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THE JUNK FAX PREVENTION ACT OF 2004

HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS AND

THE INTERNET

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

JUNE 15, 2004

Serial No. 108–87

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi, Vice Chairman

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN SULLIVAN, Oklahoma

JOHN D. DINGELL, Michigan

Ranking Member

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

TOM ALLEN, Maine

JIM DAVIS, Florida

JANICE D. SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

BUD ALBRIGHT, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida

CLIFF STEARNS, Florida

Vice Chairman

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

CHARLES F. BASS, New Hampshire

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

JOE BARTON, Texas,

(Ex Officio)

EDWARD J. MARKEY, Massachusetts

Ranking Member

ALBERT R. WYNN, Maryland

KAREN MCCARTHY, Missouri

MICHAEL F. DOYLE, Pennsylvania

JIM DAVIS, Florida

CHARLES A. GONZALEZ, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

Graham, John H., President and Chief Executive Officer, American Society of Association Executives ....................................................................... 18

Kaechele, Cheryl, Publisher, Allegan County News ...................................... 23

McDonald, Walt, President, National Association of Realtors ...................... 11

Snowden, K. Dane, Chief, Consumer and Government Affairs Bureau,

Federal Communications Commission ........................................................ 6

Material submitted for the record by:

Brady, Phillip D., President, National Automobile Dealers Association,

prepared statement of ................................................................................... 34

(III)

(1)

THE JUNK FAX PREVENTION ACT OF 2004

TUESDAY, JUNE 15, 2004

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON TELECOMMUNICATIONS

AND THE INTERNET,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:30 a.m., in room

2322 Rayburn House Office Building, Hon Fred Upton, (chairman),

presiding.

Members present: Representatives Upton, Cox, Deal, Shimkus,

Buyer, Walden, Barton (ex officio), Markey, and Wynn.

Staff present: Kelly Cole, majority counsel; Will Nordwind, majority counsel and policy coordinator; Will Carty, legislative clerk;

and Peter Filon, minority counsel.

Mr. UPTON. Good morning. Today’s hearing is on the Junk Fax

Prevention of 2004, which I plan on introducing tomorrow, hopefully with strong bipartisan support.

In 1991, Congress passed the Telephone Consumer Protection

Act, which included landmark legislation that protected consumers

from receiving unwanted and unsolicited commercial faxes. And for

over 10 years, the FCC had interpreted that law to provide businesses with an exception to the general ban when they faxed commercial or advertising material to their existing business customers.

Then in 2003, the FCC made a major change in its interpretation

of the law. Under the new FCC rules, every business, small, large,

home-based, every association, every non-profit organization and

every charity, would be required to obtain prior written approval

from each individual before it sent a commercial fax. The logistical

and financial costs of the new FCC rules, particularly to small

business and non-profit associations, would be enormous, staggering.

For instance, a survey by the United States Chamber of Commerce suggested the cost to the average small business would be

at least $5,000 in the first year and more than $3,000 every year

after. The survey further indicates that it would take, on average,

more than 27 hours of staff time to obtain the initial written consent from their customers and an additional 20 hours each year to

keep the forms current.

Recent survey by the National Association Wholesale Distributors revealed that its member companies expected to pay an average of $22,500 just to obtain the consent forms. With our economy

2

in the fragile stages of an economic recovery, I would much rather

see those dollars going toward production and job creation.

Given the dramatic impact which the new rules would have, last

August, just before the new rules were to go into effect, Billy Tauzin and I wrote the FCC and requested that the FCC delay the effective date of the new rules. Thankfully, the FCC did; in fact,

stayed the effective date until January 1 of 2005. Moreover, while

the FCC currently has the new rules under reconsideration, I think

it is the wisest course for Congress to step in and fix the law to

resolve any lingering statutory interpretation problems which led

to the FCC’s new rules, and that is why we are here today.

The Junk Fax Prevention Act would clearly reinstate the established business relationship exemption to allow businesses, associations and charities to send commercial faxes to their customers and

members without first receiving written permission. Additionally,

the bill would establish ne opt-out safeguards to provide additional

protections for fax recipients. Under the bill, senders of faxes must

alert recipients of their right to opt out for future faxes and must

abide by such requests. And, finally, the bill sets out FCC reporting

requirements so that Congress can monitor the FCC’s enforcement

activity.

This act, I think, is common sense regulatory relief, and time is

of the essence for Congress to pass it since many businesses will

very soon need to begin making arrangements to be in compliance

with the new rules by January of 2005. So I would ask my colleagues—tell my colleagues that I intend to introduce the bill tomorrow and expedite its consideration in both this subcommittee as

well as the full committee perhaps as early as next week.

I look forward to hearing from today’s witnesses, particularly my

constituent and friend Cheryl Kaechele of the Allegan County

News, which covers a good share of my congressional district. We

appreciate all of you coming all this way, and I would yield to my

friend and ranking member of the subcommittee, Mr. Markey, for

an opening statement.

Mr. MARKEY. Thank you, Mr. Chairman, and thank you for having this hearing. Mr. Chairman, I was the principal House sponsor

of the Telephone Consumer Protection Act of 1991, which addressed issues affecting telemarketing, automated dialing machines, pre-recorded messages and junk faxes, among other issues.

Congress endorsed my call in 1991 for a general prohibition against

just faxes because of the intrusive nature of that form of advertising.

Junk faxes represent a form of advertising in which the ad is essentially paid for by the recipient. The recipient of a junk fax pays

for the fax paper and printer costs, pays in the form of precious

time as lost, as the machine is tied up, and also in the form of the

clutter in which important faxes are lost in the midst of a pile of

junk faxes.

For these reasons and for additional important consumer privacy

interests, I believe it is important that Congress retain the general

prohibition against junk faxes and the essential enforcement remedies contained in the 1991 law which the draft legislation leaves

in tact.

3

During the original implementation of the TCPA’s junk fax provisions, the Federal Communications Commission included an exception to the general prohibition against sending a junk fax for established business relationships. In the statutory provisions addressing telephone solicitations, this term was included in the law to

capture the notion of business relationships between commercial

entities as well as relationships between entities and residential

consumers that were not incidental or minor but voluntary twoway relationships.

This concept of an established business relationship permitted a

commercial entity to invoke its ability to prove such a relationship

with a consumer in order to contact that consumer in spite of the

general prohibitions of the law. It was hoped that business relationships with consumers that were so established would be consistent with consumer expectations and not lead consumers to resent the contact or get irate at receiving such commercial solicitations.

The FCC has more recently determined that the term, ‘‘established business relationship,’’ was not specifically included in the

provisions addressing junk faxes and the TCPA and, therefore, rescinded this regulatory exception. The new rules require written

permission from consumers and these new rules have been stayed

from going into effect until January of 2005.

The legislation before us is designed to put specific language into

the statute permitting an established business relationship to the

general prohibition against junk faxes. Many businesses have complained that written permission is too onerous a regulatory requirement. While many other faxes that they stipulate are routinely

sent in the ordinary course of business, presumably without complaints from the recipients of such faxes.

The draft is responsive to these complaints from many businesses. We must recognize, however, that many small business and

residential consumers find many of these faxes to be a considerable

irritant and strongly object to receiving them. The legislation,

therefore, addresses additional issues.

First, the draft bill includes important consumer provisions that

will avail consumers of the opportunity to stop junk faxes being

sent to them, even under the established business relationship exception. This is something that wasn’t in the original law, nor in

the FCC’s previous regulations, but it represents an important addition to the statute. My feeling is that even if a commercial entity

can prove it has an established business relationship which allows

it to legally send an unsolicited fax to a consumer, many consumers

may still object and want to stop all future faxes.

The draft bill, therefore, requires entities to include on the first

page of the unsolicited advertisement a notice informing consumers

that they have the right not to receive any future junk faxes from

the entity. And this notice must also include a domestic contact

telephone and fax number for the consumer to express that request. This is an important right for consumers to have, and they

shouldn’t have to call Canada or the Cayman Islands to reach

someone to object to receiving junk faxes.

Moreover, I think it is important to take a comprehensive look

at overall enforcement of the junk fax law. While the existing statVerDate 11-MAY-2000 12:36 Aug 30, 2004 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 95441.TXT HCOM1 PsN: HCOM1
4

ute has permitted consumers to take action in court to seek redress

from jun fax senders, and this has served as a deterrent to some,

I am concerned that some of the most egregious junk fax operations, the entities to broadcast such faxes to millions often escape

enforcement. They may be found guilty, cited by the FCC and

sometimes fined, but often it appears as if they either ignore the

fine, skip town or live overseas.

For these reasons, the bill includes provisions that will give us

an annual accounting of the FCC’s enforcement activities, as well

as a GAO analysis of what additional enforcement tools may be

necessary to provide support deterrent, especially to the most egregious and abusive junk fax senders. I am hopeful that this legislation proceeds through the committee, that we can continue fine

tune the bill and strengthen its consumer protection provisions.

I want to commend you, Chairman Upton, for your willingness

to work with me and Ranking Member Dingell, and we look forward to continuing our progress on this bill with Chairman Barton

and the other colleagues in the coming weeks. Thank you.

Mr. UPTON. Thank you. The Chair would recognize the chairman

of the full committee, Mr. Barton, for an opening statement.

Chairman BARTON. Thank you, Chairman Upton. I appreciate

the opportunity to testify today and appreciate you holding this

hearing on the Junk Fax Prevention Act of 2004. I want to commend you for the bipartisan effort to make sure that this bill can

become law this year.

The committee has tackled many issues that frustrated consumers, including telemarketing and spam. Today, we are going to

tackle junk faxes. There is nothing in this bill that will make it

easier to send unsolicited faxes to consumers. Current law does not

allow companies, organizations, businesses or charities to fax unsolicited advertisements, and this bill makes no changes to those

strong consumer protections.

What the bill does do is remedy a problem in the original Telephone Consumer Protection Act. For those companies and associations with an existing business relationship, this bill would allow

commercial faxes to be sent to those relationships. Without a law

to fix this problem, all organizations will be forced to get written

permission for each fax that it sends. This would present a huge

logistical and financial hurdle that would have an enormous negative impact.

For instance, school associations would be forced to initiate the

tedious process of collecting written permission slips from its thousands of member just to send a fax. Small businesses who market

on a national level would be pulled away from running their businesses to manually contact each customer to get permission to send

them a fax. This bill will remove that hurdle and allow commercial

faxing without written permission if there is an existing business

relationship.

But the bill goes a step further. If those who have an existing

business relationship choose that they no longer wish to receive a

commercial fax, this bill would give them the right to opt out of receiving future faxes. This is a strong protection that would provide

a necessary fix to the current law. It properly, in my opinion, balances the need for efficient and effective communication between

5

businesses and its customers and also provides the required consumers protections to ensure those who don’t want faxes don’t receive faxes.

I look forward to working at the full committee, not only with

Chairman Upton, Ranking Member Markey but with the ranking

member of the full committee, Mr. Dingell, if we need to improve

this bill. The Junk Fax Prevention Act is a good step and right direction, and I hope that we can move it through it subcommittee,

full committee, through the House, through the Senate and on to

the President’s desk sometime this year.

I want to thank you, Mr. Upton, for your strong work on this,

and I would yield back the balance of my time.

Mr. UPTON. Thank you. Mr. Wynn?

Mr. WYNN. Thank you, Mr. Chairman.

Mr. UPTON. Mr. Shimkus?

Mr. SHIMKUS. I woll also defer.

Mr. UPTON. Mr. Deal?

Mr. DEAL. I defer.

Mr. UPTON. At this point, I will ask unanimous consent that all

members have an opportunity to put their opening statements in

as part of the record, and we will proceed with the panel.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. PAUL E. GILLMOR, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF OHIO

I would like to thank the Chairman for calling us here to not only examine the

details of the Junk Fax Prevention Act, but also to address both consumer and industry concerns with regard to the FCC’s unsolicited fax advertisement rules scheduled to be implemented on January 1st of next year.

Of note, I welcome the well-balanced panel of witnesses and look forward to hearing more about the history of this rulemaking as well as its recent revisions and

potential impacts on the parties represented today.

Like the measure before us, we should continue to focus our efforts on maintaining a balance of protecting businesses and consumers’ privacy while at the same

time ensuring that those who market them are not overly burdened.

Again, I thank the Chairman and yield back the remainder of my time.

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

Thank you, Mr. Chairman.

I look forward to our hearing today on stemming the scourge of ‘‘junk faxes.’’ This

problem goes back many years and many Congresses. In 1991, the Congress essentially banned ‘‘junk faxes,’’ referred to as ‘‘unsolicited advertisements’’ under the

Telecommunications Consumer Protection Act (TCPA). The law did, however, allow

for ‘‘prior express invitation or permission’’ to be given by the intended recipient of

the fax. This ‘‘permission’’ must have been what the FCC interpreted as authorizing

unsolicited faxes under an ‘‘existing business relationship.’’ Unfortunately, since

these laws and regulations went on the books, they have not been effective in stemming instances of ‘‘junk faxes’’ clogging consumer’s fax machines.

In an effort to shore up the rules, the FCC whipsawed in the other direction, and

last summer revised its regulations to require written authorization to be provided

for folks to receive these unsolicited advertisements. Now I am hearing that these

regulations are too restrictive.

No one wants to unduly burden legitimate commerce. But I think everyone would

agree with me that we need to reduce, and hopefully eliminate, the abuses that

have been going on for years. I am not certain, however, that an existing business

relationship is the best avenue to protect consumers. Perhaps the better course is

to clarify what constitutes ‘‘prior express invitation or permission’’ to receive these

faxes. After all, we are in an electronic age, where electronic signatures are allowed

6

for commerce, even paying one’s taxes to the I.R.S., so why can’t we leverage technology to help expedite a recipient’s authorization?

