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[Senate Report 108-102]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 209
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-102

======================================================================

                          CAN-SPAM ACT OF 2003

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                       S. H.R. deg. 877

DATE deg.July 16, 2003.--Ordered to be printed
?

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      one hundred eighth congress

                             first session

                     JOHN McCAIN, Arizona, Chairman

TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas          Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey

           Jeanne Bumpus, Staff Director and General Counsel

                   Ann Begeman, Deputy Staff Director

                  Robert W. Chamberlin, Chief Counsel

               Kevin D. Kayes, Democratic Staff Director

                Gregg Elias, Democratic General Counsel

                                  (ii)
                                                       Calendar No. 209
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-102

======================================================================

 
                          CAN-SPAM ACT OF 2003

                                _______
                                

                 July 16, 2003.--Ordered to be printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 877]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 877) to regulate interstate 
commerce by imposing limitations and penalties on the 
transmission of unsolicited commercial electronic mail via the 
Internet, having considered the same, reports favorably thereon 
with an amendment in the nature of a substitute and recommends 
that the bill (as amended) do pass.

                          Purpose of the Bill

  The purposes of this legislation are to: (i) prohibit senders 
of electronic mail (e-mail) for primarily commercial 
advertisement or promotional purposes from deceiving intended 
recipients or Internet service providers as to the source or 
subject matter of their e-mail messages; (ii) require such e-
mail senders to give recipients an opportunity to decline to 
receive future commercial e-mail from them and to honor such 
requests; (iii) require senders of unsolicited commercial e-
mail (UCE) to also include a valid physical address in the e-
mail message and a clear notice that the message is an 
advertisement or solicitation; and (iv) prohibit businesses 
from knowingly promoting, or permitting the promotion of, their 
trade or business through e-mail transmitted with false or 
misleading sender or routing information.

