Telecommunications: Weaknesses in Procedures and Performance Management Hinder Junk Fax Enforcement
Published: 2006-04-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Telephone Consumer Protection Act of 1991 prohibited invasive telemarketing practices, including the faxing of unsolicited advertisements, known as "junk faxes," to individual consumers and businesses. Junk faxes create costs for consumers (paper and toner) and disrupt their fax operations. The Junk Fax Prevention Act of 2005 clarified an established business relationship exemption, specified opt-out procedures for consumers, and requires the Federal Communications Commission (FCC)--the federal agency responsible for junk fax enforcement0--to report annually to Congress on junk fax complaints and enforcement. The law also required GAO to report to Congress on FCC's enforcement of the junk fax laws. This report addresses (1) FCC's junk fax procedures and outcomes, (2) the strengths and weaknesses of FCC's procedures, and (3) FCC's junk fax management challenges.
section_title: What GAO Found
paragraphs: FCC has procedures for receiving and acknowledging the rapidly increasing number of junk fax complaints, but the numbers of investigations and enforcement actions have generally remained the same. In 2000, FCC recorded about 2,200 junk fax complaints; in 2005, it recorded over 46,000. Using its procedures to review the complaints, FCC's Enforcement Bureau (EB) issued 261 citations (i.e., warnings) from 2000 through 2005. EB has ordered six companies to pay forfeitures for continuing to violate the junk fax rules after receiving a citation. The six forfeitures totaled over $6.9 million, none of which has been collected by the Department of Justice for various reasons. EB officials cited competing demands, resource constraints, and the rising sophistication of junk faxers in hiding their identities as hindrances to enforcement. An emphasis on customer service, an effort to document consumers' complaints, and an attempt to target enforcement resources efficiently are the strengths of FCC's procedures; however, inefficient data management, resulting in time-consuming manual data entry, data errors, and--most important--the exclusion of the majority of complaints from decisions about investigations and enforcement, are weaknesses. FCC's guidance to consumers does not provide them with all of the information they need to support FCC's enforcement efforts. FCC faces management challenges in carrying out its junk fax responsibilities. The commission has no clearly articulated long-term or annual goals for junk fax monitoring and enforcement, and it is not analyzing the junk fax data. Without analysis, FCC cannot explore the need for, or implement, changes to its rules, procedures, or consumer guidance that might help deter junk fax violations or give consumers a better understanding of the junk fax rules. Most important, without performance goals and measures and without analysis of complaint and enforcement data, it is not possible to explore the effectiveness of current enforcement measures.

section_title: Letter
paragraphs: For more than a decade, it has generally been illegal to send unsolicited  facsimile (fax) advertisements, commonly known as “junk faxes,” to  consumers and businesses. This type of advertising burdens consumers  and businesses because they incur costs associated with receiving the fax  (paper and toner) as well as cause disruptions to their fax operations. The  Telephone Consumer Protection Act of 1991 (TCPA) prohibited a variety  of telemarketing practices, including the faxing of advertisements without  the recipient’s prior express permission. In 1992, the Federal  Communications Commission (FCC) established rules for receiving junk  fax complaints and taking enforcement actions. In July 2005, Congress  enacted the Junk Fax Prevention Act of 2005 (2005 Act), which amended  certain provisions of TCPA. Specifically, the 2005 Act clarified an  “established business relationship” exception, required specific opt-out  procedures for consumers and businesses, and required FCC to report  annually to Congress on junk fax complaints and enforcement actions. FCC  is to adopt new rules implementing these changes by April 5, 2006.
The 2005 Act required GAO to report to Congress on FCC’s enforcement of  the junk fax laws. Accordingly, we answered the following questions in this  report: (1) What procedures has FCC established for taking action on junk  fax complaints—including procedures for receipt, acknowledgment,  investigation, and enforcement—and to what extent has it taken such  action? (2) What are the strengths and weaknesses of FCC’s junk fax  procedures? and (3) What challenges do FCC face in carrying out its junk  fax responsibilities? In addition, we provide in appendix I of this report  information on enforcement measures and penalties that have been  established to protect consumers from other types of unsolicited  advertising.
To assess FCC’s procedures, implementation, and strengths and  weaknesses, we reviewed the applicable statutes and FCC rules pertaining  to junk fax enforcement. We interviewed FCC officials responsible for  receiving junk fax complaints and taking enforcement actions. We obtained  FCC data on junk fax complaints and enforcement actions and reviewed  portions of the complaint database and enforcement spreadsheet. Although  we discuss limitations to the complaint data in the report, we determined  that these data were sufficiently reliable for us to present overall trends  and approximate figures. To identify challenges, we compared FCC’s  enforcement efforts with recognized performance management practices  and reviewed applicable FCC performance goals, measures, and data  analysis. Finally, we reviewed other statutes relevant to protecting  consumers from unsolicited advertisements. We conducted our work from  November 2005 through March 2006 in accordance with generally accepted  government auditing standards. See appendix II for a more detailed  explanation of our scope and methodology.
subsections: section_title: Background
paragraphs: In 1991, Congress enacted TCPA to address a growing number of telephone  marketing calls and certain telemarketing practices thought to be an  invasion of consumer privacy and, in some cases, costly to consumers.  Provisions of this law generally prohibit anyone from faxing unsolicited  advertisements, or “junk faxes,” to consumers or businesses. An  unsolicited advertisement under TCPA was 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.”
In addition, there are three distinct enforcement mechanisms for violations  of the junk fax provisions. First, persons or entities that believe they have  been sent a fax in violation of the act have a private right of action—that is,  they can sue the fax advertiser in an appropriate court for damages and/or  injunctive relief. Second, a state attorney general (or another official or  agency designated by the state) may bring a civil lawsuit for damages  and/or injunctive relief when a case involves a pattern or practice of  violations. Third, FCC is authorized to assess and enforce a “forfeiture”  against those who violate the junk fax provisions—that is, a monetary penalty against the faxer for violating the junk fax rules. Appendix I  provides a brief overview of how unsolicited advertisements sent via  telephone, the Internet, and cellular telephones are regulated and enforced. “…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.”
In July 2003, FCC revised many of its telemarketing and fax advertising  rules under TCPA. In part, the commission reversed its prior conclusion  about an EBR, stating that its existence alone does not constitute the  express permission required by TCPA. Instead, the commission concluded  that a fax advertiser must first obtain written permission, including the  recipient’s signature, before a fax can be sent. This requirement for written  permission was stayed by FCC pending reconsideration and, to date, has  not taken effect.
Congress has now settled the question of whether prior written consent is  explicitly required with the Junk Fax Prevention Act of 2005. The act  (1) amends TCPA and codifies the EBR by expressly permitting businesses  or entities to fax unsolicited advertisements to those with whom they have  an EBR and (2) provides that prior permission may be in writing or  otherwise. The act does, however, impose new disclosure and opt-out  requirements on advertisers. Businesses or entities sending fax  advertisements must now include on the first page of the ad an opt-out  notice, the date and time the fax was sent, the registered name of the  company sending the fax, and the telephone number of the company  sending the fax or the sending fax machine’s telephone number. The  opt-out notice should clearly state that the recipient may opt out of any  future faxes and provide clear instructions for doing so. The opt-out  telephone number must be domestic and free of charge to the recipient.
Some businesses and individuals contract with fax broadcaster (also  known as “fax blasters”) companies that transmit mass fax advertisements  for others. This practice is legitimate if the fax broadcaster complies with  the junk fax rules. In some instances, however, fax broadcasters fax  unsolicited advertisements to parties that have no EBR with the advertising  company. According to Verizon officials in an FCC filing, fax broadcasters  often use automatic dialers on outbound fax servers to send large volumes  of faxes in a short time, often in the middle of the night. Furthermore, their  dialing lists may include primary residential telephone numbers as well as  fax numbers. For example, according to these officials, one fax  broadcaster transmitted 10,600 calls over Verizon’s network within 10  minutes.
