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SENATE COMMITTEE ON BUSINESS 
AND PROFESSIONS - Fax Law
Senator Liz Figueroa, Chair

Attorney Reference
           ----------------------------------------------------------
          |Hearing Date:August 20,        |Bill No:AB                |
          |2001                           |839                       |
           ----------------------------------------------------------


                  SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
                          Senator Liz Figueroa, Chair

                    Bill No:        AB 839Author: Lowenthal
                    As Amended:April 5, 2001 Fiscal:     Yes


          SUBJECT:  Advertising: facsimile machine.

          SUMMARY:  Prohibits the use of a facsimile machine to
          disseminate unsolicited advertising and promotional
          materials.

          Existing state law:

          1)Regulates false and misleading advertising generally, and
            subjects violators to both civil and criminal penalties.

          2)Regulates unfair or deceptive business practices
            generally, and subjects violators to both civil and
            criminal penalties.

          3)Provides that no person or entity conducting business in
            this state shall fax   documents consisting of unsolicited
            advertising material for the lease, sale, rental, gift
            offer, or other disposition of any realty, goods,
            services, or extension of credit, unless that person or
            entity establishes a toll-free telephone number that a
            recipient of the unsolicited faxed documents may call to
            notify the sender not to fax the recipient any further
            unsolicited documents.

          4)Provides that all unsolicited faxed documents shall
            include a statement informing the recipient of the
            toll-free telephone number that the recipient may call,
            or a valid return address to which the recipient may
            write or e-mail, as the case may be, notifying the sender
            not to fax the recipient any further unsolicited
            documents to the fax number, or numbers specified by the





                                                                     AB 839
                                                                     Page 2



            recipient.  The statement shall be the first text in the
            body of the message and shall be of the same size as the
            majority of the text of the message.

          5)Provides that upon notification by a recipient of his or
            her request not to receive any further unsolicited faxed
            documents, no person or entity conducting business in
            this state shall fax any unsolicited documents to that
            recipient.

          Existing federal law:  The Telephone Consumer Protection
          Act of 1991 (TCPA), prohibits the transmission of
          unsolicited advertisements by telephone facsimile machines
          and provides various remedies.


          This bill:

          1)States the following findings and declarations:

             a)   Unlike other forms of advertising media, the use of
               a fax machine to transmit unsolicited advertising and
               promotional material imposes a real cost on the
               recipient of the transmission.

             b)   Every fax transmission creates expense for the
               recipient in the form of paper, ink, and wear and tear
               on a fax machine.

             c)   Unsolicited fax advertising imposes this cost
               without the knowledge or permission of the recipient.

          1)Provides that no person or entity shall disseminate an
            unsolicited advertisement via any telephone facsimile
            machine, computer, or other device, to make an electronic
            or telephonic transmission to a telephone facsimile
            machine located in California by means of any connection
            with a telephone network for the purpose of transmitting
            a commercial solicitation.

          2)Defines telephone facsimile as equipment that has the
            capacity to either: (a) transcribe text or images or both
            from paper into an electronic signal, and transmit that
            signal over a regular telephone line; or (b) transcribe
            text or images or both onto paper from an electronic
            signal received over a regular telephone line.





                                                                     AB 839
                                                                     Page 3




          3)Defines commercial solicitation as an electronic or
            telephonic transmission to a facsimile device of
            unsolicited advertising material for the lease, sale,
            rental, gift, offer, or other disposition of any realty,
            goods, services, or extension of credit.

          4)Provides that commercial solicitation does not include an
            electronic or telephonic transmission to a facsimile
            device that is any of the following:

             a)   Made in the course of prior negotiations between
               the party sending and the party receiving the
               materials.

             b)   Made to a party with whom the sender has a prior
               business relationship or an existing business
               relationship.

             c)   Made in the course of a follow-up sales call.

          1)Provides that any person or entity aggrieved by a
            violation of this section may bring an action in the
            appropriate court and shall be entitled to recover, for
            each violation, the amount of actual monetary loss, or
            the sum of five hundred dollars ($500), whichever is
            greater.

