United States: FCC Amends Junk Fax Rules to Address "Established Business Relationships"

The Federal Communications Commission (FCC) voted unanimously to amend its rules restricting transmission of unsolicited commercial facsimile messages to implement the Junk Fax Prevention Act of 2005. In particular, the amendment provides a new definition of "established business relationship" (EBR) that expands the range of unsolicited advertisements that may be transmitted; requires opt-out notices and procedures; and limits the way facsimile numbers can be obtained. The FCC also provided guidance on the types of "transactional" messages that would not be considered advertisements, discussed incidental advertisements within other noncommercial material, and underscored the potential for liability by both facsimile "broadcasters" and senders — the businesses, associations, or individuals on whose behalf the messages are sent.

In general, unsolicited fax advertisements may not be sent (to consumers or businesses) without the express consent of a recipient unless the sender has an established business relationship with that recipient. "Unsolicited advertisement" is broadly defined to include material advertising the commercial availability or quality of any property, goods, or services.

The FCC’s new definition of "established business relationship" (EBR) provides that a sender has formed an EBR with a recipient when it has engaged in a voluntary, two-way communication with the recipient based on the recipient’s inquiry, application, purchase or transaction, provided that the EBR has not been previously terminated by either party. Significantly, this new EBR definition adopted for the fax rule differs from, and is more permissive than, the definition of EBR applicable to telemarketers under the Telephone Consumer Protection Act of 1991 (TCPA). While the "fax" EBR does not require the prior two-way communication to have occurred during any particular recent period of time, the "telemarketing" EBR is limited to consumers who have made a purchase from the telemarketer during to the prior 18 months or have made an inquiry or application for products or services within the prior three months.

In the new "fax" rule, the FCC emphasized that concrete contacts regarding "products or services" are required. Merely visiting a website without requesting information or making an inquiry about a store location or trying to identify a fax sender, for example,would not be sufficient to form an EBR.

In addition, the definition of EBR in the "fax" rule will not extend to an affiliate of the sender, whether that is a third party fax "broadcaster" or a corporate entity related to the company on whose behalf faxes are sent. So, for example, while a fax broadcaster may transmit an advertisement on behalf of an entity that has an EBR with the recipient, the fax broadcaster is not permitted to "piggyback" off that same EBR to send a fax advertisement on behalf of another client. In addition, the FCC made it clear that companies may not transfer their EBRs to affiliated companies because it would place an enormous burden on consumers to prevent faxes from companies with which they have no direct business relationship.

If an EBR exists, senders must comply with other requirements pertaining to fax numbers and opt-out notices.

1. Manner of Acquiring Fax Number. Unsolicited advertisements may be faxed to a recipient with whom the sender has an EBR so long as the sender obtained the fax number in one of the following ways:

1. the recipient provided the number to the sender
2. the recipient provided its fax number to a directory, advertisement or Internet site for public distribution¹; or
3. if an EBR with a fax recipient was in place before July 9, 2005, there is a rebuttable presumption that the sender also possessed the recipient’s fax number prior to that date.

The FCC emphasized that the public availability of a fax number, by itself, does not create an EBR and does not entitle a person to send a fax advertisement to that number.

2. Conspicuous Opt-Out Notice. In addition, unsolicited advertisements may be faxed to a recipient with whom the sender has an EBR or from whom the sender has obtained prior explicit consent as long as the fax contains a detailed opt-out notice on the first page. The following requirements apply to the opt-out notice:

• "Clear and conspicuous" means that it must be separate and distinguishable from the advertising copy (e.g., through boldface, italics, etc.), placed at either the top or bottom of the first page of the fax, and must be apparent to the reasonable consumer.
• It must contain a statement that a recipient may request the sender not to fax any future advertisements to one or more fax machines and that failure to comply with such a request within 30 days is unlawful.
• It must include the requirements for a consumer to make an effective opt-out request, i.e.,

1. the recipient must provide the telephone number or numbers of the machine or machines that the recipient wishes to block from future faxes;
2. the request must be made to the telephone number, fax number, website address or email address identified in the sender’s fax advertisement; and
3. the person making the request has not, since making the request, provided express consent to the sender to send fax advertisements to this fax number.

• The opt-out notice must also include a domestic contact telephone number and fax number for the recipient to send the request to the sender; and if those numbers are not toll-free, must include a separate cost-free mechanism such as a website address, email address, or free local phone number to permit the recipient to make the request.
• The telephone and fax numbers and cost-free means identified in the notice must permit the recipient to make an opt-out request 24 hours a day, 7 days a week.