I would like to hear from the FCC what they could do to improve the rule, in light

of the outcry we’ve heard since last August, to address the concerns of the groups

represented here, while keeping in mind that it is consumers, small businesses, and

other fax owners who bear the cost-shifting burden of paper and toner that fax

spamming entails.

That’s why I look forward to hearing from our distinguished panel on these matters Today and look forward to a productive dialog on solutions for this very real

problem.

I yield back the balance of my time.

Mr. UPTON. We are pleased to say that we have Mr. Dane

Snowden, Chief of the Consumer and Government Affairs Bureau

from the FCC here with us today, along with Mr. Walt McDonald,

president of the National Association of Realtors thank you for

making the trip; Mr. John Graham, president and chief executive

officer of the American Society of Association Executives, and Ms.

Cheryl Kaechele, publisher of the Allegan County news from

Allegan, Michigan on behalf of the National Newspaper Association.

We appreciate your testimony being submitted in advance, and

if you could limit your opening statement to about 5 minutes, that

would be terrific, and Mr. Snowden, we will start with you. Thank

you for being with us this morning.

STATEMENTS OF K. DANE SNOWDEN, CHIEF, CONSUMER AND

GOVERNMENT AFFAIRS BUREAU, FEDERAL COMMUNICATIONS COMMISSION; WALT MCDONALD, PRESIDENT, NATIONAL ASSOCIATION OF REALTORS; JOHN H. GRAHAM,

PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN

SOCIETY OF ASSOCIATION EXECUTIVES; AND CHERYL

KAECHELE, PUBLISHER, ALLEGAN COUNTY NEWS

Mr. SNOWDEN. Thank you. Good morning, Chairman Upton,

Ranking Member Markey and members of the subcommittee. My

name is Dane Snowden, and I am the Chief of the Consumer and

Governmental Affairs Bureau at the FCC. I appreciate the opportunity to appear before you, and I look forward to discussing both

the history of the rules on the transmission of unsolicited fax advertisements under the Telephone Consumer Protection Act, as

well as the FCC’s role in implementing and enforcing these rules.

As many of you know, Congress passed the TCPA in 1991 in an

effort to address a growing number of telephone marketing calls

and certain telemarketing practices Congress found to be an invasion of consumer privacy and even a risk to public safety. The statute also restricts the use of telephone fax machines to send unsolicited advertisements, making it unlawful, ‘‘to use any telephone facsimile machine, computer, or other device to send an unsolicited

advertisement to a telephone facsimile machine.’’ The TCPA’s fax

provision acts as a ban on fax advertisements unless the recipient

has given prior express invitation or permission to receive the fax.

In adopting rules in 1992 to implement the TCPA, the Commission stated that the statute leaves the Commission without discretion to create exemptions from or limit the effects of the fax prohibition. The Commission indicated however that fax transmissions

from persons or entities that have an established business relationVerDate 11-MAY-2000 12:36 Aug 30, 2004 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 95441.TXT HCOM1 PsN: HCOM1
7

ship with the recipient can be deemed to be invited or permitted

by the recipient.

In 2002, the Commission initiated a rulemaking proceeding to

update its rules under the TCPA. A part of that review included

the restrictions on fax advertising. Specifically, we sought comment

on the continued effectiveness of the fax rules, including whether

an established business relationship establishes the requisite express permission to receive fax advertisements. We also sought

comment on any developing technologies that might warrant revisiting the rules. The record we compiled indicated the many individuals and businesses are in fact inundated with unsolicited faxes.

Some commenters explained that advertisers continue to send

faxes despite efforts to be removed from the sender’s fax lists.

Again, according to the record, such faxes can be burdensome and

costly to receive.

The Commission in 1992 found that ‘‘prior express invitation or

permission’’ could be interpreted broadly enough to allow an ‘‘established business relationship’’ to suffice. However, a more extensive

consideration of the statutory language in our 2003 rulemaking, informed by enforcement experience, led us to a different outcome.

The record revealed that inclusion of an established business relationship within the meaning of prior express permission had resulted in consumers and businesses alike, particularly small businesses, assuming the unwanted advertising costs of faxing of any

entity with which they conduct business. Therefore, based on the

record before us, we reversed our prior conclusion that an established business relationship provides companies with the necessary

express permission to send faxes to their customers. We instead determined that companies that wish to fax unsolicited advertisements to customers must obtain their express permission before

transmitting faxes to them.

Under the revised rules, which will not become effective until

January 1 of 2005, such permission must be provided in writing

and include the recipient’s signature and fax number. This written

permission requirement was designed to ensure that consumers

and businesses have a means to control the messages sent to their

fax machines. Since the FCC adopted rules to implement the

TCPA, the Commission has aggressively enforced the rules on

sending fax advertisements despite the fact that identifying and

tracking down the senders of junk fax messages can be, and quite

frankly is, a very difficult task.

Complaints filed with the Commission often contain insufficient

information for the FCC to pursue alleged violations, primarily because some fax senders do not include adequate identification information or a working telephone number on their faxes. Instead,

senders of junk faxes often disguise their identities with aliases,

acronyms or simply provide no identifying information whatsoever.

Nevertheless, under Chairman Powell, the Commission, through

our enforcement bureau, has been able to identify violators and

issue forfeiture orders totaling $6.9 million in penalties for junk

faxing. The Commission has also issued over 233 citations for faxes

sent in violation of the TCPA. Most recently, the Commission

issued a forfeiture of nearly $5.4 million against fax.com for violating the TCPA and FCC’s junk fax rules.

8

As part of our normal rulemaking process, the Commission is

currently reviewing the numerous petitions filed seeking review of

the fax rules. Many such petitions are from entities that did not

comment on the fax rules in our 2003 proceeding, including each

of the panelists here today. Since the release of our item, they,

along with others, argue that the elimination of the established

business relationship exemption, on which businesses have come to

rely, will cause serious disruption to routine business operations.

They point out that for businesses in trade or membership associations, the fax machine continues to be a valuable tool for communicating with customers and conducting routine business.

Because these petitions are currently pending before the Commission, I am extremely limited as to what I can say about them.

I will, nevertheless, endeavor to answer as many of your questions

as I can. The goal of the TCPA is to protect consumers from certain

marketing practices that can be intrusive and costly. As companies

continue to advertise via fax, we must ensure that consumers and

businesses alike have a means to control the messages they receive

on their fax machines.

I thank you, and I look forward to answering any of your questions.

[The prepared statement of K. Dane Snowden follows:]

PREPARED STATEMENT OF K. DANE SNOWDEN, CHIEF, CONSUMER AND

GOVERNMENTAL AFFAIRS BUREAU, FEDERAL COMMUNICATIONS COMMISSION

I. INTRODUCTION

Good morning Chairman Upton, Ranking Member Markey, and members of the

Subcommittee. My name is K. Dane Snowden, and I am Chief of the Consumer &

Governmental Affairs Bureau of the Federal Communications Commission (‘‘FCC’’

or ‘‘Commission’’). I appreciate this opportunity to appear before you to discuss the

history of the rules on the transmission of unsolicited facsimile advertisements

under the Telephone Consumer Protection Act of 1991 (TCPA), as well as the FCC’s

role in implementing and enforcing these rules.

In 2002, the FCC initiated a rulemaking proceeding to update its rules under the

TCPA, which culminated in the establishment of the popular and successful national ‘‘do-not-call’’ registry. While the do-not-call registry certainly garnered a great

deal of media attention with over 60 million telephone numbers now registered on

the list, the Commission undertook at the same time a comprehensive review of the

unsolicited fax rules under the TCPA. The Commission asked for public comment

on the effectiveness of those rules and on any developing technologies that might

warrant revisiting the restrictions on fax advertising. Based on the FCC’s own extensive enforcement experience and on the record before us, the Commission revised

the rules implementing the TCPA to require any entity transmitting a fax advertisement to first obtain the recipient’s express permission in writing. We concluded that

an established business relationship would no longer be sufficient to constitute the

necessary permission under the TCPA to allow the lawful transmission of an advertisement to a person’s fax machine. I appreciate this opportunity to explain the

Commission’s action in 2003 and how these revised rules differ from our prior ruling

in 1992 on sending fax advertisements.

II. BACKGROUND

A. The TCPA and 1992 Commission Rules

On December 20, 1991, Congress passed the TCPA to address a growing number

of telephone marketing calls and certain telemarketing practices Congress found to

be an invasion of consumer privacy and even a risk to public safety. The statute

also restricts the use of telephone facsimile machines to send unsolicited advertisements, making it unlawful ‘‘to use any telephone facsimile machine, computer, or

other device to send an unsolicited advertisement to a telephone facsimile machine.’’

In addition, the TCPA requires all fax messages to identify the sender on the first

page or on each page of a transmission.

9

It is important to emphasize that the TCPA treats fax advertising differently than

it does telemarketing calls. In defining a ‘‘telephone solicitation,’’ the TCPA excludes

calls to consumers with whom a company has either their ‘‘prior express invitation

or permission’’ or an ‘‘established business relationship.’’ Thus, a company may

make a telemarketing call to an existing customer. If that customer asks not to be

called again, the company must place the consumer on its company-specific do-notcall list and honor the consumer’s request not to be called. The TCPA does not, however, expressly exempt from its fax provision those faxes that are sent to ‘‘established business relationship’’ customers. Instead, the TCPA’s fax provision acts as

a ban on fax advertisements unless the recipient has given ‘‘prior express invitation

or permission’’ to receive the fax. Neither the statute nor the legislative history contemplates a mechanism for consumers to ‘‘opt out’’ of unwanted fax transmissions,

as is the case with telemarketing calls.

In adopting rules in 1992 to implement the TCPA, the Commission stated in its

Report and Order that the TCPA leaves the Commission without discretion to create

exemptions from or limit the effects of the fax prohibition. The Commission noted,

however, that fax transmissions from persons or entities that have an established

business relationship with the recipient can be deemed to be invited or permitted

by the recipient. The Commission subsequently made clear in 1995 that the existence of an established business relationship between a fax sender and recipient establishes consent to receive telephone facsimile advertisement transmissions.

B. Enforcement

Since the FCC adopted rules to implement the TCPA, the Commission has aggressively enforced the rules on sending fax advertisements, despite the fact that identifying and tracking down the senders of junk fax messages can be a difficult task.

Complaints filed with the Commission often contain insufficient information for the

FCC to pursue alleged violations—primarily because fax senders do not include adequate identification information or a working telephone number on their faxes. Instead, senders of junk faxes often disguise their identities with aliases, acronyms,

or simply provide no identifying information whatsoever.

It is also worth noting that the obstacles that senders of junk faxes use to avoid

identification create a significant challenge for enforcement action within the oneyear statute of limitations period for proposing forfeiture penalties. This is because

before the Commission can consider a forfeiture penalty against most senders of

junk faxes, it is required under section 503 of the Communications Act to issue a

warning citation to any violator that does not hold a Commission authorization

(which would include most fax senders). Only if the non-licensee violator subsequently engages in conduct described in the citation may the Commission propose

a forfeiture, and the forfeiture may only be issued as to the subsequent violations.

Nevertheless, the Commission has issued forfeiture orders totaling over $6.9 million

in penalties for junk faxing. The Commission has also issued 233 citations for faxes

sent in violation of the TCPA. Most recently, the Commission issued a forfeiture of

nearly $5.4 million against Fax.com for violating the TCPA and the Commission’s

junk fax rules. This enforcement action marked the largest forfeiture the Commission had ever issued with respect to the sending of unlawful faxes.

Despite a general ban on unsolicited facsimile advertisements, and aggressive enforcement by the Commission, unwanted faxed advertisements have proliferated,

particularly as facsimile service providers (or fax broadcasters) enable sellers to

send advertisements to multiple destinations at relatively little cost.

III. RECENT COMMISSION ACTION

Against this backdrop, the Commission decided to review the fax rules under the

TCPA when it took up the telemarketing rules in September of 2002. In a Notice

of Proposed Rulemaking, the Commission sought comment on both telemarketing

and fax practices and asked whether any of the rules should be revised to ensure

the TCPA’s mandate was being carried out. Specifically, we sought comment on the

continued effectiveness of the fax rules, including whether an established business

relationship establishes the requisite express permission to receive faxed advertisements, and on any developing technologies that might warrant revisiting the rules.

With regard to the effectiveness of the rules under the existing regime, the record

we compiled indicated that many individuals and businesses are, in fact, inundated

with unsolicited faxes. Some commenters explained that advertisers continue to

send them faxes despite efforts to be removed from senders’ fax lists. The record

revealed that, in addition to the cost of paper and toner associated with receiving

faxes, consumers and businesses—both small and large—are burdened by the time

spent reading and disposing of faxes. In addition, the record demonstrated that

10

when fax machines must print unsolicited advertisements and are not operational

for other purposes, there is a loss in productivity for those businesses.

In reviewing whether an established business relationship between a fax sender

and recipient establishes the requisite express permission to receive facsimile advertisements, the Commission received comments from a small number of businesses

that opposed the elimination of the established business relationship ‘‘exemption’’

for faxing. These businesses argued that doing so would interfere with ongoing business relationships and raise business costs. Consumer advocates, however, maintained that the TCPA requires companies to obtain express permission from consumers—even their existing customers—before transmitting a fax to a consumer.

