BILL ANALYSIS
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|Hearing Date:August 27, |Bill No:AB |
|2002 |2944 |
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SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
Senator Liz Figueroa, Chair
Bill No: AB 2944Author:Kehoe
As Proposed to Be AmendedFiscal: No
SUBJECT: Advertising: facsimile machine.
SUMMARY: Deletes the existing state law prohibition
relative to the faxing of unsolicited advertising material.
Existing law:
1)Regulates false and misleading advertising generally, and
subjects violators to both civil and criminal penalties.
2)Regulates unfair or deceptive business practices
generally, and subjects violators to both civil and
criminal penalties.
3)Provides that no person or entity conducting business in
this state shall fax documents consisting of unsolicited
advertising material for the lease, sale, rental, gift
offer, or other disposition of any realty, goods,
services, or extension of credit, unless that person or
entity establishes a toll-free telephone number that a
recipient of the unsolicited faxed documents may call to
notify the sender not to fax the recipient any further
unsolicited documents.
4)Provides that all unsolicited faxed documents shall
include a statement informing the recipient of the
toll-free telephone number that the recipient may call,
or a valid return address to which the recipient may
write or e-mail, as the case may be, notifying the sender
not to fax the recipient any further unsolicited
documents to the fax number, or numbers specified by the
recipient. The statement shall be the first text in the
body of the message and shall be of the same size as the
majority of the text of the message.
5)Provides that upon notification by a recipient of his or
her request not to receive any further unsolicited faxed
documents, no person or entity conducting business in
this state shall fax any unsolicited documents to that
recipient.
Existing federal law: the Telephone Consumer Protection
Act of 1991 (TCPA), prohibits the transmission of
unsolicited advertisements by telephone facsimile machines
and provides various remedies.
This bill, as proposed to be amended, deletes the existing
state law prohibition relative to the faxing of unsolicited
advertising material.
FISCAL EFFECT: Legislative Counsel has determined that this
is a non-fiscal measure.
COMMENTS:
1.Background.
a) State Law - Business and Professions Code Section
17538.4. In 1992, the Legislature passed and the
Governor signed AB 2438 (Katz, Chap. 564, statutes of
1992). Section 17538.4 prohibits unsolicited faxes
unless the sender meets certain requirements, such as
providing an 800 number so that the recipient can call
to have his/her name removed.
The Author argues that AB 2438 was established for the
purpose of protecting Californians during the
estimated two-year interim between the passage of the
federal ban and the time when the Federal
Communications Commission's (FCC) regulations
implementing the federal ban would become effective.
Evidence to support the Author's view can be found in
letters from the Department of Consumer Affairs (DCA)
to both Assemblyman Katz and Governor Wilson. For
example, in DCA's enrolled bill report to Governor
Wilson, they note that the federal law (which would
prohibit unsolicited faxes altogether) goes into
effect on December 20, 1992 (but the prohibition will
have no effect until the implementing regulations are
in place), which could take a couple of years. The
enrolled bill report also states that assuming that
any definitions the FCC adopts do not undermine the
prohibition, once the FCC's regulations are in place
the federal law and regulations will supercede AB 2438
since they will be more protective. But until that
time, AB 2348 would give California fax machine owners
more protection than they currently have against
unsolicited faxes.
b) Federal Law -- The TCPA. On December 20, 1991, the
U.S. Congress enacted t the TCPA. The TCPA mandated
that the FCC implement regulations to protect the
privacy rights of citizens by restricting the use of
the telephone network for unsolicited advertising. On
September 17, 1992, the FCC adopted a Report and Order
which established rules governing unwanted telephone
solicitations and regulated the use of automatic
telephone dialing systems, prerecorded or artificial
voice messages, and telephone facsimile machines.
Among other things, these regulations prohibit the
transmission of unsolicited advertisements by
telephone facsimile machines.