                          Background and Needs

  Unsolicited commercial e-mail, commonly known as ``spam'', 
has quickly become one of the most pervasive intrusions in the 
lives of Americans. \1\
---------------------------------------------------------------------------
    \1\  The history of how the word ``spam'' became synonymous with 
UCE was printed in Computerworld on April 5, 1999, as follows: ``It all 
started in early Internet chat rooms and interactive fantasy games 
where someone repeating the same sentence or comment was said to be 
making a `spam'. The term referred to a Monty Python's Flying Circus 
scene in which actors keep saying `Spam, Spam, Spam, and Spam' when 
reading options from a menu.''
---------------------------------------------------------------------------
  Approximately 140 million Americans, or nearly half of all 
United States citizens, regularly use e-mail, including 63 
percent of full-time or part-time workers, according to the Pew 
Internet & American Life Project. The ease of obtaining large 
lists of these e-mail addresses has made e-mail a popular means 
for individuals, organizations, and businesses to market goods 
and services to consumers. Unlike direct mail delivered through 
the post office to consumers, however, UCE can reach millions 
of individuals at little to no cost and almost instantaneously. 
Noting its effectiveness, the Direct Marketing Association has 
reported that 37 percent of consumers it surveyed have bought 
something as a result of receiving unsolicited e-mail from 
marketers. However, in addition to legitimate businesses that 
wish to use commercial e-mail as another channel for marketing 
products or services, spam has become a favored mechanism of 
those who seek to defraud consumers and make a living by 
preying on unsuspecting e-mail users and those new to the 
Internet. As a result, Americans using e-mail, whether new 
users or those who have used it for decades, are finding their 
e-mail in-boxes deluged with unsolicited, and in most instances 
unwanted, promotions and advertisements that increasingly 
contain fraudulent and other objectionable content.
  In an April 2003 report entitled, False Claims in Spam, the 
Federal Trade Commission (FTC) found that 66 percent of all 
spam contains some kind of false, fraudulent, or misleading 
information, either in the e-mail's routing information, its 
subject line, or the body of its message. The FTC also 
determined that most spam messages can generally be grouped 
into one of several major categories, such as those promoting: 
investment or get-rich-quick ``opportunities'' (20 percent); 
pornographic websites or adult-oriented material (18 percent); 
credit card or financial offers (17 percent); and health 
products and services (10 percent).
Rapidly Increasing Volume Of Spam
  The volume of spam has been rapidly increasing year after 
year and today accounts for over 46 percent of all global e-
mail traffic. Many Internet analysts expect the volume of spam 
to exceed 50 percent of all e-mail by the end of 2003, and 
possibly sooner. By contrast, in September 2001, spam only 
accounted for 8 percent of all e-mail sent worldwide, and just 
18 percent of all e-mail as late as April 2002. However, over 
the past year, the rate at which spam is increasing has 
surpassed most observers' previous expectations and is reaching 
critically high levels.
  As of May 2003, the largest Internet service provider (ISP), 
America Online, was blocking up to 2.4 billion spam messages 
each day, or approximately 80 percent of its 3 billion daily 
inbound e-mails. This number of blocked messages was up from 1 
billion per day only 2 months beforehand, and 500 million per 
day in December 2002. Microsoft, the country's second-largest 
e-mail provider, also reported this past May that its MSN mail 
and Hotmail services combined block up to 2.4 billion spam 
messages each day. Earthlink, the third largest ISP in the 
United States, reported a 500 percent increase in inbound spam 
over the past 18 months. With many more similar reports in 
recent months, the sheer volume of spam is threatening to 
overwhelm not only the average consumer's in-box, but also the 
network systems of ISPs, businesses, universities, and other 
organizations. Putting this volume of spam in perspective, USA 
Today recently reported that more than 2 trillion spam messages 
are expected to be sent over the Internet this year, or 100 
times the amount of direct mail advertising pieces delivered by 
United States mail last year.
  IDC, a leading technology industry analysis firm, recently 
reported that Americans bear the brunt of this increased growth 
in spam. According to IDC, North America was receiving 
approximately 3.9 billion spam messages per day out of the 7.3 
billion spam messages sent daily around the globe.
Deceptive Sender Information and Subject Lines
  The inconvenience and intrusiveness to consumers of large 
volumes of spam are exacerbated by the fact that, in many 
instances, the senders of spam purposefully disguise the source 
or content of the e-mail by falsifying or including misleading 
information in the e-mail's ``from'', ``reply-to'', or 
``subject'' lines. Thus, the recipient is left with no 
effective ability to manage the constant inflow of spam into an 
e-mail in-box because he or she cannot often tell without 
opening the individual messages who is sending the messages or 
what they contain. Even after opening a message, a consumer 
often will not be able to ascertain the true identity of the 
sender. Furthermore, once receiving unwanted messages, most 
consumers do not have any way to dependably contact the senders 
to instruct them to take the recipient off their mailing lists.
  The FTC found in its recent report that one-third of all spam 
contains a fraudulent return e-mail address that is included in 
the routing information (known as the ``header'') of the e-mail 
message. Early on, spam experts believed that fake return 
addresses were used to entice recipients to reply to spam and 
ask that their names be removed from the spammers' e-mail 
lists. Replying like this was thought to confirm to the spammer 
that the e-mail account was active, but the FTC did not find 
enough evidence in a previous study to confirm this risk. 
Regardless, as discussed further below, spammers have much 
quicker and more automated ways to confirm valid e-mail 
addresses even before sending out spam. Furthermore, headers 
continue to be falsified not only to trick ISPs' increasingly 
sophisticated spam filters, but also to lure consumers into 
mistakenly opening messages from what appears to be people they 
know.
  One common method of collecting consumers' addresses, known 
as a ``dictionary attack'', involves rapid, short-burst 
communications with the target ISP's server (known as 
``pinging'' the server) with automatically-generated, recipient 
e-mail addresses in alphabetical (or dictionary) order. In this 
attack, the spammer's software will record which addresses 
cause the server to respond positively that it is ready to 
accept e-mail for a tested recipient e-mail address. Each 
positive response from the server confirms a valid address at 
the target ISP, and the addresses are collected into a list 
that is used to send a block of spam to that server at a later 
time. Another common method of obtaining consumers' e-mail 
addresses is to capture them from websites where users post 
their addresses in order to communicate with other users of the 
website. This practice, known as e-mail address ``harvesting'', 
is often done by automated software robots that scour the 
Internet looking for and recording posted e-mail addresses.
  Additionally, many spam messages contain ``web bugs'' or 
other hidden technological mechanisms to immediately notify a 
spammer via the Internet when an unsolicited message has been 
opened. Far short of replying to a spam message, a consumer's 
mere act of opening a spam message containing a web bug may 
eventually cause that consumer to receive more spam as a result 
of confirming to the spammer his or her willingness or 
susceptibility to open unsolicited e-mail.
  In addition to false sender information, spammers often lure 
consumers to open their e-mail by adding appealing or 
misleading e-mail subject lines. The FTC reported that 42 
percent of spam contains misleading subject lines that trick 
the recipient into thinking that the e-mail sender has a 
personal or business relationship with the recipient. Typical 
examples are subject lines such as ``Hi, it's me'' and ``Your 
order has been filled''. Moreover, e-mail messages with 
deceptive subject lines may still lead unsuspecting consumers 
to websites promoting completely unrelated products or even 
scams, such as pornography or get-rich-quick pyramid schemes.
  Pornographic spam is more likely than other spam to contain 
fraudulent or misleading subject lines. In its recent report, 
the FTC found that more than 40 percent of all pornographic 
spam either did not alert recipients to images contained in the 
message or contained false subject lines, thus ``making it more 
likely that recipients would open the messages without knowing 
that pornographic images will appear.'' Unsuspecting children 
who simply open e-mails with seemingly benign subject lines may 
be either affronted with pornographic images in the e-mail 
message itself, or automatically and instantly taken--without 
requiring any further action on their part (like clicking on a 
link)--to an adult web page exhibiting sexually explicit 
images.
  Compounding these problems is the fact that nearly all spam 
being sent today is considered untraceable back to its original 
source without extensive and costly investigation. Although 
many ISPs try to locate spammers in order to shut down their 
operations, spammers can rather easily disguise their 
whereabouts, quickly move to other ISPs, or set up websites at 
new domains in order to avoid being caught. In addition, FTC 
Chairman Muris and Commissioners Swindle and Thompson each 
testified in hearings before the Committee this past spring to 
the FTC's tremendous difficulty in tracking and finding 
spammers who send out spam with fraudulent transmission 
information. In response to members who questioned the FTC's 
effectiveness in reducing the volume of spam, Chairman Muris 
testified that their investigations are more effective when 
``following the money'' through the business promoted in the e-
mail message to the spammer.
  Testimony provided to the Committee by Brightmail Inc., a 
leading company in anti-spam technology and services for ISPs 
and corporations, supported the FTC's findings by concluding 
that nearly 90 percent of all of the spam sent worldwide is 
``untraceable'' to its actual source. Of the spam that does 
``claim'' (in its header information) to come from a certain 
region of the world, the overwhelming majority of it is sent 
through computer e-mail servers in countries outside of North 
America.\2\ According to the routing information of the spam 
Brightmail has analyzed, approximately 60 percent comes from 
Internet protocol (IP) addresses assigned to Europe (including 
10-12 percent alone from Russia), and 16 percent originates in 
Asia (with China leading that region). Although North America 
receives over half of all spam sent each day, only 11 percent 
of spam claims to emanate from North America.
---------------------------------------------------------------------------
    \2\ Brightmail analyzes data it collects from its ``probe 
network'', more than a million continually monitored e-mail addresses 
seeded in ISPs around the world. These e-mail addresses never send out 
e-mail and have never been used in e-commerce, but still attract 300-
350 million e-mail messages per month, 100 percent of which can be 
classified as ``unsolicited''.
---------------------------------------------------------------------------
  Some observers suspect that spammers located in North America 
account for more of the global spam traffic. These observers 
argue that data showing a small percentage of spam emanating 
from North America is merely indicative of sophisticated North 
American spammers' known practice of sending their messages 
overseas first to ``bounce'' them off of misconfigured e-mail 
servers known as ``open relays''--a process that masks the true 
origin of the message. When successfully used, open relays pass 
on the e-mail message to intended destinations in the United 
States while deleting or over-writing the original source 
information that would give away the spammer's true location. 
However, because 90 percent of all spam is not easily traceable 
back to its originating address, consumers, ISPs, government 
investigators, and spam experts alike are left with only 
theories about the countries truly responsible as the greatest 
sources of spam.
Fraudulent Schemes, Privacy Risks, and Objectionable Content
  The FTC has consistently reported that many unsolicited e-
mail messages contain fraudulent, misleading, or objectionable 
content. Common types of fraudulent spam promote chain letters, 
pyramid schemes, stock and investment scams, and solicitations 
for bogus charitable causes, all of which may place consumers' 
privacy and financial assets at significant risk. Also common 
is spam with pornographic content or links to websites with 
pornographic content, which many recipients find offensive and 
which places additional burdens on parents to constantly 
monitor their children's e-mail (even when they are already 
using an ISP's ``parental controls'').
  Consumers who buy products offered through spam face numerous 
risks, including the exposure and sharing of sensitive personal 
information over the Internet, and credit card or identity 
theft. In a recent example, the FTC filed a complaint against 
30 Minute Mortgage Inc., which it claimed used an array of 
deceptions to lure consumers into sharing their personal 
financial data. According to the FTC, the company advertised 
itself as a national mortgage lender and used spam to urge 
potential customers to complete detailed online loan 
applications. The applications required consumers to supply 
sensitive personal information, such as their names, addresses, 
phone numbers, Social Security numbers, employment information, 
income, first and second mortgage payments, and asset account 
types and balances. The company assured consumers that when 
they submitted the loan applications, their sensitive 
information would be protected. Instead, the FTC alleges the 
company and its principals sold or offered to sell thousands of 
completed applications to nonaffiliated third parties.
  Spam also is used to lure unwary users to websites that 
contain viruses, spyware, or other malicious computer code. 
Late last year, for instance, an Internet adult entertainment 
company created a ``Trojan horse'' program that was downloaded 
to unsuspecting users'' computers. Users were tricked into 
accepting the program through a spam message that promised to 
deliver an electronic greeting card. The downloaded program, 
however, instead routed users to the company's pornography 
websites.
  Pornographers, long on the cutting edge of technology, have 
taken to employing increasingly brazen techniques to sell their 
products and services. As mentioned above, the FTC estimates 
that 18 percent of all spam is pornographic or ``adult-
oriented'' material. While not all of such spam contains 
images, spammers often do send graphic sexual images embedded 
in the body of spam so that simply upon opening the e-mail 
message, a user is assaulted with explicit photographs or video 
images. More frequently, though, spam contains HTML code and a 
JavaScript applet that together automatically load a 
pornographic web page as soon as the spam message is either 
opened or, in some cases, simply ``previewed'' in certain e-
mail programs'' preview panes.
Costs to ISPs, Consumers, and Businesses
  Spam imposes significant economic burdens on ISPs, consumers, 
and businesses. Left unchecked at its present rate of increase, 
spam may soon undermine the usefulness and efficiency of e-mail 
as a communications tool. Massive volumes of spam can clog a 
computer network, slowing Internet service for those who share 
that network. ISPs must respond to rising volumes of spam by 
investing in new equipment to increase capacity and customer 
service personnel to deal with increased subscriber complaints. 
ISPs also face high costs maintaining e-mail filtering systems 
and other anti-spam technology on their networks to reduce the 
deluge of spam. Increasingly, ISPs are also undertaking 
extensive investigative and legal efforts to track down and 
prosecute those who send the most spam, in some cases spending 
over a million dollars to find and sue a single, heavy-volume 
spammer.
  Though major service providers tend to disagree about the 
overall monetary impact spam has had on their respective 
networks, anti-spam initiatives cost providers time and money, 
and those expenses typically have been passed on as increased 
charges to consumers. A 2001 European Union study found that 
spam cost Internet subscribers worldwide $9.4 billion each 
year, and USA Today reported in April that research 
organizations estimate that fighting spam adds an average of $2 
per month to an individual's Internet bill. Additionally, some 
observers expect that free e-mail services (often used by 
students and employees who obtain free Internet access) will be 
downsized as the costs of spam increase, which may result in 
consumers facing significant ``switching costs'' as they are 
forced to migrate to subscription-based services. As reported 
by the Boston Globe, industry analysts are concerned that this 
trend could influence millions of consumers to abandon the use 
of e-mail messaging as a viable means of communication.
  Spam presents other real costs to consumers who live in 
remote areas or travel on business when they are forced to 
spend time sorting through crowded e-mail in-boxes and deleting 
unwanted messages. Although Internet access through broadband 
connections is steadily growing, a dial-up modem continues to 
be the method by which a vast majority of Americans access the 
Internet and their e-mail accounts. In rural areas, however, 
dial-up customers may pay per-minute access charges while 
online or, in some cases, long distance charges for their 
Internet connection. In addition, business travelers who sign 
onto e-mail services from remote locations must either pay 
long-distance fees or elevated per-minute surcharges in hotel 
rooms. In these cases, deleting spam is more than just a loss 
of time or productivity; it is actually an additional charge to 
the consumer or business traveler.
  In addition to the costs to ISPs and consumers, recent 
industry research has focused on the impact of spam's growth on 
businesses and e-commerce. Ferris Research currently estimates 
that costs to United States businesses from spam in lost 
productivity, network system upgrades, unrecoverable data, and 
increased personnel costs, combined, will top $10 billion in 
2003. Of that total, Ferris estimates that employee 
productivity losses from sifting through and deleting spam 
accounts for nearly $4 billion alone. Recent press reports also 
indicate that large companies with corporate networks typically 
spend between $1 to $2 per user each month to prevent spam, 
which is currently estimated to make up 24 percent of such 
corporations' inbound e-mail. At current growth rates, however, 
spam could account for nearly 50 percent of all inbound e-mail 
to large corporations by 2004. Ferris reports that corporate 
costs of fighting spam today represent a 300 percent increase 
from 2 years ago, and the Yankee Group estimates that costs to 
corporations could reach $12 billion globally within the next 
18 months. Based on current spam growth rates, the Radicati 
Group estimates that, on a worldwide basis, spam could cost 
corporations over $113 billion by 2007.

