Complying With The CAN-SPAM Act: New FTC Regulations Provide Guidance On "Primary Purpose"

Tuesday, February 1, 2005 - 00:00


On March 28, 2005 the Federal Trade Commission's ("FTC") regulations defining the relevant criteria used to determine the "primary purpose" of an electronic mail message (the "Regulations") under the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 , otherwise known as the CAN-SPAM Act of 2003 (the "Act") will go into effect. After living with the Act for a year, these regulations were meant to provide some clarity in the otherwise sometimes murky waters of what e-mails fall within the confines of the Act. Whether or not they will be successful in doing so remains to be seen, but a careful analysis shows that the Regulations provide some useful guidance for anyone responsible for ensuring they are in compliance with the Act.

Background - The ImportanceOf The Regulations

By way of background, the Act generally requires certain disclosures with respect to, and otherwise imposes limitations on and penalties for the transmission of certain commercial electronic mail messages. The specific requirements of the Act have been covered in prior issues of this publication, so will not be repeated here. Importantly, however, the first step in determining whether the Act is applicable to a specific marketing plan or program is to determine whether the proposed e-mailing activities fall under the Act's definitions. The Act defines a "commercial electronic mail message" as any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service ("commercial e-mail"). An electronic message containing a reference to a commercial entity or a link to the website of a commercial entity does not, by itself, become subject to the Act's requirements if the contents or circumstances of the message indicate a primary purpose other than commercial advertisement or promotion of a commercial product or service. Under this definition, whether the recipient is a business or consumer is irrelevant. The focus of the Act is not on the identity of the recipient, but rather on the content of the message. The Act does exclude from the definition of "commercial electronic mail message" messages that are "transactional or relationship messages," the primary purpose of which is to facilitate, complete, or confirm a commercial transaction that the recipient has previously agreed to enter into with the sender or to provide information (such as warranty information) or notification about product changes for products that have already been purchased. Transactional or relationship messages also specifically include messages (a) that provide notification or information relating to an ongoing commercial relationship (such as providing account balance information or an account statement), (b) that provide information related to an employment relationship, or (c) to deliver goods or services that the recipient is entitled to receive pursuant to a previous transaction.

Given the foregoing, it is easy to see why further clarification of the meaning of "primary purpose" under the Act is so important. While determining the "primary purpose" of a single purpose e-mail ( e.g. , an e-mail advertising goods or services for sale, and nothing more, or an e-mail with only transactional or relationship content) should usually be self-evident, dual purpose e-mails ( e.g. , an e-mail advertising goods or services for sale, but also providing warranty or account balance information) are much more tricky. Given current marketing techniques, a large portion of commercial e-mails being sent today appear to fall under the dual purpose category. Without appropriate guidance from the FTC, most senders of dual purpose e-mails would be stuck in the untenable position of guessing at whether such e-mails fall under the Act's purview.

Definition Of "Primary Purpose"

The Regulations purport to provide such guidance. Specifically the criteria that the FTC has set forth in the Regulations for determining the primary purpose of an e-mail are as follows:

1. If an e-mail message contains only the commercial advertisement or promotion of a commercial product or service ("commercial content"), the primary purpose of the message will be deemed to be commercial;

2. If an e-mail message contains both commercial content and "transactional or relationship" content, the primary purpose of the message will be deemed to be commercial if either: (a) a recipient reasonably interpreting the subject line of the e-mail would likely conclude that the message contains commercial content; or (b) the e-mail's "transactional or relationship" content does not appear in whole or substantial part at the beginning of the body of the message;

3. If an e-mail message contains both commercial content and content that is neither "commercial" nor "transactional or relationship," the primary purpose of the message will be deemed to be commercial if either: (a) a recipient reasonably interpreting the subject line of the message would likely conclude that the message contains commercial content; or (b) a recipient reasonably interpreting the body of the message would likely conclude that the primary purpose of the message is commercial; and

4. If an e-mail message contains only "transactional or relationship" content, the message will be deemed to have a "transactional or relationship" primary purpose.

What Do The Regulations Mean?

At first glance, the Regulations do not appear to really change anything. E-mail marketers are not provided with any concrete guidelines on which to base their decisions of whether or not to comply with the Act. Instead, senders of commercial e-mails are asked to rely upon the "reasonable interpretation of the recipient." This subjective standard is potentially difficult to interpret. Indeed, many in the industry argued for a more objective standard, including a "proportion of content" standard, and a "but for" test under which a message would not be considered "commercial" if it would have been sent in any event because of its noncommercial content. However, such a standard is not without precedents. Consumer protection law, in general, looks at the impact of advertising from the reasonable consumer's perspective, and the FTC has long relied upon the reasonable interpretation or reaction of a consumer to determine whether or not a particular act or practice is deceptive. ( See, e.g. , FTC Policy Statement on Deception, October 14, 1983.) A closer examination shows that the FTC has provided e-mail marketers with an effective road map that allows them to tailor dual purpose messages in such a way so that they can easily determine whether compliance with the Act is necessary. This road map can be broken down roughly into two separate but related "forks": (1) the e-mail subject line; and (b) the placement and prominence of the e-mail content.

