Senate Hearing on Spamming
Wednesday, June 17, 1998
U.S. Senate Subcommittee on Communications
Committee on Commerce, Science, and Transportation
The committee met, pursuant to notice,
at 9:29 a.m., in Room SR-253, Russell Senate Office Building,
Hon. Conrad Burns presiding.
OPENING STATEMENT OP HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns: We would like to call the hearing to order.
It is a little before 9:30, about a minute. You know, it is terrible
in Washington to be a minute ahead.
We have two Senators and a Congressman that wishes to drop
by this morning and offer their testimony on spamming. They come
up with all of this stuff and I never know where they come up
with it. But, nonetheless, we have a conference that starts at
10:30 this morning, and it involves all the Senators, on our side
of the aisle anyway, and so we are going to try to make that conference,
and limit the opening statements as much as we can.
I would like to welcome our witnesses that are here now, and
our guests this morning, as we take a look at the explosion of
junk E-mail, or spamming, on the Internet. Prom all that I can
gather, this seems to be a growing problem on the Internet. And
there has been some actions taken with regard to spamming. And
we thought maybe we better have some folks up and visit with us
about how big the problem is and all the ins and outs of it and
how much it is hurting the Internet or it is helping the Internet.
I am going to submit my written statement this morning for
the record and -- being that I am the unanimous consent myself.
You know, it is kind of like playing golf by yourself you get
a lot more give-meís this way.
Senator Burns: I would like to welcome this morning --and
we will start off with Sheila Anthony, who is Commissioner of
the Federal Trade Commission. And if she would come forward and
offer her testimony this morning. And as the Senators would show
up, we will make room for them. In the meantime, the witnesses
might get their statements together. And if you want to paraphrase,
if you want to make them smaller, your full statement will be
made a part of the record.
[The prepared statement of Senator Burns follows:]
Senator Burns: I appreciate this, this morning. And, Commissioner
Anthony, welcome, and we look forward to hearing from you at this
STATEMENT OF SHEILA POSTER ANTHONY, COMMISSIONER,FEDERAL
Ms. Anthony: Thank you, Senator. It is nice to be back here.
I am here today to tell you about spam and junk E-mail, as
you call it, also called unsolicited E-mail, or UCE. The Federal
Trade Commission is the Nationís primary national consumer protection
agency. Its principal consumer protection mandate is to take action,
under Section 5 of the Federal Trade Commission Act, against unfair
or deceptive acts or practices in or affecting commerce.
Section 5 gives the Commission broad law enforcement authority
over virtually every sector of the economy. Commerce on the Internet,
including unsolicited commercial E-mail, falls within the scope
of this statutory mandate.
The problem with unsolicited commercial E-mail, or spam in
Internet lingo, is that it is often sent in bulk to a consumer
without the consumerís prior request or consent. Although spam
might be irritating to consumers, not all of it is fraudulent.
The Internetís capacity to reach literally millions of customers
quickly and at a low cost through UCE has been seized on, however,
by fraud operators, who are often among the first and most effective
at exploiting any technological innovation.
In fact, spam has become the fraud artistsí calling card
on the Internet. The staff of the Commission has reviewed
a collection of over 100,000 pieces of spam. Much of it contains
fictitious information about the sender, misleading subject lines,
and extravagant earnings or performance claims about goods and
services. These types of claims are the fraud operatorsí stock
Bulk UCE also burdens Internet service providers and frustrates
their customers. But our concern as a Commission is its widespread
use to disseminate false and misleading claims about products
and services offered for sale on the Internet. The Commission
believes the proliferation of deceptive bulk UCE on the Internet
poses a threat to consumer confidence on online commerce. And
we view this problem as significant.
Today, Congress, law enforcement, and regulatory authorities,
industry leaders, and consumers are faced with important decisions
about roles of self-regulation, consumer education, law enforcement,
and government regulation in dealing with unsolicited commercial
E-mail, and its impact on the development of the Internet. Deceptive
spam is a small part of a larger problem of deceptive sales and
marketing practices on the Internet. The Commission has taken
the lead in pursuing Internet fraud and deception under Section
5 since commerce on the Internet began.
We have brought 36 law enforcement actions to halt online
deception and consumer fraud. These cases targeted Internet scams
ranging from pyramid schemes to credit repair schemes to fraudulent
business opportunities. Last summer, we set up a special mailbox
at the Commission to provide assistance to Internet service providers,
privacy advocates and other law enforcers, and we invited consumers
to forward their UCE to it.
