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[Senate Report 108-381]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 741
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-381

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

 
                    JUNK FAX PREVENTION ACT OF 2004

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 2603

                                     

               September 28, 2004.--Ordered to be printed

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred eighth congress
                             second 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
                   Rob Freeman, Deputy Staff Director
                  Robert W. Chamberlin, Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel

                                  (ii)

                                                       Calendar No. 741
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-381

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

                    JUNK FAX PREVENTION ACT OF 2004

                                _______
                                

               September 28, 2004.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 2603]

  The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 2603) ``A Bill to amend section 
227 of the Communications Act of 1934 (47 U.S.C. 227) relating 
to the prohibition on junk fax transmissions.'', having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                          Purpose of the Bill

  The purposes of this legislation are the following:
           To create a limited statutory exception to 
        the current prohibition against the faxing of 
        unsolicited advertisements to individuals without their 
        ``prior express invitation or permission'' by 
        permitting such transmission by senders of commercial 
        faxes to those with whom they have an established 
        business relationship (EBR).
           To require that senders of faxes with 
        unsolicited advertisements (i.e., ``junk faxes'') 
        provide notice of a recipient's ability to opt out of 
        receiving any future faxes containing unsolicited 
        advertisements and a cost-free mechanism for recipients 
        to opt out pursuant to that notice.
           To require the Federal Communications 
        Commission (FCC) and Comptroller General of the United 
        States to provide certain reports to Congress regarding 
        the enforcement of these provisions.

                          Background and Needs

               TELEPHONE CONSUMER PROTECTION ACT OF 1991

  Congress first addressed the legality of faxing unsolicited 
advertisements to residential telephone subscribers in the 
Telephone Consumer Protection Act of 1991 (TCPA).\1\ The law, 
which is still in effect, generally prohibits anyone from 
faxing unsolicited advertisements without ``prior express 
invitation or permission'' from the recipient. The statute 
contains no other exceptions for junk faxes, and does not 
authorize the FCC to create any additional exceptions.
---------------------------------------------------------------------------
    \1\ P.L. 102-243; 47 U.S.C. 227.
---------------------------------------------------------------------------
  In October 1992, the FCC released its original order 
interpreting the TCPA and establishing the rules implementing 
the junk fax prohibition. In response to comments by Mr. Fax 
and National Faxlist urging the Commission not to ban 
unsolicited faxes, the FCC in its order noted in a footnote 
(which remains unpublished in the Code of Federal Regulations) 
that the TCPA did not give it ``discretion to create exemptions 
from or limit the effects of the prohibition.'' \2\ The 
footnote continued to say, ``We note, however, that facsimile 
transmission from persons or entities who have an established 
business relationship with the recipient can be deemed to be 
invited or permitted by the recipient.'' \3\ On this basis, 
many commercial entities considered an ``established business 
relationship'' or ``EBR'' to be a permissible exemption from 
the general prohibition of sending unsolicited faxes. 
Additionally, from 1992 through July 2003, the FCC enforced the 
TCPA junk fax provisions under this original interpretation.
---------------------------------------------------------------------------
    \2\ See Rules and Regulations Implementing the Telephone Consumer 
Protection Act of 1991, CC Docket No. 92-90, Report and Order, 7 FCC 
Rcd 8752 (rel. 1992) (hereinafter, ``1992 TCPA Order''), at 8779, para. 
54, n. 87.
    \3\ Id.
---------------------------------------------------------------------------
  The Commission continued to assess the effectiveness of the 
TCPA's provisions over the course of the decade and, in 
September 2002 sought public comment on a number of issues, 
including whether the FCC should refine or adopt new rules 
related to ``unsolicited facsimile advertisements.'' The FCC 
explained its purpose for initiating this formal review 
proceeding as follows: ``In the last ten years, telemarketing 
practices have changed significantly. New technologies have 
emerged that allow telemarketers to target potential customers 
better and that make marketing using telephones and facsimile 
machines more cost-effective. At the same time, the new 
telemarketing techniques have increased public concern about 
the impact on consumer privacy.'' \4\
---------------------------------------------------------------------------
    \4\ FCC Press Release, September 12, 2002 (http://
hraunfoss.fcc.gov/edocs--public/attachmatch/DOC-226183A1.doc).
---------------------------------------------------------------------------
  On March 11, 2003, the Do-Not-Call Act was signed into law. 
In addition to authorizing the Federal Trade Commission (FTC) 
to implement a national registry, it also required the FCC to 
issue a final rule in its ongoing TCPA proceeding within 180 
days. Additionally, it required the FCC to consult and 
coordinate with the FTC to ``maximize consistency'' with the 
rules promulgated by the FTC.\5\
---------------------------------------------------------------------------
    \5\ See Rules and Regulations Implementing the Telephone Consumer 
Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC 
Rcd 14014 (2003) (hereinafter, ``July 2003 TCPA Order'').
---------------------------------------------------------------------------