They argued that consumers should not have to assume the cost of the paper used,

the cost associated with the use of the facsimile machine, and the costs associated

with the time spent receiving a facsimile advertisement during which the machine

cannot be used by its owner to send or receive other facsimile transmissions, without their permission. Some businesses indicated that facsimile advertisements interfere with receipt of faxes connected to their own business, and that the time spent

collecting and sorting such faxes increases their own labor costs.

In addition, the Commission reviewed closely the express language of the TCPA

and its legislative history. One of Congress’s primary concerns behind the TCPA

was to protect the public from bearing the costs of unwanted advertising. It restricts

certain practices found to impose unacceptable costs on consumers, such as

autodialed calls to wireless numbers and unsolicited advertisements sent to fax machines. Although the TCPA expressly excludes calls to persons with whom a company has an ‘‘established business relationship’’ from the restrictions on ‘‘telephone

solicitations,’’ it does not contain a similar exception from the fax prohibition. Similarly, the legislative history describes the need to protect ongoing business relationships in terms of companies being able to make telemarketing calls to their customers. It contains no similar references to an established business relationship for

fax senders. As some commenters pointed out, Congress initially included in the

TCPA an EBR exemption for sending faxes, but removed it from the final version

of the statute. Instead, the legislative history focuses exclusively on the concern

that, in the words former Representative Matthew Rinaldo (R-NJ), ‘‘unsolicited and

unwanted faxes can tie up a machine for hours and thwart the receipt of legitimate

and important messages.’’

Although the Commission in 1992 noted that ‘‘prior express invitation or permission’’ could be interpreted broadly enough to allow an ‘‘established business relationship’’ to suffice, a more extensive consideration of the statutory language in our

2003 rulemaking informed by our enforcement experience, led us to a different outcome. The record in our proceeding revealed that inclusion of an established business relationship within the meaning of prior express permission had resulted in

consumers and businesses assuming the unwanted advertising costs of faxing, of

any entity with which they conduct business. Therefore, we reversed our prior conclusion that an established business relationship provides companies with the necessary express permission to send faxes to their customers. We instead determined

that companies that wish to fax unsolicited advertisements to customers must obtain their express permission before transmitting faxes to them. Under the revised

rules (which will not become effective until January 1, 2005), such permission must

be provided in writing, including through electronic mail, and include the recipient’s

signature and facsimile number. This written permission requirement was intended

to ensure that consumers and businesses have a means to control the messages sent

to their fax machines.

IV. CURRENT STATUS OF FAX RULES

Following the release of the Commission’s 2003 Report and Order, businesses, associations, and other entities that advertise via fax filed comments indicating that

obtaining written permission from persons to whom they fax will be burdensome—

both time consuming and costly. In light of these additional claims, the Commission

immediately stayed the effective date of the written consent requirement until January 1, 2005. In the interim, we also concluded that businesses could continue to rely

on an established business relationship for permission to send fax advertisements.

And, we clarified that the time limitations on the duration of an established business relationship for telephone solicitations—18 months from any purchase or transaction and 3 months from an inquiry or application—would not apply to the sending

of unsolicited advertisements.

The stay has provided the Commission with an opportunity to review industry

and consumer concerns. As part of our normal rulemaking process, numerous petitions have been filed with the Commission, seeking review of the fax rules. Many

11

such petitions are from entities not involved in our 2003 proceeding. These petitioners have asked the Commission to reinstate the established business relationship ‘‘exemption’’ for faxing and to allow businesses to secure permission orally or

via fax. They argue that elimination of the established business relationship exemption, on which businesses have come to rely, will cause serious disruption to routine

business operations. They point out that businesses and membership and trade associations use the fax machine to send customers a variety of communications, such

as invitations to conferences and event, pricing sheets, announcements of weekly

specials and real estate listings. According to these businesses, the fax machine continues to be a valuable tool for communicating with customers and conducting normal business. Because these petitions for reconsideration are currently before the

Commission, I am extremely limited as to what I can say about the Commission’s

deliberations regarding these matters.

V. CONCLUSION

The goal of the TCPA is to protect consumers from certain marketing practices

that can be intrusive and costly to the consumer. As companies continue to advertise via facsimile, we must ensure that consumers and businesses have a means to

control the messages they receive on their fax machines.

I look forward to answering any questions you have.

Mr. UPTON. Thank you.

Mr. McDonald.

STATEMENT OF WALT MCDONALD

Mr. MCDONALD. Chairman Upton, Representative Markey and

members of the subcommittee, my name is Walt McDonald, and I

am president of the National Association of Realtors. NAR is the

Nation’s largest trade association with over 1 million members.

Our members include brokers, salespeople, property managers and

other professionals engaged in every aspect of the real estate business.

I appreciate the opportunity to share some thoughts with you regarding the Junk Fax Prevention Act of 2004 and commend this

subcommittee for its leadership in recognizing that the Federal

Communication Commission’s revised rules governing the use of

facsimile transmission are a radical departure from current practice and would significantly interfere with day-to-day business activities.

First, let me say that NAR members understand and strongly

support the goal of the Telephone Consumer Protection Act. Realtors themselves are recipients of unsolicited fax that tie up our

business fax machines. NAR does, however, question the need for

change that the FCC has made to the TCPA rules. The prior rule

with its established business relationship exception has worked

well over the past 12 years. In reversing its rule, the Commission

did not note any consumer complaints with the result of the established business relationship rule. However, it is clear that the Commission revised rule to address unsolicited fax will have the unintended consequences of interfering with solicited fax.

Despite all the advantages in technology, the prices of buying

and selling a home is still dependent upon fax. While fax are most

commonly used today to facilitate the paperwork associated with

home sales, fax also are used in ways that could be construed as

advertisement and would therefore meet the FCC definition of an

unsolicited fax. Real estate professionals use fax to communicate

quickly with consumers who have contacted them about real estate.

12

Take the case of a seller looking for an agent to list their home.

After an initial phone call, an agent routinely will offer to fax comparable market analysis for seller’s review prior to an actual meeting. This CMA provides comparable listing data on homes on markets, describes what the agent will do to market the home and

proactively solicits the listing. Under the revised rule, faxing is

presentation or even information on other homes on the market

would not be permissible without prior signed permission.

Real estate brokers and agents also use fax to send home listing

information directly to potential buyers upon request. Under the

revised rule, a real estate agent could no longer follow up with consumer inquiries with a fact of available properties. In a tight housing market, which we have experienced throughout the country,

the delay caused by having to obtain written permission could

mean the difference between a buyer getting the house they want

or losing it.

Consider, too, how awkward this scenario would be when a potential customer calls and asks for information on a home for sale.

Under the revised rule, the agent would not be able to fax the information. Instead, the agent would have to explain why he can’t

fax the information direct to consumer to a web site where they can

provide the required written consent or for an address so that the

agent can mail or courier the information along with the consent

form for future use.

This will cause frustration, suspicion and in some cases I think

ill will. This wold be a giant step backwards in a business where

good customer service depends on quick turnaround time. Similarly, NAR and its State and local associations routinely fax communications to their members. These faxes inform members about

upcoming continuing education classes or products and services

available to them. And sometimes at member-preferred pricing.

Once again, since these opportunities are available for a fee, these

faxes would meet the definition of an unsolicited fax.

The FCC has argued that obtaining written permission is not difficult. We disagree. Each of the means proposed by the FCC for obtaining a written permission, the face-to-face meeting, direct mail,

emails with electronic signatures all present a challenge for consumers. Interestingly enough, one technology which is fast, inexpensive and widely available is not an allowed means of distributing or returning the permission form. That technology is a fax.

In discussion with the FCC staff, they have indicated that faxing

the permission form would not be allowed since the form could be

construed as a solicitation for which written permission is needed.

Finally, we would like to have been able to quantify for you some

of the costs associated with the implementation of these FCC rules.

Unfortunately, though, we are unable to predict how many of the

1 million realtors and approximately 12 million home sellers and

buyers would have had to interact if they revised rules had been

in place last year when 6 million homes were sold throughout the

country.

In our written testimony; however, we have presented some conservative simple assumptions. We estimate that over 67 million

written permissions would have to be required to sustain last

year’s roughly 6 million home sales. Obviously, the dollar cost inVerDate 11-MAY-2000 12:36 Aug 30, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 95441.TXT HCOM1 PsN: HCOM1
13

volved in preparation, distribution and management of the 67 million forms would be sizable, and a result NAR believes that it is

critical that the established business relationship exception which

has functioned well since the FCC first issued the rules to implement the TCPA some 12 years ago. We think it is important that

they be reestablished and that alternate means of giving consent

be allowed. We believe that narrowly drafted technical correction

language of the Junk Fax Act can rectify the problem created by

the new rules and continue to protect consumers from unwanted

faxes that are already prohibited under TCPA rules.

We look forward to working with you to achieve this end, and

thank you for the opportunity to be here today.

[The prepared statement of Walt McDonald follows:]

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF REALTORS 

Chairman Upton, Representative Markey, and Members of the Subcommittee, the

NATIONAL ASSOCIATION OF REALTORS  (NAR) appreciates the opportunity to

share its thoughts regarding the Junk Fax Prevention Act of 2004. NAR is the nation’s largest professional trade association with a million members who belong to

over 1500 REALTOR  associations and boards at the state and local levels. NAR

membership includes brokers, salespeople, property managers, appraisers and counselors as well as others engaged in every aspect of the real estate industry.

NAR commends the Subcommittee for its leadership in recognizing that the Federal Communication Commission’s (FCC) revised rules governing the use of facsimile transmissions are a radical departure from current practice, would significantly interfere with day-to-day businesses activities and impose a significant new

compliance burden on business of all types.

NAR understands the goal of Congress in enacting the Telephone Consumer Protection Act (TCPA) to protect consumers’ privacy expectations to not be bothered by

unwanted faxes. As business people and consumers, REALTORS  are often the recipients of unsolicited faxes that tie up the fax machines vital to their real estate

practices and business communications. We strongly support, therefore, the goals of

the TCPA and believe that the law’s provisions banning unsolicited faxes are appropriate. Likewise, we appreciate the FCC’s efforts to craft rules to effectively implement the law and the Commission’s willingness to meet with NAR members as we

have worked to understand the new fax requirements.

We do, however, question the need for the changes that the FCC has made to the

rules governing the fax provisions of the law. The prior rules, with an established

business relationship (EBR) exception for faxes sent by firms to established clients

and allowances for alternative forms of permission, have worked well over the past

twelve years since implementation. The prior ruling created settled expectations

among consumers and businesses alike.

Now, however, it is also very clear to us that the Commission’s new rules which

are intended to stop unsolicited, junk faxes will have the unintended consequences

of interfering with solicited faxes. In the case of the real estate industry, for example, faxes sent in response to a consumer inquiry or in the course of normal business

and desired by the recipient (consumer, agent or firm) will no longer be allowed.

These new rules will also interfere with NAR’s and its state and local associations’

abilities to satisfy their members’ expectations regarding communications and service to those members.

As a result, we believe that it is critical that (1) the established business relationship (EBR) exception which has functioned well since the FCC first issued rules to

implement of the TCPA some twelve years ago be reestablished and (2) alternative

means of giving consent also be allowed. These steps are necessary so that communication with existing clients and those who have inquired about a good or service

is not subject to overly burdensome and disruptive regulation.

We believe that narrowly crafted, technical correction language such as is being

considered by the Committee in the Junk Fax Act of 2004 can rectify the problems

created by the new rules while at the same time continuing to protect consumers

and businesses from unwanted faxes that are already prohibited by the TCPA.

Background

The Telephone Consumer Protection Act (TCPA) of 1991 prohibits the use of any

telephone facsimile machine, computer or other device to send an ‘‘unsolicited adverVerDate 11-MAY-2000 12:36 Aug 30, 2004 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 95441.TXT HCOM1 PsN: HCOM1
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1 47 C.F.R. § 64.1200(f)(10). 2 1992 Report and Order, In the Matter of Rules and Regulations Implementing the Telephone

Consumer Protection Act of 1991, 7 FCC Rcd 8752, ¶ 191 (rel. Oct. 16, 1992)(CC Docket No. 92-

90) (‘‘1992 Report and Order’’).

tisement’’ to a telephone facsimile machine. An unsolicited advertisement is defined

‘‘as 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.’’ 1

When first implementing the new law in 1992, the Federal Communications Commission determined that an established business relationship constituted express invitation or permission to receive an unsolicited fax. As part of its July 2003 Do-NotCall (DNC) rulemaking, the FCC revised that original interpretation.

In reversing its long-standing rule, the FCC determined that the TCPA requires

a person or entity to obtain the express invitation or permission from the recipient

before transmitting any unsolicited fax advertisement. This express invitation or

permission must be in writing and include the recipient’s signature. The recipient

must clearly indicate that he or she consents to receiving such faxed advertisements

from the company and individual within the company to which permission is given.

Furthermore, the consent form must provide the individual and their business fax

number to which faxes may be sent. The permission form cannot be faxed to the

recipient or submitted via fax to the business to whom permission to fax is granted.2

The Importance of Faxed Information to the Real Estate Industry

Despite all the advances in communication technology, the process of buying and

selling a house is still heavily dependent on the ability to send and receive faxed

information. Consequently, real estate brokers and agents use facsimiles regularly

to communicate with other real estate professionals, settlement and other service

firms, as well as with both home buyers and sellers.

The most common use of fax by the real estate sales industry today is to facilitate

the completion of the paperwork associated with the sales transaction, i.e. offers to

purchase, counteroffers, disclosure forms, etc. While these transactional faxes seemingly would be exempt from the new rules, faxes are also routinely used for purposes that would unfortunately meet the current definition of an ‘‘unsolicited’’ fax.

