http://www.latimes.com/business/la-me-privacy24sep24,1,7231912.story?coll=la-home-headlines

California Bans Spam, Sets Fines

By Carl Ingram

Times Staff Writer

September 24, 2003

SACRAMENTO — Gov. Gray Davis signed into law Tuesday a groundbreaking
bill aimed at banning often offensive "spam" advertisements from the
online mailboxes of millions of California computer users.

The measure, by state Sen. Kevin Murray (D-Culver City), would make it illegal
for spam marketers and their advertisers to e-mail Californians, unless the
recipient had specifically requested it or had had a prior business relationship
with the advertiser, such as a bookseller.

Violators would be subject to a fine of $1,000 for each unsolicited message and
up to $1 million for blitz campaigns in which hundreds of thousands or even
millions of unsolicited sales pitches are sent out daily.

As Davis signed the bill, SB 186, he announced that he had also signed or soon
would approve other measures in a package aimed at protecting the privacy of
Californians and guarding them from identity theft.

Many states, including California, have enacted laws aimed at cracking down on
unsolicited e-mail, whose topics can include products such as sexual enhancers,
"anti-aging" creams, weight-loss pills and heavily discounted home
loans. But Murray said his bill, effective Jan. 1, would be the first to hold
an advertiser liable along with the spam merchant.

"We think it is going to be the toughest bill in the nation," the
senator said Tuesday. "The beauty of this is you go after the advertisers.
They are fineable and attachable."

Murray noted that spam has increased astronomically in the last couple of years
and said it costs frustrated businesses and consumers billions of dollars in
wasted time as well as the costs of trying to prevent it.

The new law will allow state Atty. Gen. Bill Lockyer, Internet service
providers and individual citizens to sue spam marketers and their advertisers
in civil court. Backers of the bill said that feature alone would discourage
spam.

As the bill traveled through the Legislature, lawmakers agreed that it would be
relatively easy for California to win judgments against spam merchants and
their advertisers in state courts. But some considered actually recovering
damages from those outside the state and overseas problematic.

Currently, the state routinely sues out-of-state and foreign companies that do
business in California for a variety of offenses, such as fraud and false
advertising.

Lockyer spokesman Tom Dresslar said, for example, that a judgment could be made
in favor of the state against a spam merchant in Beijing, but that it "may
be more difficult, depending on distance and the circumstances, to collect. But
that doesn't mean we don't go after the guy in Beijing."

Dresslar said Lockyer, who is currently prosecuting a spam merchant under
another law, intends to aggressively enforce the anti-spamming law.

Murray disagreed that fines would be difficult to collect against spam
merchants located beyond the California state line. He said that since
virtually all online transactions involve the use of four internationally
recognized credit card companies based in the U.S., it would be relatively easy
to locate the offender's bank accounts and attach them for the amount of the
fine owed.

Or, Murray said, the plaintiffs could sue a credit card company and attempt to
attach the spam merchant's or advertiser's revenue that traveled through the
company's channels.

"As long as we know where your money is, we can attach it," he said.

David Kramer, a partner in the Wilson Sonsini law firm in Palo Alto, has been
dealing with efforts to control e-mail spam for seven years.

He said the only other state to pass a law banning spam is Delaware.

"It's not working there," said Kramer, "because banning spam is
only half the battle. You actually have to create an effective enforcement
mechanism to make sure the prohibition is enforced."

In Delaware, the principal enforcer is the attorney general, who is busy with
more serious crimes.

The new law in California "not only gives victims the ability to seek
redress for themselves," Kramer said, "but it also creates a means of
serving the public interest, because those suits create deterrent and the
threat of those suits creates deterrent."

He said he hopes that the California law will not be abused as he believes the
right to take private action has been in Utah, where the law allows a spam
recipient to sue for $10 for every e-mail. There, two law firms have filed
1,500 individual lawsuits seeking $6,500 settlements with e-mail senders, said
Kramer.

The California bill was backed by a variety of consumer advocates, who had made
protection of residents' privacy a leading issue of the recently concluded
legislative session.

Murray said the new law will require recipients to give their consent before
receiving a sales pitch via e-mail, unless the individual and the entity had
previously done business. In that case, the recipient could demand that no more
unsolicited messages be sent.

In a statement, Davis said the California law will signal to the nation that
the "time has come for unscrupulous spammers to stop feeding our e-mail
boxes a daily diet of unwanted e-mail."

Several bills have been proposed this year in Congress that would restrict the
use of commercial e-mail. Sen. Charles E. Schumer (D-N.Y.) has called for a
federal anti-spam registry, similar to the do-not-call registries for
telemarketers. That would enable consumers to prevent unsolicited commercial
e-mail. And Sen. Ron Wyden (D-Ore.) has co-sponsored a bill that would impose
stiff civil penalties on spammers who failed to include valid links allowing
recipients to unsubscribe to unwanted e-mails.

Davis, however, warned against other federal legislation that threatens to
overturn new privacy measures in California and nullify several existing
identity-theft laws.

One potential target is the heavily contested California law that requires
banks and other financial institutions to first obtain a consumer's consent
before his or her private financial history can be sold or traded to third
parties for marketing purposes. The law also clamps restrictions on which
companies in a business family can and cannot receive such information without
the customer's advance approval.

Legislation is moving in both houses of Congress that would throw out the law,
written by state Sen. Jackie Speier (D-Hillsborough), on grounds that state
laws cannot be stricter than federal laws.

Instead of wiping out California laws, Davis said in a letter to congressional
leaders, "Congress should consider them as a model for the rest of the
nation."

He said that, if nothing else, the federal legislation should exempt
California.

In the Legislature, the Murray proposal drew surprisingly little opposition.

But the California Assn. of Realtors expressed fear that the bill would limit
its ability to send electronic notices of trade shows and seminars to its
130,000 members.

Stan Wieg, an association lobbyist, said it would be hard for local chapters,
often run by volunteers, to keep up on who does and doesn't want such
information.

"You can see how you can be tripped up by that sort of record-keeping
obligation," he said.

The direct-marketing industry, which opposed other privacy bills, did not fight
the Murray proposal. But industry observers warned that the new law would not
touch the most notorious spam merchants, which are based outside the United
States.

"It fails to address the core issue about spam. It totally fails to be
able to reach the offshore criminals who are sending Viagra ads," said Ray
Schultz, editorial director of Direct, a magazine that covers the
direct-marketing industry. He said the industry would prefer to see a uniform
federal law that supersedes state statutes.

Another bill signed Tuesday by Davis was SB 27, which will require firms that
have divulged a customer's personal financial information to others to inform
the customer, upon request, which third parties received the information and
what it contained.

Times staff writer Nancy Vogel contributed to this report.