 JULY 2003 FEDERAL COMMUNICATIONS COMMISSION TCPA ORDER: REVISED JUNK 
                               FAX RULES

  On July 3, 2003, the FCC issued its report and order 
establishing the Do-Not-Call registry and updating the 
provisions of the TCPA, including the junk fax provisions. 
After reviewing the record regarding the use and enforcement of 
junk faxes as well as the legislative history of the TCPA, the 
Commission reversed its prior conclusion that the presence of 
an EBR between a fax sender and recipient establishes the 
requisite consent necessary to permit businesses to send 
commercial faxes to their customers, effectively eliminating 
the EBR exception to the general prohibition on unsolicited fax 
advertisements.\6\ Instead, the FCC concluded that a 
recipient's express invitation or permission must be obtained 
in writing, include the recipient's signature, contain a clear 
indication that he or she consents to receiving such faxed 
advertisements, and provide the fax number to which faxes are 
permitted to be sent.\7\
---------------------------------------------------------------------------
    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------
  Reviewing the record, the FCC found that a majority of 
consumer advocates disagreed with the Commission's prior 
interpretation that an EBR constituted prior express 
permission, and they urged the Commission to eliminate the EBR 
exemption. In describing the record they had examined since 
2002, the FCC stated that consumers felt `` `besieged' by 
unsolicited faxes'' and that ``advertisers continue to send 
faxes despite [their] asking to be removed from senders' fax 
lists.'' The FCC also said consumers indicated they bore the 
burden of not only paying for the cost of paper and toner, but 
also the opportunity costs of ``time spent reading and 
disposing of faxes, the time the machine is printing an 
advertisement and is not operational for other purposes, and 
the intrusiveness of faxes transmitted at inconvenient times, 
including in the middle of the night.'' \8\
---------------------------------------------------------------------------
    \8\ Id. at para. 186.
---------------------------------------------------------------------------
  Conversely, the FCC found that the majority of industry 
commenters on the issue not only supported the Commission's 
prior interpretation permitting reliance on an EBR, but also 
urged the Commission to amend its rules implementing the TCPA 
to expressly provide for the EBR exemption. Industry comments 
maintained that ``faxing is a cost-effective way to reach 
customers'' particularly for small businesses for whom faxing 
is a cheaper way to advertise.'' They also warned that 
eliminating an EBR would ``interfere with ongoing business 
relationships, raise business costs, and limit the flow of 
valuable information to consumers.\9\
---------------------------------------------------------------------------
    \9\ Id.
---------------------------------------------------------------------------
  In addition to weighing consumer and industry comments, the 
FCC's order analyzed the legislative history of the TCPA. The 
Commission stated that Congress's primary purpose in passing 
the Act was to protect the public from bearing the costs of 
unwanted advertising, and the FCC maintained that ``certain 
practices were treated differently because they impose costs on 
consumers.'' \10\ The FCC cited other examples where the TCPA 
prohibits advertising calls without prior express consent, such 
as calls to wireless phones and other numbers where the called 
party is charged, viewing that cost-shifting onto consumers as 
identical in nature with respect to fax advertising where 
consumers must pay for paper and toner. It also pointed out 
that, unlike telemarketing, Congress provided no mechanism for 
opting out of unwanted faxes, arguing that to create such a 
system would ``require the recipient to possibly bear the cost 
of the initial facsimile and inappropriately place the burden 
on the recipient to contact the sender and request inclusion on 
a `do-not-fax' list.'' \11\ For these reasons, the FCC 
concluded that Congress had made the determination that 
entities desiring to fax unsolicited advertisements must obtain 
express permission from the recipient before they do so.
---------------------------------------------------------------------------
    \10\ Id. at para. 190.
    \11\ Id.
---------------------------------------------------------------------------
  With respect to the other new requirements imposed by the FCC 
for obtaining prior permission (e.g., written consent, 
signature, etc.), the Commission justified them on the basis 
that they believed ``the interest in protecting those who would 
otherwise be forced to bear the burdens of unwanted faxes 
outweighs the interests of companies that wish to advertise via 
fax.'' \12\
---------------------------------------------------------------------------
    \12\ Id. at para. 191.
---------------------------------------------------------------------------

AUGUST 2003 FEDERAL COMMUNICATIONS COMMISSION ORDER ON RECONSIDERATION: 
           STAY OF EFFECTIVE DATE FOR REVISED JUNK FAX RULES

  Following the FCC's release of the amended TCPA rules, 
numerous petitions for reconsideration were filed with the 
Commission requesting that the FCC maintain its earlier 
interpretation of the junk fax rules. Those businesses, 
associations, and other organizations that had relied on the 
prior interpretation for over a decade argued that to now 
require prior, written permission for every fax sent out to an 
existing customer or client was an overly burdensome regulation 
that would be expensive to implement and was ultimately 
unnecessary to protect consumers. Many companies also argued 
that it would be impossible to change their practices overnight 
and obtain the necessary consents by August 25th (30 days after 
the appearance of rules in the Federal Register) in order to 
comply with the rule's effective date, leaving them with only 
the option to immediately litigate.
  Finally, many industry petitioners challenged the FCC's 
fundamental premise that the new rules were better for 
consumers, contending instead that the revised interpretation 
would have significant, unintended consequences that harmed 
consumers. For example, restaurants pointed out that they would 
not be able to fax a menu to a customer who called and 
requested one unless the caller provided them with a written 
consent (presumably by fax) or had one on file. Additionally, 
realtors explained that, in their business, potential home 
buyers often call and request faxes when passing by homes for 
sale. They argued that the FCC's new requirement for a written 
signature would effectively prevent realtors from faxing 
potential new home buyers the listing information they 
requested when they made such calls, adding unnecessary hurdles 
and delays even when consumers clearly wanted to receive the 
faxes as quickly as possible.
  In light of these additional claims, on August 18, 2003, the 
Commission stayed until January 1, 2005, the effective date of 
both the written consent requirements as well as its July 2003 
determination that an EBR would no longer be sufficient to show 
that an individual or business has given express permission to 
receive unsolicited fax advertisements. At the time, the FCC 
justified its adoption of the stay because ``the public 
interest would best be served by allowing senders of such 
advertisements additional time to obtain such express 
permission before the new rules become effective.'' The order 
also noted that this extension would give the FCC itself more 
time to fully consider any more petitions for reconsideration 
on these or related issues, and that the FCC reserved the right 
to further extend the effective date if necessary.\13\
---------------------------------------------------------------------------
    \13\ See Rules and Regulations Implementing the Telephone Consumer 
Protection Act of 1991, CG Docket No. 02-278, Order on Reconsideration, 
FCC 03-208 (rel. Aug. 18, 2003) (hereinafter, ``August 2003 Order on 
Reconsideration'').
---------------------------------------------------------------------------

OCTOBER 2003 FEDERAL COMMUNICATIONS COMMISSION ORDER: STAY OF ``18/3'' 
 TIME LIMITS ON EXISTING BUSINESS RELATIONSHIP EXCEPTION FOR JUNK FAXES