The TCPA provides consumers with several options to
enforce limitations against unsolicited telemarketing
contacts. Absent state law to the contrary, the TCPA
permits consumers to file suit in state court if an
entity violates the TCPA prohibitions on the use of
facsimile machines, automatic telephone dialing
systems, and artificial or prerecorded voice messages
and telephone solicitation. Consumers may also bring
their complaints regarding TCPA violations to the
attention of the state attorney general or an official
designated by the state. This state entity may bring
a civil action on behalf of its residents to enjoin a
person or entity engaged in a pattern of telephone
calls or other transmissions in violation of the TCPA.
Additionally, a consumer may request that the FCC
take enforcement actions regarding violations of TCPA
and the regulations adopted to enforce it.
1.Purpose. According to information provided by the
Author's office, this measure prevents the shifting of
advertising costs to unwilling consumers and businesses
and prevents the unwanted occupation of consumer and
business fax machines by marketers by simply repealing
California's opt-out junk fax law.
2.Is the TCPA Unconstitutional - Violates the First
Amendment? In a request by Senator Bowen, Legislative
Counsel was asked whether the TCPA is constitutional.
The Opinion, dated April 2, 2002, notes that in view of
the fact that unsolicited faxes shift the cost and
inconvenience of advertising to consumers without their
permission, the banning of these faxes directly advances
the goal of reducing this shifting of advertising costs.
Additionally, because the TCPA's ban prohibits only
unsolicited advertising faxes, which are the direct
source of the problems, we think it is narrowly tailored
in such a manner that advertisers are not precluded from
sending advertisements by the mail or through other
mechanisms that would not shift advertising costs onto
consumers or from sending solicited advertising faxes.
Therefore, we conclude that the TCPA's prohibition
against unsolicited advertising faxes directly advances
the government interest asserted and is not more
extensive than necessary to serve that interest.
Accordingly it is our conclusion that the TCPA's
prohibition is constitutional under the First Amendment.
3.Is California Law -- Business and Professions Code
Section 17538.4-- Preempted by the TCPA? In a request by
Assemblymember Lowenthal, Legislative Counsel was asked
whether the TCPA preempts the provisions of Section
17538.4 as applied to unsolicited advertising faxes. The
Opinion, dated December 7, 2001, notes that it is a
well-established principle that the supremacy clause
invalidates state laws that interfere with, or are
contrary to, federal law. State law is preempted by
federal law where state law actually conflicts with
federal law. A conflict occurs between state and federal
law when state law stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress. The intention of Congress in
prohibiting the faxing of unsolicited advertising
materials (junk faxes) was twofold. First, the TCPA is
intended to help remedy the problem of fax advertisers
sending advertisements to available fax numbers with the
knowledge and intention that they be received and printed
by the recipient's machine, thereby shifting the
advertising cost in part onto the recipient. Secondly,
the TCPA is intended to stop the problem of recipient's
fax machines being unavailable for legitimate business
messages while processing and printing junk faxes. In
our view, the exemption in Section 17538.4, allowing junk
faxes if an 800 number is established, hinders the intent
of Congress to stop the cost and inconvenience of junk
faxes to recipients.
4.Will This Measure Put Legitimate Companies Out of
Business? One of the concerns that Fax.com has raised in
the past is that this type of proposal will put them out
of business. According to j2 Global Communications, Inc.
(j2) this is not necessarily the case. j2 is a publicly
traded company that offers their customers a service that
enables them to receive faxes in their email inbox. j2
currently has more than 4 million customers, each with a
unique telephone number issued to them by j2. j2 offers
both free and paid accounts, and all of their free
customers expressly authorize j2 to send them third party
fax or email advertisements. j2's free customer base is
entirely "opt-in."
5.Should Fax Advertisements Be Treated Differently Than
Other Forms of Advertisements? According to information
provided by the Author's office, "advertising by theft"
is what many call the practice of sending unsolicited
advertisements to people's home and business fax
machines. That's because unlike billboard, radio, TV,
newspaper, magazine, or even direct mail - where the
advertiser pays for the ad - junk faxes force each and
every recipient to foot the bill by paying for the paper
and toner used to print the ad on their fax machine.