                         Summary of Provisions

  The CAN-SPAM Act, S. 877, aims to address the problem of spam 
by creating a Federal statutory regime that would give 
consumers the right to demand that a spammer cease sending them 
messages, while creating civil and criminal sanctions for the 
sending of spam meant to deceive recipients as to its source or 
content. Under the legislation, enforcement would be undertaken 
by the FTC and, in some cases, industry-specific regulatory 
authorities. In addition, the bill would enable State attorneys 
general and ISPs to bring actions against violators.
  If enacted, S. 877 would require senders of all commercial e-
mail to include a valid return e-mail address and other header 
information with the message that accurately identifies the 
sender and Internet location from which the message has been 
sent. Except for transactional or relationship e-mail messages 
(as defined therein), the legislation would also require 
senders of commercial e-mail to provide an Internet-based 
system for consumers to opt out of receiving further messages 
from that sender. Moreover, a sender of UCE would be required 
additionally to include in the e-mail message itself a valid 
physical address of the sender as well as clear and conspicuous 
notice that both the message is an advertisement or 
solicitation and that the recipient may opt out of further UCE 
from the sender.
  S. 877 would also require businesses to ensure that they are 
not promoted in e-mail sent with false or misleading 
transmission information. The bill would hold the promoted 
businesses responsible if they: (i) know or should know about 
such deceptive promotion; (ii) are receiving or expect to 
receive an economic benefit from it; and (iii) are taking no 
reasonable precautions to prevent such promotion or to detect 
and report it to the FTC.
  S. 877 would permit criminal sanctions to be imposed on 
senders of e-mail who intentionally disguise the source of 
their messages by falsifying header information. Civil 
sanctions would also be available for this violation as well as 
all other violations of the bill. Additionally, aggravated 
violations would apply to those who violate the provisions of 
the bill while employing certain problematic techniques used to 
either generate recipient e-mail addresses, or remove or mask 
the true identity of the sender.

                          Legislative History

  Senator Burns, the chairman of the Communications 
Subcommittee, introduced S. 877 on April 10, 2003, with Senator 
Wyden as an original cosponsor. The bill is also cosponsored by 
Senators Breaux, Carper, Chambliss, Dodd, Edwards, Gregg, 
Johnson, Landrieu, Lautenberg, Lieberman, Murkowski, Nelson of 
Florida, Schumer, Snowe, Stevens, Talent, and Thomas.
  S. 877 is based on legislation (S. 630) that was approved and 
reported out of the Committee during the 107th Congress. In 
addition to S. 877, 4 other bills relating to spam have been 
introduced and referred to the Committee during the 108th 
Congress. The bills are: S. 563, introduced by Senator Dayton; 
S. 1052, introduced by Senator Nelson of Florida and 
cosponsored by Senator Pryor; S. 1231, introduced by Senator 
Schumer and cosponsored by Senator Graham of South Carolina; 
and S. 1237, introduced by Senator Corzine.
  On May 21, 2003, the Committee held a full committee hearing 
chaired by Senator McCain on the proliferation of spam and 
options for addressing the threat it poses to consumers, 
business, ISPs, and the very medium of e-mail. Witnesses at the 
hearing included two FTC commissioners and a diverse group of 
companies, associations, and private parties interested in 
spam. Additionally, several other individuals and organizations 
provided written testimony for the record.
  On June 19, 2003, the Committee held an executive session 
chaired by Senator McCain at which S. 877 was considered. The 
bill was approved unanimously by voice vote and was ordered 
reported with an amendment in the nature of a substitute. 
Amendments were offered by Senator Burns, to make substantive 
modifications to the bill as introduced, and also by Senator 
McCain to make businesses knowingly promoted through e-mail 
with false or misleading transmission information subject to 
FTC Act penalties and enforcement.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 14, 2003.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 877, the Controlling 
the Assault of Non-Solicited Pornography and Marketing Act of 
2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Melissa E. 
Zimmerman (for federal spending), Annabelle Bartsch (for 
revenues), Victoria Heid Hall (for the state and local impact), 
and Paige Piper/Bach (for the impact on the private sector).
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