Business to Business Faxes. Real estate sales agents and brokers commonly

use facsimiles to quickly share new property listings with other real estate professionals who are active in a given market and may have clients interested in purchasing a newly listed property. In a recent survey by NAR, REALTORS  also indicated that faxes are commonly used to inform other real estate professionals of price

reductions on a property that had been viewed by that agent’s clients or the time

and date of open houses for newly listed homes. Such faxes communicate valuable

market information that benefits recipients and their clients in a manner that is

both timely and cost-effective.

Business to Consumer Faxes. Real estate sales professionals also use faxes to

communicate in a quick and cost-effective manner with consumers who are looking

to sell or buy a home.

In the case of a homeowner interested in selling their home, a seller may contact

an agent or a number of agents about listing their home. In response to the contact,

an agent would typically prepare a comparative market analysis which would (1) describe what the agent would do to market the home, (2) provide comparable listing

data on homes currently on the market so as to begin discussions about a suggested

listing price and (3) proactively solicit the listing.

In those situations where time is of the essence, such an analysis is faxed for review prior to any face-to-face meeting. In some cases, such as the sale of a resort

or inherited property, a face-to-face meeting may not even occur due to time or distance constraints. In all cases, this informational exchange takes place prior to any

formal business agreement, i.e. listing agreement, which could provide the vehicle

for the necessary written permission to fax. Under the new rules, faxing this listing

presentation or even comparative listing information would not be permissible without prior signed permission.

Real estate brokers and agents also routinely use faxes to send house listing information directly to potential buyers who may request it by telephone, but with whom

the agent has not yet entered into a formal agreement for representation. Under the

new rules, a real estate professional could no longer share new listings or followup a telephone, personal or even Internet-delivered inquiry with targeted research

via fax. Consequently, the new rules meant to deal with unsolicited faxes would

have the unintended effect of interfering with solicited faxes.

15

In a tight housing market, the delay caused by having to obtain written permission from a potential client or another real estate professional before the relevant

house listing information is sent could mean the difference between a buyer getting

a house they want or losing it.

Consider too how awkward this scenario would be when a potential customer calls

and asks for information on a home for sale. Under the new rule, the real estate

professional would not be able to fax the information requested. Instead the agent

or broker will have to explain why they can’t fax the information, direct the consumer to a website where they can provide the required written consent or ask for

an address so the real estate professional can mail or courier the information along

with a consent form for future use. This will create frustration, suspicion and, in

some cases, ill-will. This would be a giant step backwards in a business where good

customer service depends on quick turnaround.

REALTOR  Association to Member Fax. Similarly, NAR and its state and

local associations routinely use facsimiles to communicate effectively with their

members. These facsimiles inform members about upcoming continuing educations

classes, meetings, seminars, products, services, and membership renewal. This is information that members not only expect, but for which they have paid NAR, state

and local associations dues in order to receive. Once again, many of these faxes will

meet the definition of unsolicited fax advertisements and could not be sent under

the new FCC rules.

The Feasibility of FCC-Suggested Means of Obtaining Permission

The FCC has argued that obtaining written permission is not a difficult thing to

do. We disagree. A close examination of the business consent methods proposed by

the FCC for business to obtain consent—‘‘direct mail, websites and interaction with

their customers in their stores’’—points out some of the hurdles unanticipated

by the FCC that will be encountered by the real estate professional.

Face-to-Face Meetings. As our previous examples have indicated, face-to-face

meetings are not the norm and are impracticable prior to the occasion to fax. Unlike

the corner grocery or restaurant, consumers do not routinely visit their local real

estate firm offices. (Most consumers engage in a real estate transaction every seven

years.) Consequently, most real estate practitioners will have not had a consumer’s

permission on file when a request for information is received.

A face-to-face meeting will require a special trip with the commitment of time,

travel expenses, etc. At a minimum, these costs will increase the cost of a transaction that will need to be absorbed by the agent, firm or consumer. At its worst,

a face-to-face meeting will be impracticable, if not impossible, e.g. where an owner

lives out of the area as is commonly the case in a resort market or when property

is inherited.

Courier. A permission form could be hand-delivered to a potential fax recipient

via courier. This is not an inexpensive means of delivery and would be impracticable

from a cost perspective for all but a very small number of transactions or those

transactions with an assured outcome. In order to make a living, real estate real

estate professionals commonly respond to large number of customer requests for information—only one in twelve contacts eventually results in a home sale and compensation.

Mail/Overnight Delivery. Using an overnight service will have the same cost

drawbacks as a courier service. Both regular and overnight mail will suffer from the

additional problem that an interested customer will have to wait 24 hours or more

before the information that they requested can be delivered. In our ‘‘instant gratification’’ world—and an industry where quick customer service can be the difference

between gaining a new customer or not—the delayed delivery would make this an

unattractive approach.

Internet/E-Mail/Electronic Signature. Despite the rapid adoption that the

Internet and e-mail have had in the United States, there are still significant numbers of households—including underserved minority, immigrant and low-income

populations, etc.—with limited or no access to the Internet, e-mail or the technology

which would allow them to access, let alone electronically sign, documents. Additionally, not all states have enacted legislation that allows for electronic signature of

documents. This method, therefore, is seriously limited in those markets where real

estate real estate professionals serve a population with limited access to this means

of access or without the appropriate state enacting legislation.

Fax. We would point out that faxing a permission form to a consumer would be

a quick and inexpensive way to disseminate the form and receive permission. However, in discussions held with the FCC staff on this matter and in its written guidance, the FCC has indicated that faxing the permission form would not be allowed

16

3 1992 Report and Order, ¶ 191.

since the form itself could be construed as a solicitation or advertisement.3 Likewise,

a faxed permission form with a signature would not provide the necessary written

permission because the signature is not a valid, original signature.

Faxes have been used by the real estate industry to deliver information to consumers and other real estate professionals because of (1) the speed of information

transmission and (2) the minimal cost associated with that speedy transmission.

While it is possible to use one of the FCC recommended means to obtain written

permission, doing so will result in delay and increased costs for fax senders and recipients. It is hard to imagine that these new rules will not impede the ability of

real estate professionals to quickly and efficiently help homebuyers and seller complete their real estate transactions.

The Magnitude of the Resources Needed for Compliance Purposes

While the cost of obtaining a signed permission in any one instance may not seem

significant, in the aggregate, the magnitude of the new paperwork required for permission and/or the associated costs of alternative delivery methods (e.g. courier,

overnight, or mail) required by the new rules are sizable. While no means exhaustive, we would offer the following very conservative estimates of simply the number

of permissions that would be required for the real estate industry to continue to operate as it currently does.

Agent to a Consumer. Last year, approximately six million homes changed

hands. If we make a very conservative assumption that each seller requested information from two potential listing agents that would typically be faxed today (listing

presentations and/or comparable listing data that could be construed as a solicitation) and each buyer received two faxes from two different agents during their home

search that were subject to the new rules (e.g. Multiple Listing Service (MLS) listing

sheets on a particular property, for example), then approximately 24,000,000 faxes

would have been sent and 24 million signed permission forms would now be required before those faxes could be sent. Those 24 million permission forms would

have to be printed, delivered to the consumer by some means at a cost, returned

to the agent also at a cost, filed and stored.

This estimate does not recognize that many families shop for a new home each

year without purchasing a home. Consequently, the above estimate of 24 million

permissions required is a significant underestimate of the volume of permission

forms that would in fact be generated by the industry acting to comply with the new

rules.

Agent to Agent/Real Estate Firms. According to our surveys, faxes are typically used by real estate real estate professionals to advertise open houses, announce new property listings and changes in asking prices for listed homes. To estimate the number of permissions needed to facilitate faxes for these purposes, we

can conservatively assume that each of our one million, self-employed members will

want to fax, at one time or another, to at least ten real estate firms/offices, ten individual agents home offices, five settlement service providers and five general business service providers. Thirty (30) million permissions, therefore, would need to be

gathered to allow for unfettered faxing between real estate professionals and the

other real estate professionals and firms with which they work.

Given that the real estate sales population changes significantly from year to year

as new agents enter the industry, others leave the business, and fax numbers are

changed and added, the need to seek permissions will be an ongoing yearly effort.

Consequently, the 30 million estimate will be a first year figure that will be added

to each year as new permissions are needed to stay current of all the changes that

have ensued.

Real Estate Firms to Agents/Other Firms. In addition, the nation’s 145,000

real estate firms, as legal entities distinct from their independent contractor agent

sales force, would also need to obtain permission to fax to real estate professionals

and other firms. Assuming that each firm will have the need to fax to ten other real

estate firms, thirty agents, twenty settlement service providers and twenty other

general business service firms, the number of permissions required to support the

current level of fax activity that is accepted as common practice would total

11,600,000. Again, this figure is a first year estimate that will need constant updating to account for changes in the industry players and fax numbers.

REALTOR  Association to Member. In order for NAR and its state and local

associations to continue to fax their one million members, an additional 3,000,000

signed written permission forms would be generated. REALTORS  do not join just

the national association but join their state associations as well as their local associations. Hence, the need for 3 million separate permission forms to be circulated,

17

4 1992 Report and Order, ¶ 34. 5 H.R. Rep 102-317, at 13 (1991). Though this statement was made in the context of telephone

solicitations, the same rationale applies equally to the fax context.

complied, maintained and checked prior to any communications via fax would be undertaken. We would anticipate that this would be an annual exercise in which each

of our associations would engage.

A Final Thought. It is important to recognize that each of the forgoing estimates

of numbers of permissions to fax that would be required to comply with the FCC’s

new fax rules are only one part of the cost equation. We have not attempted to estimate the dollar cost of obtaining each of these permissions and maintaining the resulting records since to do so would require a level of detail that we do not have

available to us. However, it is clear that given the shear magnitude of the numbers

involved and the costs of preparation, distribution, and management of the resulting

paperwork that the costs will be substantial.

Compliance Cost vs. Benefits Achieved

As we have illustrated, the costs associated with the elimination of the EBR and

alternative means of granting permission to fax are enormous. The new rules do

this despite the fact that the Commission’s do-not-fax rules have worked for over

a decade. In reversing the 1992 decision, the Commission did not note any consumer

complaints that were a result of the established business relationship rule. Indeed,

there is scant evidence of harm to justify the Commission’s abrupt change.

Though there is not evidence of harm that needed to be fixed by eliminating the

EBR exception or alternative means of giving the requisite permission, there is evidence of over ten years of business expectations in reliance on that exception. NAR,

real estate professionals, and entities in countless other industries implemented a

practice of routinely faxing information regarding products and services to other entities with which they have an established business relationship.

Accordingly, while the compliance costs of the new rule in the aggregate would

be quite high, the benefits would be minimal, because the faxes sent and received

by real estate agents are the type routinely exchanged by those persons who do

business together. These are not the type of ‘‘junk’’ faxes that the TCPA and Commission rule were designed to prohibit. But the Commissions’ revised rule for the

first time covers all faxes, including those integral to existing and new business relationships in the real estate market.

A Solution to the Problems Created by the New Fax Rules

NAR believes that the established business relationship exception to the TCPA

rules should be reestablished and that others forms of consent should be allowed.

In the matter of the EBR exception, NAR believes that the Commission correctly

analyzed consumer expectations and the affect privacy interests in its 1992 rulemaking: ‘‘a solicitation to someone with whom a prior business relationship exists

does not adversely affect subscriber privacy interests.’’ 4 Also, the Commission prudently found that the standards for a telephone solicitation and faxed advertisement

should be the same and thus exempted established business relationships from both

sets of rules.

With respect to the allowance for means of permission beyond express written

permission, NAR believes that consent should be allowed that is:

• faxed;

• provided electronically (whether by a web-based ‘‘click-through: or in an e-mail);

• orally (in person, by telephone, or in a telephone message); or

• by automated means (in response to an automated fax-on-demand phone system

by which the caller can request faxed information).

Written signed consent is unnecessary and imposes a requirement far out of proportion to the harm it seeks to address, and thus contradicts the intent of Congress

in adopting the TCPA. The legislative history shows that Congress considered imposing a written requirement and decided against that high threshold of consent.

The House Report accompanying the TCPA states that Congress ‘‘did not see a compelling need for [] consent to be in written form. Requiring written consent would,

in the Committee’s view, unreasonably restrict the subscriber’s rights to accept solicitations of interest and unfairly expose businesses to unwarranted risk from accepting permissions or invitations from subscribers.’’ 5 The Senate Report is equally

on point. The Senate bill as introduced contained the phase ‘‘express written consent’’ in the context of telemarketing, but dropping the requirement tat consent be

written was one of three changes the Senate Committee made before favorably reporting the bill. The Committee justified its decision to drop the written requireVerDate 11-MAY-2000 12:36 Aug 30, 2004 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 95441.TXT HCOM1 PsN: HCOM1
18

6S. Rep. 102-178, at 5 (1991).

7 Report and Order ¶ 114.

ment because the Committee found that mandatory written consent was ill-suited

to the interests of consumers and sellers.6

A written consent requirement also is contrary to the Commission’s telemarketing

rules. Those regulations exclude from the definition of a telephone solicitation any

call concerning the sale of goods or services in response to an individual’s inquiry,

when the individual would be expecting such a call.7 In contrast, the fax advertising

rules not only specify that a fax sent in the same situation is an ‘‘unsolicited advertisement,’’ but actually prohibit such a fax.

This is problematic for two reasons. First, classifying a telephone call made in response to an inquiry as not a solicitation, but a fax sent in exactly the same circumstances as an unsolicited advertisement is confusing, contradictory, and arbitrary since the terms ‘‘solicitation’’ and ‘‘advertisement’’ have the same meaning.