  In the July 2003 TCPA Order, the FCC had also modified its 
definition of an EBR in the context of telephone solicitations 
to limit the duration that a telemarketer could rely on the 
exception to a maximum of 18 months following a purchase or 
transaction, or a maximum of three months following an inquiry 
or application (commonly referred to as the ``18/3'' time 
limits). Prior to that ruling, no limitation had been placed on 
the duration of the EBR as it applied to either telephone or 
fax solicitations, but the FCC concluded that establishing time 
limits was ``necessary to minimize confusion and frustration 
for consumers who receive calls from companies they have not 
contacted or patronized for many years.'' Because there was 
``little consensus'' among industry players who had offered 
various lengths of time, the FCC sought a duration that 
``strikes an appropriate balance between industry practices and 
consumer privacy interests,'' settling on the 18/3 time frame. 
Acknowledging that these time limits created burdens on 
industry (especially small businesses) to monitor the length of 
their customer relationships, the FCC argued that endorsing a 
rule consistent with the FTC's own 18/3 time limit would 
benefit businesses by creating a ``uniform standard with which 
businesses must comply'' regardless of which agency's 
jurisdiction the businesses fell under.\14\ This also helped 
fulfill the FCC's charge from Congress to maximize consistency 
between the agencies' telemarketing rules.
---------------------------------------------------------------------------
    \14\ See July 2003 TCPA Order at para. 34.
---------------------------------------------------------------------------
  Recognizing that the FCC's August 2003 Order on 
Reconsideration had reinstated an EBR for junk faxes, but 
potentially limited its duration to the 18/3 rule for 
telemarketing, the U.S. Chamber of Commerce and others filed a 
petition for reconsideration one week later on August 25, 2003, 
requesting, among other things, that the FCC reconsider the new 
18/3 rule.\15\ In response, the FCC issued an order on October 
3, 2003, that stayed until January 1, 2005, the 18/3 
limitations only with respect to their application to 
unsolicited fax advertisements. Because their modification of 
the EBR duration in the July 2003 TCPA Order was promulgated in 
the context of telephone solicitations, the FCC held that there 
was good cause to stay application of those time limitations to 
the EBR in the context of junk faxes until they had time to 
consider the application of the 18/3 time limits in the context 
of junk faxes.\16\ The FCC concluded, however, that nothing in 
this new order would affect its August 2003 decision to 
recognize an EBR exception to the general prohibition against 
unsolicited faxes until January 1, 2005.
---------------------------------------------------------------------------
    \15\ See, e.g., Chamber of Commerce of the United States, Petition 
for Reconsideration of Facsimile Advertisements Rules, filed August 25, 
2003; National Association of Chain Drug Stores, Petition for 
Clarification and Revision, filed August 25, 2003.
    \16\ See August 2003 Order on Reconsideration.
---------------------------------------------------------------------------

           EFFECTS OF REVISED RULES AND NEED FOR LEGISLATION

  In practice, the revised junk fax rules, as ordered by the 
FCC would have significant consequences. The cost and effort of 
compliance could place significant burdens on some businesses, 
particularly those small businesses that rely heavily on the 
efficiency and effectiveness of fax machines. In particular, 
organizations such as trade associations and other non-profits, 
that have hundreds of thousands of members, would be saddled 
with a huge burden to collect signatures from each member just 
to send an unsolicited fax advertisement.
  For instance, the National Association of Wholesaler-
Distributors claimed that its member companies expected to pay 
an average of $22,500 to obtain consent forms and an average of 
$20,000 for annual compliance. The National Association of 
Realtors estimated that it would have to collect over 67 
million permissions to sustain the roughly 6 million home sales 
from last year. Other economic impacts included the costs of 
training, making multiple contracts to obtain signatures 
providing consent, and obtaining permission for each fax 
machine when the recipients change location.
  Finally, over the past 10 years, following enactment of the 
TCPA and issuance of previous FCC orders implementing and 
interpreting the rules on junk faxes, many legitimate 
businesses and associations have appropriately relied on the 
FCC's interpretation and have sent unsolicited faxes to 
recipients with whom they have an EBR. During this time, the 
FCC has acknowledged that businesses faxing under EBRs were in 
compliance with the FCC's existing junk fax rules. If the 
revised rules go into effect, the previously legitimate 
practices will be immediately unlawful, and unsuspecting or 
uninformed businesses may be subject to unforeseen and costly 
litigation unrelated to legitimate consumer protection aims.
  The revised rules are currently set to go into effect in 
January 2005 following the expiration of the FCC's currently 
self-imposed stay. Because the Commission may choose not to 
reverse its new rule removing the EBR exception from the 
general ban on sending unsolicited facsimile advertisements, S. 
2603, the ``Junk Fax Prevention Act of 2004'' specifically 
creates a statutory exception from the general prohibition on 
sending unsolicited advertisements if the fax is sent based on 
an EBR and certain conditions are met. This legislation is 
designed to permit legitimate businesses to do business with 
their established customers and other persons with whom they 
have an established relationship without the burden of 
collecting prior written permission to send these recipients 
commercial faxes. Nonetheless, in reinstating the EBR 
exception, the Committee determined it was necessary to provide 
recipients with the ability to stop future unwanted faxes sent 
pursuant to such relationships. The Committee therefore also 
added the requirement that every unsolicited facsimile 
advertisement contain an opt-out notice that gives the 
recipient the ability to stop future unwanted fax solicitations 
and that senders of such faxes provide recipients with a cost-
free mechanism to stop future unsolicited faxes.

                         Summary of Provisions

  S. 2603, the ``Junk Fax Prevention Act of 2004,'' 
reestablishes an ``established business relationship'' 
exception to allow entities to send commercial faxes to their 
customers and members without first receiving written 
permission, and establishes new opt-out safeguards to provide 
additional protections for fax recipients.

