Home > 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