California Crackdown - spam and electronic marketing

Byline: Paul Miller

If you've ever sent a marketing e-mail to someone who did not specifically request it from you, you're a spammer in the eyes of a new California law. And that can cost you - big time.

Introduced by state senator Kevin Murray (D-Los Angeles), the California antispam law, S. 186, goes into effect in January. Send a marketing e-mail to a California resident who doesn't have a prior business relationship with you, and you could owe the state $1,000 per unsolicited message. Embark on an e-mail campaign using rented lists - even if they're lists of consumers who opted in to receive e-mail offers - and it could cost you as much as $1 million.

And it doesn't matter whether or not you're based in California. California-based marketers, however, are also forbidden to send unsolicited e-mails to anyone outside the state as well as within California.

The strictest state antispam bill to be signed into law, the legislation "certainly has national ramifications, and not only because California is such a large state," says David Sorkin, an associate professor at the John Marshall Law School in Chicago. (California represented more than 12% of the U.S. population in 2001, according to the California Department of Finance.) "Many e-mail marketers don't know where most of their prospective customers are located, so they may end up having to follow the most restrictive laws for everyone. Even those marketers who are able to segment their prospects by jurisdiction may not find it cost-effective to adopt different strategies and follow different rules for different states."

What's more, the law could affect the outcome of several state and federal bills currently being debated. "California has been a bellwether in other areas," says Jerry Cerasale, senior vice president, government affairs for the Direct Marketing Association in Washington. "So other states will look at it, and if history is repeated, I believe some states will follow California's lead" unless federal bills are signed into law first.

Legitimate marketers also at risk

Even before the California law goes into effect, marketers have been modifying their e-mail marketing campaigns.

In early October, video and DVD cataloger Movies Unlimited stopped sending out its "E-Flash" e-newsletter to noncustomers, even those who had requested it, says general manager Ed Weiss. And the Philadelphia-based company is not restricting this e-mail suppression to Californians, in part because it's not easy to determine which customers are from California based on their e-mail address. All told, Weiss says, Movies Unlimited is e-mailing about 10% fewer newsletters now than it was in September.

As of October, Delray Beach, FL-based Levenger hadn't made any changes to its e-mail policies, but it didn't rule out doing so. "We are very diligent with our opt-in e-mail procedures, but with this new California law, we would consider requesting a second opt-in confirmation from our California customers," says Tracy Lamb, director of marketing for the "reading tools" cataloger. By requesting a second opt-in, she adds, "hopefully, this would eliminate those who 'forgot' requesting Levenger e-mail, as we would cite the law in the second e-mail request."

Los Angeles-based Viking Office Products stopped renting e-mail lists for prospecting nearly a year ago because of the California bill, says vice president of marketing Sean Clough - even though e-mail prospecting "had been working well enough that we'd keep going back and doing it."

Viking's success with e-mail prospecting contradicts the viewpoint of the bill's author, Sen. Murray. Most "well known brands" already adhere to the letter of the law, Murray told Catalog Age, "because it affects the value of the brand name. As a rule, most of the bigger mailers don't send out unsolicited e-mails."

What, me worry?

Indeed, several catalogers say they aren't concerned with the bill, for that very reason.

"We have direct consent [from customers]. And through the definition in the bill, our e-mails are specifically based on preexisting relationships where customers have supplied us with their e-mail addresses," says Rich Donaldson, a spokesperson for Freeport, ME-based outdoor apparel and sporting goods cataloger L.L. Bean. "We don't rent or use any other lists to send out e-mail solicitations."

The Wolferman's catalog division of Lenexa, KS-based food marketer Williams Foods also sends e-mails only to customers who have opted in. "And in every message, we give them an out if they want to tell us not to send them anything," says divisional vice president John Butorac.

Wolferman's used to send prospecting e-mails a few years ago, Butorac says, to "people who supposedly gave permission to receive promotions from other companies such as ours. But we now adhere to a policy that you should have permission-based names."

Among respondents to Catalog Age's most recent Benchmark Survey on Lists and E-lists (March 1, 2002, issue), nearly 45% sent marketing e-mails to customers who specifically opted in, and 21% sent them to customers who did not specifically opt in. But 5% e-mailed Website visitors who had provided an e-mail address but did not specifically opt in, the same percentage that sent e-mails to names from compiled lists.

While some individual catalogers may not be hurt by the California bill, list firms no doubt will. Jay Schwedelson, corporate vice president of Boca Raton, FL-based list firm Worldata, believes that the size of the prospecting e-list universe will drop 10%-15%.

Marketers must also consider that about 30% of the e-mail names on all databases don't have any type of geographic information associated with them, Schwedelson says, "and that means you'll have to treat those addresses as if they're California residents because you don't know." Combine the 10%-15% of e-mail addresses that come from California with the 30% unknown, and "you're losing 35%-40% of the list size off every e-mail list available for rental."

Multititle mailers have another implication to consider, Schwedelson adds: "If you own multiple catalog brands that are completely separate from each other, and someone buys something from one catalog and gives their e-mail address and you choose to use that to promote something from your other catalogs, you're going against that law."

That's not a problem for Neiman Marcus Direct, says spokesperson Ginger Reader. The upscale apparel and home decor marketer, which mails the Neiman Marcus, Horchow, and Chef's Catalog titles, keeps its properties separate when it comes to e-mail marketing. "We don't cross over," Reader says. "If you sign up for Horchow, you only get Horchow. You can click to our other catalogs' sites to sign up."

Likewise, Viking Office Products, which is a division of cataloger/retailer Office Depot, "specifically does not exchange" e-mail lists between its Viking and Office Depot brands, Clough says.

Looking to Congress

Some marketers are hoping that the California law will soon be superseded by a less restrictive federal law. Several bills that are being considered include a provision specifying that they would override state regulations.

Chief among the federal bills is the Can-Spam Act (S. 877), authored by Sen. Conrad Burns (R-MT) and Sen. Ron Wyden (D-OR). Approved by the Senate on Oct. 22, the bill would require unsolicited commercial e-mails to be labeled with "ADV" in the subject line and to include opt-out instructions and the sender's physical address. It would also prohibit the use of deceptive subject lines and false headers in such messages. But perhaps most important for catalogers, it would preempt any state laws that prohibit unsolicited commercial e-mail outright.

Viking's Clough, for one, has his eye on Washington. "We're kind of on a wait-and-see," he says, "are are hoping some federal laws will override California."

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COPYRIGHT 2003 PRIMEDIA Business Magazines & Media Inc. All rights reserved.
COPYRIGHT 2003 Gale Group

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