          FISCAL EFFECT:  "Potential minor non-reimbursable local
          costs for investigation and prosecution of violations,
          potentially offset by fine revenue," according to the May
          9, 2001, Assembly Appropriation Committee analysis.

          COMMENTS:

          1.Measure Heard by this Committee on June 25, 2001.  This
            Committee heard this measure on June 25, 2001, but no
            vote was taken.  When the  author presented on the
            measure, he argued that his measure simply mirrored
            federal law.  Additionally, the author argued, and was
            supported by Legislative Counsel, that state law is
            preempted by federal law.  The opposition, fax.com,
            disagreed and argued that not only is the federal law
            unconstitutional but that the state law is not preempted.
             The opposition also indicated that the issue of the
            constitutionality of the federal law is currently being





                                                                     AB 839
                                                                     Page 4



            deliberated in California and Missouri.

            Ultimately, the Chair suggested that maybe the author may
            want to consider coming back to Committee in August to
            see if either the California or Missouri court ruled in
            the meantime.  The author agreed.  It should be noted
            that while the California court has recently ruled on the
            matter before it for consideration, it is unclear whether
            that ruling sheds any light on the potential implications
            of supporting this measure.  Additionally, it appears
            that the Missouri court has not ruled on the matter
            before it.

          2.Measure Aimed at Prohibiting the Transmission of
            Unsolicited Fax Advertising Material.  According to
            information provided by the author's office, unlike more
            traditional media, the use of a fax machine to transmit
            unsolicited advertising and promotional material imposes
            a hard cost on the recipient of the fax.  Additionally,
            the information provided by the author's office states
            that a faxed advertisement or "junk fax" is a form of
            advertising that is delivered C.O.D. to the recipient.
            Also, the information points out that every fax
            transmission imposes a real expense for the recipient in
            the form of paper, ink, and wear and tear on the fax
            machine.

          3.Background.

             a)   State Law - Business and Professions Code Section
               17538.4.  In 1992, the Legislature passed and the
               Governor signed AB 2438 (Katz, Chap. 564, statutes of
               1992).  As originally introduced, the measure looked
               quite similar to AB 839.  As enacted, it allowed
               unsolicited faxing provided certain conditions were
               met.  It also provided that violations were an
               infraction punishable by a fine of $500.00.

               In 1998, Sec. 17538.4 was amended by AB 1676 (Bowen,
               Chap. 865, Statutes of 1998).  AB 1676 focused on
               electronic email and does not appear to have addressed
               unsolicited faxes.  However, since Sec. 17538.4 deals
               with both emails and faxes, and the penalty provision
               applied to both equally, when the author took
               amendments to apparently appease opposition, the
               violation provision was deleted.  It is unclear





                                                                     AB 839
                                                                     Page 5



               whether the Legislature recognized that such an
               amendment also impacted unsolicited faxes.

             b)   Federal Law -- The Telephone Consumer Protection
               Act of 1991 (TCPA).  On December 20, 1991, the U.S.
               Congress enacted the TCPA.  The TCPA mandated that the
               Federal Communications Commission (FCC) implement
               regulations to protect the privacy rights of citizens
               by restricting the use of the telephone network for
               unsolicited advertising.  On September 17, 1992, the
               FCC adopted a Report and Order which established rules
               governing unwanted telephone solicitations and
               regulated the use of automatic telephone dialing
               systems, prerecorded or artificial voice messages, and
               telephone facsimile machines.  These regulations
               prohibit the transmission of unsolicited
               advertisements by telephone facsimile machines among
               other things.