                          Legislative History

  Senator Smith, the chairman of the Competition, Foreign 
Commerce, and Infrastructure Subcommittee, introduced S. 2603 
on June 24, 2004, with Senators Hollings, Allen, and Sununu as 
original cosponsors. The bill is also cosponsored by Senators 
Breaux, Bunning, Burns, Carper, Craig, Dorgan, Lautenberg, 
Lott, Nelson of Florida, Snowe, and Stevens.
  On July 22, 2004, the Committee held an executive session 
chaired by Senator McCain at which S. 2603 was considered. The 
bill was approved unanimously by voice vote and was ordered 
reported without amendment.

                            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:

S. 2603--Junk Fax Prevention Act of 2004

    S. 2603 would amend current law and regulations relating to 
unsolicited advertisements sent via telephone facsimile 
machine. The bill would direct the Federal Communications 
Commission (FCC) to issue regulations to control such 
advertisements and would require the FCC and the Government 
Accountability Office to issue reports to the Congress on the 
effectiveness of those regulations. The FCC currently enforces 
laws relating to unsolicited advertisements, including 
assessing and collecting civil penalties for violations of such 
laws. (Civil penalties are recorded in the federal budget as 
revenues.) Based on information from the FCC, CBO estimates 
that implementing S. 2603 would not have a significant effect 
on revenues or spending subject to appropriation. Enacting the 
bill would not affect direct spending.
    S. 2603 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments.
    S. 2603 would impose private-sector mandates, as defined in 
the UMRA, on senders of unsolicited facsimile advertisements. 
The bill would require senders to include an opt-out notice 
that is clear, conspicuous, and on the first page. Such a 
notice would allow recipients to contact the sender to prevent 
them from sending unsolicited advertisements in the future. 
Additionally, the opt-out notice must include ``a domestic 
contact telephone and facsimile machine number for the 
recipient to transmit such a request to the sender; and a cost-
free mechanism for a recipient to transmit a request.'' The 
cost-free mechanism might include either a toll-free or a local 
telephone number.
    Regulations promulgated by the FCC in July 2003, which are 
slated to take effect in January 2005, would require written 
permission from recipients prior to senders' transmission of 
any unsolicited fax advertisements. If this bill were enacted, 
it would eliminate the requirement to obtain written permission 
from customers but replace this requirement with the opt-out 
mechanism. Based on information from industry sources, CBO 
expects that the aggregate direct cost of mandates in the bill 
would be fully offset by savings from the bill and thus would 
fall below the annual threshold established by UMRA for 
private-sector mandates ($120 million in 2004, adjusted 
annually for inflation).
    On July 7, 2004, CBO transmitted a cost-estimate for H.R. 
4600, the Junk Fax Prevention Act of 2004, as ordered reported 
by the House Committee on Energy and Commerce on June 24, 2004. 
The two pieces of legislation are similar, and the estimated 
costs are the same.
    The CBO staff contacts for this estimate are Melissa E. 
Zimmerman (for federal costs), Sarah Puro (for the state and 
local impact), and Karen Raupp (for the private-sector impact). 
The estimate was approved by Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

                       NUMBER OF PERSONS COVERED

  S. 2603 would provide all individuals with fax machines 
certain protections from unsolicited senders of unsolicited 
faxes, and an opportunity to opt out of receiving future 
unsolicited faxes from them. Additionally, the legislation 
would require all persons who send commercial faxes to meet 
certain requirements, including proper identification, and to 
provide phone numbers or another mechanism for recipients so 
they may opt out of future commercial faxes sent by that 
sender. Therefore, S. 2603 would cover all consumers who 
receive faxes, and all senders of commercial faxes.

                            ECONOMIC IMPACT

  The legislation would result in new or incremental costs for 
senders of commercial faxes to comply with the legislation's 
requirements, to the extent that those senders have not already 
made provisions to ensure proper identification of the sender, 
and provide mechanisms that allow recipients to choose whether 
to receive future commercial faxes.

                                PRIVACY

  S. 2603 would increase the personal privacy of all users of 
fax machines by providing them with the ability to decline to 
receive future unsolicited commercial faxes from the same 
sender. S. 2603 also would require senders of unsolicited 
commercial faxes to identify themselves to the recipients with 
truthful facsimile and telephone numbers where a recipient can 
contact the sender, thereby better informing the recipient of 
the identity of the sender.

                               PAPERWORK

  S. 2603 would require the Comptroller General to conduct a 
study on junk fax enforcement and make recommendations to 
Congress on whether additional enforcement measures are 
necessary to protect consumers. S. 2603 would also require the 
FCC to submit an annual report to Congress on enforcement of 
the junk fax provisions of this legislation over the previous 
year. The legislation is expected to generate similar amounts 
of administrative paperwork as other legislation requiring 
agency enforcement, recommendations for enhancing enforcement, 
and reports to Congress.

                      Section-by-Section Analysis

Section 1. Short title

  Section 1 establishes the short title as the ``Junk Fax 
Prevention Act of 2004.''

Section 2. Prohibition on fax transmissions containing unsolicited 
        advertisements.