Two FCC bureaus—CGB and EB—are primarily responsible for developing  and implementing rules and procedures to collect and analyze junk fax  complaints and for conducting investigations and enforcement, among  their other responsibilities. CGB develops and implements FCC’s consumer  policies. CGB also addresses consumers’ informal inquiries and works to  mediate and resolve complaints under FCC’s jurisdiction. These include  complaints about the commission’s regulated entities, including common  carrier, broadcast, wireless, satellite, and cable companies; complaints  about unauthorized changes in telecommunications providers (slamming); complaints about unwanted e-mail messages on wireless devices such as  mobile telephones (spamming); and six types of TCPA-related complaints,  including junk faxes, violations of the do-not-call list, and time-of-day  violations (marketing between 9 p.m. and 8 a.m).
EB is responsible for enforcing TCPA’s provisions and the commission’s  rules and orders. EB handles three major areas of enforcement: local  competition, public safety and homeland security, and consumer  protection. Enforcement officials said that they follow FCC’s guidance on  how to prioritize these responsibilities, and that these priorities can change  as required by circumstances. EB’s Telecommunications Consumers  Division is responsible for considering junk fax complaints for  investigation and enforcement.
EB uses several procedures to select complaints for investigation and  possible enforcement. EB’s formal enforcement actions consist of several  sequential steps. First, EB issues a citation, which notifies the faxer of the  complaint(s) against it and informs the faxer that its alleged activity is  illegal. The citation also states that further such activity could make the  faxer subject to a forfeiture action. If FCC receives additional complaints  against the faxer for violations of the junk fax rules and substantiates the  complaints, EB may pursue the forfeiture action. This could lead to the  involvement of the Department of Justice (DOJ), which is responsible for  collection. Figure 1 depicts FCC’s process for responding to junk fax  complaints.
section_title: FCC Has Recorded a Growing Number of Junk Fax Complaints, but Has Taken Limited Enforcement Action to Date
paragraphs: In 2000, FCC recorded about 2,200 junk fax complaints; in 2005, that  number had grown to more than 46,000. Despite this growth in junk fax  complaints, the numbers of investigations and enforcement actions have  generally remained the same.
subsections: section_title: FCC’s Consumer & Governmental Affairs Bureau Has Received an Increasing Number of Junk Fax Complaints, Especially through Internet Forms
paragraphs: In 2000, CGB began using a new database to record the various types of  consumer complaints under FCC’s jurisdiction, including complaints about  TCPA violations. For junk fax complaints, CGB staff accept the complaints;  enter information into the database; and scan the materials submitted with  the complaints, including copies of the alleged junk faxes. CGB staff mail a  letter to the majority of complainants acknowledging FCC’s receipt of their  complaint. The letter states that FCC does not resolve individual  complaints and cannot award monetary or other damages directly to the  complainant. The letter also states that the complainant has the right to  take private legal action against any junk fax violator.
In 2000, FCC recorded about 2,200 complaints; in 2005, that number had  grown to more than 46,000. Since 2002, FCC has reported quarterly on the  number of consumer complaints received, consolidating all six types of  TCPA complaints into one category. As a result, the number of junk fax  complaints has never been separately reported. Using CGB data, we found  that within the specific category of TCPA complaints, junk faxes  represented over 85 percent of the complaints logged in 2005. In fact, when  looking at all types of reported consumer complaints, junk fax complaints  have ranked as the second most frequently reported since 2003—second  only to complaints about indecency and obscenity in radio and television  broadcasting. Appendix II lists the number of complaints reported  publicly by FCC, by type, from 2003 through 2005 and details the  percentage of the TCPA complaints that are junk fax complaints.
Both individual consumers and businesses can report junk fax complaints  to the commission by e-mail, postal mail, fax, telephone, or the Internet  (using an on-line complaint form—Form 475—that appears on FCC’s Web  site). FCC documents both the type of complainant (individual consumer  or business) and the method of reporting (e-mail, postal mail, fax,  telephone, or the Internet). Figure 2 shows the number of junk fax  complaints that businesses and individuals reported through various  methods from 2003 through 2005. As the figures indicate, the number of  junk fax complaints reported by businesses dropped in 2005, but the  number of complaints reported by individuals increased, bringing the total  for both groups significantly higher in 2005 than in prior years. Additionally,  the number of complaints reported using the on-line complaint form has  increased, especially for individual consumers. In 2005, about half of all  junk fax complaints were reported via the Internet.
In their junk fax complaints to FCC, individuals and businesses often  described the adverse effects of junk faxes. We looked at hundreds of  complainant comments received from September through December 2005  and found complaints that cited the costs of toner and paper, the disruption  of business activities during junk fax transmissions, and interruptions to  personal lives. For example, the complainants expressed frustration about  calls coming in the middle of the night and waking them up or causing  panic. FCC has recently addressed this issue. Some complainants noted  problems with the opt-out number—that is, the telephone number that they  should be able to call to stop receiving the faxes. For example, the opt-out  number did not work, was always busy, or was connected to a prerecorded  message. According to some complainants, calling the opt-out number  seemed to increase the number of junk faxes they received. Additionally,  some complainants expressed frustration with the commission’s response  to their prior complaints.
Some complainants described junk faxes they had received as unbelievable  or potentially fraudulent. Among the frequently cited topics were hot  stocks, cheap vacations, low-interest mortgages, and low-cost health care.  We asked FCC officials whether they believed fraud was an issue with junk  faxes. They said that, although enforcement related to fraud falls outside of  FCC’s jurisdiction, some of the faxes advertising stock tips could be  fraudulent and come under the jurisdiction of the Securities and Exchange  Commission (SEC). Federal Trade Commission (FTC) staff, whom we also  asked about fraud in connection with junk faxes, said they believed it was a  concern and they cited travel and mortgage offers. FTC staff also  mentioned pump-and-dump marketing schemes, which they also noted  would come under SEC’s jurisdiction.
section_title: FCC’s Enforcement Bureau Has Generally Issued a Limited Number of Citations Each Year since 2000 and Has Rarely Issued Forfeiture Orders
paragraphs: FCC’s EB, established in November 1999, is responsible for investigating  and determining the appropriate enforcement action for all types of TCPA  complaints, including junk fax complaints. Currently, EB dedicates 11 staff  (9 full-time analysts and 2 part-time attorneys) to work on junk fax  enforcement. According to EB officials, the bureau’s overall staffing levels  have remained relatively stable over the years. As a result, the staffing level  for junk fax enforcement has remained about the same over the past 5  years, even though the number of junk fax complaints has rapidly  increased.
Because of the large number of complaints and limited resources, EB does  not investigate each junk fax complaint. Instead, EB officials said, they try  to identify and take enforcement action against the major alleged violators  and repeat offenders who, they believe, have had the greatest impact on  consumers. EB defines a major alleged violator as a company, carrier, or  individual that has sent a large number of junk faxes to complainants over a  given period of time; it defines a repeat offender as a company, carrier, or  individual that continues to violate the junk fax rules after receiving a  citation from the commission.