               The TCPA provides consumers with several options to
               enforce limitations against unsolicited telemarketing
               contacts.  Absent state law to the contrary, the TCPA
               permits consumers to file suit in state court if an
               entity violates the TCPA prohibitions on the use of
               facsimile machines, automatic telephone dialing
               systems, and artificial or prerecorded voice messages
               and telephone solicitation.  Consumers may also bring
               their complaints regarding TCPA violations to the
               attention of the state attorney general or an official
               designated by the state.  This state entity may bring
               a civil action on behalf of its residents to enjoin a
               person or entity engaged in a pattern of telephone
               calls or other transmissions in violation of the TCPA.
                Additionally, a consumer may request that the FCC
               take enforcement actions regarding violations of TCPA
               and the regulations adopted to enforce it.

          1.Is California Law -- Business and Professions Code
            Section 17538.4-- preempted by the TCPA?  It is the
            Author's opinion, and Legislative Counsel has confirmed,
            that Section 17538.4 is preempted by the TCPA.
            Therefore, the author believes that his measure simply
            clarifies existing federal law.  However, it should be
            noted that the opposition believes that California law is
            not preempted by the federal law.






                                                                     AB 839
                                                                     Page 6



          2.If the Author Feels that the TCPA Is the Law, Why Is This
            Measure Needed?  According to the author's office, the
            TCPA has failed to deter companies from sending
            unsolicited faxes.  Additionally, the author's office
            indicates that although it may be possible for a business
            or individual to seek legal redress in state court under
            the federal law, it would be easier and more user
            friendly to have a similar state law on the books.  The
            author believes that consumers are more likely to
            recognize a state prohibition as offering the opportunity
            to pursue the violation in small claims court.  The
            author's office indicates that states such as Oklahoma,
            Connecticut, Nebraska and South Carolina have enacted
            similar prohibitions on junk faxes and have seen a
            decrease in such activity.

            In their letter of support, the Foundation for Taxpayer
            and Consumer Rights (FTCR) states that while California
            consumers can currently avail themselves of the federal
            law in California state courts, it makes sense to amend
            state law so that consumers will not mistakenly think
            they have no right of action in California.

          3.Should the Exemption for Prior and Existing Business
            Relationships Be Allowed?  This measure, in essence,
            exempts electronic and telephonic transmissions to a fax
            device made to a party with whom the sender has a prior
            business relationship or an existing business
            relationship.  In a publication provided by the FCC
            entitled, "What You Can Do About Unsolicited Telephone
            Marketing Calls and Faxes," the FCC states that an
            individual has an established business relationship with
            a person or entity if they have made an inquiry,
            application, purchase or transaction regarding products
            or services offered by such person or entity.
            Additionally, the FCC states that if the individual has
            an established business relationship with the person or
            entity sending the message, an invitation or permission
            to receive unsolicited fax advertisements is presumed to
            exist.  Finally, the FCC states that an individual can
            end this relationship by telling the person or entity
            that they do not want them to send any more unsolicited
            advertisements to their fax machine.

             The author should ensure that the exemptions provided in
            this measure conform to the TCPA.





                                                                     AB 839
                                                                     Page 7



            
          4.Amendments to Be Proposed by the Author in Committee.
            Per conversations between the author's office and
            Committee staff, the author intends to submit two
            amendments in Committee.

             a)   Findings and Declarations.  At the request of
               Committee staff, the author intends to amend this
               measure to delete Section 1.  Section 1 states three
               findings and declarations.  Committee staffs' internal
               policy on findings and declarations is to require that
               they be backed by a recognized study.  In this case,
               while the findings and declarations might be accurate,
               author's staff was unable to produce a recognized
               study.  Therefore, Committee staff recommended that
               they be deleted from the bill.

             b)   Exclusion from the Measure's Provisions.  At the
               request of Pacific Bell, the author intends to offer
               the following amendment:  As used in this section,
               "disseminate" does not include or refer to the
               transmission of any documents by a telecommunications
               utility or Internet service provider to the extent
               that the telecommunications utility or Internet
               service provider merely carries that transmission over
               its network.  According to Pacific Bell, it would be
               unfair to expose a telecommunications utility or
               Internet service provider to liability under this
               section merely because it provides the conduit for
               transmitting a fax.  Pacific Bell indicates that
               current law affords this "exemption."  Additionally,
               it should be noted that it appears this amendment
               would be consistent with the TCPA.