Relevance Of Subject Line

The FTC puts emphasis on the subject line of any e-mail because it believes that consumers reasonably use the information it contains to decide whether to read a message or delete it without reading it. The subject line is therefore the first thing that will need to be considered in the creation of any dual purpose e-mail. If the subject line indicates that the e-mail contains commercial content, the e-mail will be considered to be commercial, and thus subject to the Act. If it does not, an analysis of the content of the e-mail must be undertaken. Of course, merely changing the subject line to something of a non-commercial nature is of no help since the Act specifically prohibits the use of subject lines that would likely mislead a recipient as to the content of the message. However, the fact that the FTC looks to the subject line in order to evaluate any particular e-mail does not require senders to use a subject line that refers to a message's commercial content, if the message is a dual purpose message. For example, an e-mail with the subject line of "Your Citibank Account Balance" should not be considered misleading if the e-mail did, indeed, include information about the recipient's account balance at Citibank as well as other content advertising Citibank's low interest rates on its home equity loans.

Placement And ProminenceOf Content

As stated above, if the subject line of an e-mail does not indicate commercial content, the content of the e-mail itself must be analyzed. For dual purpose e-mails consisting of both commercial content and transactional or relationship content, the important factor to consider is whether the transactional or relationship content appears at the beginning of the e-mail. If the transactional or relationship content does appear at the beginning, the primary purpose of the e-mail should not be considered commercial. Senders of these types of dual purpose e-mails are not required to complete the content of a transactional or relationship message before providing any commercial content. Once there is some substantial portion of transactional or relationship content, commercial content may be provided. It is important to note, however, that the FTC has specifically stated that the term "substantial" does not refer to volume of the content, but rather its nature. In other words, the transactional or relationship content must be recognizable as such. For example, in the same e-mail described above with the subject, "Your Citibank Account Balance," a statement providing the recipient's account balance placed at the beginning of the e-mail would be considered substantial. In this example, commercial content could follow after the account balance statement, with any additional information related to the account balance, (like recent account activity), thereafter.

For dual purpose e-mails consisting of both commercial content and content other than transactional or relationship content, the analysis is slightly different. In this situation, a "net impression" standard prevails to determine whether the recipient reasonably interpreting the body of the message would likely conclude that the primary purpose of the message is commercial. Factors relevant to this interpretation include the placement of commercial content in whole or in substantial part at the beginning of the body of the message; the proportion of the message dedicated to commercial content; and how color, graphics, type size, and style are used to highlight commercial content. The FTC has stated that "the net impression standard seeks expressly to evaluate the message in its totality, looking to the impression the entire e-mail message makes on a reasonable recipient. If a sender prominently places advertising near the top of the body of an e-mail message, and draws attention to this content . . . then the net impression of the e-mail message . . . may be that the message is commercial." (See Definitions and Implementation Under the CAN-SPAM Act of 2003: Statement of Basis and Purpose and Final Rule, pp 44- 45). These types of e-mails could be the most important category to legitimate e-mail marketers, as they attempt to provide consumers with real "value" above and beyond the commercial content. For example, in addition to information about products, a marketer of kitchen goods may provide recipients with recipes or household tips, while a seller of garden tools may provide a newsletter with information relating to planting and maintaining flowers, vegetables and other plants. Such e-mails may or may not be considered commercial e-mails and thus subject to the Act, depending on the subject line and the placement and prominence of the content advertising the products. Assuming that the subject line does not indicate that the e-mail contains commercial content, in the gardening newsletter example, the placement of the newsletter at the beginning of the e-mail, with minor references at the end to useful gardening tools sold by the sender, without undue emphasis on such references, could be sufficient to keep the e-mail out of the ambit of the Act. E-mail marketers must be careful, however, since there are no hard and fast rules to follow, and each e-mail must be analyzed on a case by case basis.

Conclusion

In today's technologically sophisticated society, sending dual purpose e-mails that contain both commercial content and transactional / relationship content (or some other content) is an invaluable way in which to get consumers to keep, and read, the e-mail - including the commercial content. As a practical matter, the subjective standards set forth in the Regulations for determining the primary purpose of these e-mails don't seem to be so problematic. The bottom line is that if an e-mail marketer wants a dual purpose e-mail not to be treated as a commercial e-mail under the Act, the steps it would need to take could be as simple as: (1) ensuring that the subject line only references the non-commercial content in a truthful, non-deceptive way; (2) placing the commercial content at the end of the message; and (3) for e-mails that have no transactional or relationship message, not overly highlighting the commercial content and keeping it short in proportion to the rest of the message. Be wary, however. Compliance with the Act is not unduly burdensome, and the contours of the Regulations are somewhat vague and subject to interpretation either way. Accordingly, it is imperative that any e-mail containing commercial content be analyzed by reliable and competent legal counsel before a decision is made that the e-mail is not subject to the Act.

Joseph J. Lewczak is a Partner in the Advertising, Marketing and Promotions Group of New York-based Davis & Gilbert LLP. He may be reached at (212) 468-4909.

Please email the author at jlewczak@dglaw.com with questions about this article.