  Section 2(a) amends section 227(b)(1)(C) of the 
Communications Act of 1934 by creating an exception to the 
general prohibition against sending unsolicited commercial 
advertisements to fax machines. This provision would permit the 
sending of unsolicited commercial advertisements if the fax is 
sent based on an ``established business relationship'' and if 
the fax contains an opt-out notice and a cost-free mechanism 
for the recipient to respond to the notice. In the event a 
recipient opts out of receiving future unsolicited 
advertisements, it is unlawful for a sender to fax any 
additional unsolicited advertisements to such recipients.
  Section 2(b) defines the term ``established business 
relationship'' by incorporating the definition of ``established 
business relationship'' in 47 C.F.R. 64.1200 as those 
regulations were in effect as of January 1, 2003, except that 
the definition now applies to both residential and commercial 
entities. Additionally, section 2(b) allows the Commission to 
limit the duration of the EBR pursuant to section 2(f).
  Section 2(c) adds a new subparagraph (D) to section 227(b)(2) 
of the Communications Act of 1934 by setting forth the 
necessary elements of an opt-out notice. The opt-out notice 
must be clear and conspicuous and on the first page of the 
unsolicited advertisement. The Committee used the phrase 
``first page of the unsolicited advertisement'' as opposed to 
the ``first page of the facsimile'' to ensure that senders of 
unsolicited fax advertisements inadvertently would not be 
liable if such faxes were sent and the clear and conspicuous 
notice was not on the first page received by the recipient 
because pages were faxed or received in the wrong order. The 
Committee believes an opt-out notice should comply with this 
section if it clearly and conspicuously appears on the first 
page of a fax, such as a fax cover page, or on the first page 
of the faxed unsolicited advertisement if no fax cover page has 
been provided.
  The opt-out notice must inform the recipient of his or her 
ability to opt-out of future unsolicited advertisements to any 
fax machine or machines, and that request must be complied with 
in the shortest reasonable time. The notice must include a 
domestic telephone and facsimile number that will receive an 
opt-out request, and a cost-free mechanism for the recipient to 
send such a request to the sender. This provision should not be 
interpreted as a mandate for such businesses to establish any 
particular cost-free mechanism to receive opt-out requests, but 
should allow businesses to exercise some flexibility and 
creativity in providing cost-free options that all fax 
recipients could use to submit opt-out requests. In order to 
minimize the possible financial consequences of this provision, 
section 2(c) gives the Commission the authority to, by rule, 
exempt certain classes of small business senders from the 
requirement to provide the additional cost-free mechanism if 
the Commission determines that the costs to those businesses is 
unduly burdensome given the revenues generated by that class of 
small business.
  Section 2(c) also requires that the telephone and facsimile 
machine numbers and the cost-free mechanism provided to a 
recipient must permit an individual or business to make an opt-
out request during regular business hours. Finally, the opt-out 
notice must comply with the current provisions of section 
227(d), which require that any fax being sent contain in the 
margins at the top or bottom of each page the date and time it 
is sent, the identification of the sender of the message, and 
the telephone number of the sending machine.
  Section 2(d) adds a new subparagraph (E) to section 227(b)(1) 
of the Communications Act of 1934 by setting forth what a 
recipient must do to opt-out of future unsolicited 
advertisements. The Commission, by rule, shall provide that an 
opt-out request is valid if it (1) identifies the telephone 
number or numbers of the fax machine or machines subject to the 
request; (2) is made to the telephone or fax number of the 
sender that is provided under subparagraph (D)(iv), or by any 
other method as determined by the Commission; and (3) is made 
by a person who has not subsequently provided express 
invitation or permission to receive unsolicited advertisements. 
Although the ``established business relationship'' has been 
defined on the basis of a commercial transaction or inquiry, 
with or without the exchange of consideration, the Commission 
should take precautions to ensure that if a recipient opts out 
of receiving unsolicited facsimile advertisements, that any 
subsequent purchases or inquiries do not create or renew the 
``established business relationship'' exemption without some 
affirmative opt-in by the recipient.
  Section 2(e) adds a new subparagraph (F) to 227(b)(1) of the 
Communications Act of 1934 by giving the Commission the 
authority to establish an exemption from the opt-out notice 
requirements for tax-exempt, nonprofit trade or professional 
associations if those faxes are in furtherance of the group's 
tax-exempt purpose. Section 2(e) is designed to apply to 
certain entities classified under the Internal Revenue 
Service's definition of section 501(c)(6) organizations, which 
include such groups as business leagues, chambers of commerce, 
real estate boards, and boards of trade which are not organized 
for profit and no part of the net earnings inures to the 
benefit of any private shareholder or individual. This section 
is not designed to apply to charities. This provision is 
discretionary, and the Commission may create a rule only if the 
Commission finds that such opt-out notices are not necessary to 
protect the ability of association members to stop future 
unsolicited facsimile advertisements sent by the association. 
The Committee provided the Commission with this authority 
because members of tax-exempt, nonprofit trade and professional 
associations have chosen to affirmatively join a particular 
organization, which typically requires the payment of annual 
dues. Arguably, these members may have an expectation of 
communications, including faxes, as part of their membership 
and have a greater degree of control in effectuating their 
preferences with respect to how their association communicates 
with them.
  Although under section 2(e), the Commission may decide to 
exempt tax-exempt, nonprofit trade and professional 
associations from the opt-out notice requirements, nothing in 
S. 2603 is designed to exempt these organizations from the 
requirement to honor a request to opt-out of future unsolicited 
facsimile advertisements from their members.
  Section 2(f) adds a new subparagraph (G)(i) to section 
227(b)(2) of the Communications Act of 1934 by giving the 
Commission the authority to establish a time limit on the 
``established business relationship'' exemption. Under the TCPA 
junk fax rules as interpreted prior to January 1, 2003, there 
was no specific time limit on the length of the EBR.
  The Committee is mindful that the financial and 
administrative costs incurred by senders to implement a 
specific time limit on the EBR could be burdensome. On the 
other hand, the costs of not implementing a specific time limit 
could also harm fax recipients. Accordingly, the Committee has 
given the Commission the authority to create such a specific 
time limit. Three years after enactment of S. 2603, the 
Commission may by rule create a time limit for the EBR 
exemption for junk faxes that may be no less than 5 years and 
no more than 7 years. The Commission may only create a rule if 
it (1) determines that the existence of the EBR exception has 
resulted in a significant number of complaints to the 
Commission regarding the sending of unsolicited advertisements 
to telephone facsimile machines; (2) upon review of such 
complaints, the Commission has reason to believe that a 
significant number of such complaints involve unsolicited 
advertisements that were sent based onan EBR that was longer 
than the Commission believes is consistent with the reasonable 
expectations of consumers; (3) determines that the costs to senders of 
demonstrating the existence of an EBR within a specified period of time 
do not outweigh the benefits to recipients of establishing a limitation 
on the EBR; and (4) determines that for small businesses, the costs are 
not unduly burdensome given the revenues generated by small businesses 
and taking into consideration the number of specific complaints to the 
Commission involving faxes sent by small businesses.
  Section 2(g) amends section 227(a)(4) of the Communications 
Act of 1934 by clarifying that ``express invitation or 
permission'' may be secured in writing or otherwise, as 
determined by the Commission.
  Section 2(h) requires the Commission to issue its regulations 
no later than 270 days after enactment of this Act.

