How Utah, Michigan Legislators Got Fooled

Columnist Brian Livingston says new email taxes will mean less legitimate email but more spam.
Residents of Utah and Michigan are likely to get less legitimate e-mail, but receive more spam, under new state laws.

I wrote on July 26 that the two states had imposed e-mail taxes that have nothing to do with spam. And on August 2, I explained that legitimate publishers of opt-in e-mail newsletters would have to pay crushing fees to comply -- more than $1,000 per year per 1,000 subscribers -- if as few as 12 states adopt similar laws and tariffs.

"These figures are just ridiculous," I was told by Derek Harding, CEO of Innovyx, an e-mail publishing service used by several major corporations, including Disney, Sony, and Isuzu. "We'd have to recommend to our clients that they consider excluding all Utah and Michigan addresses from their lists. Otherwise, the costs are prohibitive."

Both states' bills were cleverly labeled "child protection e-mail registries" to get legislators to vote for them. But these laws won't stop any spam and won't protect any children.

The U.S. Federal Trade Commission, after months of study, unanimously rejected do-not-email registries in a 2004 report requested by Congress. The FTC said allowing families to put their addresses into such a database would create "the National Do Spam Registry, creating more spam." Even Utah's own Web site informs parents, "contact points may be at a greater risk of being misappropriated by marketers."

That's because spammers, just like anyone else, can process their e-mail lists through the registries to identify "kids" and "no kids" addresses. If people flock to the registries, spammers can easily use them to find out which addresses are likely to be read by kids with cash in their jeans.

How did legislators in these states get tricked into supporting such dumb laws? My research indicates they fell for contractors seeking profits and state departments seeking more revenue.

The Contractor and the Contractees

The contractor selected to operate the address databases for both Utah and Michigan is known as Unspam Technologies Inc. (formerly Unspam LLC). The CEO of Unspam is Matthew Prince, an Illinois attorney.

In a telephone interview regarding the two state contracts, Prince told me, "There was a bidding process, and we placed the winning bid." Having programmed the online services for both states, Unspam is now urging other states to enact the same laws. In addition, the company's site says, "Our clients also include those companies that seek to comply with the law." The firm is paid both by the states to run the registries and by e-mail publishers who fear the felony charges the laws prescribe for noncompliance.

Two years ago, Prince filed U.S. patent application 20040148506, laying claim to the specific database technology that the two states are now using. Since patents are not necessarily absolute, it's anyone's guess whether this would prevent other companies from competing for these contracts.

What's certain is that Unspam's back-end system now operates an integrated registry used by both Michigan and Utah. It costs little or nothing for such a computer system, once established, to process additional e-mail addresses. So Unspam can expand to other states and underbid any competitor that might try to build such a service from scratch.

Unspam was a vocal supporter of the Michigan legislation, but the bill was also promoted by that state's Dept. of Labor & Economic Growth. Before adoption, the department sent legislators a position paper supporting the bill's passage.

Under Michigan's law, the department administers a fund that receives 85 percent of the fees the program extracts from e-mail publishers. In its paper, the department advised legislators that "the registry would have to be purchased frequently by senders." Contrasting Michigan's potential revenue with that of Utah, the department said: "It is estimated that annual revenue in Utah, a much smaller state, could be in the $3-6 million range."

Utah wants publishers to pay 1/2 cent per e-mail address to check their lists before each e-mail newsletter goes out. (Checking only once a month isn't sufficient to comply, if your mailings are more frequent.) In Michigan, Prince told me via telephone, the rate will initially be 7/10 of a cent. Furthermore, he points out that the legislation allows adjustments, saying, "the cap in Michigan is 3 cents" per address per mailing. That adds up to millions of dollars for one small Illinois company and potentially 48 other state governments, all of which are constantly seeking new revenues.

The Broad Reach of the New E-Mail Laws

No one seriously believes the two states' laws will slow spammers. In fact, neither law is directed at spam, which is usually defined as "unsolicited bulk e-mail." Both laws make it a felony to send a single e-mail message -- even one that is personally typed -- to an address on the registry if the message contains certain otherwise-legal information.

In both states, a message is a felony if it advertises "a product or service that a minor is prohibited by law from purchasing, viewing, possessing, participating in, or otherwise receiving." Besides drinking and smoking, Michigan law also prohibits young people from driving, hunting, using tanning salons, and being out between 12 midnight and 6 a.m., among many other things. It's illegal in Michigan for kids under 14 to work for money, too, so watch your help-wanted messages.

