What to Watch for in 2004

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A continued focus on spam and privacy are just two of many legislative topics for direct marketers in 2004. Here's a roundup of issues to watch.


Spam Enforcement Turns to FTC


Now that the CAN-SPAM Act of 2003 has taken effect, attention shifts to the Federal Trade Commission's implementation of the law. The FTC has several items to handle this year, including:


o The do-not-e-mail registry. The law authorizes, but does not require, the implementation of such a registry as soon as Oct. 1. The FTC is required to report to Congress before July 1 with a plan to implement the list, along with any concerns it has about security, privacy and technical feasibility. The FTC is on record doubting a do-not-e-mail registry would work, but Sen. Charles Schumer, D-NY, a proponent of the list, said he would use either appropriations pressure or further legislation to ensure it goes into effect.


o Rules for commercial e-mail. The FTC has until Jan. 1, 2005, to determine what qualifies as commercial e-mail. The law defines it as e-mail with the "primary purpose" of advertising or promoting a product or service. But it will be up to the FTC to develop regulations that set out criteria for deciding whether a message is subject to the law. For example, newsletters from advertisers might fall under the law.


o Labeling adult content. The FTC and the attorney general have 120 days to issue a mark that must be carried on e-mail with sexually explicit content.


o Altering the 10-day waiting period. The law requires commercial e-mailers to honor consumers' unsubscribe requests within 10 days. The FTC is permitted to alter this deadline if necessary.


o Bounty hunter report. The FTC is to issue a report before Oct. 1 for creating a system that rewards those who supply information about the law's violators, including a cut of civil penalties.


o ADV labeling report. The FTC has 18 months to report on the feasibility of requiring commercial e-mail to carry an "ADV" mark or another identifier in its subject line.


o Commercial e-mail study. The FTC has 24 months to submit a report on the law's effectiveness in combating spam and an analysis of its shortcomings.


o Wireless-messages rules. The FTC is to aid the Federal Communications Commission in developing rules to protect consumers from unwanted wireless commercial messages. The rules are to be issued within 270 days.


Will Postal Reform Happen This Year?


The U.S. Postal Service likely will see quite a bit of activity, including Congress taking up the reform issue once again. Last month, President Bush issued five guidelines that were in line with the conclusions of his postal commission:


o Implement best practices. Ensure that the USPS is equipped to meet its responsibilities and objectives.


o Transparency. Ensure that important information on postal product costs and performance is accurately measured and made available to the public in a timely manner.


o Flexibility. Ensure that USPS management has the authority to reduce costs, set rates and adjust key aspects of its business to meet obligations to customers.


o Accountability. Ensure that the postal service has appropriate independent oversight to protect consumer welfare and universal mail service.


o Self-financing. Ensure that the USPS is financially self-sufficient, covering all of its obligations.


Sen. Susan Collins, R-ME, who chairs the Senate Governmental Affairs Committee, said Bush's principles would guide her in developing reform legislation that she expects to file later this year. Collins also said she and Sen. Thomas Carper, D-DE, "have committed to work together with other interested members [of Congress] to draft a bipartisan postal reform bill."


Congress also is expected to address the possibility of reversing an escrow account provision and the policy on military pension payments for postal retirees created in the Postal Civil Service Retirement System Funding Reform Act of 2003.


The legislation requires the postal service to place its CSRS savings in an escrow account starting in 2006 and to take over funding CSRS benefits earned by its employees during military service, a $27 billion obligation. The USPS has argued that it should not be responsible for the military benefits, and it also wants to abolish the escrow account.


Without these changes, postal officials say, rates will have to rise even more than is necessary to reflect inflation, and that the increase would be in the double digits.


Bob McLean, executive director of the Mailers Council, said, "I expect members of both the House and Senate to introduce postal reform bills in late January, and I think both will include a solution to the escrow situation, as opposed to a free-standing bill."


One reason for the quick passage will be that this is a presidential election year, which means the congressional session will be dramatically shortened.


