Junk Fax Prevention

On July 9, 2005, President Bush signed the Junk Fax Prevention Act of 2005 (the “Act”) into law as Public Law No. 109-21. The Act codifies the established business relationship (“EBR”) exemption to the Telephone Consumer Protection Act’s[1] (“TCPA”) general ban on the transmission of unsolicited facsimile ads. In general terms, under the EBR exemption, a business may transmit an unsolicited facsimile ad to a person or entity with whom it has an established business relationship.

In enacting the TCPA in 1991, Congress delegated to the Federal Communications Commission the task of developing rules to implement the TCPA. The FCC had previously recognized the EBR exemption, but it retreated from this position, and on July 3, 2003 it promulgated a rule which eliminated the EBR exemption.[2] This rule was originally scheduled to become effective on August 25, 2003. However, several business groups requested the FCC to delay the effective date of this rule and the FCC entered orders on three occasions delaying the effective date for the implementation of its rule. The FCC's rule has now been rendered meaningless by the enactment of the Act into law.

The Junk Fax Prevention Act of 2005

The Act was introduced in the 109th Congress in the Senate as S. 714 and was passed by the Senate on June 24, 2005 and by the House on June 28, 2005. An attempt was made to pass a similar bill[3] in the 108th Congress, and the legislation failed in the Senate. The Act is effective as of July 9, 2005. As noted above, the primary purpose of the Act is to amend the TCPA to expressly allow businesses to transmit unsolicited facsimile advertisements to persons or entities with whom they have an EBR.

Definition of an EBR

The Act defines an EBR by adopting a definition of an EBR which the FCC had previously promulgated and which was effective as of January 1, 2003. This definition defined an EBR 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 terminated by either party. 47 C.F.R. §64.1200(f)(4) (effective January 1, 2003).

The TCPA also regulates telemarketing calls so the definition of an EBR cited above referred to “residential subscribers.” The FCC has always interpreted the definition of an EBR to include a business to business relationship. To make it clear that the EBR exemption also applied in the situation where a business is sending an unsolicited facsimile ad to another business with whom it has an EBR, the Act expressly provides in Section 2(b) that the definition of an EBR also includes faxes sent to a business.

Thus an EBR now exists anytime there is a voluntary two-way communication between a business and its customer (either an individual or a business) as a result of an inquiry to the business, or an application or a transaction regarding products or services offered by the business, provided that the relationship between the business and the customer had not been terminated by either of them. For example, if a potential customer makes an inquiry to a business about their products or services and requests sales literature, an EBR is deemed to exist between this potential customer and the business even though the customer did not make a purchase. With some qualifications, which shall be discussed below, the business could send this potential customer an unsolicited facsimile ad promoting its products and services.

Length of time an EBR is deemed to exist

Pursuant to the Act, at present there is no time limitation on the duration or period for which an EBR is deemed to exist. The Act specifically provides that the FCC may not establish such a time frame before October 9, 2005. In its July 3, 2003 Report and Order, the FCC promulgated a rule which provided that an EBR for purposes of telemarketing calls lasted only for an 18-month period from the date of a purchase by a consumer and for a 3-month period following an inquiry by a consumer.

Method of acquiring facsimile number

The Act provides that for EBRs created on or after July 9, 2005, for the EBR exemption to apply, the facsimile number of the recipient must be obtained by the business as the result of either a voluntary communication of the facsimile number by the recipient in the context of the transaction creating the EBR, or the sender of the facsimile may acquire the number from a directory, advertisement or internet site where the recipient voluntarily agreed to make available its facsimile number for public distribution.

This means that for EBRs created on or after July 9, 2005, the manner in which the facsimile number of the recipient is acquired is relevant to whether the EBR exemption applies. The recipient either has to provide the facsimile number voluntarily to the sender in the course of the transaction creating the EBR or the recipient has to voluntarily agree to make its facsimile number available to a directory, advertisement or internet site and the sender obtains it from one of these sources. If a sender obtains the facsimile number of a person or entity with whom it has an EBR in some other manner, the EBR exemption is invalid.

