New Anti-Spam Legislation Endangers California E-Commerce and Charitable Organizations

California’s 2005 anti-spam law, which is designed to address deceptive email practices, is one of the toughest in the country.  This week the California Assembly likely will vote on amendments to the law that will seriously harm e-commerce companies and charitable organizations in California and beyond.

asm_ed_chauAssemblyman Chau’s (D-San Gabriel Valley) AB 2546, was primarily drafted by two anti-spam plaintiff’s lawyers to reverse rulings against them under the current law.  The bill is a wish list of giveaways that greatly expands the reach of the law to ensnare legitimate email operations.

AB 2546 amends the scope of the law to include any solicitation whatsoever, thus bringing in charitable and even political advocacy and campaign solicitations which may then be subject to civil penalties of $1,000 per email plus attorneys’ fees.  Since the law applies to anyone who sends email to or from California, these changes will have a national impact.

The bill prohibits sending email from a domain name that uses a domain privacy service that protects the identities and contact information of the website holders.  Domain providers like NameCheap automatically include such services at no cost when you purchase a domain.  As a result, according to a 2010 ICANN study, approximately one in five domains are protected by such services.  If this bill passes, every solicitation from one of these domains would now cost $1,000.

AB 2546 also prohibits the use of multiple domain names to send email (which the drafters consider to be a “deceptive spam practice”) unless the party can demonstrate that it was for a reason other than evading spam filters.  This, however, is a common practice used as a means to manage multiple email lists or campaigns and a quick review of my inbox revealed it was used by organizations such as the California Lawyers Association. This new presumption will only invite litigation which appears to be precisely the point.

Similarly, the bill expands the scope of the law to permit lawsuits not just for deceptive from or subject lines, but any “misrepresentation” in the body of the email regardless of whether the recipient relied upon and suffered harm.  This is a dangerous provision given some of the extreme positions that have been taken under existing law.  It will, in essence, appoint these few lawyers as the advertising police who will send demand letters to advertisers for anything they deem misleading, forcing them to decide whether to fight or pay settlements.

Few of these spam cases go to trial, as these lawyers usually package hundreds or thousands of emails and offer to settle for some discounted amount per email which may still be a sizeable number.  Should an advertiser wish to pursue the case to trial, current law allows the court to reduce the per email penalty to $100 per email if they have established and implemented practices and procedures designed to prevent violations.  The bill changes this defense to impose onerous training and recordkeeping requirements.

It is expected that passage of this legislation will force e-commerce companies to severely curtail or abandon email solicitations altogether, resulting in a dramatic loss in sales and substantial layoffs.  Similar effects can be expected in the nonprofit sector which will suffer a serious decline in fundraising that will hamper its ability to serve our communities.

Assemblyman Chau’s legislation will not benefit consumers one bit and instead will lead to a significant decline in tax revenue, thousands of lost jobs and a disruption in social services.  All this, primarily just to benefit a few lawyers who already have profited handsomely under the existing law.

It is worth noting that the drafters of this bill were behind another failed attempt to rig the system in 2008 (AB 2950), which Governor Schwarzenegger wisely vetoed as unnecessary and inviting “excessive litigation for a nuisance that does not result in any damages or losses.”  This bill is far broader than the one a decade before and should be rejected for the very same reasons.

Postscript – The bill was amended Tuesday night to drop the provisions concerning privacy domains.  A vote Wednesday or later this week is likely.

Please contact your elected officials (click here to find out who your California representatives are) to tell them to preserve e-commerce jobs in California.

See also California’s Dangerous Spam Lawyer Relief Bill.