"Though Congress will be in session after Labor Day, much of the legislative work will have to be done by the August recess," McLean said. "If you want to get a bill, any bill, passed this year, you need to get off to a very fast, very strong start. And that's why I think you're going to see postal reform legislation introduced fairly quickly."


Internet Access Taxes Still in Limbo


Congress adjourned for the year without renewing a federal ban on state and local taxes on Internet access. The ban, which expired Nov. 1, ran into Senate opposition over concerns the legislation would hamper cash-strapped governments.


Congress originally placed a temporary moratorium on Internet access taxes in 1998. The House of Representatives voted to make the tax moratorium permanent in September, and the White House supports the ban. But it died in the Senate over the bill's proposal to expand the definition of Internet access to include broadband, DSL and wireless and debate over the length of the extension.


The bill's supporters argue that a new definition of Internet access would ensure equal treatment for all methods, from dial-up to cable to DSL. Opponents, like Sens. Lamar Alexander, R-TN, and Frank Lautenberg, D-NJ, said such a move could cost state and local governments billions in tax revenue as the telecommunications industry expands.


The chief sponsors of the measure, Sens. Ron Wyden, D-OR, and George Allen, R-VA, plan to reintroduce the bill when the Senate returns this month. Despite the ban lapsing, no states have made moves to levy Internet access taxes.


FCRA Update Takes Effect


In early December, the president signed the Fair Credit Reporting Act legislation with permanent state pre-emption, derailing a tough California privacy law that would have mandated opt-in consent for the sharing of financial data. Had the provision not passed, it would have expired Jan. 1, and the California law would have taken effect July 1.


Other changes to the FCRA such as safeguards against identity theft, including the availability of free annual credit reports for all consumers, also were passed.


Privacy Issues Steam Along


The list industry's practices will face greater scrutiny this year, predicted Pat Faley Kachura, vice president for ethics and consumer affairs at the Direct Marketing Association.


"I think the industry will have to pay more attention to the adequate control and monitoring of consumer data so that when consumers ask a question it can be answered," she said. "For example, consumers' most frequent question is, 'Where did you get my name?' We must be able to address that."


Kachura said it will become more important for list owners to ascertain the nature of how the data will be used before renting out their names and monitoring their use after names are rented.


Though privacy issues still will be around this year, one attorney at a law firm specializing in advertising, marketing, e-commerce and privacy said a do-not-mail list wouldn't be among them.


"A lot of people are worried that there will be a do-not-mail list, but I think that the odds of that are as close to zero as possible," said D. Reed Freeman, an attorney at Collier Shannon Scott PLLC, Washington.


Among his reasons: Direct mail is an enormous industry that employs thousands of people and generates a tremendous amount of commerce; mail is held in check because, unlike spam, the costs of sending it are imposed on the sender, not the receiver; and a no-mail list would break the USPS' back.


Notice is an issue that probably will continue to get attention this year, Kachura said. This first arose with the Gramm-Leach-Bliley Financial Modernization Act of 1999.


Under GLB, banks and other financial institutions must provide clear disclosure of their privacy policies regarding the sharing of nonpublic personal information with both affiliates and third parties, and give notice to consumers and a chance to opt out of sharing nonpublic personal information with nonaffiliated third parties. The privacy notices must be sent annually.


There is a push to get these institutions to send a short version with the notice to make it easier for consumers to understand.


"They will still want the long notice but also a short synopsis ... in plain language," Kachura said. "Once we see the short standard notices in financial services, I would not be surprised to see that trend go to other areas."


Canada Restricts Personal Data


A Canadian privacy law on how businesses handle personal information took effect Jan. 1 in all but Quebec and British Columbia, which have their own privacy legislation.


The Personal Information Protection and Electronic Documents Act requires Canadian businesses to give consumers notice of what personal information they collect and what it is used for prior to data collection. It gives consumers the right to refuse to provide any data extraneous to the transaction as well as the right to full disclosure on what data a company has on them and to challenge its accuracy.


The law actually went into effect three years ago but applied only to federally chartered firms such as banks before now.


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