What's more, small businesses and self-employed people
with limited resources and few telephone lines to their
offices are also forced to bear the cost of having their
business interrupted while their fax line is occupied
receiving unsolicited fax advertisements. Companies that
try to get off of junk fax lists face further
productivity losses, as employees spend time calling junk
fax senders in an attempt to get removed from junk fax
lists.
7.Amendment to Be Offered by the Author in Committee. The
Author intends to offer an amendment in Committee that
will take the urgency provision out of the bill.
8.Arguments in Support. The letter of support from the
Office of the Attorney General states, that in light of
the costs and inconvenience of unsolicited faxed
advertisements to consumers and businesses alike, it
makes sense to repeal California's junk fax law and rely
solely on the federal law which will provide greater
protection for California consumers and businesses.
In their letter of support, Food for Humans (a retail
grocer) states that their corporation relies heavily on
their fax machines for ordering, product information and
correspondence. Daily, their tasks are interrupted by
unknowns pushing their products and services through
faxes. Sometimes Food for Human's communications are
completely broken by these inconsiderate intruders. They
feel that it is as though strangers invade their office
and take control, and in a sense that is exactly what
happens - again on a daily basis. They recently
conducted a yearend cost analysis and it was reported
that they spent well over $300.00 on fax toner cartridges
alone. And, without a doubt, the vast majority of this
resource (not to mention paper) was devoured by junk
faxes.
In their letter of support, the Privacy Rights
Clearinghouse indicates that they have received numerous
complaints from individuals and from business owners who
are forced to pay for the toner, paper, and wear and tear
on their fax machines. Their phone lines are tied up when
receiving these solicitations, and their time is also
consumed in dealing with these unwanted nuisance calls.
The letter from the Privacy Rights Clearinghouse
references one individual, a doctor, who receives calls
to her home in the middle of the night. Even though she
might miss emergency calls, she has been forced to
disconnect that phone at night. Others have complained of
receiving several calls a day to their home and business
phones. The Privacy Rights Clearinghouse states that they
have been contacted by individuals complaining about junk
faxes who have tried to contact the 800 numbers on the
advertisements but have found these numbers to be
virtually useless. These numbers are apparently busy, or
no one answers.
9.Arguments in Opposition. In their letter of opposition,
Fax.com argues that the TCPA has a major loophole that
benefits large companies and penalizes small and medium
sized businesses. According to Fax.com, under the TCPA,
large companies have an unfair advantage over small
businesses because they are in constant contact with
large numbers of potential and current customers and have
the capacity to keep records of their contacts. Small
businesses and new companies are handicapped because they
are less able to document the "established business
relationship" that is required under the TCPA. Fax.com
argues that, unlike the TCPA, the current California law
creates a level playing field between small businesses
and large established companies, by allowing all senders
to have the same limited opportunity to transmit one fax
advertisement without respect to any documented
"established business relationship" with the recipient.
Additionally, Fax.com argues that Californians will not
be well served by repealing the current law that
regulates fax advertisements. They believe that if AB
2944 becomes law, an important consumer protection will
be lost as California consumers will lose the prerogative
of calling a prominently displayed toll free telephone
number in order to stop receiving more fax
advertisements. Furthermore, Fax.com argues that local
small businesses will lose an affordable advertising tool
to compete with major corporations that are typically
headquartered outside of California.
10.Related Measures This Session.
a) SB 1358 (Bowen) deletes the existing state law
prohibiting unsolicited fax advertisements. This
measure failed passage in the Assembly Business and
Professions Committee.
b) AB 839 (Lowenthal) as initially heard by this
Committee, would have created a new junk fax ban in
California law, modeled after the TCPA. Additionally,
it would have created a new private right of action
and penalties on top of the remedies available under
the federal ban. AB 839 received two hearings by this
Committee last year. Fax.com opposed the measure, for
the same reasons that it opposes this measure, and
offered an alternative proposal. The proposal
basically would have created a do not fax database.
Ultimately, Fax.com was able to convince a majority of
the Members of this Committee to support their
proposed provisions in place of AB 839's provisions.