On top of Michigan's verbiage, Utah's law adds the following: "...or advertises material that is harmful to minors." The state attorney general has published a formal interpretation of this wording, ruling that it includes any form of nudity whatsoever, even a single breast or buttock, if it is "prurient."

Amazingly, the Michigan law makes a prohibited e-mail message a felony if it merely links to a Web site that advertises something a minor may not purchase. The Utah law somehow left out that clause. But the Utah Dept. of Commerce, which operates that state's e-mail tax, filled the gap for legislators. The department subsequently published a policy statement saying it's illegal for an e-mail message to "link to the material," even if the message itself is clean.

The fact that someone opted-in to receive your message doesn't make it legal, either. "The consent of a minor or third party to receive the message is not a defense," the Michigan act states.

Can you be sure what ads will appear on every Web site your company's e-mail newsletters might ever link to? From a purely business point of view, identifying and deleting every Michigan and Utah subscriber (using reverse e-mail append services) is looking better and better.

Legislation That's Deliberately Vague

The state solons who voted for these bills undoubtedly wanted to "stop porn spam." At the same time, the laws couldn't actually say so. The opaque wordings are intended to evade the U.S. CAN-SPAM Act, which prohibits states from regulating spam, and several Supreme Court decisions, which mandate filters, not censorship, to block objectionable messages.

The vagueness of the resulting laws is no accident. The position paper of Michigan's Dept. of Labor & Economic Growth puts it this way: "The bill has been carefully crafted to overcome potential constitutional challenges."

The extremely broad reach of these laws, unfortunately, makes it impossible to know exactly what a judge might decide is covered. This uncertainty puts a devastating tool in the hands of political partisans on both the left and the right.

Remember, it's illegal in Michigan, and many other states, for a minor to purchase a gun. It's also illegal in many states for minors to purchase emergency contraception. (For example, Gov. George Pataki of New York on Aug. 4 vetoed a bill that would have given minors in that state access to the "morning-after" pill.) Given these facts, the following scenarios come to mind:

A conservative activist puts her e-mail address, which is also used by her daughter, on a state registry. The listing takes 30 days to become effective. She then e-mails a health clinic for information about morning-after pills. If the clinic replies with the information, the sender is guilty of a felony.

A liberal activist registers his and his son's e-mail address. After 30 days, he e-mails a gun dealer, asking for product listings. If the dealer replies with details, he's guilty of a felony.

In both cases, the facts are clear: yes, the address was on the registry and no, minors can't buy emergency contraception, guns, or whatever. The fact that the information was requested is not a defense. The sender should have paid the tax and checked the registry before clicking Send.

The sponsors of the bills would surely protest: "But judges will only apply our laws to porn!" That point of view, unfortunately, is not what's written in the laws. Any private citizen, furthermore, may sue to collect the promised bounty of $5,000 per message. If judges interpret the laws using "strict construction" of the wordings, felony convictions would be the logical result.

Oh, and by the way -- fines and imprisonment aren't the only penalties if your business is found guilty. The Michigan law authorizes the seizure and forfeiture of "all computer equipment, all computer software, and all personal property" used to send the offending message.

The Cost of Living in the Land of the Free

Michigan's enforcement of its laws has been postponed from August 1 to a future date that is "still under discussion," according to Judy Palnau, a spokeswoman for the Michigan Public Service Commission. But it's coming all too soon for most publishers to react.

I asked Palnau how many people had put their e-mail addresses into the state's registry. "As of today [Aug. 5], 2,982 addresses," she said.

Michigan has more than 1.2 million households with children, according to the 2000 census.

For the sake of fewer than 3,000 families -- who represent less than 1/4 of 1 percent of the state's kids -- politicians expect publishers to hand over millions of dollars for pre-publication sweeps. Most free newsletters would have to shut down if forced to comply with such laws.

In my opinion, it doesn't matter whether the cost to sweep registry addresses from a publisher's e-mail list is $100,000 a year or just a mere dollar. In a free society, allowing a government to tax publishers differently, based on some politburo definition of "acceptable" content, is abhorrent to liberty and democracy.

Next week, I'll describe what legitimate publishers can do to overturn these idiotic laws and prevent other legislators from being bamboozled, as Michigan and Utah's were.






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