It should be noted that many unsolicited facsimile actions are being brought as class actions. The manner in which the recipient’s facsimile number was obtained may create yet another individual factual determination which is relevant to the issue of whether a class may be certified.

Notice on fax is required

The Act further provides that in order for the EBR exemption to apply, the facsimile must contain a “clear and conspicuous notice” on the first page of the facsimile which provides: a) that the recipient may make a request to the sender not to send any further facsimiles and that the failure to comply within the time frame to be determined by the FCC is unlawful; b) that such a request is only valid if: (i) it identifies the telephone number(s) of the facsimile machine(s) to which it applies, (ii) the request is made to the telephone or facsimile number provided in the notice or in such other manner as may be approved by the FCC, and (iii) that the person making the request has not subsequent to making the request provided express permission in writing or otherwise, granting sender permission to send facsimile ads to recipient; c) a domestic telephone and facsimile machine number for recipient to transmit a request to sender; d) a cost free mechanism for the recipient to transmit the request to sender which is available 24 hours each day and 7 days a week.

Summary of requirements for a valid EBR

To summarize, in general a valid EBR exists after July 9, 2005 only if the following criteria have been satisfied:

• There was a voluntary two-way communication between the sender and recipient with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction by the recipient regarding products or services offered by sender, which relationship has not been terminated by either party.

• Recipient has not already given notice to sender not to send facsimile ads.

• Sender obtained recipient’s fax number in an appropriate manner as provided in the Act.

• Clear and conspicuous notice is provided on first page of facsimile advising recipient of right to request sender not to send further faxes, which details what constitutes a valid request and provides a cost-free mechanism for transmitting such a request to sender.

What Should a Business Do?

Transmission of facsimile advertisements is a marketing tool which may always create exposure to litigation. There have been hundreds of class actions filed across the country alleging violations of the TCPA and state law claims for conversion and for violation of state consumer statutes arising from the transmission of facsimile ads. Since the TCPA provides for a statutory remedy of $500 per unsolicited fax which may be trebled, a facsimile ad campaign may create ruinous exposure for a company. Even if a business complies with the requirements to transmit unsolicited facsimile ads, it may still face litigation.

If a business engages in facsimile advertising, the maximum level of protection available is to obtain express written permission in advance of transmitting facsimile ads from each intended recipient of the facsimile ad. While such a course of conduct is not necessarily required under the TCPA if an EBR exists, it provides a business with the maximum level of safety available. The Act and prior FCC interpretation allow for the transmission of unsolicited facsimile ads to persons with whom the sender has an EBR. For EBRs created after July 9, 2005, a business must comply with all the requirements set forth in the Act to rely upon the EBR exemption.

Finally, it should be noted that in addition to the TCPA, several states have enacted state statutes regulating unsolicited facsimile ads. See e.g: Colorado - C.R.S. 6-1-702 (2005). Illinois has enacted a criminal statute which makes it a petty criminal offense to knowingly send an unsolicited facsimile ad. 720 ILCS 5/26-3 (2005). Other states are in the process of enacting their own versions of the TCPA. For example, SB833 is presently pending in the California State Legislature which creates a California version of the TCPA and the proposed bill does not contain an EBR exemption. A business transmitting facsimile ads must also ensure that it is also in compliance with state law in the states to which it is transmitting facsimile ads.

Ice Miller can assist you in dealing with all facsimile marketing issues

Whether it is defending individual or class action litigation brought under the TCPA for the transmission of unsolicited facsimile ads or advising your business regarding compliance issues for a fax marketing campaign, Ice Miller has the experience and skills to effectively represent your business. Please contact Bart Murphy for further information.

Bart Murphy is a Partner in Ice Miller's DuPage County, IL Office (western suburbs of Chicago), and he is a member of our Business Litigation Practice Group. His practice is focused on complex litigation matters including class action defense. He has successfully defended clients in over 40 TCPA unsolicited fax class actions.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.