This mailbox has received more than 100,000 forwarded messages,
including about 1,500 new pieces of spam a day. Staff enters the
message into a searchable database and analyzes it and identifies
trends. And then we use these findings to target law enforcement
and education efforts.
The largest category of spam in the FTCís database is chain
letters and pyramid schemes. Both schemes make money for only
a few participants. Our experience with pyramid marketing schemes
supports the conclusion that 90 percent or more of investors are
mathematically certain to lose money. Fees paid by new recruits,
not profits from the sale of goods, generate most of their revenues.
Both pyramid schemes and chain letters are illegal.
The Commission has responded to a large amount of chain letter
and pyramid UCE with comprehensive consumer and business education
programs and tough law enforcement. For example, in October 1997,
the Commission sued Nia Cano, doing business as Credit Development
International and Driverís Seat Network. In that suit, the Commission
alleged that the defendants falsely promised that investors would
receive an unsecured Visa and MasterCard, and they could earn
$18,000 a month by recruiting others into the scheme.
The complaint alleged that the defendants urged participants
to use bulk E-mail to solicit recruits. An estimated 27,000 participants
flooded the Internet with UCE, repeating the defendantsí offer.
The Commission obtained a temporary restraining order and preliminary
injunction against these defendants, freezing more than $2 million
for restitution to victims. The case is still in litigation.
The staff has taken aggressive steps to deter others who use
spam to promote chain letter and pyramid schemes. Last February,
with the assistance of the United States Postal Inspection Service,
the Commission put more than 1,000 junk B-mailers sending UCE
on notice that law enforcement agencies monitoring UCE for deception
and fraud are keeping track of them.
The Commission sent letters, warning senders that their E-mail
may violate Federal law, advising them of relevant laws, and inviting
them to visit the FTCís Web site for further guidance. We continue
to monitor the UCE database to make sure that those who have been
warned do not resume sending deceptive UCE.
If the Commission finds that senders of deceptive UCE who
have been warned continue to send these messages, however, we
will take appropriate action.
In addition to online pyramid schemes and chain letters, the
Commissionís UCE database contains other categories of possibly
deceptive UCE. These categories mirror schemes which have proliferated
in other media: business opportunity offers, work at home schemes,
guaranteed credit cards and loans, credit repair schemes, and
diet and health products making false or unsubstantiated claims.
Analysis database shows that well-known manufacturers and
sellers of consumer goods and services do not send unsolicited
E-mail. Rather, these merchants use solicited E-mail to give their
consumers information they have requested about available products,
services and sales.
For example, consumers may agree in advance to receive information
about newly published books, online catalogs or weekly E-mails
about discounted air fares. These examples demonstrate the value
of consumer sovereignty to the growth of Internet commerce. When
consumers are able to choose the information they receive over
the Internet, they seem more likely to have confidence in its
content and in the sender.
Conversely, when unsolicited information arrives in consumersí
electronic mailboxes, the consumers who have contacted the Commission
say they are far less likely to engage in commerce with the sender.
As government, industry and consumer interests examine legislative,
self-regulatory and law enforcement options at this important
turning point, it is useful to be mindful of lessons learned in
the past. Earlier in this decade, the advent of the first and
still most universal interactive technology, the 900 number, telephone-based,
pay-per-call technology held great promise. Unfortunately, unscrupulous
marketers quickly became the technologyís most notorious users.
Although the FTC and State attorneys general brought dozens
of enforcement actions to halt these schemes, and warned legitimate
900 number vendors that industry practices needed to improve,
the industry did too little too late to halt the widespread deception.
And Congress enacted the Telephone Disclosure and Dispute Resolution
Act of 1992, directing the FTC and the FCC to regulate 900 numbers
by issuing rules under the Administrative Procedures Act.
The regulations have forced all 900 number vendors into a
standard practice of full disclosure of cost and other material
terms, and have virtually eliminated the problem of deceptive
900 numbers advertising. The Commission has steadfastly called
for self-regulation as the most desirable approach to Internet
governance. We still believe that economic issues related to the
development and growth of economic commerce should be left to
industry, consumers and the marketplace to resolve. But for problems
involving deception and fraud, the Commission is committed to
law enforcement as a necessary response.
Should the Congress enact legislation granting the Commission
new authority to combat deceptive UCE, we will act carefully but
Thank you, Mr. Chairman.
[The prepared statement of Ms. Anthony follows:]
Senator Burns: Commissioner, thank you very much. And thank
you for coming this morning.