S. 877--Controlling the Assault of Non-Solicited Pornography and 
        Marketing Act of 2003

    Summary: S. 877 would impose new restrictions on the 
transmission of unsolicited commercial electronic mail (UCE), 
often referred to as ``spam.'' The bill would require all 
senders of UCE to identify the messages as UCE, provide 
accurate header information, include a functioning return email 
address, and stop sending messages to recipients who opt not to 
receive them. In addition, the bill would create criminal 
penalties for knowingly sending UCE that contains false 
information on the email's header line.
    The provisions of S. 877 would be enforced primarily by the 
Federal Trade Commission (FTC) under the authorities provided 
in the Federal Trade Commission Act, which includes assessments 
of civil penalties for violations of the act. However, agencies 
such as the Office of the Comptroller of the Currency (OCC), 
the Board of Governors of the Federal Reserve System, the 
Federal Deposit Insurance Corporation (FDIC), the Office of 
Thrift Supervision (OTS), the National Credit Union 
Administration (NCUA), the Securities and Exchange Commission 
(SEC), and the Secretary of Transportation would enforce the 
bill as it applies to businesses within the agencies' 
respective jurisdictions. Those agencies would punish 
violations of the bill's provisions with civil and criminal 
penalties.
    CBO estimates that implementing S. 877 would cost about $1 
million in 2004 and about $2 million a year in 2005 and 
thereafter, assuming appropriation of the necessary amounts. 
CBO estimates that civil penalties collected as a result of 
enacting this bill would increase governmental receipts 
(revenues) by about $3 million a year when fully implemented 
(by 2005). The bill also would have additional effects on 
revenues and direct spending by imposing costs on banking 
regulators and by creating new penalties. However, CBO 
estimates that those additional effects would be negligible.
    S. 877 would preempt certain state or local laws that 
regulate the use of electronic mail to send commercial 
messages. Such a preemption is a mandate as defined in the 
Unfunded Mandates Reform Act (UMRA), but CBO estimates that the 
budgetary impact of the mandate would be minimal and would not 
exceed the threshold established in UMRA ($59 million in 2003, 
adjusted for inflation).
    S. 877 would impose private-sector mandates as defined in 
UMRA by requiring that senders of commercial electronic mail 
include certain information within their messages. Based on 
information provided by government and industry sources, CBO 
expects that the direct costs of complying with those mandates 
would fall below the annual threshold established by UMRA ($117 
million in 2003, adjusted annually for inflation).
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of S. 877 is shown in the following table. The 
costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                              CHANGES IN FTC SPENDING SUBJECT TO APPROPRIATION \1\

Estimated Authorization Level \2\..................................        1        2        2        2        2
Estimated Outlays..................................................        1        2        2        2        2

                                               CHANGES IN REVENUE

Estimated Revenues.................................................        1        3        3        3        3
----------------------------------------------------------------------------------------------------------------
\1\ S. 877 also would increase direct spending by less than $500,000 a year.
\2\ The FTC received a gross 2003 appropriation of $177 million. This amount will be offset by an estimated $95
  million in fees the FTC collects for merger reviews and administering a national ``do-not-call'' registry.

    Basis of estimate: S. 877 would require the FTC to enforce 
the provisions of the bill under the Federal Trade Commission 
Act. Based on information from the FTC, CBO expects that the 
agency would need to upgrade its database of UCE complaints, 
hire additional staff to investigate possible violations, and 
assist companies attempting to comply with the bill's 
provisions. CBO estimates that those activities would cost $1 
million in 2004 and $2 million a year in subsequent years, 
assuming appropriation of the necessary amounts.
    S. 877 would create a variety of new civil and criminal 
penalties, which are classified in the budget as governmental 
receipts (revenues). The FTC would enforce the bill with civil 
penalties using its authority under the Federal Trade 
Commission Act. Based on information from the FTC, CBO 
estimates that those enforcement efforts would cause revenues 
to rise by $3 million a year under the bill. The bill also 
would create new criminal penalties and authorize other 
agencies, including the SEC and the Department of 
Transportation, to enforce the bill's provisions on industries 
within their jurisdictions using both civil and criminal 
penalties. However, CBO estimates that the effect of those 
additional provisions on revenues would not be significant in 
any year.
    Collections of criminal fines are deposited in the Crime 
Victims Fund and spent in subsequent years. Because any 
increase in direct spending would equal the amount of fines 
collected (with a lag of one year or more), the additional 
direct spending also would be negligible.
    The OCC, NCUA, OTS, FDIC, and the Board of Governors of the 
Federal Reserve System would enforce the provisions of S. 877 
as they apply to financial institutions. The OCC, NCUA, and OTS 
charge fees to the institutions they regulate to cover all of 
their administrative costs; therefore, any additional spending 
by these agencies to implement the bill would have no net 
budgetary effect. That is not the case with the FDIC, however, 
which uses insurance premiums paid by all banks to cover the 
expenses it incurs to supervise state-chartered banks. The 
bill's requirement that the FDIC enforce the bill's 
restrictions on UCE sent by these banks would cause a small 
increase in FDIC spending but would not affect its premium 
income. In total, CBO estimates that S. 877 would increase net 
direct spending of the OCC, NCUA, OTS, and FDIC by less than 
$500,000 a year.
    Budgetary effects on the Federal Reserve are recorded as 
changes in revenues (governmental receipts). Based on 
information from the Federal Reserve, CBO estimates that 
enacting S. 877 would reduce such revenues by less than 
$500,000 a year.
    Estimated impact on state, local, and tribal governments: 
S. 877 would establish new federal prohibitions on certain 
types of commercial electronic mail. While the Federal Trade 
Commission and other federal agencies would generally enforce 
these prohibitions, in the case of any person engaged in 
providing insurance, the prohibitions would be enforced under 
state insurance laws. However, any such state enforcement would 
be voluntary.
    S. 877 would preempt certain state or local laws that 
regulate the use of electronic mail to send commercial 
messages. Such a preemption is a mandate under UMRA. CBO 
estimates that the mandate would have little budgetary impact 
on state and local governments and would not, therefore, exceed 
the threshold established in UMRA ($59 million in 2003, 
adjusted for inflation).
    Estimated impact on the private sector: S. 877 would impose 
private-sector mandates as defined in the UMRA by requiring 
that senders of commercial electronic mail include certain 
information within their messages. The bill would require that 
all senders of commercial electronic mail include a valid 
return electronic-mail address and an accurate subject heading 
within their message. Senders of unsolicited commercial 
electronic mail would further be required to include a valid 
physical postal address and to identify their messages as UCE 
within their messages. The bill would require that the 
electronic-mail address of the UCE sender must remain 
functioning for at least 30 days after transmission of UCE.
    In addition, S. 877 would require persons who send UCE to 
provide the recipients of their messages with an option to 
discontinue receiving UCE from the sender and to notify 
recipients of that option to discontinue in each UCE message. 
If a recipient makes a request to a sender not to receive some 
or any UCE messages from such sender, then the sender, or 
anyone acting on the sender's behalf, would be prohibited from 
initiating the transmission to the recipient starting 10 
business days after the receipt of such request. Based on 
information from government and industry sources, CBO estimates 
that the direct costs of complying with the mandates contained 
in the bill would fall below the annual threshold established 
by UMRA for private-sector mandates ($117 million in 2003, 
adjusted annually for inflation).
    Estimate prepared by: Federal Spending: Melissa E. 
Zimmerman; Federal Revenues: Annabelle Bartsch; Impact on 
State, Local, and Tribal Governments: Victoria Heid Hall; and 
Impact on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

  S. 877 would provide all individuals using e-mail certain 
protections from fraudulent or misleading behavior by senders 
of commercial e-mail, and an opportunity to elect whether or 
not to receive UCE. Additionally, the legislation would mandate 
that all persons who send commercial e-mail meet certain 
requirements, including proper identification and providing an 
Internet-based reply system for recipients so they may opt out 
of future UCE sent by that sender. Therefore, S. 877 would 
cover all consumers who receive e-mail, and all senders of 
commercial e-mail.