To identify major alleged violators, the EB analysts responsible for  responding to junk fax complaints first review CGB’s complaint database to  identify those complaints with an attached fax. EB officials said they use  only complaints with attached faxes because they contain the best  evidence for starting an investigation. The analysts then transfer  information from the complaint and the fax into an enforcement  spreadsheet. Periodically, the EB analysts sort the information in the  enforcement spreadsheet to align matching telephone numbers and  identify those that are repeated most often. According to enforcement  officials, the most frequently repeated telephone numbers are indicative of  the major alleged violators that are creating the most widespread problems  for consumers. In addition to using EB’s spreadsheet to prioritize which  complaints receive enforcement action, EB will also initiate enforcement  action on the basis of complaints received from other sources, such as  congressional offices, FCC commissioners, or state attorneys general. In  the past year, about half of the citations issued by EB were based, at least in  part, on referrals from outside sources—the majority of these outside  sources were Members of Congress.
The next step in the investigation is for the EB analysts to identify the  major alleged violators associated with the most frequently repeated  telephone numbers. Finding their names and addresses involves contacting  carriers to learn who was paying for the telephone numbers from which the  alleged junk faxes were sent on the dates the faxes were sent. Waiting for  this information from the carriers can take several days. According to  enforcement officials, identifying and locating major alleged violators is the  most challenging aspect of junk fax enforcement. They said that obtaining  this information is becoming increasingly more challenging because  violators have become more adept at hiding their identity. As a result, the  officials said, the analysts have to spend more time on each investigation.
Once a major alleged violator is identified, the analysts can decide whether  to begin the formal, two-step enforcement process of citation and possible  forfeiture action. EB officials said they consider the citation to be their  most efficient enforcement action because many, perhaps the majority, of  the violators are unaware that their activities are illegal and could lead to  monetary forfeitures. As a result, the officials said, most violators that  receive a citation do cease their junk fax activities. However, EB officials  could not provide data to support this assertion.
EB officials have issued a limited number of citations over the past 6 years,  and the annual number did not change substantially, except in 2002. As  table 1 indicates, FCC issued 261 citations covering 1,456 junk fax  complaints from 2000 through 2005. EB officials cited competing demands,  personnel reductions, and the increasing skill of violators in concealing  their identity as reasons for the limited number of citations issued.
EB officials also noted that in 2005 the average number of complaints that  each citation covered increased. They believe this demonstrates EB has  successfully targeted the major alleged violators. However, as shown in  table 1, the percentage of the total annual number of complaints resulting  in a citation has been less than 1 percent since 2003.
To identify repeat violators, EB analysts enter citation information into  their enforcement spreadsheet, including the telephone numbers of the  citation recipients, and search the information in the spreadsheet to  identify any complaints sent after the citation date against these recipients.  If any such complaints are found, the analysts decide whether to take the  second formal enforcement step—a forfeiture action—which begins with  the issuance of a notice of apparent liability. This notice informs the alleged  repeat violator that its actions make it liable for forfeiture of a specific  dollar amount. The notice must  be issued within 1 year of the alleged violation(s) that forms the basis  for the notice;  identify each specific statute, rule, order, term, or condition that  allegedly has been violated;   explain how the alleged repeat offender’s activities have violated the  junk fax rules and the dates of the violations; and   specify the amount of the proposed monetary forfeiture.
According to EB officials, their enforcement efforts are hampered by the  requirement that a notice of apparent liability be issued within 1 year of an  alleged repeat violation. For example, FCC’s notice of apparent liability  against Fax.Com, Inc., stated that although FCC received some consumers’  correspondences and related declarations detailing additional unsolicited  advertisements received from Fax.Com, FCC was unable to include these  violations in the forfeiture action because they were beyond the 1-year  statute of limitations. This statute of limitations is problematic, they said,  because it takes time, after identifying a repeat violation, to prepare the  notice and obtain a sworn statement from the complainant verifying that  there was no EBR with the sender of the fax. FTC staff said that they have a  statute of limitations of at least 5 years to enforce various telemarketing  rules by seeking civil penalties, and they agreed with FCC that a 1-year  statute of limitations was restrictive.
Within a reasonable period of time, usually within 30 days of receiving the  notice, the alleged repeat offender must either pay the proposed forfeiture  in full or file a written response requesting that the proposed forfeiture be  rescinded or be reduced. If the proposed forfeiture penalty is not paid in  full in response to the notice, the commission, upon considering all  relevant information available to it, will issue an order (1) canceling or  reducing the proposed forfeiture or requiring that it be paid in full and (2)  stating the date by which the forfeiture must be paid. If the recipient of the  order fails to pay the fine within 30 days from the date it is due, EB staff  will refer the case to the commission’s Office of General Counsel (OGC).
If the recipient ignores OGC’s request for payment, the commission refers  the forfeiture order to DOJ for collection.
EB officials stated that they have identified eight repeat offenders from the  261 citations issued from 2000 through 2005, and that they have pursued  forfeiture actions against all of the repeat offenders they have identified.  Six of the eight repeat offenders have received forfeiture orders, as detailed  in table 2. The amounts of the monetary forfeitures have increased, but no  forfeitures have been collected to date. For various reasons, five of the six  forfeitures will never be collected. The sixth forfeiture order accounts for  about 78 percent of the fines FCC has levied.
Two additional enforcement actions were taken in early 2006, outside the  scope of our review. The remaining two forfeiture actions that EB began  are against Elf Painting and Wallpaper (Elf) and First Choice Healthcare,  Inc. (First Choice). FCC issued a notice of apparent liability to Elf in  December 2004 for continuing to send junk faxes after receiving a citation  in February 2003. The notice proposed a penalty of $22,500 for five specific  violations of the junk fax rules. A final forfeiture order issuing a fine of  $22,500 was released by FCC against Elf on March 10, 2006. In February  2006, FCC issued a notice of apparent liability against First Choice,  proposing a fine of $776,500 against the company for sending at least 98  unsolicited fax advertisements after receiving a citation in July 2004.
section_title: FCC’s Procedures Have Emphasized Customer Service and Documentation, but Enforcement Is Hampered by Multiple Factors
paragraphs: The strengths of FCC’s junk fax procedures are that CGB has emphasized  both customer service and documentation of consumers’ complaints;  however, these processes are resource-intensive and susceptible to error.  Additionally, CGB’s database contains detailed information about  complaints, but does not present the information in a way that meets EB’s  enforcement needs. While EB’s approach to making investigation and  enforcement decisions is designed to make efficient use of limited  enforcement resources, it does not consider or factor in the majority of  complaints.
subsections: section_title: Focus on Customer Service and Documentation Is Time-consuming, and Data Entry Errors May Occur
paragraphs: CGB has emphasized customer service by establishing multiple methods  for consumers to report junk fax complaints to FCC, providing multiple  sources of information about junk fax issues, and sending a letter in  response to the majority of the junk fax complaints. As previously  discussed, consumers can report junk fax complaints by postal mail,  telephone, fax, e-mail, and the Internet. FCC also staffs two consumer  centers to handle consumer inquiries and provide junk fax guidance. This  guidance is located in several places, including FCC’s Web page, a  consumer fact sheet, and the Internet consumer complaint form (Form  475). The letter that FCC sends in response to complaints further advises  consumers of their legal options for addressing their complaints.
CGB consolidates and maintains information about complaints in its  database, together with any attachments. According to CGB officials, the  database has improved CGB’s coding and counting of TCPA complaints.  However, entering complaint information into the database is  time-consuming. Data from complaints reported by postal mail, e-mail, fax,  and telephone must be entered manually, while data reported on FCC’s  Internet complaint form (Form 475) can be electronically transferred from  the form to the database. However, CGB staff still have to review the  complaint summary from the consumer’s complaint (by opening a text box  from the Form 475) to determine what type of TCPA violation is being  reported. As figure 3 shows, the form includes a text box that asks the  complainant, among other things, to describe the type of violation. CGB  staff then have to analyze the consumer’s comment and manually code the  type of TCPA violation into the database.