We have been joined by two of our colleagues that have a very
big interest in this issue. And they may have a question or two
of you. And I would call upon my good friend from Alaska, who
chairs the Energy and Natural Resources Committee. And, gentlemen,
let me say thank you for your patience this morning. We got started
right on time. We have a conference this morning at 10:30, and
we only have an hour. And I want to get to as many of my witnesses
as I possibly can.
So, I would call on Senator Murkowski. Thank you for coming
STATEMENT OF HON. PRANK MURKOWSKI, U.S.
SENATOR PROM ALASKA
Senator Murkowski: I have a brief statement. Mr. Chairman,
I want to compliment you for holding this hearing -- I think it
is very timely -- and also for your expertise in the area of communications,
which you have led as subcommittee chairman of the Commerce Committee.
I do not know if you recall the first time you ran into Spain.
I do. I was a youngster during the Second World War. It seemed
to me the cartoons at that time showed in the soldiersí rations
a can of Spam and a package of cigarettes. And they threw the
Spain away and kept the cigarettes. But I do not know whether
there is any timely message there or not.
Senator Murkowski: But, in any event, as you have said time
and time again, it is inappropriate to go down to many rabbit
trails when we are in a hurry. But what we have today of course
is junk mail known as spam. It is an issue of growing concern
to many members, including Senator Torricelli and myself. It is
a big business. Internet service providers and government agencies
responsible for controlling fraud all have an interest in this.
Junk E-mail is a particular burden, however, on many rural people
in my State and in your State of Idaho, who must pay a significant
long distance charge to access the Internet, just simply to get
For instance, rural users with less than high quality, but
average, telephone connections may spend more than 10 minutes
a day just downloading junk E-mail, just to get the mail that
they want. This costs an average Montanan or Alaskan constituent,
who must pay about $6 an hour for a long distance surcharge to
access America Online via a 1-800 number -- and that is as much
as 50 minutes a week -- could mean $24 of additional charges a
month. And the individual would have no choice. That is just the
reality of what it takes to pull down your own E-mail.
So, I am pleased to see the panel testifying before you today.
Joe Keeley of my staff and a number of others have worked diligently
on this. I think it is fair to say that each of the witnesses
today has participated, along with many other members and their
staffs, in a workshop which was created at the request of the
Federal Trade Commission.
The leader of the workshop, as I understand it, was Ms. Mulligan,
who is with us today. And with the Center for Democracy and Technology,
is to be commended for her efforts in hosting the forum, with
a variety of views which were expressed at those forums and thoroughly
debated. So, we look forward to the release of the final report
on the workshop within the next few weeks.
We have been working to address the issue of junk mail for
well over a year. Recognizing that junk E-mail has been a problem
that deserved legislative attention, I introduced Senate bill
771 last May. Based upon comments that I have received from many
interested parties and the work of CDT, I along with my colleague
who is here today, Senator Torricelli, added a provision to the
Telephone Slamming bill. And that is when you are basically taken
off one carrier and put on another without your knowledge. That
would represent a first step in controlling some of the problems
of junk E-mail. And our measure would weed out the bad actors
on the Internet by requiring identification of online marketers
as well as requiring that Remove requests are honored.
For some in the Internet community, our solution, of course,
does not go far enough. They propose an outright ban on unsolicited
E-mail. I think such a ban would establish a dangerous precedent.
It would erode the protection of the first amendment. The government
should simply not dictate, in my opinion, what a consumer sees
in his or her E-mail box. We have been down that road before with
the Communications Decency Act, which the chairman was involved
The Supreme Court, by unanimous vote, has made it very, very
clear what it thinks of such sweeping bans on Internet material.
Consumers, I think, should have the final word in deciding what
comes into their mailboxes, and not the U.S. Government.
So, finally, Mr. Chairman, I would finish my statement this
morning by pointing out that there are numerous views. And from
your witness list, they are certainly going to be well represented
before you today. So, thanks for the opportunity to spend a few
minutes. And let me 2ongratulate Ms. Anthony for her statement,
And if you would excuse me, I will take my leave.
[The prepared statement of Senator Murkowski follows:]
Senator Burns: Senator Murkowski, thank you very much. And
we appreciate your concern and we appreciate the work that you
have done on this.
We have been joined now by Senator Torricelli, who has similar
concerns. Your full statement, Senator, will be made part of the
I never asked Commissioner Anthony if she would take questions
from the Senators, but I suppose she would. But if you would like
to ask her -- she had a very forthright statement on this, and
it sounds like the problem is much larger than I think most of
us realize at this point.
Thank you for joining us this morning.
STATEMENT OF HON. ROBERT TORRICELLI, U.S.