                            ECONOMIC IMPACT

  The legislation would result in new or incremental costs for 
senders of commercial e-mail to comply with the legislation's 
requirements, to the extent that those senders have not already 
made provisions to prevent fraudulent or misleading headers or 
subject headings, ensure proper identification of the sender, 
and provide Internet-based reply mechanisms that allow 
recipients to choose whether to receive future messages. 
Certain reports have noted the fairly low cost borne by senders 
of commercial e-mail and the increased costs that ISPs and 
their customers pay to handle increasing commercial e-mail 
traffic. The Committee notes that many direct marketing groups 
and companies that use commercial e-mail have already 
implemented Internet-based response systems for recipients. 
Therefore, many of the costs that would be expected to be 
incurred from S. 877 have already been absorbed by the 
marketing and sales industries that send commercial e-mail. 
However, certain industries with extensive marketing affiliates 
claim that the costs of integrating opt-out systems network-
wide may be significant.

                                PRIVACY

  S. 877 would increase the personal privacy of all users of e-
mail by providing them with the ability to decline to receive 
future UCE from the same sender. S. 877 also would require 
senders of UCE to identify themselves to the recipients by 
truthful header information and a mailing address where a 
recipient can contact the sender, thereby better informing the 
recipient of the identity of the sender. S. 877 would 
furthermore prohibit the unauthorized use of a consumer's e-
mail account (also known as ``hijacking'') for the purposes of 
sending out spam. S. 877 also would increase the privacy 
protection of consumers' e-mail addresses and accounts by 
outlawing the use of e-mail address collection methods, such as 
e-mail harvesting and dictionary attacks, when used in 
connection with the sending of commercial e-mail in violation 
of S. 877.

                               PAPERWORK

  S. 877 would require the FTC to make recommendations to 
Congress for a workable plan to create a nationwide marketing 
Do-Not-E-mail list within 6 months of completing implementation 
of its national telemarketing Do-Not-Call list. S. 877 would 
also require the FTC to perform a study and submit a report to 
the Congress within 24 months after the date of enactment of 
the legislation. The legislation is expected to generate 
similar amounts of administrative paperwork as other 
legislation requiring multiple agency enforcement, 
recommendations for implementing a program, and a report to 
Congress.

                      Section-by-Section Analysis

Section 1. Short title

  This section would provide that the legislation may be cited 
as the ``Controlling the Assault of Non-Solicited Pornography 
and Marketing Act of 2003'' or as the ``CAN-SPAM Act of 2003''.

Section 2. Congressional findings and policy

  This section describes the rising volume of UCE, the threat 
it poses to e-mail's popularity and utility, the costs it 
imposes, and a number of practices that spammers commonly use 
to frustrate recipients' ability to identify and control the 
flow of UCE. This section also notes that State statutes have 
not been effective in managing the problem to date, and that 
Federal legislation will need to be coupled with technological 
approaches and international cooperation. Based on these 
findings, this section would, if enacted, express the policy 
determination that there is a substantial government interest 
in regulating commercial e-mail on a Federal basis to prevent 
commercial e-mail that misleads recipients as to the source or 
content of the message and to ensure that recipients have a way 
to tell a sender of commercial e-mail to stop.