This is particularly the case since, under the plain meaning of the term, a fax is

not unsolicited if the recipient has made a request for the information and there

are numerous other ways to invite or permit a fax other than by providing prior

written and signed consent.

Conclusion

In conclusion, we want to thank the leadership of the Subcommittee and the full

Energy and Commerce Committee for the opportunity to share the views of the NATIONAL ASSOCIATION OF REALTORS  on the need for Congressional attention

to the problems faced by the real estate industry as the result of the new fax regulations that will take effect January 1, 2005. We strongly believe that consumers looking for new homes and rental units will be disadvantaged by the new regime as will

real estate professionals and firms. We urge you to take action to create the statutory authority for an established business relationship exception needed by the FCC

to allow the EBR exception that has served consumers and businesses well for over

a decade and clarify once again that permission can and should be allowed to be

granted by means other than express written permission.

Mr. UPTON. Thank you. Mr. Graham?

STATEMENT OF JOHN H. GRAHAM

Mr. GRAHAM. Mr. Chairman, Ranking Member Markey and

members of the subcommittee, my name is John Graham——

Mr. UPTON. If you’d just turn that mike on.

Mr. GRAHAM. My name is John Graham, president and CEO of

the American Society of Association Executives. ASAE is a Washington-based association representing 24,000 members who represent and managed 11,000 trade, professional and individual voluntary organizations.

I wanted to thank you for the opportunity today to testify on the

legislation before you, which ASAE strongly supports. The legislation addresses the unfortunate situation created by the new fax

regulations issued last year by the Federal Communications Commission. These regulations, which have been stayed until January

1, 2005 following an almost unprecedented outcry from the association and business community, have fostered tremendous uncertainty for everyone. These new rules would require any organization or business to obtain prior written consent before it could legally send a fax of a commercial nature. For associations, this

would require keeping physical records for members that range

from hundreds to in some cases, like we just heard from NAR,

nearly a million members and at this time when many associations

are moving toward paperless registrations and membership

records.

The situation has been further confused by the expansive nature

of the FCC’s determination of unsolicited advertisements covered

19

by the new regulations. The new standard of prior written approval

appears to apply to any fax associated with a current or future

monetary exchange.

It also appears that the FCC would apply rules to activities such

as fundraising by charitable organizations and to faxes involving

those transactions. This would make these regulations some of the

most intrusive requirements on the basic activities of both tax-exempt entities and for-profit businesses. It is therefore imperative

that Congress act before these new rules take effect. Absent a statutory correction, these new rules will greatly hinder basic communications and commerce and have a chilling effect on the use of this

important means of communication.

The legislation before you has several components on which we

wish to comment. The bill reestablishes a statutory existing business relationship. This is critical for the use of faxing by associations as well as businesses. The bill also contains a new requirement of a mandatory opt-out for unsolicited faxes sent under the

auspices of the reestablished EBR. This opt-out requirement is a

new and important way to help consumers, whether they are private individuals or businesses, eliminate unwanted faxes.

As part of this requirement, the legislation before the committee

also contains a provision to allow the FCC to consider waiving the

opt-out provision for trade and professional associations. Members

of these tax-exempt groups have chosen to join a particular organization which usually requires the payment of annual dues. These

members expect communications, including faxes, as part of their

membership.

Since tax-exempt associations are not commercial by either definition or nature, without such a provision for this regulatory flexibility, there is real likelihood for confusion as to the application of

the Federal opt-out requirement. This situation is much more clear

cut for a regular business or commercial operation but not for taxexempt groups.

There are several items of the current law that we believe should

be clarified in report language or clarifying legislative history. It

should be clarified that unsolicited advertisements do not include

charitable fundraising activities or faxes related to a specific or expected transaction. There appears to be agreement among both the

majority and minority staff that neither current law nor the proposed changes would classify these types of faxes as unsolicited advertisements. However, the confusion created by the FCC regulations causes great concern. We believe it is appropriate that Congress clarify the situation.

In summary, we would hope that the committee and the entire

Congress approve this corrective legislation as soon as possible. Associations and businesses are already planning for the onerous,

burdensome and expensive task that will be necessary if the new

rules take effect as scheduled. The earlier the corrective legislation

is passed, the less time and money will be expended in planning

for a worst-case scenario.

Thank you again for allowing me to come here to testify, and appreciate working with you on the pending legislation.

[The prepared statement of John H. Graham follows:]

20

PREPARED STATEMENT OF JOHN H. GRAHAM IV, PRESIDENT AND CEO, AMERICAN

SOCIETY OF ASSOCIATION EXECUTIVES

Mr. Chairman, Ranking Member Markey, and members of the subcommittee, my

name is John Graham, and I am President and CEO of the American Society of Association Executives (ASAE). ASAE is a Washington, D.C.-based association comprised of more than 24,000 professionals who manage approximately 11,000 trade,

individual, and voluntary organizations and associations. Almost all the associations

represented by ASAE’s membership are exempt from taxation under section

501(c)(3), 501(c)(4) or 501(c)(6) of the Internal Revenue Code.

I want to thank you for the opportunity to testify today on the legislation before

you, the Junk Fax Prevention Act of 2004. ASAE strongly supports the swift passage of this important and necessary legislation.

The legislation before the subcommittee addresses the unfortunate situation created by the new federal facsimile regulations issued last year by the Federal Communications Commission (FCC). These regulations, which have been stayed until

January 1, 2005, have fostered tremendous uncertainty in both the association and

business community regarding this important and necessary form of communication.

While in many ways faxing is not as technologically advanced as other forms of

communication, it remains a very valuable and important tool both for our everyday

dealings with our members and for regular commerce on the part of our nation’s

business community. Despite the evolution of e-mail and electronic attachments,

faxing is still a key part of the operations of the organizations represented by our

members and of basic commerce.

BACKGROUND

As you all are well aware, last year the FCC issued regulations to alter the treatment of fax communications under the 1991 Telephone Consumer Protection Act, to

be effective in August 2003. In their rulemaking, the FCC repealed the ‘‘existing

business relationship’’ principal, or EBR, that had guided facsimile communications

for 10 years. As part of the FCC’s rewrite of its regulations to implement the ‘‘donot-call’’ rules, the FCC determined that the EBR exception for faxes could not be

supported by existing law, despite the existence of these regulations for a decade.

EFFECT OF THE FCC’S NEW REGULATIONS

Consequently, the FCC’s new rules would require any organization or business to

obtain prior written consent before it could legally send a fax of a ‘‘commercial’’ nature to any other person or place of business. This consent would have to be obtained for each person and for each fax number in order to comply with the new

rules. An organization or business could not simply get a blanket permission form,

let alone verbal permission, but instead would need signed permission from each fax

recipient stating the specific fax number for which permission is granted. Consent

forms could not even be faxed under our understanding of the FCC regulations, but

would have to be distributed by another method such as by regular mail or e-mail.

For associations, this would require keeping physical records substantiating permission for memberships that range from hundreds of members to, in some cases,

near or above one million members. And these physical records would have to be

maintained at a time when many associations are moving towards ‘‘paperless’’ registration and membership records as new systems are being developed to take advantage of technological capabilities and innovations.

The situation has been further confused by the expansive nature of the FCC’s determination of unsolicited advertisements covered by the new regulations. The new

standard of prior written approval appears to apply to any fax that in any way could

be considered commercial in nature. In discussions with FCC staff, this standard

appears to cover any fax associated with a monetary charge, or any fax that might

be associated with a future monetary charge. As such, it appears to apply to notices

of annual meetings of an association if a registration fee is required, an annual

membership renewal notice, education seminars with an associated fee, information

on books and publications that members can purchase, and other basic communications that are routinely sent to members.

It also appears that the FCC would apply the new prior written approval requirement to activities such as fundraising by charitable organizations and to basic

transactions between associations and their members and between businesses and

their customers. This would make these regulations some of the most intrusive requirements on the basic activities of both tax-exempt entities and for profit businesses.

21

FCC RULES DELAYED PENDING DELIBERATION ON THE ISSUE BY CONGRESS

Fortunately, the FCC has delayed the effective date of these new regulations until

January 1, 2005. This delay, announced shortly before the regulations were to take

effect last year, came after an almost unprecedented outcry from the association and

business community objecting to the new rules. The FCC has stated that this delay

will give Congress time to examine whether legislative changes are appropriate before the new rules take effect.

Because of the obvious cost and administratively burdensome nature of these new

rules, ASAE, on behalf of hundreds of associations, filed Petitions for Stay and

Emergency Clarification with the FCC to encourage more deliberate consideration

of these new rules and to allow time to determine congressional intent. More than

1,500 ASAE members ultimately signed onto the petitions.

While ASAE and other entities have asked that the FCC return to its prior interpretation of the federal fax laws, it appears clear that they will not do this absent

legislative action by Congress. Now that they have determined that, in their opinion, they never had the authority to grant the EBR exception that existed for a decade, it does not appear that they will return to what they view as an incorrect interpretation of current law.

NEED FOR ACTION BY CONGRESS

Because of this, it is imperative that Congress act to rationalize our federal fax

laws before these new rules take effect. Absent a statutory correction, these new

rules will greatly hinder basic communications and commerce after the end of the

year, at great expense and burden to associations and businesses.

The need for Congress to act promptly is further dictated by the ‘‘private right

of action’’ that exists under current law. Under this provision as it has evolved over

the years, private citizens can sue in state court for up to $1,500 per violation if

they receive an unsolicited fax. As the law is currently drafted, a single fax can contain multiple violations, each subject to a potential $1,500 judgment. Moreover, we

are seeing a surge in frivolous lawsuits that could not have been envisioned or intended by Congress.

The newest twist on this activity is the assignment of the right to sue under the

private right of action provision. In the most egregious cases, individuals have actually solicited and purchased faxes from office support personnel for minimal sums

such as $2 per fax in exchange for a signed document assigning the right to sue

for damages. Some of our members have actually had their associations sued by a

third party for faxes sent to their own members, despite the fact that the communication was desired and not in violation of the law.

It is important to note that these lawsuits are often filed across state lines, and

a written demand letter generally offers to settle for an amount less than the cost

of fighting the action. This has amounted in some cases to extortion and financial

harassment of law abiding associations and businesses. A simple Internet search

can find step-by-step instructions, including sample demand letters, suggested strategy, and forms for assigning rights to sue. While the intent of this provision was

to arm consumers with a weapon to fight illegal faxes, in many cases it is being

used to terrorize law abiding associations, businesses and citizens whose faxes fall

into the hands of unscrupulous individuals.

While we understand that the abuses of the private right of action cannot be addressed in this bill, the pattern that has developed in filing frivolous lawsuits underscores the need to pass the pending legislation as soon as possible. If January 1,

2005 comes around and the new FCC rules take effect, there will be literally millions of technical violations of the law that could result in an avalanche of lawsuits.

This prospect would have a chilling effect on the use of an important means of communication in our nation.

DISCUSSION OF LEGISLATION PROPOSAL BEFORE THE SUBCOMMITTEE

The legislation before you has several components on which we wish to comment.

The bill reestablishes a statutory ‘‘existing business relationship.’’ This is critical for

the use of faxing by associations and businesses. It allows entities to fax legitimate

information covered by the law without the fear of retribution in state courts. It essentially restores the situation that existed prior to the FCC rule change last summer.

The bill also contains a new requirement of a mandatory ‘‘opt-out’’ for unsolicited

faxes sent under the auspices of the newly reestablished EBR. This opt-out information must appear prominently on the first page of the fax stating that the receiver

may make a request not to receive any future unsolicited faxes. It must include a

22

domestic telephone and facsimile number that can be accessed during regular business hours. While this opt-out requirement is reasonable, we caution as to the exact

enforcement of this provision.

While the requirement calls for this information to be provided ‘‘in a conspicuous

notice’’ on the first page of the fax communication, we are concerned that human

or mechanical errors could result in faxing of pages out of order or other unavoidable ‘‘glitches.’’ Our concern is that this would trigger a technical violation of the

law, inappropriately subjecting the sender to liability under the private right of action. We would hope that this issue could be addressed in either legislative or report

language so that the intent of the law can be enforced without punitive consequences. Additionally, we would request that report language discuss the requirements necessary to comply with the ‘‘conspicuous notice’’ criteria. Many organizations and businesses design faxes to be sent on one page, and we believe it is possible to comply with this requirement without devoting the type of space that would

in many cases require the faxing of multiple pages.

This opt-out requirement is a new and important right to help consumers, whether they are private individuals or businesses, eliminate unwanted faxes. It should

be noted, however, that many current faxes that are unwanted are already illegal

under current law. New requirements may not be effective in reducing the actions

of those who willfully choose to violate the law. Prudence, then, needs to be exercised to insure that new requirements do not unduly burden law-abiding citizens

and businesses who want to operate in accordance with federal and state laws governing faxing.

The legislation before the committee also contains a provision that would allow

the FCC, after receiving public comment, to waive the opt-out provision for trade

and professional associations similar to the types represented by ASAE. This flexibility would apply only to a tax-exempt organization faxing to its members on items

related to the exempt purpose of the organization. If this legislation is enacted into

law and the FCC exercises this provision, which of course we would encourage them

to do, it would work to relieve some of the new regulatory burden of the opt-out

provision that may be unnecessary for membership organizations. By definition,

members of these tax-exempt groups have chosen to join a particular organization,

which usually requires the payment of annual dues. These members expect communications, including faxes, as part of their membership. Associations generally have

opt-out rules already in place for member communication, and know that members

have the choice not to renew their membership if such requests are not respected.