SENATOR FROM NEW JERSEY
Senator Torricelli: Thank you, Mr. Chairman. I have read the
Commissionerís statement. I did not want to address questions
to her but, like Senator Murkowski, wanted to thank you for holding
this hearing and giving me this opportunity, and briefly just
to share a couple of comments with you.
First, I am grateful to have joined with Senator Murkowski
in offering our junk E-mail amendment, and to Senator McCain,
who has also offered his assistance throughout the course of the
year. It is also important to acknowledge that there is no one
approach to dealing with the proliferation of junk E-mail. Congressman
Chris Smith, of New Jersey, has a different approach, in an outright
ban, an approach that I would support, but have some constitutional
Last year, we came together, many of us who share this concern,
recognizing that there is a growing threat to Internet commerce
and communication because of what Senator Murkowski has rightfully
identified as the spam problem. It may be a problem in rural Alaska,
but I can assure you it is also a problem in suburban New Jersey.
And it is even a problem in this institution.
My official Senate E-mail address is inundated with E-mail
every day. Even doing business in the United States Senate is
being complicated. And this is not something that affects American
life in the margins any longer. Sixty-two million Americans use
the Internet every day, and traffic is doubling every 100 days.
Every American, in their business, in communication with their
family, in access to general information, is going to be impacted
by this problem of junk E-mail. Indeed, it is estimated today
that 30 percent of all E-mail traffic could be junk mail, unwanted,
unsolicited, interfering with commerce and everyday American life.
The problem is that not only is the problem large and growing,
but the incentive is for even larger abuse. E-mailing millions
of people can cost a few hundred dollars. There is no other form
of communication in the country on any kind of economic basis
that begins to compare. So, it is an invitation for even further
The question of course is how to deal with this on a constitutional
basis, and without having the government inappropriately involved
in regulating the Internet. I would like to see government interference
at a minimum, while offering some basic protection. The need for
protection is also not just one of convenience, which is important
in making this case of why we need to do anything at all.
If it were simply an inconvenience, it might be all right
to be left alone. Last March, spammers crashed the Pacific Bellís
network, leaving customers without service for 24 hours. So, it
is not simply that this is an annoyance; it can break down the
I think, in the Murkowski-Torricelli approach, we have got
he right balance. It does not go quite as far as Congressman Smith
has gone, with a complete ban. Instead, it empowers E-mail users,
the customers, by doing several things. First, it gives citizens
the power to stop future junk E-mail by replying to the sender.
Federal law will give the E-mail addressee the right to stop E-mail
to their address. Just as a citizen can go the post office and
stop the delivery of mail to their home, or have an unlisted phone
number for their telephone, it gives them some basic level of
Second, the amendment would require junk E-mailers to identify
themselves. If people from corporations knew that the receiver
could identify who they were, they would not be as abusive, they
would be much more careful about interfering with peopleís E-mail.
This is simply a question of taking the cloak of secrecy off those
who are originating all of this junk E-mail.
Mr. Chairman, I think that we have a fair and a balanced approach
that addresses the ability of families and businesses to protect
themselves. It prevents the breakdown of this vital new area of
commerce, while being responsible to constitutional concerns of
the right of people to use the Internet, and minimizing government
The Internet is one area of American life, communication
and commerce where we have a chance to start all over again,
keep the governmentís role at a minimum, keep it free, fair and
open. But that does not mean open to abuse and doing nothing.
Senator Murkowski and I have given you a suggestion that strikes
that fair balance. And I appreciate very much the chance to present
it to you today.
Senator Burns: Thank you very much, Senator.
Just sitting here, trying to figure out how we craft legislation,
but also I would like to ask you a question. It appears to me
that this is going to be one of those issues that it is going
to take a massive amount of educating the consuming public.
Senator Torricelli: I think it does, Mr. Chairman. Though
I have been surprised, in discussing this around the country,
how sophisticated the public is with the problem. In many respects,
this is one where the American people are significantly ahead
of their Congress. Because many Americans who run their businesses
on the Internet and communicate with family and friends on the
Internet, beyond what most of us are doing in the Senate, they
are living this problem more than we are. They are aware of it
more than we are. You may be surprised how far ahead of us they
Senator Burns: Well, they usually are.
Senator Burns: That is the great elasticity and the imagination
of the American people. They are always ahead of us a little bit,
even whenever we thought we were ahead of the curve. You know,
we started to restructure the communications industry, as you
well know. And, again, we were behind the curve there.
Commissioner Anthony, I would just like to ask you, do we
have to approach this problem with the same mind set as we did
with the 900 numbers?