          1.Arguments in Support.  In their letter of support, the
            Office of the Attorney General argues that this measure
            would bring California in line with the federal
            government and provide better protections for consumers.
            Additionally, they argue that they believe that the
            decision by the Court of Appeals of the Ninth Circuit
            Court, declaring the TCPA constitutional, is a very sound
            decision.

            In their letter of support, the FTRC states that they
            have received numerous complaints from individuals who
            say that their home fax machines are inundated with





                                                                     AB 839
                                                                     Page 8



            dozens of junk faxes per day.  In a week's time, this
            quickly adds up to hundreds of wasted pages of fax paper
            and the need to replace toner cartridges far too
            frequently.  The FTCR argues that there is no reason that
            a consumer or business who has no prior relationship with
            the junk fax company should be forced to pay that
            companies advertising costs.

            In a letter of support from a small business located in
            Davis, California, the business states that they have
            been a victim of junk faxes for approximately the last
            six months and they have been unable to stop them.  They
            point out that calls made to the toll free opt-out phone
            numbers have been ignored in most cases.  Furthermore,
            none of these faxes have a return address or originating
            fax number on them.  They indicate that as a small
            business, junk faxes waste time and supplies and are
            simply an annoyance.

          2.Arguments in Opposition.  In their letter of opposition,
            Fax.com indicates that there are several reasons for
            their opposition.  Initially, believe that the federal
            legislation is an invitation to the type of jackpot
            litigation that has clogged the courts and will
            ultimately be ruled unconstitutional.  Additionally,
            Fax.com's letter states that they believe it makes more
            sense for the Legislature to have an interim hearing
            after the court rules this Fall and that it does not make
            sense to conform legislation to a federal statute that
            could possibly be ruled unconstitutional.

            Fax.com argues that, while they recognize that commerce
            isn't always convenient, consumers also have the right to
            receive product notices that they send to consumers from
            reputable companies, legally doing business in
            California.  However, they do believe consumers have the
            right to say, "enough is enough."  They believe that in
            California a provision should be enforced so that
            consumers who call an 800 number can be removed from the
            fax list.  Fax.com indicates that they put an 800 number
            on their faxes.

          SUPPORT AND OPPOSITION:
          Support:
          Attorney General Bill Lockyer
          The Foundation for Taxpayer and Consumer Rights





                                                                     AB 839
                                                                     Page 9




           Opposition:
          Fax.com

          Consultant:Kristin J. Triepke


Let's Stop The Fax Spammers In Their Tracks!

To Report An Unsolicited Junk Fax
Please Fill Out The Form Below

THEN FAX US ALL OF YOUR SPAM FAXES TO:
(754) 264-0166 AND GET PAID!
* All Fields Are Required
*Company:
*First Name (No Initials):
*Last Name (No Initials):
*State:
*Type Of Business:
* Fax Number:
Example: 9254325458 (No Dashes)

* I confirm that I do not have an established business relationship with the advertiser and that I have not expressly consented or permitted the advertiser to send me the attached fax advertisement.

We will investigate your fax spam report at no charge to you and 
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Background Information About Junk Spam Faxes.

The TCPA and Federal Communications Commission (FCC) rules generally prohibit most unsolicited junk facsimile (fax spam) advertisements. The TCPA states that an advertiser cannot send you unsolicited fax advertisements unless you have given the advertiser your prior express consent to receive fax advertisements or you have an established business relationship (EBR). Even if the advertiser has received your prior express consent or has EBR, they are also required to allow you to ?opt out? of receiving their junk fax advertisements. The Junk Fax Prevention Act of 2005, directed the FCC to amend its rules adopted pursuant to the TCPA regarding fax advertising. The FCC?s revised rules:

     
  Require the sender of fax advertisements to provide specific information on the fax that allows recipients to ?opt-out? of any future faxes from the sender
  Specify the circumstances under which a request to ?opt-out? complies with the Act.
 

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