Section 3. FCC annual report regarding junk fax enforcement

  Section 3 adds a new section (g) to section 227 of the 
Communications Act of 1934 that requires the Commission to 
report annually to the Congress on the enforcement of the junk 
fax provisions of the TCPA. Specifically, the report must 
include the following: (1) The number of complaints received by 
the Commission annually alleging a violation of the general ban 
on sending unsolicited advertisements; (2) the number of such 
complaints received during the year on which the Commission has 
taken action; (3) the number of such complaints that remain 
pending at the end of the year; (4) the number of citations 
issued for sending unsolicited advertisements; (5) the number 
of notices of apparent liability issued for sending unsolicited 
advertisements; (6) for each such notice (a) the amount of the 
proposed forfeiture; (b) the person to whom the notice was 
issued; (c) the length of time between the date on which the 
complaint was filed and the date the notice was issued; (d) the 
status of the proceeding; (7) the number of final orders 
imposing forfeiture penalties for sending unsolicited 
advertisements; (8) for each such forfeiture order (a) the 
amount of the penalty; (b) the person to whom the order was 
issued; (c) whether the penalty was paid; and (d) the amount 
paid; and (9) for each case that was referred for recovery (a) 
the number of days from the date the Commission issues such 
order to the date of referral; (b) whether an action has been 
commenced to recover the penalty; and (c) whether the recovery 
action resulted in any amount collected.

Section 4. GAO study on junk fax enforcement

  Section 4(a) requires the Comptroller General of the United 
States (GAO) to conduct a study regarding complaints received 
by the Commission dealing with unsolicited advertisements that 
shall determine the following: (1) The mechanisms established 
by the Commission to receive, investigate and respond to such 
complaints; (2) the level of enforcement success by the 
Commission; (3) whether complainants are adequately informed by 
the Commission regarding their complaints; (4) whether 
additional enforcement measures are necessary to protect 
consumers, including recommendations for additional enforcement 
measures.
  Section 4(b) requires the Comptroller General to specifically 
examine (1) the adequacy of existing statutory enforcement 
actions available to the Commission; (2) the adequacy of 
existing statutory enforcement actions and remedies available 
to consumers; (3) the impact of existing statutory enforcement 
remedies on senders of facsimiles; (4) whether increasing the 
amount of financial penalties is warranted to achieve greater 
deterrent effect; and (5) whether establishing penalties and 
enforcement actions for repeat violators similar to those 
established in section 1037 of title 18, United States Code, 
would have a greater deterrent effect.
  Section 4(c) states that the Comptroller General shall submit 
a report to Congress no later than 270 days after enactment of 
this Act.

                   ADDITIONAL VIEWS OF SENATOR BOXER

  I strongly support preventing junk faxes, as the title of 
this bill purports to do.
  However, what the bill actually does falls far short and does 
not adequately protect consumers.
  S. 2603 would allow any business with an ``established 
business relationship'' with a customer to send unrequested 
faxes to that customer's machine for up to seven years. The 
bill sets a customer inquiry as the very low threshold 
necessary for businesses to claim an established business 
relationship with a customer.
  In a seven year time frame individuals interact with dozens, 
if not hundreds, of businesses. To say that all those 
businesses should then be allowed to indiscriminately inundate 
individuals with faxes does not put a stop to a lot of junk 
faxes.
  Now that computers have made it dramatically easier to send 
faxes, many businesses have deemed it their right to drown 
consumers in junk faxes at their homes and places of business. 
One expert estimates that 2 billion faxes are sent every year 
and that the loose language in this bill will allow for twice 
that number in the near future.
  And, as the San Jose Mercury News editorial page stated on 
August 27, 2004, ``Junk faxes rival only spam as the most 
egregious form of intrusive marketing. They unfairly force 
recipients to pay, in reams of paper and toner cartridges, for 
ads they did not ask for.''
  The Commerce Committee approved this bill without ever 
holding a hearing on it and without considering a single 
amendment in Committee. As a result, consumers never had a say, 
and Senators were never given an opportunity to improve the 
legislation through the amendment process.
  A new Federal Communications Commission rule is scheduled to 
go into effect in January 2005. Some have argued that it places 
an onerous burden on business by requiring prior written 
permission before sending any fax. But, this bill goes much too 
far in the opposite direction, and we should not let this bill 
become law without additional provisions to protect consumers.
  I believe that we should amend this bill to allow consumers 
to place their fax numbers on a Do-Not-Fax list that trumps the 
``established business relationship'' rule in the legislation. 
Others have suggested that we limit the right of sending faxes 
to consumers with which a business has an established business 
relationship to those consumers from whom the business received 
the fax number directly. And, others have said that at a very 
minimum, we should place a firm 18-month limit on the duration 
of an established business relationship after a sale or 3 
months after an inquiry.
  All three ideas would be improvements upon the bill as 
reported. To date, there has been no opportunity to consider 
them. Before the bill passes the Senate, we must have that 
opportunity.
  Policymakers must protect consumers from junk faxes. It is 
disingenuous to name this bill the Junk Fax Prevention Act when 
in fact we are doing exactly the opposite. We must find a 
middle ground solution between the FCC rule and this 
legislation.

                                                     Barbara Boxer.