Besides being time-consuming, CGB’s data entry processes may cause  errors in the database, despite the periodic supervisory review that CGB  officials told us takes place. For example, errors can occur in coding  complaints, matching complaints with associated attachments, and dating  complaints. These problems may, to an unknown extent, affect the  reliability of CGB’s complaint counts. They also may impact the quality of  the report that FCC is now required to provide to Congress on the number  of junk fax complaints received each year. Given the large numbers of  complaints, we do believe that overall trends can be reported, but the  specific numbers may not be accurate.
Errors in coding complaints can occur if the complainant’s comments on  the Form 475 do not provide CGB staff with sufficient information to  determine what type of violation should be coded in the database, or if the  CGB staff simply miscode a comment. In a cursory review of 2005  complaint data, we found several instances in which an Internet complaint  was miscoded. For example, CGB’s database incorrectly identified one  Internet complaint as a junk fax complaint, even though the complainant  was asking for assistance in having charges removed that resulted from  unsolicited advertisements sent as text messages to the complainant’s  cellular telephone.
Errors may also occur in matching complaints submitted by telephone,  e-mail, or the Internet with the associated faxes sent to FCC separately by  postal mail. Unless the consumer writes on the fax the unique identifier  that CGB assigns to every complaint on the fax and CGB staff scan the fax  into the database with the original complaint, the fax may be entered into  the database as a new complaint. CGB officials acknowledged that these  types of errors could be occurring, but they could not estimate the extent  of the problem.
section_title: CGB’s Database Does Not Meet EB’s Enforcement Needs, Leading to Duplicate Data Entry and Demonstrating Limited Coordination
paragraphs: Although CGB’s database contains detailed information about complaints,  the database does not present the information in a way that meets EB’s  enforcement needs. According to EB officials, CGB’s database does not  meet EB’s enforcement needs because it does not contain separate fields  for all of the information EB requires, and not all fields of the database can be easily searched. For example, the database does not contain separate  fields for the names of the businesses or individuals that may have sent the  junk faxes or for their telephone numbers. Most of this information, if  included in the complaint, has been entered into a comment field manually  by CGB staff or transferred electronically from a text box on the Form 475.  To find the most frequently reported businesses or individuals (major  alleged violators), EB staff would have to use the “Find” feature to search  the comment fields for one name or telephone number at a time.
Because CGB’s database does not contain the data fields that EB needs for  enforcement, EB has developed a separate spreadsheet that contains the  requisite data fields and allows the data to be searched and sorted to  support EB’s enforcement activities. This spreadsheet is not linked in any  way to CGB’s database. Consequently, EB analysts manually enter the data  they need from CGB’s database and from the faxes scanned in as  attachments to CGB’s database. Furthermore, since the type of attachment  is not identified in the database, EB analysts have to open each attachment  to determine whether it is a fax. According to EB officials, the 9 EB  analysts who work on junk fax complaints spend about half their time on  data entry and the remainder of their time on enforcement activities.
This duplication of data management activities demonstrates that limited  coordination has taken place between CGB and EB in determining how  best to manage junk fax complaint data. For example, CGB staff currently  have no follow-up procedures to obtain any additional information from  junk fax complainants that may assist in investigations and enforcement.  In addition, EB staff acknowledged that maintaining a separate  spreadsheet takes resources away from investigation and enforcement.
section_title: Practice of Limiting Consideration for Enforcement to Complaints with Attached Faxes Has Excluded the Majority of Reported Complaints
paragraphs: EB’s practice is to investigate and consider taking enforcement action only  when a fax is provided with a complaint. As previously noted, according to  EB officials, a fax is not needed to issue a citation but may be needed for  other formal enforcement actions. EB staff enter data into their  spreadsheet only for those complaints from CGB’s database that have an  attached fax. As figure 4 indicates, the majority of the junk fax complaints  in CGB’s database for every year from 2003 through 2005 did not have an  attachment. The remaining complaints had an attachment that may or  may not have been a fax. For 2005, about 60 percent of the  complaints—including almost all of the complaints reported via the  Internet—did not have an attachment and, therefore, under EB’s practice,  would not have been included in EB’s enforcement spreadsheet. As a  result, EB would not have included these complaints in its searches for  major alleged violators or repeat offenders or considered them in its  decisions about investigation or enforcement.
With the majority of reported complaints excluded from EB’s review, the  chances of identifying repeat offenders—those who have already received  a citation or a notice of apparent liability from FCC but have continued to  send junk faxes—are more limited. We searched CGB’s 2005 complaint  data for selected company names and telephone numbers from issued  citations, using the “Find” feature, and found several complaints alleging  violations by citation recipients dated after the citations were issued.  However, none of these complaints had an attachment, and we did not find  these repeat offenders when we searched EB’s spreadsheet. In addition, we  found six complaints of violations by Elf Painting and Wallpaper that  postdated the notice of apparent liability issued to this firm in December  2004. The most recent complaint was dated November 2005. However,  these complaints were all reported via the Internet and lacked an  attachment; therefore, like the 2005 complaints we found against the other  citation recipients, they may not have been found in a search of EB’s  spreadsheet.
Compounding this problem is FCC’s consumer guidance on submitting junk  fax complaints. Some of this guidance encourage consumers to send in the  junk faxes they have received. However, none of the guidance state that  without a fax, EB analysts do not review a complaint, include it in their  investigations, consider it for enforcement action, or include it in their  searches for repeat offenders. “If you have received unsolicited faxes, you are encouraged to contact the FCC regarding  the incident(s). You may need to provide documentation in support of your complaint, such  as copies of the fax(es) you received.…Your complaint should include:...a copy of the fax  advertisement, if possible, or confirmation that you have retained a copy of the fax.…”
By contrast, the form for reporting complaints via the Internet says nothing  about sending in a copy of the fax to FCC and does not tell complainants  how to do so. As shown in figure 2, the Form 475 is designed for consumers  to report a wide variety of telephone complaints. As a result, much of the  information the form provides, as well as the information it seeks from  consumers, does not apply to junk fax complaints. Only the last section of  the form applies to junk fax complaints.
Our review of a portion of CGB’s 2005 complaint data revealed that several  consumers who reported junk fax complaints via the Internet were  frustrated because they could not attach the faxes they had received to the  form and could not find any guidance on how to send the faxes to FCC. For  example, some consumers said they had kept copies of the faxes but did  not know how to send them to FCC. Other consumers asked FCC to  contact them to let them know how to send the faxes.
Both CGB and EB officials said they do not explicitly state that a fax is  needed for enforcement because they do not want to discourage  consumers who no longer have the fax from sending in a complaint. In  some instances, consumers who received a junk fax may not have kept the  fax. In addition, CGB officials said the Form 475 asks for all of the  information from the fax that is useful for EB to consider for possible  investigatory action or to issue a citation, such as the telephone number of  the company or individual that sent the fax and the “opt-out” numbers  provided on the fax. However, enforcement officials will not see this  information because, under current practice, they are only looking for  complaints that have an attached fax to transfer to the EB spreadsheet,  regardless of how complete the information is on the Form 475.
section_title: FCC Faces Management Challenges in Carrying Out Its Junk Fax Responsibilities
paragraphs: Congress passed the Government Performance and Results Act of 1993  (GPRA) to require federal agencies to take specific steps to improve their  performance. In general, GPRA sets forth recognized performance  management practices that agencies can apply in carrying out their  governmental responsibilities. These practices include establishing  long-term strategic goals and annual goals, measuring performance in  meeting these goals, and reporting publicly on the agency’s progress.  These performance management practices are critical in helping an agency  determine how well it is achieving intended outcomes. FCC does not  appear to be applying this model to its junk fax monitoring and  enforcement activities and, therefore, lacks an important tool for assessing  and reporting its progress.
