Even in 2014, fax marketing by associations, businesses, and other individuals shows no sign of slowing down.  We have previously noted the significant number of class action lawsuits involving fax advertisements under the Junk Fax Prevention Act (“JFPA”). Now the Federal Trade Commission (“FCC”) is drawing more attention to this less common form of advertising.  On October 30, 2014, the FCC issued an order rejecting the arguments of advertisers and fax broadcasters, and a majority of Commissioners held that opt-outs under the JFPA extend to all fax advertisements, even those sent with recipients’ prior permission. The FCC’s long-awaited decision explicitly confirms that all fax advertisements must contain the opt-out instructions set forth by FCC rules. 

About ten years ago, Congress enacted the JFPA and amended the fax advertising provisions of the Telephone Consumer Protection Act. The amendments, among other things, created an exemption allowing businesses or individuals to send unsolicited fax ads to those persons with whom they had an established business relationship. To fall within the exemption, however, the sender was required to offer a cost-free, 24-hour means for the recipients to “opt-out” of receiving future fax ads. Shortly after the revised statute went into effect, the FCC adopted the Junk Fax Order, which required in part, the inclusion of the “opt-out” notices on “solicited” and “unsolicited” fax ads alike.  The implementation of the provision relating to “solicited” ads (i.e., those sent to persons that have given prior express permission) sparked significant controversy and confusion amongst affected parties, and led to numerous petitions from associations and businesses seeking a declaratory ruling about the FCC’s authority to issue the proposed rule.

In its order, a majority of Commissioners rejected the contentions that it lacked authority to adopt the rules, both as procedurally barred and substantively flawed. Two commissioners dissented, however.   

Despite some internal disagreement, the Commission recognized many affected parties reasonably misconstrued the original ruling. First, the FCC blamed a pesky footnote in its 2006 implementation order that stated “the opt-out notice requirement only applies to communications that constituteunsolicited advertisements.” The placement of the word “unsolicited” created an internal inconsistency within the order and, in the FCC’s view, led to understandable confusion regarding the application of the opt-out notice. Second, the FCC acknowledged that it did not make expressly clear it was contemplating an opt-out requirement for fax ads sent with the prior express permission of the recipient. Although the FCC defended that the notice of proposed rulemaking for its 2006 order was legally adequate to adopt a rule applying to both solicited and unsolicited fax ads, the Commission appreciated that the lack of explicit notice may also have contributed to the confusion or misplaced confidence in the application of the rule to solicited fax ads.

As a result, the FCC granted a “limited retroactive waiver” of the opt-out requirement to certain fax ad senders.  Parties that obtained waivers are relieved from any past obligation to provide the opt-out notice to recipients from the date the opt-out notice took effect in 2006 to April 30, 2015. The waiver might therefore be a powerful shield, insulating the holder from substantial monetary damages that a class action plaintiff could collect from a violation of the opt-out requirements over a sustained period of years. But it not clear whether courts will defer to these “limited retroactive waivers” in pending or future junk fax litigation. 

So how does the new fax order impact you? 

  1. The Commission’s order leaves unchanged the rules for sending faxes to anyone who did not request them, did not want them, or who had no established business relationship with the sender. Thus, the waiver does not grant reprieves for failing to include opt-out notices on fax ads sent pursuant to established business relationship, nor does it affect the general prohibition against sending unsolicited fax ads.
  2. An opt-out notice is now required on all advertising faxes, even those sent with the recipient’s consent. Your opt-out notice must 1) be clear and conspicuous and appear on the first page of the ad; 2) state that the recipients can request not to receive future fax transmission from the sender, and that the senders must honor that request within the shortest reasonable period of time, not to exceed 30 days; and, 3) contain a domestic phone and fax number that the recipient can contact to opt-out. Opt-out notices without all of these elements will be subjected to the same penalties as those fax ads that contain no notice at all.
  3. The waiver also only applies to the specific organizations and individuals who have specifically requested relief. Therefore, organizations and individuals that have not obtained a waiver are still subject to potentially substantial damages and/or forfeitures under the Communications Act. The FCC will allow—and expects—similarly situated parties to apply for retroactive waivers by April 30, 2015, and encourages any businesses that have not been strictly compliant to submit requests as soon as possible. Moreover, beginning May 2015, any sender that fails to include the opt-out notice at all or uses a deficient notice opens itself to significant monetary liability from the FCC or private class action litigants.
  4. Existing rules and regulations governing certain technical aspects of sending faxes remain unchanged.  For instance, it unlawful for anyone to send any message – whether commercial or not – via a fax machine unless that person clearly marks, in a margin at the top or bottom of each transmitted page:  (1) the date and time that the fax is sent, (2) an identification of the business, other entity, or individual sending the message, and (3) the telephone number of the sending machine or of the sender. The FCC can enforce these technical requirements with fines of up to $11,000 per violation.

In short, the FCC’s latest order requires that fax ads sent with the recipient’s prior express permission include an opt-out notice. The FCC expects associations, businesses, and individuals to strictly adhere to this requirement immediately. Non-compliance can potentially result in unwanted FCC enforcement proceedings or class action lawsuits.

Andrew L. Steinberg