 ADDITIONAL VIEWS OF SENATOR McCAIN, SENATOR HOLLINGS, SENATOR SMITH, 
                           AND SENATOR SNOWE

  During our consideration of S. 2603, the Junk Fax Protection 
Act of 2004, we had hoped to have an amendment adopted by 
unanimous consent that had been filed by Senators Smith, 
Hollings, and Snowe. The amendment would have struck language 
currently in the bill that restricts the FCC's ability to 
establish a durational limit on an ``existing business 
relationship'' to a period ``not shorter than 5 years and not 
longer than 7 years.'' In our view, this language unwisely 
limits the discretion of the FCC in this area. The amendment 
would have also deleted certain reporting requirements tasked 
to the FCC under the original bill. Due to the invocation of a 
Senate rule which prevented the consideration of amendments to 
this bill, this amendment could not be considered by the 
committee. It is our expectation and hope, however, that these 
changes will be agreed to and accepted as this legislation 
receives further consideration before the full Senate.
                                   John McCain.
                                   Ernest F. Hollings.
                                   Gordon Smith.
                                   Olympia J. Snowe.

                        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):

             SECTION 227 OF THE COMMUNICATIONS ACT OF 1934

SEC. 227. RESTRICTIONS ON THE USE OF TELEPHONE EQUIPMENT.

  (a) Definitions.--As used in this section--
          (1) * * *
          (2) The term ``established business relationship'', 
        for purposes only of subsection (b)(1)(C)(i), shall 
        have the meaning given the term in section 64.1200 of 
        the Commission's regulations, as in effect on January 
        1, 2003, except that--
                  (A) such term shall include a relationship 
                between a person or entity and a business 
                subscriber subject to the same terms applicable 
                under such section to a relationship between a 
                person or entity and a residential subscriber; 
                and
                  (B) an established business relationship 
                shall be subject to any time limitation 
                established pursuant to paragraph (2)(G).
          [(2)] (3) The term ``telephone facsimile machine'' 
        means equipment which has the capacity (A) to 
        transcribe text or images, or both, from paper into an 
        electronic signal and to transmit that signal over a 
        regular telephone line, or (B) to transcribe text or 
        images (or both) from an electronic signal received 
        over a regular telephone line onto paper.
          [(3)] (4) The term ``telephone solicitation'' means 
        the initiation of a telephone call or message for the 
        purpose of encouraging the purchase or rental of, or 
        investment in, property, goods, or services, which is 
        transmitted to any person, but such term does not 
        include a call or message (A) to any person with that 
        person's prior express invitation or permission, (B) to 
        any person with whom the caller has an established 
        business relationship, or (C) by a tax exempt nonprofit 
        organization.
          [(4)] (5) The term ``unsolicited advertisement'' 
        means any material advertising the commercial 
        availability or quality of any property, goods, or 
        services which is transmitted to any person without 
        that person's prior express invitation or permission, 
        in writing or otherwise.
  (b) Restrictions on the Use of Automated Telephone 
Equipment.--
          (1) Prohibitions.--It shall be unlawful for any 
        person within the United States, or any person outside 
        the United States if the recipient is within the United 
        States--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(C) to use any telephone facsimile machine, 
                computer, or other device to send an 
                unsolicited advertisement to a telephone 
                facsimile machine; or]
                  (C) to use any telephone facsimile machine, 
                computer, or other device to send, to a 
                telephone facsimile machine, an unsolicited 
                advertisement, unless--
                          (i) the unsolicited advertisement is 
                        from a sender with an established 
                        business relationship with the 
                        recipient, and
                          (ii) the unsolicited advertisement 
                        contains a notice meeting the 
                        requirements under paragraph (2)(D),
                except that the exception under clauses (i) and 
                (ii) shall not apply with respect to an 
                unsolicited advertisement sent to a telephone 
                facsimile machine by a sender to whom a request 
                has been made not to send future unsolicited 
                advertisements to such telephone facsimile 
                machine that complies with the requirements 
                under paragraph (2)(E); or