The agency has not indicated, for example, whether its focus is to decrease  the number of junk fax complaints received, increase the number of formal  enforcement actions, or improve consumer guidance on how to stop junk  faxes. FCC’s strategic goal includes a target for reducing the amount of  time it takes to respond to consumer complaints; however, this goal may be  encouraging FCC to shift its focus from monitoring and enforcement to  customer service. CGB officials maintained, for example, that they  generally send a letter to complainants within 2 to 3 days acknowledging  that FCC has received their complaint. While this letter provides  complainants with information on alternative enforcement mechanisms  under the law—that is, their private right of action and a civil action  brought by their state attorney general—it does not seek additional  information from them, if needed, to pursue an FCC enforcement action.  Furthermore, once CGB has responded to a complaint with the  acknowledgment letter, it codes the complaint as a closed case for CGB  purposes, meaning that these data can be purged from the database after  2 years. As a result, these data are no longer available for use in identifying  major alleged violators and repeat offenders or for identifying and  monitoring trends in complaints and assessing the effects of enforcement  actions.
FCC is not using the information on junk fax complaints that it collects to  measure its performance in carrying out its junk fax responsibilities.  Although CGB allocates considerable staff and other resources to entering  complaint data into its database, FCC is not analyzing these data and using  the results of its analyses to set priorities and allocate resources. For  example, it is not monitoring the number of junk fax complaints recorded  each year. Thus, FCC’s quarterly reports identify the total number of TCPA  complaints, but do not break out the total for each of the six types of TCPA  complaints. As a result, the quarterly reports mask the magnitude of the  junk fax problem, which, as our analysis indicates, accounts for about 85  percent of all TCPA complaints received in 2005. In addition, the reports do  not indicate that junk fax complaints are the second most frequently  recorded type of consumer complaint overall. Without analyzing the data it  collects to determine the relative frequency of junk fax and other types of  complaints, FCC is limited in its ability to determine whether its staff and  other resources are appropriately aligned to address the problems  consumers are experiencing.
Additionally, FCC is not analyzing the nature of the principal types of junk  fax problems complainants are reporting. This information appears in a  comment field, where CGB staff enter comments provided by  complainants, but the information cannot be analyzed electronically. As a  result, FCC may not be able to fully address concerns such as the  percentages of complainants who reported that they were continuing to  receive junk faxes after calling the opt-out number or who were receiving  junk faxes in the middle of the night. Furthermore, FCC cannot identify and  monitor trends in complaints and enforcement and, therefore, cannot  target its resources to complainants’ greatest concerns or evaluate its own  performance in addressing those concerns. Having information on the  nature and frequency of problems with opt-out numbers and FCC’s success  in addressing these problems is particularly important because Congress,  in the 2005 Act, required the opt-out number to protect consumers from  repeated unwanted faxes. FCC officials stated that these issues will be  addressed once the new junk fax rules are implemented.
Without analysis, FCC cannot explore the need for, or implement, changes  to its rules, procedures, or consumer guidance that might help deter junk  fax violations or give consumers a better understanding of the junk fax  rules. We found, for example, from our review of comments in CGB’s  database from 2005, that many complainants seemed to believe the  National Do-Not-Call Registry applies to fax numbers as well as their home  telephone numbers. Repeatedly, complainants reported that they had asked  to have their fax numbers placed on this list, and they did not understand  why they were still receiving junk faxes. FTC, together with FCC,  implemented this list in 2003 to protect consumers from unwanted  telemarketing calls. FTC staff explained that the list does not apply to fax  numbers—that is, telemarketers must consult this list before placing  covered calls to consumers, but senders of fax advertisements are not  required to consult the list before faxing. FTC has provided guidance to  consumers that fax numbers are not covered under the National  Do-Not-Call Registry. Despite the many comments in CGB’s database  indicative of complainants’ misunderstanding, FCC has not considered this  issue in a rulemaking context or revised all of its guidance to clarify  whether the National Do-Not-Call Registry is applicable to fax advertising.
Most important, without establishing performance goals and measures and  without analyzing complaint and enforcement data, it is not possible to  explore the effectiveness of current enforcement measures. Without first  gaining an understanding of the effectiveness of current enforcement  measures, it is similarly not possible to determine whether additional  enforcement measures are necessary to protect consumers.
section_title: Conclusions
paragraphs: Consumer frustration with junk faxes is evident in the rapidly increasing  number of complaints and in the time that consumers are willing to take to  seek relief from this type of unsolicited advertising. FCC has provided  consumers with several methods to submit their complaints about junk  faxes and several sources of consumer information about junk faxes, and it  promptly acknowledges receipt of most of the complaints. However,  despite collecting thousands of junk fax complaints, including the  information submitted with them, FCC has taken formal enforcement  actions against relatively few junk faxers. More important, FCC is simply  not considering the majority of complaints or any of the information  contained in those complaints when making decisions about investigations  and enforcement.
We acknowledge that FCC cannot be expected to take enforcement action  against every junk fax complaint received. The growth in complaints,  together with limited resources, would make such an effort both  impossible and impractical. However, FCC has put in place data collection  and management processes that contain clear inefficiencies and limit its  ability to target major alleged violators and repeat offenders. Overall, there  has been limited collaboration between CGB and EB to ensure that FCC’s  data processes are efficient, make the fullest use of the data collected, and  fully support the needs of EB.
FCC is not making use of performance management tools to improve its  junk fax enforcement. There are no goals or measures of success for  handling complaints or for investigating them and taking enforcement  action. More fundamentally, FCC has not done the analysis that would help  it to establish such goals and measures. Without analyzing the complaint  data, FCC does not know if it could be doing more to better target its  limited resources to address the concerns of consumers, such as seeking  out faxers that may be providing fake opt-out numbers or providing clearer  guidance to consumers on the impact of time restrictions and the National  Do-Not-Call Registry on junk fax concerns. FCC also has not established  what it needs to do to be able to completely and accurately report the  number of complaints it has received in carrying out its junk fax  responsibilities as required under the 2005 Act. Because FCC’s junk fax  enforcement efforts have data management issues, lack data analysis, and  lack performance goals and measures, it is not possible to determine  whether any additional enforcement measures would better protect  consumers and businesses from receiving junk faxes. FCC simply cannot  say whether its junk fax enforcement efforts are successful in combating  junk fax advertising. However, the steady number of citations issued from  year to year should be cause for concern in the face of the rising number of  junk fax complaints.
section_title: Recommendations for Executive Action
paragraphs: FCC’s current consumer guidance does not alert consumers to the  necessity, under FCC’s current practice, of submitting a copy of the junk  fax(es) along with the complaint. Because this impacts the number of  complaints that FCC takes into consideration when searching for major  alleged violators and repeat offenders, we recommend that the Chairman  of the Federal Communications Commission direct staff to take the  following two actions:  Revise consumer complaint guidance to make it clear to consumers that  they need to include a copy of the fax in order to make it possible for  any investigation or enforcement action to take place. This includes  revising the wording of the Consumer Fact Sheet, the Internet complaint  form (Form 475), the consumer center script, and any other junk fax  guidance provided to consumers.
Revise the Form 475 so that it includes clear instructions for  complainants on how to submit a copy of the fax. This may include  developing procedures and instructions to let consumers know how to  electronically attach a scanned copy of the fax so that it accompanies  their complaint form.
