety of legislation from individual states. "No matter how tough a federal law would be, it wouldn’t be as bad as California’s, and it would standardize across the board," Straus said.

Barring that, the courts may decide the issue. According to Straus, "There will almost certainly be court challenges, which have a good chance of success." He said these challenges would likely be brought on the grounds that the law interferes with interstate commerce and the First Amendment.

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