Section 3. Definitions

  This section would define 19 terms used throughout the bill, 
some of which have a specific contextual meaning in the 
statutory regime created by the legislation. The following 
definitions included in S. 877 are of particular importance:
          Affirmative Consent.--The term ``affirmative 
        consent'' means that the message is being sent with the 
        express consent of the recipient. Pursuant to this 
        definition, affirmative consent is intended to require 
        some kind of active choice or selection by the 
        recipient; merely remaining passive, as in the case 
        where a consumer fails to modify a default setting 
        expressing consent, is not a sufficient basis for 
        affirmative consent. If the recipient's consent was 
        prompted by a request for such consent, as opposed to 
        consent expressed at the recipient's own initiation (as 
        in the case where a consumer wants a product catalogue 
        and e-mails the company to ask for it), then such 
        request must be clear and conspicuous or affirmative 
        consent will not be deemed present. This definition 
        does not require consent on an individual, sender-by-
        sender basis. A recipient could affirmatively consent 
        to messages from one particular company, but could also 
        consent to receive either messages on a particular 
        subject matter (e.g., gardening products) without 
        regard to the identity of the sender, or messages from 
        unnamed marketing partners of a particular company. The 
        only limitation on such third-party affirmative consent 
        is that the person granting such consent must have been 
        provided clear and conspicuous notice, at the time such 
        consent is granted, that the person's e-mail address 
        may be transferred to such third parties. The purpose 
        of this limitation is to ensure that consumers are 
        fully informed of the scope of any third-party consent 
        they may grant.
          Commercial Electronic Mail Message.--The term 
        ``commercial electronic mail message'' means any 
        electronic mail message where the primary purpose is 
        the commercial advertisement or promotion of a product 
        or service. This definition is intended to cover 
        marketing e-mails. Advertisements for content on an 
        Internet website operated for a commercial purpose are 
        included within the definition because an e-mail urging 
        the recipient to visit a particular commercial website 
        is just as much a marketing message as an e-mail urging 
        the purchase of a specific product or service. However, 
        the definition is not intended to cover an e-mail that 
        has a primary purpose other than marketing, even if it 
        mentions or contains a link to the website of a 
        commercial company or contains an ancillary marketing 
        pitch.
          Electronic Mail Message.--The term ``electronic mail 
        message'' means a message sent to a unique electronic 
        mail address. The definition is intended to apply to 
        the message in the form that it is sent, regardless of 
        whether or in what form it is received. For example, an 
        electronic mail message may be blocked by filtering 
        software, or truncated or altered by some other type of 
        software installed by the recipient or the recipient's 
        Internet service provider. Such downstream effects have 
        no impact on what constitutes the underlying electronic 
        mail message for purposes of this Act.
          Header Information.--The term ``header information'' 
        means the source, destination, and routing information 
        attached to the beginning of an e-mail message, 
        including the originating domain name and originating 
        e-mail address, and any other information that appears 
        in the line purporting to identify the person 
        initiating the message (commonly referred to as the 
        ``from'' line).
          Implied Consent.--The term ``implied consent'', in 
        reference to a commercial e-mail message, means that 
        two requirements are met. First, a business 
        transaction, between the sender and recipient, must 
        have occurred within a 3-year period ending upon 
        receipt of the message. A business transaction may 
        include a transaction involving the provision, free of 
        charge, of information, goods, or services requested by 
        the recipient. However, merely visiting a free website 
        and browsing its content does not constitute a 
        ``transaction'' for purposes of this definition. 
        Second, the recipient of the message must have been 
        given clear and conspicuous notice of an opportunity 
        not to receive UCE from the sender and has not 
        exercised that opportunity. Unlike affirmative consent, 
        implied consent does not require an active choice or 
        request by the recipient, so long as the recipient has 
        been given the ability via conspicuous notice to 
        decline receiving additional messages from the sender. 
        The definition also clarifies that a recipient's 
        implied consent may apply only to a particular division 
        or line of business within a particular corporation, 
        rather than the entire corporation, if the corporation 
        represented itself as a particular division or line of 
        business in its dealings with the recipient. The 
        rationale for this is that it would be unfair to read 
        the recipient's implied consent more broadly, when the 
        recipient may not have been aware of the identity of 
        the broader corporation.
          Initiate.--The term ``initiate'', in reference to a 
        commercial e-mail message, means to originate or 
        transmit, or procure the origination or transmission 
        of, such an e-mail message. More than one person may be 
        considered to have initiated a message. Thus, if one 
        company hires another to handle the tasks of composing, 
        addressing, and coordinating the sending of a marketing 
        appeal, both companies could be considered to have 
        initiated the message--one for procuring the 
        origination of the message; the other for actually 
        originating it. However, the definition specifies that 
        a company that merely engages in routine conveyance, 
        such as an ISP that simply plays a technical role in 
        transmitting or routing a message and is not involved 
        in coordinating the recipient addresses for the 
        marketing appeal, shall not be considered to have 
        initiated the message.
          Procure.--The term ``procure'', when used with 
        respect to the initiation of a commercial electronic 
        mail message, means intentionally to pay or induce 
        another person to initiate the message on one's behalf, 
        while knowingly or consciously avoiding knowing the 
        extent to which that person intends to comply with this 
        Act. The intent of this definition is to make a company 
        responsible for e-mail messages that it hires a third 
        party to send, unless that third party engages in 
        renegade behavior that the hiring company did not know 
        about. However, the hiring company cannot avoid 
        responsibility by purposefully remaining ignorant of 
        the third party's practices. The ``consciously avoids 
        knowing'' portion of this definition is meant to impose 
        a responsibility on a company hiring an e-mail marketer 
        to inquire and confirm that the marketer intends to 
        comply with the requirements of this Act.
          Recipient.--The term ``recipient'' means an 
        authorized user of the e-mail address to which an e-
        mail message was sent or delivered. If such a user has 
        other e-mail addresses in addition to the address to 
        which the message was sent, each of those addresses 
        will be treated as an independent recipient for 
        purposes of this legislation. For example, a person may 
        have an e-mail address provided by his ISP and also 
        subscribe to a second, free e-mail service. Under the 
        legislation, each of these addresses is considered 
        independent, although they are both owned by the same 
        person. Therefore, if an unsolicited commercial message 
        is sent by the same sender to each of the recipient's 
        e-mail addresses and the recipient does not wish to 
        receive future messages, the recipient must opt out for 
        each address. However, if an e-mail address is 
        reassigned to a new user, as may happen after one user 
        gives up an e-mail address in connection with a change 
        in ISP or a change in employer, the new user shall not 
        be treated as a recipient of any commercial e-mail 
        message sent or delivered to that address before it was 
        reassigned.
          Sender.--The term ``sender'' means a person who 
        initiates a commercial e-mail and whose product, 
        service, or Internet web site is advertised or promoted 
        by the message. Thus, if one company hires another to 
        coordinate an e-mail marketing campaign on its behalf, 
        only the first company is the sender, because the 
        second company's product is not advertised by the 
        message. If the second company in this example, 
        however, originates or transmits e-mail on behalf of 
        the first company, then, under the definitions in 
        section 3 of the bill, both companies would be 
        considered to have ``initiated'' the e-mail, even 
        though only the first company is considered to be the 
        ``sender''.
          Transactional or Relationship Message.--The term 
        ``transactional or relationship message'' means an 
        electronic mail message the primary purpose of which is 
        to: facilitate, complete, or confirm a transaction; 
        provide specified types of information with respect to 
        a product or service used or purchased by the 
        recipient; provide information directly related to a 
        current employment relationship or benefit plan; or 
        deliver goods or services that are included under the 
        terms of a previous transaction. This definition is 
        intended to cover messages directly related to a 
        commercial transaction or relationship that the 
        recipient has already agreed to enter into, such as 
        receipts, monthly account statements, or product recall 
        notices. Such messages could also include some 
        promotional information about other products or 
        services, but only if the promotional material is truly 
        ancillary to a primary purpose listed in this 
        definition.
          Unsolicited Commercial Electronic Mail Message.--The 
        term ``unsolicited commercial electronic mail message'' 
        means any commercial electronic message that is not a 
        transactional or relationship message and is sent to a 
        recipient without the recipient's prior affirmative or 
        implied consent.

Section 4. Criminal penalty for commercial electronic mail containing 
        fraudulent routing information

  This section would provide misdemeanor criminal liability for 
intentionally sending commercial electronic mail with falsified 
information concerning the transmission or source of the 
message. The section would amend chapter 63 of title 18, United 
States Code, to require that a person who sends commercial e-
mail, with knowledge and intent that the message contains or is 
accompanied by header information that is materially false or 
materially misleading, shall be fined or imprisoned for up to 1 
year, or both. This section further states that header 
information that is technically correct but includes an 
originating e-mail address, the access to which was obtained by 
means of false or fraudulent pretense or representations, would 
be considered materially misleading. This provision is intended 
to address the situation where a spammer hacks into, or upon 
false pretenses obtains access to, an innocent party's e-mail 
account and uses it to send out spam.