FCC’s current data collection and management processes contain  inefficiencies and adversely affect FCC’s procedures for targeting major  alleged violators and repeat offenders. To begin to address these problems,  we recommend that FCC take the following action:  Direct consumer and enforcement staff to develop data management  strategies to (1) make the consumer complaint database more usable for  FCC’s staff and (2) mitigate the amount of time spent on manual data  entry, as well as possible errors, resulting from this manual data entry.  For example, these efforts could include, but not be limited to, revising  the Form 475 so that consumers identify through checked boxes, or  another similar method, the type of complaint they are filing. This could  enhance accuracy and improve staff efficiency by eliminating the need  for FCC staff to read a text box to identify the type of complaint and  then enter that information into the database. In addition, staff should  develop strategies that would enable enforcement staff to search all  consumer complaint information contained in the database to identify  major and repeat violators.
Finally, FCC should introduce recognized performance management  practices into its operations in order to improve the performance of its junk  fax enforcement efforts. Toward this effort, FCC should take the following  three actions:  Establish goals and performance measures for receiving,  acknowledging, investigating, and taking enforcement actions on junk  fax complaints.
Use the information in the complaint database to analyze the nature and  scope of the complaints. FCC can then begin to determine whether its  current enforcement efforts are sufficient in combating junk faxers, and  whether any additional enforcement mechanisms might be needed to  protect consumers.
Evaluate whether its staff and other resources are appropriately aligned  to carry out its junk fax responsibilities. This could include, but not be  limited to, evaluating the benefits of targeting staff resources to issue  more citations that could prompt more violators to cease their offending  behavior.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to FCC for comment. Senior officials  from the commission’s Enforcement and Consumer & Governmental  Affairs Bureaus provided oral comments. FCC generally concurred with  our recommendations and noted that they have already begun taking steps  to address our recommendations. For example, FCC officials stated staff  have been working to implement a new data management system that will  in part consolidate all inquiry and complaint data into a new database by  May 2006. FCC officials said this new database will identify possible  duplicate complaint records and increase the efficiency of processing junk  fax inquiries and complaints. They also said discussions on developing  additional modifications to the new database are now under way, including  modifications that would eliminate the need for EB to have its own  enforcement spreadsheet. In the interim, FCC officials said CGB and EB  staff are planning to link the EB spreadsheet to the new database, but the  officials could not provide a workplan describing how and when this  linkage would be accomplished.
FCC officials said they take issue with our conclusion that FCC’s current  process for prioritizing junk fax complaints for enforcement may not  identify the major alleged violators and repeat offenders. FCC believes that  the number of complaints transferred to EB’s spreadsheet for review,  although only a portion of the total number of complaints received, is large  enough to identify the major alleged violators and repeat offenders. We  reiterate that EB’s spreadsheet contains less than half of the total number  of junk fax complaints received and contains almost none of the Internet  complaints. FCC has done no analysis to determine whether the complaints  that have been excluded from enforcement consideration involve the same  entities they have identified as major alleged violators. Moreover, searching  for repeat offenders (junk fax violators that have already been warned by  FCC to cease their activities) using a subset of the complaints received is  not as effective since even one additional violation makes the entity subject  to further enforcement action, including monetary forfeiture.
Since FCC is beginning to explore changes to its database to eliminate the  need for a separate EB spreadsheet, as previously noted, it is possible for  FCC to also explore changes to the database that would improve EB’s  ability to analyze all complaint data to better identify the major alleged  violators, as we have recommended. Improved search functions within the  database would also aid in identifying the repeat offenders.
FCC officials also said the agency had included a consumer protection goal  that covered junk fax issues in the agency’s 2004 performance summary.  FCC officials also provided us with 2004 and 2005 CGB goals. However,  after reviewing these documents, we maintain that FCC does not have  goals or measures specifically related to junk fax enforcement. We reiterate  that the introduction of recognized performance management practices  into FCC’s operations could improve the performance of its junk fax  enforcement efforts. FCC also provided technical comments that were  incorporated throughout this report as appropriate.
We are sending copies of this report to interested congressional  committees and the Chairman, FCC. We will make copies available to  others upon request. The report is available at no charge on GAO’s Web site  at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me on (202) 512-2834 or goldsteinm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report were Faye  Morrison, Assistant Director; Kimberly Berry; Elizabeth Eisenstadt; Edda  Emmanuelli-Perez; Chad Factor; Michele Fejfar; Mike Mgebroff; Josh  Ormond; Terri Russell; and Mindi Weisenbloom.
section_title: Statutes Protecting Consumers from Unsolicited Advertisements
paragraphs: This appendix provides a brief description of how unsolicited  advertisements provided through commercial telephone calls and e-mails  are regulated and how the regulations are enforced.
subsections: section_title: Regulating Unsolicited Telephone and E-mail Advertisements
paragraphs: In response to consumer frustration and dissatisfaction with advertising via  unsolicited telephone calls and e-mails, Congress has passed several  statutes directing the Federal Communications Commission (FCC) and the  Federal Trade Commission (FTC) to regulate unsolicited advertisements  delivered by telephone or e-mail. The Telephone Consumer Protection Act  of 1991 is FCC’s basic statutory mandate with respect to telemarketers and  applies to unwanted telemarketing calls and facsimile (fax) solicitations.  The Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994  is FTC’s specific statutory mandate regarding telemarketing. The  Controlling Assault of Non-Solicited Pornography & Marketing Act of 2003  (CAN-SPAM Act) provides FTC with the authority to regulate commercial  e-mails whose “primary purpose” is the “commercial advertising or  promoting of a commercial product or service.” FCC has authority under  the CAN-SPAM Act to regulate unsolicited commercial messages on  wireless devices. Thus, FCC’s and FTC’s enforcements are based upon  different statutory authority.
FCC’s enforcement efforts are generally accomplished through an  administrative process. FTC’s enforcement actions are usually filed in  federal district court and seek injunctive relief; consumer redress; and, in  some circumstances, civil penalties. The latter actions are filed by the  Department of Justice (DOJ) on behalf of FTC. Both commissions can  obtain civil penalties up to $11,000 per violation.
subsections: section_title: FCC - The Telephone Consumer Protection Act of 1991
paragraphs: The Telephone Consumer Protection Act of 1991 (TCPA) was created in  response to consumer concerns about the growing number of unsolicited  telemarketing calls to their homes and the increasing use of automated and  prerecorded messages. FCC’s rules under that act prohibit telephone  solicitation calls to homes between the hours of 9 p.m. and 8 a.m. Also,  under the rules, anyone making a call to a home, must provide his or her  name, the name of the person or entity on whose behalf the call is being  made, and a telephone number or address at which the person or entity  may be contacted. These telemarketing rules do not apply to calls or  messages placed with a consumer’s prior expressed permission, by or on  behalf of a tax-exempt nonprofit organization, or from a person or  organization with whom the consumer has an established business  relationship (EBR). TCPA telephone solicitation violations are enforced in  the same manner as TCPA junk fax violations.
section_title: FTC - The Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994
paragraphs: The purpose of the Telemarketing and Consumer Fraud and Abuse  Prevention Act of 1994 was to combat telemarketing fraud by providing law  enforcement agencies with new tools and to give consumers new  protections. The act directed FTC to issue a rule prohibiting deceptive and  abusive telemarketing acts or practices, and specified, among other things,  certain acts or practices FTC’s rule must address, including “…unsolicited  telephone calls which the reasonable consumer would consider coercive or  abusive of such consumer’s right to privacy.”