Since much of the fax material sent to members is often not an ‘‘unsolicited advertisement,’’ this provision, if implemented by the FCC, could help prevent confusion

in determining which faxes under federal law require a mandated opt-out mechanism. Since tax-exempt associations are not commercial by either definition or nature, without such a provision for this regulatory flexibility there is a real likelihood

for confusion as to the application of the federal opt-out requirement. This situation

is much more clear-cut for a regular business or commercial operation, but not for

tax-exempt groups.

NEED FOR CLARIFICATION OF EXISTING LAW IN CERTAIN AREAS

There are several items that, while not included in the bill before the committee,

should be clarified in report language or clarifying legislative history. This has to

do with the fact that ‘‘unsolicited advertisements’’ do not include charitable fundraising activities or faxes related to a specific or expected transaction.

In discussion with both majority and minority staff of this committee, it appears

clear that neither current law nor the proposed legislative changes would classify

these types of fax communications as unsolicited advertisements. However, the confusion created by the new FCC regulations causes us great concern. We believe it

appropriate and necessary that Congress clarify this situation so that an unintended

interpretation of the law does not take place.

ASAE members represent a large number of charitable organizations. These organizations are by definition not commercial, and they rely heavily on volunteers for

their good works. It is extremely important for Congress to clarify that neither current law nor the proposed legislative corrections apply to their activities.

Associations also engage in a large number of ‘‘transactions’’ with their members,

such as dues payments and registrations for seminars and continuing education programs. It is important to clarify that faxes relating to these activities as well as

faxes related to transactions that occur in the business world are outside the scope

of both current law and the proposed changes, and that they are not ‘‘unsolicited

advertisements.’’

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SUMMARY AND CONCLUSION

In summary, we would hope that the committee and the entire Congress approve

this corrective legislation as soon as possible. While the new FCC fax rules are delayed until January 1, 2005 to give Congress time to address the necessary statutory changes and hopefully prevent their implementation, it is important that legislation be approved sooner rather than later. Associations and businesses are already

planning for the onerous, burdensome and expensive task that will be necessary if

the new rules take effect as scheduled. The earlier corrective legislation is passed,

the less time and money will be expended in planning for a worse case scenario.

I want to take this opportunity again to thank you all for your leadership on this

important issue, and to thank you again for allowing me to come here today to testify on the pending legislation.

Mr. UPTON. Thank you very much. Ms. Kaechele.

STATEMENT OF CHERYL KAECHELE

Ms. KAECHELE. Good morning, Mr. Chairman and members of

the subcommittee. With your permission, I will summarize my remarks and submit a longer statement for the record.

My name is Cheryl Kaechele. I publish the Allegan County News

and two other weekly newspapers in southwest Michigan. We serve

a rural area with total circulation just under 10,000. I am here to

testify in favor of the Junk Fax Prevention Act of 2004 and to explain why I believe the FCC’s signed consent rule is the wrong solution to unsolicited fax problems.

I am regional director for the National Newspaper Association

which was established in 1885 to represent small daily and weekly

newspapers such as mine. Our newspapers rely upon the fax to

help our small business customers to use our services. The written

consent rule surprised us. It was released on June 26, 2003 at first

allowing only 60 days to collect the consents. Without a change in

the law, we will begin to comply later this summer.

This requirement punishes businesses that respect their customers and use the fax machine responsibly. Without the fax, we

would be unable to tell our established customers of advertising opportunities. Even a transaction after a sale would require the consent form. Sending an ad proof would require a signed form. The

customer needs another form from us to send it back.

Mr. Chairman, our customers’ time is precious. We all have

small staffs and the fax is a time saver. Our advertising departments cannot possibly call on every small business in our area. Our

county takes at least an hour to traverse, and with gas prices what

they are today the cost would be prohibitive. Without the fax, we

might never reach the home-based hair salon or the backyard fish

and tackle shop.

In my written testimony, I have explained some of the ways we

use the fax. Let me highlight three. We alert businesses to special

opportunities. Without the fax, they would lose an opportunity to

grow their businesses. Some weeklies use the fax as a substitute

for a mid-week addition. For example, NNA’s member, the semiweekly Weis County messenger in Decatur, Texas, distributes its

daily fax newspaper update to about 1,000 of its subscribers. Finally, some newspapers allow citizens to use their fax machines.

That practice would surely have to end.

Some proponents of the rule have said, ‘‘Just get the form signed.

What is the big deal?’’ Mr. Chairman, that may be a fair question

to a big business with an Information Technology Department, but

24

we do not collect and massage massive data bases. I cannot think

of a single community paper with a data base manager.

Most of my publisher colleagues would have to hire new staff to

comply. The new staff and publisher would have to acquire or upgrade a data base program, mail out hundreds of consent forms, explain a hundred times at the post office, at the golf course and

while we are having lunch that we must require the forms, irritate

customers by saying, ‘‘No, we can’t fax you the ad rates because

you forgot to send your form back,’’ send someone out repeatedly

to try to collect the forms. The cost and effort of compliance could

wipe out a year’s profit for some very small papers.

Mr. Chairman, I believe your bill takes the right approach. It

says that if we have an established business relationship with the

people and businesses to whom we are sending faxes, the burden

of written consent forms is unnecessary. It recognizes good business practices and leaves the FCC free to go after those who od

send junk faxes.

Mr. Chairman, I want to close by expressing urgency. If your bill

does not become law, we will have to begin absorbing the cost of

compliance in August or September. I would like to pledge NNA’s

commitment to work with you to help move the bill forward quickly.

Thank you for your time. If any questions come up following the

hearing, I would be happy to supply responses for the record, and

I am willing to answer anything now. Thank you.

[The prepared statement of Cheryl Kaechele follows:]

PREPARED STATEMENT OF CHERYL KAECHELE, PUBLISHER, ALLEGAN COUNTY NEWS

ON BEHALF OF THE NATIONAL NEWSPAPER ASSOCIATION, INC.

Good morning, Mr. Chairman and members of the subcommittee. Thank you for

inviting the National Newspaper Association to appear before you today.

My name is Cheryl Kaechele. I am publisher of the Allegan County News, the

Commercial Record, which covers the communities of Saugatuck and Douglas and

the Union Enterprise which covers the communities of Plainwell and Otsego all in

southwest Michigan. Our newspapers cover a fairly rural area, with a combined circulation of a little less than 10,000. I am here to testify in favor of the Junk Fax

Preservation Act of 2004, and to explain why I believe the Federal Communications

Commission’s fax consent rule is the wrong approach to solving unsolicited fax problems.

I have owned my newspapers for more than 22 years. Before I came to the newspaper business, I was a school teacher. The opportunity to serve the communities

I live in through newspaper publishing was an exciting opportunity for me after 15

years in the classroom. I believe community newspapers are an important part of

American life. We serve a unique niche in the information world.

I am a former president of the Michigan Press Association. I presently serve as

regional director for NNA, which was established in 1885 to represent the interests

of hometown newspapers. NNA has been prominent in its public policy work for

local papers since that time.

Our organization represents about 2,500 newspapers from coast to coast. The typical member is a weekly newspaper in the 2,000-5,000 circulation range or a daily

in the 5,000-10,000 circulation range. It includes papers like mine, small dailies like

the Daily Times Chronicle in Woburn, MA, the Bradford County Telegraph in

Starke, FL, and the Archbold Buckeye, in Archbold, OH. We are primarily in rural

areas and small towns, but our membership also contains urban and niche markets

like the Intowner, here in Washington, DC. I have provided, as an attachment to

my testimony, a map that indicates where our members publish.

The wide majority of our titles are owned by their publishers, mostly small family

operations, many of whom are in their third, fourth or fifth generations. I like to

think that our segment of the newspaper industry is where hometown journalism

is best nurtured, and where civic pride is an asset.

25

The establishment of a new requirement for written consent for advertising faxes

caught our industry completely by surprise.

The FCC order establishing this requirement appeared in revisions of its regulations under the Telephone Consumer Protection Act. The requirement was codified

as follows:

We may not:

(3) Use a telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.

(i) For purposes of paragraph (a)(3) of this section, a facsimile advertisement is

not ‘‘unsolicited’’ if the recipient has granted the sender prior express invitation or permission to deliver the advertisement, as evidenced by a signed,

written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient’s consent to receive

such facsimile advertisements from the sender.

The regulation was released on June 26, 2003, providing a scant 60 days before

newspapers would be required to have these written statements on file for hundreds

of fax numbers. Needless to say, our advertising people were dismayed. Reports to

our NNA offices in Washington about families being required to cancel vacations

began to flow in, and calls from newspaper staffs wondering what in the world was

going on in Washington became a daily matter.

Plus, the breadth of the interpretation of advertisement, our attorneys tell us, is

such that even a transaction carried out after a sale is already completed—such as

the transmittal of an ad proof—might well require compliance with this new rule.

In fact, if we sent an ad proof to a customer, it appears the customer would have

to have a signed consent from us in order to fax it back. In other words, any fax

with advertising, or even about advertising, appears to require these written consents.

You can imagine that our newspaper staffs were amazed. The fax is such a common communication tool for us, and for our own customers, that we never dreamed

that an agency in Washington might find reason to object.

Very few of us—and I’ve recently re-posed this question to NNA’s leadership—

ever receive a request from one of our customers not to use the fax machine. Certainly, if we do, we honor it. Quite the contrary, our customers very often prefer

the fax to any other route, but they would be dumbfounded if we told them we could

not honor their wishes unless they signed a form.

Prior to last June, we had received no indication that the Federal Communications Commission believed we had a problem, nor that it intended to consider revising the requirements for fax use. If we had realized the Commission intended to

pursue this direction, we would certainly have made our case to the commissioners.

I have since learned that the Commission continues to receive complaints about

junk fax, even though it was illegal under the old rules, and that it concluded that

imposing regulations upon the law abiding and the scofflaw alike was the only solution. I have to think that if they saw what we see every day, they would realize

that a more targeted approach was needed.

Our typical customers are small businesses. They would far prefer to have us send

them information by fax than to spend their precious minutes on the telephone or

in personal sales calls. Most of them know who we are, and they know what they

want. All they count on us to do is to let them know when there is a new opportunity. And our own newspapers are small. Most newspaper advertising departments comprise only three or four people. They cannot possibly make personal calls

on every small business that might need our paper. Nor, with gasoline prices what

they are today, would it be a smart use of resources for them to do so. They rely

on the fax to reach customers, and all of our customers—particularly the smallest

businesses that we would never reach in person—seem to welcome the contact.

Without the fax, we probably would never reach the hairdresser with a salon in her

home, the shadetree mechanic who repairs cars on the weekend or the fish and

tackle shop that operates outside of someone’s garage.

Let me detail some of the ways our members use the fax:

1) We alert businesses to special sections and themed editions that we intend to

publish. For example, I have attached a flier from one of our members in Virginia that I would say is pretty typical of the promotion that might go out to

a small business. This newspaper was producing a special edition to honor the

American troops serving our country, and benefiting the American Red Cross.

It wanted its customers to know about it, in case they wanted to participate.

2) We let them know when there is going to be a new discount, or a price break

for a certain volume of ads that will save them money and bring them new customers.

26

3) We send out rate cards—often because of telephone requests.

4) We create ads, and send out proofs for their approval (and we get them back,

with edits.)

5) We send invoices and statements so they can keep their bookkeeping up to date.

6) And we have a host of other creative ways that are used in small towns to keep

people informed. For example, NNA’s member, the semi-weekly Wise County

Messenger in Decatur, TX, has a daily fax newspaper ‘‘Update’’ that is distributed to about 1,000 of its business and residential subscribers, to carry news

and advertising promotions that break between weekly editions.

7) Finally, many of our members provide a public fax service. By that I mean that

they may own the only fax machine in town. They permit citizens to come in

and use it as needed. This is a practice that would surely come to an end under

the FCC rule, because citizens would commonly not possess the signed consent

forms, the publishers would not be able to risk the liability of improper use, and

the exercise of explaining all of the new rules would take more time and generate more ill will among customers than most newspapers would be able to

sustain.

The question we have heard from some of your staffs as we have discussed our

difficulty with the consent rule is: ‘‘so... keep using the fax. Just get the forms

signed. What’s the big deal?’’ NNA’s Government Relations Chairman, Jerry

Reppert, publisher of the Anna (IL) Gazette Democrat, met recently with the Federal Communications Commission staff in charge of this rule, and that was pretty

much the question he heard.

I think that question is not meant to be belligerent, although to our ears, it sometimes sounds so. I think it reflects the thinking of people in a big city accustomed

to working with big businesses that keep Information Technology departments busy

round the clock, collecting, massaging and managing data.

It probably is hard to imagine businesses like ours—although I’m confident there

are tens of thousands operating out of office buildings and in small offices and home

offices in this very area. I can’t speak for a big business on this issue, but I can

tell you what I know about community newspapers.

We do not collect, absorb and massage massive amounts of data. We keep simple

lists of our subscribers, and our advertisers. We do not, by and large, have sophisticated databases, and I cannot think of a single community paper that has a database manager. What luxury!

Here is what I believe most of my publisher colleagues would have to do, in order

to comply with this rule:

1) Acquire or upgrade a database program;

2) Mail out, or hand carry, several thousand consent forms;

3) Explain over and over, at the post office, at the golf course, at church, standing

in the school parking lot, that, yes, we really must have these forms back;

4) Send someone out again to get some of them back;

5) Send someone out again to get some of them back;

6) Explain over and over on the phone, ‘‘no, we can’t fax you the ad rates, because

you forgot to send your form back.’’

7) Apologize to an irate customer, while standing in the post office or in the school

parking lot;

8) Send someone out again to get some of them back.