Section 5. Other protections for users of commercial electronic mail

  This section contains the bill's principal requirements for 
persons initiating commercial e-mail and UCE, violations of 
which would not be criminal but would be unfair or deceptive 
acts or practices enforced by the FTC and other Federal 
agencies.
  Section 5(a)(1) would prohibit falsified transmission 
information. Specifically, it would be unlawful to initiate a 
commercial e-mail message that contains or is accompanied by 
header information (source, destination and routing 
information, ``from'' line) that is false or misleading. As in 
section 4, if the e-mail includes an originating e-mail address 
in the header the access to which was obtained fraudulently, 
the commercial e-mail would be considered materially 
misleading. The intent of this subsection is to eliminate the 
use of inaccurate originating e-mail addresses that disguise 
the identities of the senders.
  Section 5(a)(2) would prohibit the knowing use of deceptive 
subject headings in commercial e-mail messages. The test is 
whether the person initiating the message knows that the 
subject heading would be likely to mislead a reasonable 
recipient about a material fact regarding the content or 
subject matter of the message. Thus, minor typographical errors 
or truly accidental mislabeling should not give rise to 
liability under this section.
  Section 5(a)(3) would require that a commercial e-mail 
message must have a functioning return e-mail address or other 
Internet-based reply mechanism (such as a link to a web page at 
which a user can ``click'' to select e-mail options) through 
which a recipient can opt out of future messages. The return 
address, or other Internet-based reply mechanism, must remain 
capable of receiving communications from recipients for at 
least 30 days from the date of the original e-mail. The 
temporary inability of a return address to accept e-mails due 
to a technical or capacity problem would not be a violation of 
the law if the problem was not foreseeable in light of the 
potential volume of response messages and if the problem is 
corrected within a reasonable time period. It is recognized 
that computer systems are fallible on occasion, and this 
exception is intended to protect persons who act in good faith 
to receive opt-out messages but are unable do to so because of 
these occasional and accidental system failures. However, the 
exception is not available to a person who sends out a large 
volume of commercial e-mail but sets up a reply mechanism with 
very limited capacity. In such a case, the failure of the 
system is foreseeable. The exception is also not available to a 
person who fails to make repairs in a reasonable time. The 
intent of this exception is to protect against truly accidental 
outages, not to protect parties who have not made a reasonable 
and good faith effort to ensure a working opt-out mechanism. 
Subparagraph (B) is intended to make clear that the opt-out 
mechanism required by the subsection would not need to be an 
``all or nothing'' proposition. A recipient must have the 
option of declining to receive all further messages, but a 
sender could also give the recipient the option of receiving 
some types of messages but not others.
  Section 5(a)(4) would require that once a sender receives a 
request from a recipient to not send any more UCE, the sender 
must cease the transmission of UCE to that recipient within 10 
business days after receiving the recipient's request. This 10 
business-day window also applies to any person acting on behalf 
of the sender to initiate the transmission of the UCE, or any 
person who provides or selects e-mail addresses for the sender, 
so long as those persons know that a request to cease the 
messages was made by the recipient. Those persons cannot avoid 
liability under this section by consciously avoiding knowing 
that a recipient requested to opt out of receiving unsolicited 
commercial messages. The intent of this requirement is to 
ensure that persons providing e-mail marketing services will be 
responsible for making a good faith inquiry of their clients 
(the senders, under the definitions of this bill) to determine 
whether there are recipients who should not be e-mailed because 
they have previously requested not to receive e-mails from that 
sender. E-mail marketers who willfully remain unaware of prior 
recipient opt-outs would not be excused from liability under 
this legislation. In addition, subparagraph (D) prohibits the 
sale or other transfer of the e-mail address of a recipient 
submitting an opt-out request. This is intended to prevent a 
sender or other person from treating an opt-out request as a 
confirmation of a ``live'' e-mail address, and selling that 
information to other would-be spammers.
  Section 5(a)(5) would require UCE to contain clear and 
conspicuous identification that the e-mail is an advertisement 
or solicitation. The section would also require clear and 
conspicuous notice of the opportunity to decline receiving 
further UCE, and would require the inclusion of a valid 
physical postal address for the sender.
  Section 5(b) addresses several techniques frequently employed 
by the most problematic spammers. These techniques would be 
classified as aggravated violations, and parties that use them 
would be subject to sharply increased liability.
  Paragraph (1)(A)(i) deals with ``address harvesting''. 
Specifically, it would make it an aggravated violation to send 
unlawful UCE to a recipient whose address was obtained using an 
automatic address gathering program or process from a website 
or proprietary online service that has a policy of not sharing 
its users' e-mails for purposes of sending spam. Paragraph 
(1)(A)(ii) would do the same thing with respect to unlawful UCE 
sent to addresses generated through ``dictionary attacks'', in 
which a spammer sends messages to a succession of automatically 
generated e-mail addresses (such as [email protected], 
[email protected], [email protected]) in the expectation that some of 
them will turn out to be the addresses of real people. The 
paragraph contains a disclaimer to clarify that these 
provisions should not be read as establishing ``ownership'' of 
e-mail addresses by a person operating a website or proprietary 
online service from which those addresses are harvested, or by 
any other person.
  Paragraph (2) would make it an aggravated violation for ISP 
or other e-mail service subscribers to use an automated means 
to register for multiple e-mail accounts from which to send 
unlawful UCE. This is a technique spammers use to cycle rapidly 
through different originating addresses, making the spammers 
hard to track down and the UCE they send more difficult for 
ISPs and other e-mail service providers to filter. Finally, 
paragraph (3) is intended to make it an aggravated violation to 
hijack computers or open relays for the purpose of sending 
unlawful spam.
  Section 5(c) would provide an opportunity for a defendant in 
an action alleging a violation of this bill (other than a 
violation involving falsified header information) to escape 
liability by showing that it had adopted reasonable practices 
and procedures to prevent violations and has made good faith 
efforts to maintain compliance with the provisions of the bill. 
This defense is intended to protect those persons who have 
preventive practices in place but through unforeseen 
circumstances find themselves in violation. It is expected that 
persons who regularly fail to comply with the bill's provisions 
would not meet the requirements of reasonable practices or 
procedures, nor be able to make a clear showing of good faith 
efforts to be compliant.

Section 6. Businesses knowingly promoted by electronic mail with false 
        or misleading transmission information

  Section 6, which was offered as an amendment by Senator 
McCain at the Committee's executive session, would make 
businesses knowingly promoted in an e-mail with false or 
misleading transmission information subject to FTC Act 
penalties and enforcement remedies. Unlike other violations of 
the bill, enforcing violations of this section would not be 
dependent upon finding the person who ``initiated'' the e-mail 
(as defined in section 3). Instead, this section would hold 
businesses that use deliberately falsified spam as a means to 
promote themselves liable to FTC enforcement, regardless of 
whether the FTC is able to identify the spammer who initiated 
the e-mail.
  The purpose of this section would be to give the FTC a tool 
to more effectively ``follow the money'' and enforce the law 
against businesses that hire spammers to send e-mail to 
consumers in large volumes with deliberately falsified header 
information. These businesses might otherwise escape liability 
under section 5 of the bill because that section would require 
the FTC to prove that a business ``procured'' a spammer to send 
the e-mail on its behalf. This section would therefore set a 
different standard for the FTC to meet when enforcing the law 
against online or offline businesses that promote themselves 
through spam messages with deliberately falsified sender and 
routing information. Additionally, this section is limited in 
important ways that focus FTC enforcement on the deliberately 
falsified header spam used by high-volume spammers, minimizing 
the risk to legitimate retailers who do not disguise their 
identity in e-mail marketing.
  Section 6(a) would prohibit any person from promoting, or 
knowingly permitting the promotion of, that person's trade or 
business in a commercial e-mail message that is in violation of 
section 5(a)(1). Section 6(a) would therefore apply only to e-
mail that contains false sender or routing information, the key 
element of the criminal provisions under section 4 as well as a 
violation of section 5. Testimony from the Committee's hearings 
indicated that the use of falsified identity information is 
something that legitimate marketers and retailers will never 
do; however, it is exactly what volume spammers will continue 
to do in order to get their e-mails past ISP filters. As such, 
the use of false headers for commercial e-mail is a bright-
line, objective standard that all parties can agree identifies 
a message as ``spam''.
  Section 6(a) would hold a promoted business subject to 
enforcement only when it: (1) knows or should know it is being 
promoted by falsified spam, (2) is receiving or expects to 
receive an economic benefit from such promotion, and (3) is 
taking no reasonable precautions to prevent such spam, or to 
detect and report it to the FTC. The latter provision is an 
important safeguard to give legitimate companies an opportunity 
to proactively avoid mistaken FTC action if they have been 
victimized by ``spoofed sender'' spam--unauthorized messages 
sent using their corporate name or one of their employee's e-
mail addresses as the purported sender. This is increasingly 
becoming a preferred tactic of spammers who include a 
legitimate company's information in the e-mail's ``from'' line 
(or other parts of the header information) in order to either 
bypass ISP filters, trick consumers into opening the message, 
or sell counterfeit goods of that company.
  Section 6(b) would prevent the extension of liability under 
section 6(a) to website hosts, landlords, equipment lessors and 
other third parties that may provide goods or services 
unwittingly to a falsely promoted business. These businesses 
would be protected against FTC enforcement action unless they 
own or control the falsely promoted business, or actually know 
about the falsified spam and financially benefit from it.
  Section 6(c) would limit enforcement of this section to the 
FTC. This section, however, would not in any way revise, 
remove, or diminish any other FTC, State attorney general, or 
ISP enforcement provisions set forth elsewhere in S. 877.