           *       *       *       *       *       *       *

          (2) Regulations; exemptions and other provisions.--
        The Commission shall prescribe regulations to implement 
        the requirements of this subsection. In implementing 
        the requirements of this subsection, the Commission--
                  (A) * * *
                  (B) may, by rule or order, exempt from the 
                requirements of paragraph (1)(B) of this 
                subsection, subject to such conditions as the 
                Commission may prescribe--
                          (i) * * *
                          (ii) such classes or categories of 
                        calls made for commercial purposes as 
                        the Commission determines--
                                  (I) * * *
                                  (II) do not include the 
                                transmission of any unsolicited 
                                advertisement; [and]
                  (C) may, by rule or order, exempt from the 
                requirements of paragraph (1)(A)(iii) of this 
                subsection calls to a telephone number assigned 
                to a cellular telephone service that are not 
                charged to the called party, subject to such 
                conditions as the Commission may prescribe as 
                necessary in the interest of the privacy rights 
                this section is intended to protect[.];
                  (D) shall provide that a notice contained in 
                an unsolicited advertisement complies with the 
                requirements under this subparagraph only if--
                          (i) the notice is clear and 
                        conspicuous and on the first page of 
                        the unsolicited advertisement;
                          (ii) the notice states that the 
                        recipient may make a request to the 
                        sender of the unsolicited advertisement 
                        not to send any future unsolicited 
                        advertisements to a telephone facsimile 
                        machine or machines and that failure to 
                        comply, within the shortest reasonable 
                        time, as determined by the Commission, 
                        with such a request meeting the 
                        requirements under subparagraph (E) is 
                        unlawful;
                          (iii) the notice sets forth the 
                        requirements for a request under 
                        subparagraph (E);
                          (iv) the notice includes--
                                  (I) a domestic contact 
                                telephone and facsimile machine 
                                number for the recipient to 
                                transmit such a request to the 
                                sender; and
                                  (II) a cost-free mechanism 
                                for a recipient to transmit a 
                                request pursuant to such notice 
                                to the sender of the 
                                unsolicited advertisement; the 
                                Commission shall by rule 
                                require the sender to provide 
                                such a mechanism and may, in 
                                the discretion of the 
                                Commission and subject to such 
                                conditions as the Commission 
                                may prescribe, exempt certain 
                                classes of small business 
                                senders, but only if the 
                                Commission determines that the 
                                costs to such class are unduly 
                                burdensome given the revenues 
                                generated by such small 
                                businesses;
                          (v) the telephone and facsimile 
                        machine numbers and the cost-free 
                        mechanism set forth pursuant to clause 
                        (iv) permit an individual or business 
                        to make such a request during regular 
                        business hours; and
                          (vi) the notice complies with the 
                        requirements of subsection (d);
                  (E) shall provide, by rule, that a request 
                not to send future unsolicited advertisements 
                to a telephone facsimile machine complies with 
                the requirements under this subparagraph only 
                if--
                          (i) the request identifies the 
                        telephone number or numbers of the 
                        telephone facsimile machine or machines 
                        to which the request relates;
                          (ii) the request is made to the 
                        telephone or facsimile number of the 
                        sender of such an unsolicited 
                        advertisement provided pursuant to 
                        subparagraph (D)(iv) or by any other 
                        method of communication as determined 
                        by the Commission; and
                          (iii) the person making the request 
                        has not, subsequent to such request, 
                        provided express invitation or 
                        permission to the sender, in writing or 
                        otherwise, to send such advertisements 
                        to such person at such telephone 
                        facsimile machine;
                  (F) may, in the discretion of the Commission 
                and subject to such conditions as the 
                Commission may prescribe, allow professional or 
                trade associations that are tax-exempt 
                nonprofit organizations to send unsolicited 
                advertisements to their members in furtherance 
                of the association's tax-exempt purpose that do 
                not contain the notice required by paragraph 
                (1)(C)(ii), except that the Commission may take 
                action under this subparagraph only by 
                regulation issued after public notice and 
                opportunity for public comment and only if the 
                Commission determines that such notice required 
                by paragraph (1)(C)(ii) is not necessary to 
                protect the ability of the members of such 
                associations to stop such associations from 
                sending any future unsolicited advertisements; 
                and
                  (G)(i) may, consistent with clause (ii), 
                limit the duration of the existence of an 
                established business relationship to a period 
                not shorter than 5 years and not longer than 7 
                years after the last occurrence of an action 
                sufficient to establish such a relationship, 
                but only if--
                                  (I) the Commission determines 
                                that the existence of the 
                                exception under paragraph 
                                (1)(C) relating to an 
                                established business 
                                relationship has resulted in a 
                                significant number of 
                                complaints to the Commission 
                                regarding the sending of 
                                unsolicited advertisements to 
                                telephone facsimile machines;
                                  (II) upon review of such 
                                complaints referred to in 
                                subclause (I), the Commission 
                                has reason to believe that a 
                                significant number of such 
                                complaints involve unsolicited 
                                advertisements that were sent 
                                on the basis of an established 
                                business relationship that was 
                                longer in duration than the 
                                Commission believes is 
                                consistent with the reasonable 
                                expectations of consumers;
                                  (III) the Commission 
                                determines that the costs to 
                                senders of demonstrating the 
                                existence of an established 
                                business relationship within a 
                                specified period of time do not 
                                outweigh the benefits to 
                                recipients of establishing a 
                                limitation on such established 
                                business relationship; and
                                  (IV) the Commission 
                                determines that, with respect 
                                to small businesses, the costs 
                                are not unduly burdensome, 
                                given the revenues generated by 
                                small businesses, and taking 
                                into account the number of 
                                specific complaints to the 
                                Commission regarding the 
                                sending of unsolicited 
                                advertisements to telephone 
                                facsimile machines by small 
                                businesses; and
                  (ii) may not commence a proceeding to 
                determine whether to limit the duration of the 
                existence of an established business 
                relationship before the expiration of the 3-
                year period that begins on the date of the 
                enactment of the Junk Fax Prevention Act of 
                2004.

           *       *       *       *       *       *       *

  (g) Junk Fax Enforcement Report.--The Commission shall submit 
a report to the Congress for each year regarding the 
enforcement of the provisions of this section relating to 
sending of unsolicited advertisements to telephone facsimile 
machines, which shall include the following information:
          (1) The number of complaints received by the 
        Commission during such year alleging that a consumer 
        received an unsolicited advertisement via telephone 
        facsimile machine in violation of the Commission's 
        rules.
          (2) The number of such complaints received during the 
        year on which the Commission has taken action.
          (3) The number of such complaints that remain pending 
        at the end of the year.
          (4) The number of citations issued by the Commission 
        pursuant to section 503 during the year to enforce any 
        law, regulation, or policy relating to sending of 
        unsolicited advertisements to telephone facsimile 
        machines.
          (5) The number of notices of apparent liability 
        issued by the Commission pursuant to section 503 during 
        the year to enforce any law, regulation, or policy 
        relating to sending of unsolicited advertisements to 
        telephone facsimile machines.
          (6) For each such notice--
                  (A) the amount of the proposed forfeiture 
                penalty involved;
                  (B) the person to whom the notice was issued;
                  (C) the length of time between the date on 
                which the complaint was filed and the date on 
                which the notice was issued; and
                  (D) the status of the proceeding.
          (7) The number of final orders imposing forfeiture 
        penalties issued pursuant to section 503 during the 
        year to enforce any law, regulation, or policy relating 
        to sending of unsolicited advertisements to telephone 
        facsimile machines.
          (8) For each such forfeiture order--
                  (A) the amount of the penalty imposed by the 
                order;
                  (B) the person to whom the order was issued;
                  (C) whether the forfeiture penalty has been 
                paid; and
                  (D) the amount paid.
          (9) For each case in which a person has failed to pay 
        a forfeiture penalty imposed by such a final order, 
        whether the Commission referred such matter for 
        recovery of the penalty.
          (10) For each case in which the Commission referred 
        such an order for recovery--
                  (A) the number of days from the date the 
                Commission issued such order to the date of 
                such referral;
                  (B) whether an action has been commenced to 
                recover the penalty, and if so, the number of 
                days from the date the Commission referred such 
                order for recovery to the date of such 
                commencement; and
                  (C) whether the recovery action resulted in 
                collection of any amount, and if so, the amount 
                collected.

                                  
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