FTC issued its original Telemarketing Sales Rule (TSR) in 1995. TSR  requires certain disclosures and prohibits misrepresentations. Some of the  provisions of the rule will include the following: (1) the rule restricts calls  to the hours between 8:00 a.m. and 9:00 p.m.; (2) the rule forbids  telemarketers from calling consumers if they have been asked not to call;  and (3) the rule requires certain prompt disclosures, prohibits certain  misrepresentations and lying to get consumers to pay, and makes it illegal  for a telemarketer to withdraw money directly from a checking account  without the account holder’s specific, verifiable authorization. The TSR  rule was amended in 2003. The amended TSR established the National   Do-Not-Call Registry. In addition, the amended TSR places restrictions on  unauthorized billing, reduces abandoned calls, and requires caller  identification transmissions.
Several types of calls are expressly exempted from TSR coverage,  including calls initiated by consumers in response to direct mail (provided  certain disclosures are made), calls initiated by consumers in response to  advertisements in the general media (such as newspapers or media), and  business-to-business calls. Catalog sales calls also are exempt.
Under the statute, violations of TSR are treated as “unfair or deceptive acts  or practices in violation of the FTC Act.” FTC’s enforcement actions  generally are accomplished by seeking injunctive relief and consumer  redress. Under some circumstances (e.g., do-not-call violations),  injunctions and sometimes civil penalties (up to $11,000 per violation) are  sought. Actions seeking civil penalties are filed by DOJ on behalf of FTC  and are less common. FTC itself files and litigates its actions seeking  injunctive relief and consumer redress.
States, through their attorneys general, may bring civil actions on behalf of  their residents to enjoin the violation; enforce compliance with TSR; obtain  damages, restitution, or other compensation on behalf of residents; and  obtain such other relief as the court may deem appropriate. Private parties  may also bring a civil action within 3 years after discovery of the violation,  if the amount in controversy exceeds the sum or value of $50,000 in actual  damages for each person adversely affected by such telemarketing. Such  an action may be brought to enjoin such telemarketing, enforce compliance  with any rule, obtain damages, or obtain such additional and other relief as  the court may deem appropriate.
section_title: The National Do-Not-Call Registry
paragraphs: In January 2002, FTC proposed a National Do-Not-Call registry. One year  later, FTC amended its TSR to create the national registry and prohibit  covered telemarketing calls to consumers who registered their telephone  numbers. FCC revised its regulations pursuant to TCPA in June 2003,  requiring telemarketers under its jurisdiction to comply with the  requirements of the national registry.
In March 2003, Congress passed the Do-Not-Call Implementation Act,  which authorized FTC to establish fees “sufficient to implement and  enforce” the national registry. In September 2003, in response to legal  challenges to the national registry and requirements, Congress passed  additional legislation (1) expressly authorizing FTC to implement and  enforce a National Do-Not-Call Registry under the Telemarketing and  Consumer Fraud and Abuse Prevention Act and (2) ratifying the National  Do-Not-Call Registry regulation as promulgated by FTC in 2002.
Under FTC’s and FCC’s rules, the registry covers both traditional (wired)  and mobile (wireless) telephones. The registry is national in scope, applies  to all telemarketers (with the exception of certain nonprofit organizations),  and covers both interstate and intrastate telemarketing calls. Commercial  telemarketers are not allowed to call a consumer if his or her telephone  number is on the registry, unless there is an EBR between the seller and the  consumer or the consumer has given prior written consent to be called.  Nontelemarketing calls, such as political fundraising, market research  surveys, or debt collection, are not prohibited by the registry’s provisions.  The national registry started accepting consumer telephone number  registrations in late June 2003, and telemarketers began accessing the  national registry to obtain registered consumer telephone numbers in  September 2003. FTC and FCC began enforcing the provisions of the  national registry in October 2003.
FTC and FCC have different but overlapping jurisdiction over the activities  of entities that make telemarketing calls. FTC’s authority under its  telemarketing law is limited to entities engaged in interstate telemarketing,  while FCC’s authority covers both intrastate and interstate entities. In  addition, by statute, certain entities are wholly or partially exempt from  FTC jurisdiction but remain subject to FCC jurisdiction. These entities  include common carriers, banks, credit unions, saving and loans  institutions, airlines, nonprofit organizations, and insurance companies.
FTC and FCC do not take action on every complaint alleging a violation of  the national registry provision; rather, they consider a number of factors—  such as the number and persistence or duration of complaints filed against  a telemarketer, the nature of the claims made by the telemarketer, and any  past history of complaints or law violations—to determine whether to take  action against a telemarketer for violations of the national registry  provision.
section_title: The CAN-SPAM Act of 2003
paragraphs: The CAN-SPAM Act of 2003 establishes requirements for those who send  commercial e-mail, spells out penalties for spammers and companies  whose products are advertised in spam if they violate the law, and gives  consumers the right to ask e-mailers to stop spamming them. The law  covers e-mail whose primary purpose is advertising or promoting a  commercial product or service. A “transactional or relationship message”  (e.g., an e-mail that facilitates an agreed-upon transaction or updates a  customer in an EBR) may not contain false or misleading routing  information, but otherwise is exempt from most provisions of the   CAN-SPAM Act. State laws specifically related to commercial e-mail are  preempted. However, state laws that are not specifically applicable to   e-mail, such as trespass, contract, tort law, or state laws that relate to fraud  or computer crimes, are not preempted.
Under the CAN-SPAM Act’s major provisions, false or misleading header  information is prohibited. An e-mail’s “From,” “To,” and routing information  (including the originating domain name and e-mail address) must be  accurate and identify the person who initiated the e-mail. The law prohibits  deceptive subject lines and requires that the e-mail give recipients an opt- out method. Specifically, the sender must provide a return e-mail or  another Internet-based response mechanism that allows a recipient to  request that the sender not send future e-mails to the e-mail address.  Senders must honor opt-out requests. Additionally, the act requires that the  commercial e-mail be identified as an advertisement and include the  sender’s valid physical postal address.
FTC (and various other agencies) is authorized to enforce the CAN-SPAM  Act. Each violation is subject to fines of up to $11,000 per violation. FTC  also responds to deceptive commercial e-mail as a violation of the FTC act.  State attorneys general, state law enforcement agencies, and Internet  service providers (ISP) may also bring suit under CAN-SPAM for statutorily  set damages. In a December 2005 report to Congress, FTC stated that the  commission had brought 20 cases alleging violation of the act. The report  also noted that at the state level, three attorneys general have filed a total  of three actions—one with FTC as a coplaintiff—in federal court, naming  15 defendants under the CAN-SPAM Act. In addition, the report stated that  ISPs have also filed CAN-SPAM Act suits initially against more than 100  known defendants and more than 580 unknown (John Doe) defendants.
DOJ has the authority to enforce the criminal penalties established under  the act. Criminal penalties may include fines or imprisonment. According  to the legislative history of the act, aggressive civil and criminal  enforcement actions were needed to curb the growth of spam on all fronts.  The criminal provisions were targeted to those who use fraudulent and  deceptive means to send unwanted e-mail messages. The need for these  criminal provisions was based, in part, on a study by FTC that found that 66  percent of spam contained some kind of false, fraudulent, or misleading  information, and one-third of all spam contained a fraudulent return e-mail address that was included in the routing information, or header, of the  e-mail message.
Section 4 of the CAN-SPAM Act criminalized five types of activities in  connection with e-mail, set forth the maximum penalties for each type, and  called for the U.S. Sentencing Commission to consider new sentencing  guidelines. Specifically, the five types of activities are as follows:  accessing a protected computer without authorization to send multiple   using open relays with intent to deceive in sending multiple commercial   using materially false header information in sending commercial e-mail   falsely registering e-mail accounts or domain names in connection with  sending multiple commercial e-mail messages, and  falsely claiming to be the registrant of Internet protocol addresses for  sending spam.