9) Hire someone to file them, make a note of them in the database, and remember

to check them periodically to make sure nothing has changed, and then... 10) Send someone out again to get new forms back.

You get the picture. It is going to require, in all probability, hiring someone to

do this work. Or it will require shifting someone from selling ads or writing stories

to take on this new task.

We do very little survey work within NNA, primarily because of the cost. But we

did ask some of our leadership earlier this year what they thought of the compliance

costs and problems with this rule. I am attaching a talking paper that we produced

with some of the responses, for your record.

With many of our papers—particularly in America’s struggling small towns,

where the newspaper is only as healthy as the dwindling downtown—this extra cost

may be the difference between a profitable year and a losing year.

For what reason do we do this? Because someone out there is violating the fax

rules that are already in place, blasting out offers for everything from vacation

cruises to lower mortgage rates. That’s not us. We see no reason why we should pay

the price for those antics.

Mr. Chairman, I believe your bill takes the right approach. It basically says that

if we have an established business relationship with the people and businesses to

whom we are sending our faxes, neither we nor they are required to shoulder the

27

burden of written consent forms. It recognizes the existing good business practices

of those who use the fax machine responsibly, and leaves the Commission free to

go after those who do abuse it.

We and our customers do not need a written consent form to understand one another. We work together because we need one another, and we have developed a

good working relationship and mutual trust. We would not abuse our customers’ fax

machines, nor they ours.

We understand the established business relationship rule. Our industry has conducted training in compliance with the Do Not Call rules. It makes sense, for

simplicity’s sake, to use a similar approach.

I would be remiss if I did not say a word, as well, on behalf of our association,

operating as its own business.

I am active in both our national organization and the Michigan Press Association,

where I served as president in 2000. Our associations were nearly as shocked as

the members to learn that a collection of consent forms might be required before

staffs could fax our conference registration forms and the like. All of us had to deal

with shrinking resources in our association offices during the recent recession. I can

assure you that they have few enough resources to put the conference on, let alone

find staff to badger our busy members to remember to return the forms. Surely the

payment of dues is an indicator that a business or individual wishes to have contact

with the association. Requiring an additional consent, to me, would prove nothing.

Mr. Chairman, I want to close by expressing the urgency of my concern with this

requirement. The requirement will go into effect in January if your bill does not become law. To be realistic, most of us will have to begin absorbing the cost of compliance in August or September.

I recognize that the Congress has a very busy season ahead. I fervently hope most

of your colleagues recognize this bill to be a very rational and sensible change in

the law, to simply have the law reflect what most of us are doing anyway. I would

like to pledge the commitment of the National Newspaper Association to work with

this committee and its staff to help move the bill forward quickly.

Thank you for your time. If there are any questions that come up following the

hearing, I would be happy to supply responses for the record.

Mr. UPTON. Well, thank you, all of you, for your very good testimony. I want to way in at the outset and say that we are intending

to move this bill. I don’t think it is any secret that Chairman Barton and I are trying to make sure that we remove any roadblock

of getting this bill moved with the utmost speed and to the floor

of the House as quickly as we can. And it does appear as though

we will have very strong bipartisan support as we move forward.

I do have a couple of questions in my time, and I want to say,

Mr. McDonald, we welcome your testimony as well. The FCC has

indicated that written permission is not difficult. Tell me a little

bit—listening to Ms. Kaechele talk about the enormous burden that

it would impose on particularly small businesses, I think about myself as I have, I think as almost every American has refinanced

their house or bought a house, all the different forms you have got

to fill in and checks that you have to write to a whole bunch of different entities along the way, and you want to make sure that that

paperwork is clear as you move forward, but tell me about your

thoughts about the feasibility of the FCC suggested means of obtaining specific permission for every single one of those transactions.

Mr. MCDONALD. Well, Chairman Upton, the FCC has indicated

that they have some alternative methods of obtaining that permission. They start first with the face-to-face meeting, direct mail,

email with electronic signatures. All of these are options that do

present, I think, a challenge for real estate professionals and the

consumers involves in real estate transactions. The face-to-face

meeting would seem to be a reasonable alternative, but unlike

many businesses, many purchasers have a very close relationship

28

with the people providing those products. But in the real estate

business, while we have close relationships with those clients, they

might not be purchasing something but about every 7 years. And

so where your permission expires in a much, much shorter period

of time, it would be very, very difficult to continue getting those

written permissions if you were talking about a face-to-face meeting.

When you are talking about direct mail, well, it is true that permission could be delivered to a recipient by mail or by overnight

UPS, Fed Ex, one of those delivery services or a courier. The time

and the cost is the issue. As I mentioned earlier in my testimony,

in the market that we are in today, that time element could mean

the difference between a buyer successfully obtaining a home of

their choice or losing that home of their choice, because property

does not always stay on the market for very long.

Mr. UPTON. Let me ask this question: Some have suggested that

perhaps you put a time limit on, maybe 3, 4, 5 years. What are

each of your thoughts on some time limit? What would be reasonable? Would you support any time limit? What might you think

is——

Mr. MCDONALD. Well, my first reaction would be that we would

not be in a position to support a time limit because we think that

the basic problem here is not only time but the cost of implementing the signature request, maintaining those files on those. As

I said a while ago, you are looking to support the type of real estate

market which we hope will continue. You could be looking at millions and millions of forms being required to meet the requirements.

Mr. UPTON. Mr. Graham, what is your thought on a time limit?

Mr. GRAHAM. I think a time limit is unnecessary. I think particularly if the opt-out clause is put in there, that solves the problem.

Mr. UPTON. Ms. Kaechele?

Ms. KAECHELE. I have to agree with the gentlemen. The time

limit in our business, businesses change and requiring the right

signature can be a problem as well. For example, the local restaurant may change who owns it. Now I have got to make sure

that I know who is the owner now. I am not dealing essentially always with individuals, I am dealing with businesses. And in that

kind of an environment, often those people change.

I also have a seasonal nature to my business, and we have a

newspaper in the resort town of Saugatuck and those people are

difficult to chase down in the winter, so to speak, and often again

those businesses change. I just think it is unnecessary. I have

never had anyone, Mr. Chairman, complain about getting a fax

from me, because we don’t send faxes except to people how have

required our services.

Mr. UPTON. Well, thank you very much. Mr. Shimkus?

Mr. SHIMKUS. I don’t have any questions, Mr. Chairman.

Mr. UPTON. Mr. Walden?

Mr. WALDEN. Thank you, Mr. Chairman. I appreciate this hearing and tackling this issue, although I am a small market radio

guy in my other life, so I don’t know how much I want to help the

small newspapers, of course, our competitors.

29

Mr. WALDEN. No. I share the frustration that you have expressed

in your written testimony and here and would hope that we can get

this bill moving and out the door.

I found that opt-out provision is pretty useful. I get back to my

apartment here in Washington and usually have a few solicitations

on the phone and a few faxes on the machine, and you can dial in

the number and get off the list. And this issue of the established

business relationship, I mean I understand exactly what you are

saying. Businesses do change ownerships and then who is the right

signature, and it is just, to me, a bit overkill.

And so I guess the question I would have for the panel is, and

especially the FCC, I suppose, is in terms of complaints about

faxes, how many of them really are business-to-business complaints

that you see? How much of this is business-to-consumers and not

where there is an established business relationship?

Mr. SNOWDEN. Out of the complaints that we have received, Congressman, the majority of business-to-business complaints that we

receive are from small businesses.

Mr. WALDEN. Right.

Mr. SNOWDEN. Most of them for the record that we compiled for

this particular proceeding, the small business community said they

were being inundated with these business-to-business. So that is

the majority of where we are getting the complaints from in terms

of the——

Mr. WALDEN. And of those, how many, though, were you able to

differentiate were business-to-business—existing business-to-business relationships?

Mr. SNOWDEN. I don’t have those numbers, but we can do some

research and get that for you. But to give you an example, last

year, from March to April of last year, we received about 1,500

complaints a month on faxes in terms of the TCPA.

Mr. WALDEN. Okay. All right. Thank you, Mr. Chairman. That

is all I have.

Mr. UPTON. Mr. Markey?

Mr. MARKEY. So it is 1,500 per month total?

Mr. SNOWDEN. Each month for that year.

Mr. MARKEY. Now, you said that there was a $5.4 million forfeiture order against fax.com?

Mr. SNOWDEN. That is correct.

Mr. MARKEY. Have you collected that money?

Mr. SNOWDEN. Right now it is over at the Department of Justice,

and they are looking at it and working with us.

Mr. MARKEY. What is the process to ensure that that $5.4 million

gets into the government’s pockets?

Mr. SNOWDEN. To the U.S. Treasury? The process is twofold. According by statute, under Section 503, what we are required to do,

if you are a licensee of the FCC, there is one process, and for those

that are not, there is another. For example, if you are a licensee,

we can automatically go to a Notice of Apparent Liability. If you

are not, we must first issue a citation, then——

Mr. MARKEY. Have you issued a citation?

Mr. SNOWDEN. We have issued a citation, we have issued a NAL,

and that is how we got to the over $5 million forfeiture amount

that we got to.

30

Mr. MARKEY. So what is the Justice Department saying to you?

Are they going to be the collection agency?

Mr. SNOWDEN. Well, they are our collection agency, that is correct.

Mr. MARKEY. And so where are we in the process? Because as

soon as that is finalized, that will really send a chilling effect out

to anyone who is abusing consumers. So what is the timeframe on

that?

Mr. SNOWDEN. The timeframe is up to the Department of Justice,

and we are working with them now to get some more information

from them as to when they are going to go after and what they are

going to do as next steps for this particular violator of the rules.

Mr. MARKEY. Now, how many cases do you bring a year on those

1,500 complaints, 1,500 per month?

Mr. SNOWDEN. I will need to check with my colleagues in the Enforcement Bureau. As you know, I represent the Consumer and

Government Affairs Bureau. We have issued over 233 citations in

the past years.

Mr. MARKEY. Past years.

Mr. SNOWDEN. Yes. That——

Mr. MARKEY. But it is 1,500 per month. The complaints are 1,500

per month, so how many per year—how many per month do you,

on average——

Mr. SNOWDEN. One of the challenges that we have with enforcing

these rules is that it is hard to find who these faxers are. As the

panel said earlier, some of these faxers are offshore, some of them

go bankrupt, some are out of business.

Mr. MARKEY. So, on average, do you bring ten cases per month?

Mr. SNOWDEN. I don’t have the information at my fingertips,

but——

Mr. MARKEY. Are you talking in the range of 100 to 150 a month

or 5 to 10 per month? Which is the closer?

Mr. SNOWDEN. Again, sir, I will have to check with our enforcement—I don’t want to give you any false information.

Mr. MARKEY. But you said it is only 200 per year.

Mr. SNOWDEN. No, we have issued 233 citations so far.

Mr. MARKEY. Two hundred and thirty-three citations over how

many years?

Mr. SNOWDEN. And that is starting, I would say, back from 1999

to now.

Mr. MARKEY. So over the last 5 years 200, so that is about 40

a year that you actually—the citations that you bring, but at 1,500

per month, you are looking at like 18,000 complaints a year.

Mr. SNOWDEN. Correct.

Mr. MARKEY. Over a 5-year period. That brings you up close to

100,000 complaints, 90,000 to 100,000 complaints if that average

stayed in tact. So if you only brought action against a handful, then

it is—a driver on the road, 100,000 drivers on the road, if only a

small handful ever get stopped or if you are able not to put the

money in the parking meter, then you are not really providing a

real deterrent. So is there any effort to increase the frequency with

which there is a prosecution or there is an action taken? It does

seem like a low level.

31

Mr. SNOWDEN. One of the things that we are trying to do put in

place or we have put in place, our Enforcement Bureau has increased their enforcement activity regarding the TCPA. We announced that when we announced the new rules back in 2003.

Mr. MARKEY. Increasing it to what?

Mr. SNOWDEN. Enforcement activity.

Mr. MARKEY. Right. Increasing it to what level?

Mr. SNOWDEN. Well, we have not articulated a particular number

goal, because the challenge that we have before us is that we have

to find them.

Mr. MARKEY. No, I am saying but out of 90,000 complaints, potentially, say in that range over the last 5 years, you must be able

to find more than 10 a month.

Mr. SNOWDEN. Believe it or not, Congressman, it is very, very

difficult to find these individuals who are violating the rules. There

are a lot of ways that they escaped us. We do everything we can.

Out of the 233, we have had to go through a lot of work to be able

to even track them down to get to the point where we are right

now. This is a very arduous task to get to the—they obfuscate the

law, and they obfuscate us as well.

Mr. MARKEY. Thank you, Mr. Chairman.

Mr. UPTON. I have an additional question. Ms. Kaechele, you indicated that without a change you would see your paper beginning

to try to focus on this as early as August. Mr. McDonald and Mr.

Graham, what is your sense in terms of when you would actually

have to start making changes if you don’t see legislation begin to

move in a proper direction? How quickly will you have to begin to

really address that, knowing that the deadline is, what, the very

end of December, December 31, January 1?

Mr. MCDONALD. If your bill were not introduced and successful

within a reasonably short period of time, we would have to anticipate the implementation of those rules and start our members’ activity on making sure they were in compliance with the rules that

had been issued by the FCC. I can’t give you an exact date, but

I would say it would be a relatively short period of time.

Mr. UPTON. Mr. Graham?

Mr. GRAHAM. We are monitoring it very closely, and if we don’t

have some action I think by August, the August recess, we are

going to have to go into September with some guidance to our

members and associations on how this will affect them and how to

implement it.

