Are associations spammers, too? What you should know about the new CAN-SPAM law before you hit "send.".

"XWES * V?\BUYAMBIEN/VGRA"--LOOK FAMILIAR? THIS TYPE OF heading on incoming e-mail messages may be a thing of the past--or perhaps an even greater nuisance--now that the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) has taken effect. For better or worse, the effect of the new federal anti-spam legislation will be significant and is likely only the federal government's first step in addressing this issue.

The legislation is meant to target peddlers of pornography, false business opportunities, and body-enhancement solutions, as well as those who use other fraudulent and deceptive practices. However, the law holds some implications for nonprofit organizations, particularly those with for-profit subsidiaries or corporate partners. Read on for details of the CAN-SPAM Act and how it applies to association e-mail communication and that of association for-profit subsidiaries.

Legislative background

President Bush signed the CAN-SPAM Act into law on December 16, 2003. Prior to the law's passage, more than 30 states had already adopted some form of anti-spam legislation. But the continuing deluge of unsolicited commercial e-mail offers fueled the public's demand for federal legislation to regulate spam (the name apparently derived from the old Monty Python comedy sketch in which the word spam is incessantly and nonsensically repeated for no explainable reason). In an article published by CNET News.com on the night the CAN-SPAM Act was signed, Forrester Research, Cambridge, Massachusetts, reported that 75 percent of e-mail is spam. The report claimed: "Two spam-filtering services quantify the problem: Postini [Redwood City, California] reports that 76 percent of the e-mail it processes for its clients is spam, while Brightmail [San Francisco] reports that the number of spam attacks has grown 50 percent to 9 million per month this year."

As with unsolicited fax messages and phone calls, consumers are clearly fed up with the barrage of unwanted solicitations. After some six years of congressional wrangling, the new law represents the first federal attempt to prohibit, regulate, and reduce unsolicited commercial electronic mail, which the law defines as "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service, (including content on an Internet Web site operated for a commercial purpose)."

This definition (and its related regulation) does not cover a category of e-mail referred to as transactional or relationship messages. These terms refer to those e-mail messages whose primary purpose is to facilitate, complete, confirm, provide, or request information concerning the following types of issues:

* a commercial transaction that the recipient has previously agreed to enter into with the sender;

* an existing commercial relationship, formed with or without an exchange of consideration, involving the ongoing purchase or use by the recipient of products or services offered by the sender;

* an existing employment relationship or related benefit plan; and

* the delivery of goods and services in connection with a previous commercial transaction.

Hence, association e-mail communication that falls in these categories is exempt from the regulations. Further, the mere inclusion of the commercial name of an entity or a link to a Web site of a commercial entity does not alone subject a message to the CAN-SPAM Act as long as the primary purpose of the message is something other than commercial advertisement or promotion of a commercial product or service.

Association implications

While, in most circumstances, the federal legislation does not affect the electronic communication activities of nonprofit, religious, or political organizations, it is important that nonprofits--particularly those with for-profit subsidiaries, or those who work closely with commercial firms--be aware of the requirements of the law, as it will apply to communication generated by those related entities.

The CAN-SPAM Act, which preempts all existing and pending state laws on spam except to the extent that such laws prohibit falsity or deception in commercial e-mail messages, requires commercial e-mailers to conduct their business according to certain minimum standards. As of January 1, 2004, all commercial e-mail (as defined earlier) must

* contain a clear and conspicuous identifier that the message is an advertisement or solicitation;

* reflect an accurate originating e-mail address;

* include an opt-out option;

* use clear, non-misleading subject headings; and

* provide a valid, physical postal address.

Under the CAN-SPAM Act opt-out requirement, messages must contain either a return address or an "Internet-based mechanism" to allow the recipient to opt out of receiving further messages. And the opt-out election must be honored within 10 days. Further, spammers who send fraudulent or deceptive e-mails, e-mails with false subject lines, or e-mails with a false return address may be subject to criminal prosecution and penalties, including injunctions, fines of up to $6 million, and imprisonment for as long as five years.

In addition, pornographic or sexually oriented e-mails must be labeled or marked as such. The CAN-SPAM Act also authorizes, though does not require, the Federal Trade Commission to investigate establishing a national do-not-spam list, similar to the recently inaugurated and wildly successful national do-not-call list. For a complete discussion of the implications for associations of the national do-not-call registry, see the "Legal" column in the December 2003 issue of ASSOCIATION MANAGEMENT.

Anticipated results

Critics of the new law argue that its effect will be minimal at best and, at worst, may even encourage or sanction a greater amount of spam by providing too many loopholes and exceptions to effectively limit spam. Indeed, some critics refer to the new law as the can spam act. For example, other than the adult-oriented-content labeling requirement, the federal law does not require any labeling of unsolicited commercial e-mails other than the use of the words advertisement or solicitation, which are not required to appear in the subject line of the message. A number of stricter state laws required solicitors to use the "ADV" label in the subject line.

In addition, the CAN-SPAM Act does not provide for a private right of action against illegal spammers. Rather, complaints must be made to the relevant enforcement authorities in the federal government, primarily through the Federal Trade Commission. State attorneys general also may enforce the law in federal district court. Another criticism of the law is that it adopted an opt-out requirement rather than an opt-in prior consent requirement, such as that used in the telephone solicitation federal law.

But perhaps the greatest concern about the new law is whether it will have any effect on spam originating outside of the United States. Already many professional spammers have relocated their operations to other countries, so the actual regulatory impact of U.S. legislation on this global issue may be limited. In recognition of the increasingly international nature of spam, the United Nations recently urged governments to take appropriate action on spam at national and international levels, and the Organization of Economic Cooperation and Development, Paris, plans to address spam regulation. The European Union already has approved legislation requiring spammers to obtain prior permission (opt-in) before sending e-mails to individuals. While this becomes an administrative nightmare and a more onerous system for senders, the law is highly consumer-oriented.

A conservative approach

All current indications suggest that the CAN-SPAM Act will be confined to regulation of unsolicited commercial e-mail and is not intended to regulate messages from religious, nonprofit, or political organizations sent pursuant to the tax-exempt purposes of these groups. Therefore, the new law should not pose any significant compliance or regulatory issues for most nonprofit, tax-exempt organizations. In cases where the communication does not further the tax-exempt purpose, such as a solicitation for advertising (which is subject to unrelated business income tax), messages are subject to the regulations. Additionally, nonprofit organizations should ensure that their non-exempt or for-profit subsidiary operations comply with the new law to the extent that unsolicited e-mail is used, such as in relation to affinity programs.

Your association's legal counsel may advise complying with all of the provisions of the new law until the Federal Trade Commission (FTC) issues implementing regulations later this year. At the very least, self-regulation, always one of the strengths of the association community, is a solid approach. Organizations may be wise to include an opt-out mechanism and a valid postal address in all e-mail messages to members and donors--at least until the application of the statute is clarified.

For more information on the CAN-SPAM Act, updates on the FTC's work on rules implementing the new law, and details of ASAE's work to ensure that e-mail communication between the association community and its members and donors does not fall within the targeted realm of the legislation, go to www.asaenet.org and click on "Public Policy."

Thomas E. Arend is an attorney with the Nonprofit Organizations Practice of Shaw Pittman, Washington, D.C. E-mail: [e-mail].