3. Honoring Opt-Out Requests. If a sender receives an opt-out request that complies with the specific requirements enumerated above, the sender must honor the request within the shortest reasonable time, not to exceed 30 days. The sender may not send further unsolicited advertisements unless the recipient subsequently provides prior express invitation or permission to the sender.

The recipient’s opt-out request terminates the EBR for purposes of sending future unsolicited advertisements — even if the recipient makes a subsequent purchase, inquiry, or application. The FCC noted that an opt-out of future faxes is consistent with a consumer’s company-specific "do not call" request in the telemarketing context which also terminates an EBR despite future transactions or inquiries by the consumer.

The FCC made it clear that the sender — the business, association, or individual on whose behalf the fax is transmitted (i.e., the party whose goods or services are being advertised or promoted) — is responsible for complying with the fax rules (including the opt-out notice requirements) and for honoring opt-out requests. "Fax broadcasters" and other third parties are required to accept opt-out requests and forward them to senders so senders are able to honor such requests. Third parties will also be liable for violations of the fax rules if they have a high degree of involvement in, or actual notice of, the illegal activity. For example, if a fax broadcaster obtains the fax numbers used, the fax broadcaster would be liable should faxes be sent to recipients who do not have an EBR with the sender or have not provided express prior permission. In many cases, fax broadcasters will have firsthand knowledge of the sufficiency of opt-out notices, so the FCC expects them to ensure that faxes sent on behalf of each sender contain the necessary information. Thus, fax broadcasters may be held liable with their senders under certain circumstances.

Express Consent

Apart from relying on an EBR, a sender may send fax advertisements to recipients so long as they have given consent. Whether written or oral, consent must be express, must be given prior to sending any fax advertisements, and must include the fax number to which the advertisement may be sent. To illustrate, the FCC said that companies may not fax requests for permission to transmit faxed advertisements and may not obtain permission to fax by using a "negative option" — for example, requiring recipients to check a box or otherwise indicate that faxes are not to be sent to them. The FCC noted, however, that a company may request a fax number among other data on an application form and could obtain express consent by stating that, by providing this fax number, the individual or business agrees to receive fax advertisements.

Despite many requests, the FCC did not exempt non-profit professional associations or small businesses from the new fax rules. The FCC’s definition of "unsolicited advertisement," however, excludes all messages involving political or religious discourse or requests for charitable contributions.

The FCC concluded that faxed messages promoting "free" or no cost goods or services are still advertisements because they describe the quality of property, goods or services. Incidental advertising in a newsletter, however, does not convert the entire communication into an advertisement as long as the newsletter’s primary purpose is informational rather than to promote commercial products.

In addition, "transactional" messages that relate to existing accounts and ongoing transactions are outside of the definition of unsolicited advertisement, while messages regarding new or additional business would be prohibited. For example, a mortgage rate sheet faxed to a potential borrower or potential broker would be an advertisement but a rate sheet sent to a broker or other intermediary for the purpose of communicating the terms on which a transaction has already occurred would not be an advertisement.

The FCC did not change the rule that requires all faxes to contain, in a margin at the top or bottom of the fax, the date and time it was sent, the identification of the sender, and the telephone number of the sending machine or entity, although it said that senders that provide their telephone and fax numbers as part of the opt-out notice will satisfy the TCPA identification rule so long as they also identify themselves by name on the fax advertisement.

These new rules should clear up a confusing situation that has existed since June 2003 when the FCC adopted new "do not call" restrictions on telemarketing, established EBR definitions for telemarketing, and determined that the TCPA did not leave any discretion for the FCC to adopt an EBR exemption for unsolicited fax advertisements. In prior Sidley Client Updates,we described the evolution of the telemarketing and fax rules in August 2003, and the FCC’s actions in response to enactment of the Junk Fax Prevention Act, in June 2005 and January 2006.

In sum, those communicating by fax should bear in mind that unsolicited messages that could be construed as "facsimile advertisements"may only be sent to recipients that have either provided explicit consent or with whom the sender has an EBR, and then, only if the requirements on obtaining the recipient’s fax number and providing the notice and means to opt-out are met. Although the FCC did not require that any specific records be kept by senders, if a question arises as to the validity of an EBR, the burden of proof will be on the sender.

The new rules will become effective 90 days after they are published in the Federal Register which typically occurs two to three weeks after the agency’s action. Over the next year, the FCC will monitor implementation of the new EBR exemption and opt-out rules and will evaluate complaint data, in accordance with the Junk Fax Prevention Act requirements.

Several states have enacted laws governing fax and telemarketing activities that are more restrictive than the federal rules. The FCC is considering a number of petitions for preemption and marketers will likely seek additional guidance from the agency on the operation of both the fax and telemarketing rules.

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This article has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.