Mr. UPTON. You know, again, as I indicated, we are going to try

to put this on the fast track. We have been working and I commend

my colleague Mr. Markey and Mr. Dingell and others on both sides

of the aisle. Let’s say that we get a bill moving, let’s say that we

get to full committee markup as early as next week, we get it on

the floor under suspension. I would like to think if we continue the

bipartisan cooperation, we pass it with only Mr. Paul voting

against it in July.

And let’s say the Senate just doesn’t move, molasses continues.

Mr. Snowden, if you saw a bill introduced in the Senate with bipartisan support, a bill that actually has passed the House because of

the actions of Mr. Tauzin and myself and other members that contacted the FCC you were able to put a stay, in essence, in terms

32

of when the regulations were going to take place, would the FCC,

would they look at Congress’ intent and perhaps give us another

stay until we could actually get this bill done, maybe in lame duck

session or something like that, at least give a signal to the many

businesses out there that are looking for some help? Do you think

that would——

Mr. SNOWDEN. Well, as you noted, sir, when we first learned of

the challenges that were facing the business community with your

urging and their urging, we quickly put a stay in place to allow

businesses to get up to speed, because our goal, of course, is to be

pro-consumer and to also ensure that consumers and businesses

alike can have some control over the messages they receive.

In terms of a future stay, it will be up to the five members of

the Commission to vote on that. That is something that is not done

at the Bureau level, that is done at the Commission level, and I

would urge the committee, whatever you all are going to do to

bring clarity to this issue——

Mr. UPTON. So you would be on our side?

Mr. SNOWDEN. I would be on the side——

Mr. UPTON. A letter may come to you before it goes upstairs.

Mr. SNOWDEN. For the record, sir, I will be on the side——

Mr. UPTON. And we may not fax it either. We will have to call

to see if I can send it down there.

Mr. SNOWDEN. If I may, Chairman Upton, I would like to go back

to a point to Mr. Markey for a second. One of the questions, I

think, where you were going to in terms of our enforcement activity

that could help the Commission, for example, our forfeiture

amounts are $11,000 per violation right now. And for many of

these companies, that is peanuts. For the fax.com case, they had

over 480 different violations, and we fined them $11,000 each, and

that is what got to that amount. Raising that amount would be

helpful.

Mr. MARKEY. What would you like it at?

Mr. SNOWDEN. I think I will leave that to the Chairman. I think

Chairman Powell will get back to the committee on that particular

matter, but right now it is not where it needs to be to have a dent.

In addition to the citation—right now we have to issue a citation

to the non-licensees. Eliminating that phase would be helpful as

well.

Mr. UPTON. In some of these cases, does the faxer often hide

their own identity, their own fax number in terms of trying to respond back to them?

Mr. SNOWDEN. They sure do. In fact, what we have found is, and

it seems counterintuitive when you first think about it, if I am trying to sell a product, why am I hiding my identity because I need

to be able to call you to sell that product, but when a consumer begins to call that number, it is very difficult for them to get off a

list. It is very difficult for us to find out who actually owns this,

who do we actually put this forfeiture or this citation against? And

so that is a challenge, and as you all point out, it appears you all

are addressing that issue with the domestic call.

Mr. UPTON. Mr. Markey?

Mr. MARKEY. Mr. Snowden, should we have a requirement on the

opt-out notice requiring the legal name of the sender?

33

Mr. SNOWDEN. Well, the——

Mr. MARKEY. Would that help your enforcement if legally in the

law they actually had to put their legal name?

Mr. SNOWDEN. Any clarity that we can have in terms of knowing

who the individuals are would help our enforcement activity.

Mr. MARKEY. So you would have us make it a requirement that

they have to put their legal name?

Mr. SNOWDEN. I would ask for any clarity that you all could provide for this matter.

Mr. MARKEY. So you would support that.

Mr. SNOWDEN. I would ask for clarity, sir, yes. We offer technical

advice to the Congress. Since we have many of these issues before

us right now on reconsideration, it would be inappropriate for me

to voice the opinion of the Commission since some of these issues

are before us right now.

Mr. MARKEY. Would a requirement that they have to use their

legal name be more useful to you than they use a bogus name?

Mr. SNOWDEN. Absolutely.

Mr. MARKEY. So maybe we can make that a requirement. Thank

you, Mr. Chairman.

Mr. UPTON. Mr. Shimkus?

Mr. SHIMKUS. Mr. Chairman, along this line of questioning, who

is the legal name of an association? Who would that be? Would

that be the executive director?

Mr. GRAHAM. The legal name of an association is in the case of

ASAE would be the American Society of Association Executives is

the legal name. That is the name that would appear. That is the

registered business name.

Mr. SHIMKUS. So who is, in essence—I guess the confusion is if

we are going after bad guys and the idea is get a legal name so

we know who to go to, if it is an association, it is still—well, it is—

I mean it would be protection under corporations.

Mr. GRAHAM. Most associations are incorporated, so the legal responsible party would be the incorporated entity.

Mr. SHIMKUS. I mean so if it is a nefarious, sinister intentional

organization that uses an association name, that you still can’t—

you still wouldn’t be able to track them, you would still have the

same problem.

Mr. SNOWDEN. You are identifying the challenges that we have

in our enforcement capabilities, absolutely.

Mr. SHIMKUS. I just thought I would ask. I didn’t know how that

would work. Thank you.

Mr. UPTON. Mr. Graham?

Mr. GRAHAM. I mean the unintended consequence here, of course,

as I am hearing this testimony, is that we are very easy to spot.

You can find the realtors, you can find us, you can find newspapers. We are easy to find. The people who are violating the law,

it sounds like, in large part, are people who you can’t find. And so

we are putting in place perhaps a law that—we are not putting in

place a law but we have a law in place now that penalizes the honest and the other ones are going off scott-free.

Mr. SHIMKUS. Welcome to Washington.

Mr. GRAHAM. Right. Just thought I would point that out. Thank

you.

34

Mr. SHIMKUS. I think other people have mentioned that to us.

Mr. SNOWDEN. To us as well, sir.

Mr. UPTON. Mr. Walden, do you have additional questions? Any

comments, remaining comments from the panel?

Mr. MCDONALD. Mr. Chairman, I really wanted to add that from

my perspective after hearing the testimony from everybody this

morning, if you allow the OCC rules to go in effect the way they

were proposed—I am sorry, not OCC, the FCC rules, what you are

doing——

Mr. UPTON. We do like banking jurisdiction.

Mr. Oxley used to be a favored member of the committee and no

longer is.

Mr. MCDONALD. There you go. What you are doing by taking

away the existing business relationship exception that has been in

place is you are penalizing the good guys that they can find and

doing nothing to curtail the bad, unsolicited fax that are out there.

So our point to you today is that your bill is important to get that

exception back in place so that the good guys aren’t the ones that

are being penalized and that somehow or another they find the bad

guys and eliminate those that are doing the unsolicited faxing.

Mr. UPTON. Mr. Snowden?

Mr. SNOWDEN. Chairman Upton, I would offer as well that since

we have issued these rules, I have personally met with each of the

individuals on the—excuse me, each of the associations on this

panel here.

Mr. UPTON. We would like to know if you have gotten a subscription to the Allegan County News?

Mr. SNOWDEN. I have not purchased that, but I know the Chairman is very supportive of making sure that we have a voice in

small communities, so I will look into that. But the issue I wanted

to bring forward is that no matter what happens the FCC’s doors

are always open to each of these panelists and others who want to

come and talk to us about these rules and our records as we go forward.

Mr. UPTON. Well, again, we appreciate your testimony, your help

with us as we move forward. Again, I want to announce it as early

as tomorrow. I intend to introduce this legislation with strong bipartisan support, and we intend to move it as quickly as we can

through the legislative process, hoping that the other body begins

to take action as well, and we appreciate your thoughts, we look

forward to working with you in the days ahead, and we now stand

adjourned. Thank you.

[Whereupon, at 11:21 a.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF PHILLIP D. BRADY, PRESIDENT, NATIONAL AUTOMOBILE

DEALERS ASSOCIATION

The National Automobile Dealers Association (NADA), which represents 20,000

franchised automobile and truck dealers who sell both domestic and import vehicles

and employ more than one million people nationwide, strongly supports legislative

efforts to remedy the Federal Communication Commission’s (FCC) rule to require

written permission prior to sending any commercial fax. Without remedial legislative action before January 1, 2005, when the FCC’s rule will take effect, there will

be a severe disruption to trade associations in communications with their members

and businesses responding to their customers’ needs.

35

1P.L. 102-243

2The FCC regulations implementing the TCPA define an ‘‘established business relationship’’

as ‘‘a prior or existing relationship formed by a voluntary two-way communication between a

person or entity and a residential subscriber with or without an exchange of consideration, on

the basis of an inquiry, application, purchase or transaction by the residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party.’’ 47 CFR § 64.1200(f)(4).

BACKGROUND

In 1991 Congress enacted the Telephone Consumer Protection Act (TCPA) to prohibit sending unsolicited fax advertisements to any person or entity, including businesses. The statute defines an unsolicited advertisement as any commercial material transmitted to any person without that person’s prior express invitation or permission.1. In 1992, the Federal Communications Commission (FCC) determined that

an ‘‘established business relationship’’ with a recipient serves as prior invitation or

permission for a commercial fax.2

Despite years of reliance on an ‘‘established business relationship’’ that allowed

tax-exempt trade associations to communicate with their members and businesses

to respond to customer requests for faxed material without restriction, the FCC on

July 25, 2003 reversed its prior fax rules to remove the ‘‘established business relationship’’ exemption on the grounds that it did not have a basis in law. This part

of the new FCC regulation, scheduled to take effect January 1, 2005, will require

all senders, including tax exempt trade associations and businesses, to obtain prior

written consent from their members and customers before sending faxes of a commercial nature. This written permission must include the recipient’s signature, the

fax number to which the material may be sent, and the recipient’s clear consent to

receive such faxes from the sender.

IMPACT OF FCC’S FAX RULE

While these new fax regulations issued by the FCC are intended to stop abusive

faxing of unsolicited materials, a goal fully supported by NADA and its members,

we believe the regulations are overly broad and impose significant and unnecessary

burdens on businesses and trade associations. The fax regulation as currently structured would also impose substantial burdens on consumers and their ability to obtain information they seek in a timely and expeditious manner.

Under the new FCC rules for example, major trade associations with thousands

of members would need to undertake substantial efforts, in both time and resources,

to obtain the written permission of their members to send any faxes that may be

of a commercial nature. Because these members are individuals and entities who

have voluntarily sought the benefit of the association’s services, we do not believe

there should be government-imposed restrictions on a tax-exempt trade association’s

ability to communicate with its members. This particularly applies since under the

TCPA fax recipients can terminate the established business relationship at any time

simply by notifying the sender.

If the new FCC rules applied to our members’ businesses, they would not be able

to respond to oral requests from consumers, existing customers, or other commercial

enterprises for faxed information. For example, a fax of product or service information (such as a price quote), even if specifically requested, could not be carried out

unless there was prior written permission to do so. There should not be any doubt

that such a rule would result in tremendous cost, burdensome record keeping, and

divert time and resources away from the active conduct of the business. Automobile

retailers are already struggling to keep up with all the other regulatory burdens imposed on them by government at all levels. There is no public policy rationale to

subject them to the costs and difficulty associated with obtaining and tracking such

written consent forms where a business relationship already exists or the fax is specifically requested.

LEGISLATIVE REMEDY

Any legislative remedy to the FCC’s impending fax rules should amend the Telephone Consumer Protection Act (TCPA) to specifically create a statutory ‘‘established business relationship’’ exemption to the ban on unsolicited commercial faxes.

This would codify the ‘‘established business relationship’’ exemption for commercial

faxes that has worked well for more than ten years while also preserving protections

currently in law to prohibit and punish truly unsolicited commercial advertisements.

We understand that any legislative action to restore an ‘‘established business relationship’’ may also include an ‘‘opt-out’’ option on future faxes for those with existing

relationships. While we do not oppose such a step, we believe, if that step is taken,

the definition of ‘‘unsolicited advertisement’’ should also be amended to specifically

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exclude fax communications that: respond to a specific inquiry; complete a transaction requested by the recipient; and are sent by a tax-exempt trade association

to its members and affiliates. We believe that there is no public policy rationale to

treat such communications as unsolicited, and the application of the opt-out mechanism to such communications may impose some of the same unjustifiable burdens

as the FCC’s new written permission rule. It is especially important that there is

no ambiguity on these points since the TCPA establishes substantial penalties including a private cause of action and the Federal Communications Act separately

authorizes the FCC to issue fines that can be up to $11,000 per violation.

CONCLUSION

In conclusion, NADA believes that unless the current ‘‘established business relationship’’ exemption to unsolicited commercial faxes is preserved, there will be substantial and unnecessary disruption to ongoing communications between trade associations and their members and businesses responding to their customers. Such legislation is only a technical change and would preserve the FCC’s previous determination that a prior business relationship between a fax sender and recipient establishes the proper consent to receive fax advertisements. The FCC’s recent change

requiring prior written permission for such faxes must not be the final word on this

issue. By remedying the FCC’s fax rule, Congress can alleviate a serious and adverse impact on trade associations and small businesses such as automobile dealerships and continue to allow the unburdened use of a fax transmission to convey valuable information among those with a prior business relationship.

With the new fax regulations scheduled to take effect January 2005, trade associations and businesses are in flux and will have to undertake extraordinary and

costly compliance measures unless there is prompt legislative action. There is an urgent need to enact this straightforward legislation before Congress adjourns this

fall, and NADA urges this committee and the Congress to work expeditiously on this

matter. Thank you for your consideration.

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