The criminal penalties fall into three tiers. First, a 5-year statutory  maximum applies when the CAN-SPAM violation is in furtherance of any  felony under state or federal law, or when the defendant has previously  been convicted of an offense under 18 U.S.C. § 1037. Second, a 3-year  maximum applies for convictions of hacking into a computer, or to use a  computer system that the owner has made available for other purposes, as  a conduit for bulk commercial e-mail or for other violations of  18 U.S.C. § 1037 (a) when one of several additional conditions apply. The  conditions relate to the measure of the economic gain or loss, the volume  of e-mail sent, the number of false registrations used, or whether the  defendant had a leadership role in the offense. Finally, a 1-year statutory  maximum applies for any other violation of 18 U.S.C. § 1037. In addition, 18  U.S.C. § 1037(c) allows DOJ to seek the criminal forfeiture of both property  obtained from spamming profits and the computers used to send the spam.  In December 2005, FTC reported to Congress that DOJ had brought four  criminal prosecutions under the CAN-SPAM Act, and that numerous other  nonpublic investigations were ongoing.
Lastly, the CAN-SPAM Act supplements some consumer protections that  were already established by TCPA for regulating unwanted text messages  and e-mail on mobile devices. Together, the two laws impose limitations on  both unsolicited telephone marketing calls and any other calls to a paging  service, cellular telephone service, other radio common carrier service, or  any service for which the person being called would be charged for the call.  Under TCPA rules, a “call” includes text messaging if the messaging is sent  to a telephone number rather than an e-mail account. Electronic messages  can be sent to mobile devices using a variety of methods. The type of  technology used to send the electronic message determines how the  electronic message is regulated.
The CAN-SPAM Act required that FCC adopt rules to protect consumers  from receiving unsolicited mobile service commercial messages. Under  the act, a mobile service commercial message is a commercial e-mail  message that is transmitted directly to a wireless device that is utilized by a  subscriber of commercial mobile service in connection with that service.  The act defines an e-mail message as a message having a unique e-mail  address that includes a reference to an Internet domain. FCC issued rules  in August 2004.
FCC adopted a general prohibition on sending commercial messages to any  address referencing an Internet domain name associated with wireless  subscriber message services. To assist the senders of such messages in  identifying those subscribers, FCC requires commercial radio service  providers to submit those names to the commission, for inclusion on a  public list. FCC pursues violations of both CAN-SPAM and TCPA as it  relates to wireless devices under its general enforcement authority.
As part of our study, we considered whether additional enforcement  measures might be necessary to protect consumers from junk faxes, and  whether establishing junk fax penalties and enforcement actions for repeat  violators or abusive violations similar to the criminal penalties under  CAN-SPAM would have a greater deterrent effect. As explained in the letter  of this report, without FCC establishing performance goals and measures  and analyzing complaint and enforcement data, it is not possible to explore  the effectiveness of current enforcement measures. Without first gaining an  understanding of the effectiveness of current enforcement measures, it is  similarly not possible to determine whether additional enforcement  measures are necessary to protect consumers. We did, however, ask federal  government officials, representatives of the state attorneys general,  consumer advocates, and business associations for their opinions  regarding whether additional enforcement measures are currently  necessary to enforce junk fax violations. Those with whom we spoke  generally did not believe that additional measures were necessary at this  time and did not support imposing criminal sanctions on junk fax violators  similar to those imposed on spammers under CAN-SPAM. A few of those  with whom we spoke thought that the role of the telephone companies  might be expanded, similar to the role of ISPs under the CAN-SPAM Act, so  that telephone companies could bring suit against junk faxers using their  networks.
section_title: Scope and Methodology
paragraphs: The Junk Fax Prevention Act of 2005 required GAO to report to Congress  on FCC’s enforcement of the junk fax laws. Accordingly, we answered the  following questions: (1) What procedures have FCC established for taking  action on junk fax complaints—including receipt, acknowledgment,  investigation, and enforcement—and to what extent has it taken such  action? (2) What are the strengths and weaknesses of FCC’s junk fax  procedures? and (3) What challenges do FCC face in carrying out its junk  fax responsibilities?
To determine FCC’s procedures for taking action on junk fax complaints,  we reviewed provisions of TCPA as well as FCC’s rules and procedures for  implementing the provisions of the act. We interviewed officials from FCC’s  Consumer & Governmental Affairs Bureau (CGB)—whose responsibilities  include developing FCC rules and accepting and acknowledging  complaints—and FCC’s Enforcement Bureau—whose responsibilities  include junk fax enforcement. Additionally, we reviewed FCC’s guidance to  complainants for submitting junk fax complaints as well as FCC’s  procedures for receiving and documenting these complaints. Finally, we  obtained and reviewed FCC’s procedures for determining which  complaints would receive further investigative and enforcement actions.
To determine the extent to which FCC has taken action on junk fax  complaints, we obtained and analyzed FCC’s database for documenting  junk fax complaints and the spreadsheet used for determining investigatory  and enforcement actions. We obtained summary data on the number of  complaints received from 2000 through 2005, by source and method. We  also obtained detailed information on the amount of formal enforcement  actions taken against junk faxers since the formation of FCC’s  Enforcement Bureau. Further, to determine the type of concerns expressed  by consumers and businesses, we reviewed some individual consumer and  business comments submitted to FCC as part of the junk fax complaints  and contained in FCC’s database.
To assess the reliability of FCC’s complaint data, we interviewed FCC  officials responsible for the database regarding data entry and control  procedures and reviewed existing documentation about the system. We  conducted limited electronic tests on 2005 data to determine missing data  and duplicative complaint identification numbers; these tests revealed only  minor problems. We also conducted manual reviews to identify any  discrepancies in the database. For example, we reviewed a portion of the  comment fields in the database and found that some complaints that were  coded as junk fax complaints should not have been. Since this type of  review requires reading the comments for each complaint entered, which is  resource-intensive, we did not review all of the comments to determine the  extent of this problem. CGB officials acknowledged limitations of the data,  including reliability problems in previous years of tracking complaint  information, possible inaccuracies in coding, and continual changes to  more recent data as additional complaints are added. We determined that  the data were sufficiently reliable to present overall trends and  approximate figures. Specifically, we report only overall complaint  numbers for 2000 through 2002, and approximate numbers at a more  detailed level for complaints from 2003 through 2005.
To determine the strengths and weaknesses of FCC’s junk fax procedures,  we analyzed these procedures, including those used to determine which  junk fax complaints would be considered for further investigatory and  enforcement actions. In addition, we reviewed business and consumer  comments submitted to FCC during junk fax rulemaking and  reconsideration of existing rules. We also analyzed all junk fax consumer  complaint guidance provided by FCC to determine if the guidance was  consistent with the enforcement procedures.
To determine the challenges FCC faces in carrying out its junk fax  responsibilities, we reviewed provisions of the Government Performance  and Results Act of 1993, as well as documents and records used by FCC to  establish goals and performance measures—that is, budget justifications,  performance summaries, and strategic plans. We also reviewed FCC’s  quarterly complaint reports to determine the level of analysis being  conducted on junk fax complaints.
Finally, we used existing statutes and regulations to provide information on  additional enforcement measures and penalties that have been established  to protect consumers from other types of unsolicited advertising. We  interviewed FTC staff, representatives from the National Association of  Attorney’s General, and representatives from industry groups to obtain  more information on different enforcement rules and actions.
We conducted our work from November 2005 through March 2006 in  accordance with generally accepted government auditing standards.