Section 7. Enforcement by the Federal Trade Commission

  Sections 7(a) and 7(d) prescribe that section 5 would be 
enforced by the FTC under section 18 of the FTC Act (15 U.S.C. 
41 et seq.) as if the violation were an unfair or deceptive act 
or practice. The Commission would be required to prevent 
persons from violating this legislation in the same manner, by 
the same means, and with the same jurisdiction, powers, and 
duties as though all applicable terms and provisions of the FTC 
Act were incorporated and made a part of this legislation. 
Therefore, all the jurisdictional, remedial, and civil 
enforcement provisions of the FTC Act would be applicable to 
commercial e-mail under the provisions of this legislation.
  Sections 7(b) and 7(c) would provide for enforcement by other 
agencies for entities subject to their jurisdiction due to the 
jurisdictional limitations of the FTC. These agencies include 
the Office of the Comptroller of the Currency, the Federal 
Reserve Board, the Federal Deposit Insurance Corporation, the 
Office of Thrift Supervision, the Department of Transportation, 
the Department of Agriculture, the Farm Credit Administration, 
the Securities and Exchange Commission, and the Federal 
Communications Commission, for those entities subject to their 
jurisdiction. Under section 7(c), these agencies and the others 
set forth in section 7(b), may exercise authority provided by 
their own statutory grants to enforce the substantive 
provisions of this legislation.
  Section 7(e) would grant State attorneys general the right to 
bring a civil action for violations of section 5. A State may 
bring an action in parens patriae for aggrieved citizens of the 
State in Federal district court or other court of competent 
jurisdiction to obtain injunctive relief or recover actual or 
statutory damages, whichever is greater. Statutory damages 
under this section are (i) up to $100 per message with 
falsified header information; or (ii) $25 per message that is 
otherwise unlawful under this legislation, up to cap of 
$1,000,000. If the court finds violations of section 5 were 
committed willfully or knowingly, or if the defendant's 
unlawful activity included one or more of the aggravated 
violations set forth in section 5(b), the statutory damage 
amount could be tripled. Reasonable attorneys' fees would be 
awarded to the State for a successful action.
  Section 7(f) would allow a provider of Internet access 
service adversely affected by a violation of section 5 to bring 
a civil action in Federal district court or other court of 
competent jurisdiction. This could include a service provider 
who carried unlawful spam over its facilities, or who operated 
a website or online service from which recipient e-mail 
addresses were harvested in connection with a violation of 
section 5(b)(1)(A)(i). The provider may obtain injunctive 
relief or actual or statutory damages calculated in the same 
manner as section 7(e). The court would be permitted to assess 
the costs of such an action, including reasonable attorneys' 
fees, against any party.

Section 8. Effect on other laws

  Section 8(a) would limit the effect the legislation would 
have on current Federal statutes. It clarifies that nothing in 
the legislation should be construed to interfere with the 
enforcement of the provisions of the Communications Act of 1934 
relating to obscenity, or sexual exploitation of children, or 
of the FTC Act for materially false or deceptive 
representations or unfair practices in commercial e-mail 
messages.
  Section 8(b)(1) sets forth the general rule concerning the 
preemption of State law by the legislation. The legislation 
would supersede State and local statutes, regulations, and 
rules that expressly regulate the use of e-mail to send 
commercial messages except for statutes, regulations, or rules 
that target fraud or deception in such e-mail. Thus, a State 
law requiring some or all commercial e-mail to carry specific 
types of labels, or to follow a certain format or contain 
specified content, would be preempted. By contrast, a State law 
prohibiting fraudulent or deceptive headers, subject lines, or 
content in commercial e-mail would not be preempted. Given the 
inherently interstate nature of e-mail communications, the 
Committee believes that this bill's creation of one national 
standard is a proper exercise of the Congress's power to 
regulate interstate commerce that is essential to resolving the 
significant harms from spam faced by American consumers, 
organizations, and businesses throughout the United States. 
This is particularly true because, in contrast to telephone 
numbers, e-mail addresses do not reveal the State where the 
holder is located. As a result, a sender of e-mail has no easy 
way to determine with which State law to comply. Statutes that 
prohibit fraud and deception in e-mail do not raise the same 
concern, because they target behavior that a legitimate 
business trying to comply with relevant laws would not be 
engaging in anyway. Section 8(b)(2) of the legislation 
clarifies that there would be no preemption of State laws that 
do not expressly regulate e-mail, such as State common law, 
general anti-fraud law, and computer crime law.
  Section 8(c) would clarify that this legislation would have 
no impact on the lawfulness of ISPs' efforts to filter or block 
e-mails traversing their systems.

Section 9. Recommendations concerning Do-Not-E-mail Registry

  This section would require the FTC, within 6 months of 
implementing its national telemarketing Do-Not-Call list, to 
come up with a plan for creating a Do-Not-E-mail list or else 
explain to Congress why the creation of such a list is not 
feasible at such time. The FTC is currently in the process of 
implementing the Do-Not-Call list, and the timing of this 
provision is intended to permit the FTC to analyze its 
experience with Do-Not-Call before turning to the question of 
Do-Not-E-mail. The Committee therefore intends that the 6-month 
deadline established by this section would be measured from the 
date that the Do-Not-Call list is fully enforceable against 
telemarketers, not from the date when consumers may first sign 
up for the list. The Committee also notes that a Do-Not-E-mail 
list appears to raise significant technical, security, and 
privacy questions that would need to be resolved before such a 
list could be implemented, and this provision gives the FTC 
time to consider such issues and their impact on the efficacy 
of creating such a list.

Section 10. Study of effects of unsolicited commercial electronic mail

  This section would require the FTC, in consultation with the 
Department of Justice and other appropriate agencies, to submit 
a report to Congress, within 24 months after enactment of this 
legislation, on the effectiveness and enforcement of the 
provisions of this legislation and any modifications to the 
legislation which may be considered appropriate. The FTC would 
also be required to include in the report: an analysis of the 
extent to which technological and marketplace developments may 
affect the practicality and effectiveness of the legislation; 
an analysis of ways to address the international aspects of the 
spam problem; and an analysis of what could be done to protect 
consumers, especially children, from pornographic UCE.

Section 11. Separability

  This section states that if any provision or application of a 
provision of the legislation is held invalid, the remainder of 
the legislation and application of its provisions would not be 
affected.

Section 12. Effective date

  This section provides that the provisions of this legislation 
would take effect 120 days after the date of enactment.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                      TITLE 18, UNITED STATES CODE

                         CHAPTER 63. MAIL FRAUD

Sec. 1351. Commercial electronic mail containing fraudulent 
                    transmission information

  (a) In General.--Any person who initiates the transmission, 
to a protected computer in the United States, of a commercial 
electronic mail message, with knowledge and intent that the 
message contains or is accompanied by header information that 
is materially false or materially misleading shall be fined or 
imprisoned for not more than 1 year, or both, under this title. 
For purposes of this subsection, header information that is 
technically accurate but includes an originating electronic 
mail address the access to which for purposes of initiating the 
message was obtained by means of false or fraudulent pretense 
or representations, shall be considered materially misleading.
  (b) Definitions.-- Any term used in subsection (a) that is 
defined in section 3 of the CAN-SPAM Act of 2003 has the 
meaning given it in that section.

                                
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