Rather than move his bill forward in its amended
state, the author decided not to pursue his measure.
c) AB 2568 (J. Campbell) deletes the existing
prohibition relative to faxing unsolicited advertising
material and would instead enact new provisions
prohibiting a person from using any telephone
facsimile machine, computer, or other device to send
an unsolicited advertisement to a telephone facsimile
machine. This bill would impose specified fines for
violations of these provisions. This measure failed
passage in the Assembly Business and Professions
Committee.
d) AB 2820 (Cardenas) permits unsolicited advertising
faxes to be sent to individuals and businesses unless
the individual or business places their phone number
on the Attorney General's "Do Not Call" list. This
measure has been assigned to, but not heard by, the
Senate Business and Professions Committee.
SUPPORT AND OPPOSITION:
Support:
Art Bonner Slip Covers
California Chamber of Commerce
California District Attorneys Association
California Public Interest Research Group (CALPIRG)
California Retailers Association
Carson Chamber of Commerce
Coalition of California Insurance Professionals
Congress of California Seniors
Dada's True Value Hardware & Electronics
Food For Humans
Golden Gate Construction Company, Inc.
Guerneville Graphics & Printing
Integrated Quid Pro Quo Technology
j2 Global Communications, Inc.
Kwik Shop Stores
Lomita Chamber of Commerce
Office of the Attorney General
Office of Ratepayer Advocates
Older Women's League of California
Privacy Rights Clearinghouse
Silicon Valley Manufacturing Group
Torrence Area Chamber of Commerce
Venice Chamber of Commerce
Westchester/LAX-Marina del Rey Chamber of Commerce
Wilmington Chamber of Commerce
The Willows
Opposition:
15 individuals
A.C.I.C. Physical Therapy
Acme Electric
Advanced Business Graphics
Advanced Office Solutions, Inc.
Advanced Systems Applications & Products
Advantage Concrete
Affordable Pictures
AJM Construction Services
All Deck
Amazing Air Conditioning & Heating
American Asphalt
At Home Pet Sitting
Barolo Caf?
Brea Orthopedic Medical Associates
CS & Associates
CanAm Industries Co.
Clear Care Corrective Skin
Corporate Business Interiors
Cowen Rental Service
Creative Construction
Creative Creations
Cuevas Maintenance Service
Customprecast Manufacturing
Dan Naulty Pitching Academy
Doheny Builders Supply
Don Jose Mexican Restaurant
Engineering Specialty Prototype Machining
Equity Builders
Excel Auto Body
Express Under Car Parts Warehouse of CA, Inc.
Extreme Custom Trailers
Fax.com
Free Cartidges.com
G & W Towing
Gro-Rite Fertilizer Co.
Highland Deck Coating
Idexx Veterinary Services, Inc.
Irvine Heating, Air Conditioning & Plumbing
Island Connections
J. Cole Construction
Jakes Home Repair & Remodeling
James Le Court Plumbing
John Hedges Screen 'N Glass
Jones & Son HVAC
Kids-etc.com
Kyriss Electrical Service
Landmark Lettering
Linens for Us
MGR Service Property Inspection
Marlin Club Marine
Network Rooter & Plumbing
Newmarks Yacht & Ship Brokers
Newport Photo
Orange County Cubs Co.
Pacific Mini-Load
Plaza Muffler
Point of View Travel
ProMed Financial, Inc.
Puccio Properties, Inc.
Randy's Painting Service
Reece Communications, Inc.
Scott's Screenprinting Services
SeaWest Cargo
Seiko Pool Co.
The Shade Shop
South Coast Muffler, Hitch & Welding
South Coast Shortload
South-West Independent Marketing, Inc.
Sullivan Properties, Inc.
Superior Property Services
TR Trading Company
Talimar Systems, Inc.
Tino's Garden Service
Trade Wind Inflatables & Marine
The Tune Up Center
Tustana Pool & Spa Supplies
Tustin-Santa Ana Veterinary Hospital
Walsh Carpet & Draperies
Wayne Shriver Bobcat Services
Works of Gold
Worldnetgroup
00 Inkjets.com
123 Inkjets.com
1-800-Biltong
Consultant:Kristin J. Triepke