Ms. Anthony: Senator, I think it would be a very good model
to utilize, particularly in the way that you might go about --
if, for example, you gave us the authority to enforce this area
of the law, to make a rulemaking under the Administrative Procedures
Act, which can be done very quickly. And then we would be happy
to work with you to refine legislation and to share with you the
benefit of our experience in what we know about E-mail.
Senator Burns: Now, we get junk mail. The postman brings us
junk mail and puts it in our mailbox. But that does not cost us
anything. And we can sort of see it in front of us and then just
throw it away. There is a huge difference between electronic junk
mail and the junk mail that you receive through the Postal Service.
Ms. Anthony: You are right about that. Because the recipient
bears much of the cost and the service providers bear much more
of the cost than the sender does. And the sender, for example,
in the area that we look at, in deception and fraud, the sender,
for very little amounts of money, does not need a big return when
he sends out 100,000 pieces of E-mail. If he just gets a little
back, it is very profitable for him.
So, we would like to see this stopped. And we would be happy
to work with you in any way that we possibly can. I think the
Senateís bill, Senators Murkowski and Torricelliís bill, strikes
a fair balance, because it identifies deception as an extremely
important problem, but it also gives the consumer the right to
opt out of receiving E-mail, just as you have given consumers
the right under telemarketing and junk mail.
Senator Burns: Obviously you have looked into this with some
depth. And I would ask both of you if this legislation provides
an opt out for the consumer. That still does not prevent that
person from receiving the first piece.
Ms. Anthony: That is true, it does not. But if the routing
information is correct and there is something in your bill that
can identify the sender, my best guess is that that will stop
a great deal of the fraud.
Senator Burns: Do senders identify themselves?
Ms. Anthony: No. In the fraudulent area, they usually give
fictitious information and false messages. But there are fictitious
names that they give. They can also route through a third party.
So, it is very difficult for a recipient to determine in fact
who is sending them this E-mail.
Senator Burns: Senator Torricelli, take a State like New Jersey.
I would imagine that you are in a State -- and this is a problem,
where the person that wants to defraud and the people they are
wanting to defraud, it does not make any difference where you
are in this country electronically.
Senator Torricelli: Unfortunately technology has provided
the one perfect new vehicle for fraud and abuse of our citizens.
For all the wonders of the Internet, this is an opportunity for
someone anywhere in the country, hiding in the complete cloak
of secrecy, to issue these E-mail messages and perpetuate a fraud
upon the American people. And that is exactly what is happening.
It is something that I think has a relatively easy solution.
As Commissioner Anthony suggested, if these people are required
to give, under penalty of Federal law, to properly identify themselves,
where they are and who they are, you may get their message once,
but if you do not like it and you do not want it and you do not
want anything to do with them, you stop them.
So, yes, they get one shot free. And I think, constitutionally,
we probably have to give them that. But that is all they get.
Senator Burns: I am just looking down the questions here before
-- both of you I know have got other things to do today; this
is not the only thing you have got going. And the next panel has
to do with those folks who are involved in the Internet and its
operation, which we have some more questions for. But that is
all the questions I have at this time.
I want to thank both of you for your statements. And I appreciate
your coming down this morning.
Ms. Anthony: Thank you, Senator.
Senator Burns: And we want to work with you, too. And as this
legislation moves along, we will be seeking, probably, advice
on what you can do and what you cannot do as this moves through
Ms. Anthony: We would be happy to provide it.
Senator Burns: And we would hope that with the problem as
you have described, the legislation is timely and needs to be
Senator Torricelli: Thank you.
Senator Burns: Thank you.
Now, we will call the next panel, Mr. Randall Boe, who is
the Associate General Counsel for America Online; Jerry Cerasale,
who is Vice President, Direct Marketing Association; Ray Everett-Church,
who is Co-Founder of the Coalition Against Unsolicited Commercial
E-mail; and Dierdre Mulligan, Staff Counsel for the Center for
Democracy and Technology.
We appreciate you coming this morning. We may have set an
all-time record of a hearing scheduled to start at 9:30 in the
morning, and you are already at the table at 10:00. That is unusual
in this 17 square miles of logic-free environment.
Senator Burns: I got a message the other day from a good friend
of mine who was in the chair, and his replacement was 15 minutes
late getting there, and he sent me a message down on the floor
that says, rescue me from the cave of the winds.
We look forward to your testimony this morning.
Mr. Randall Boe, Associate Counsel for America Online. Thank
you for coming this morning. And if you want to consolidate your
statement, you may. If you have a longer statement, it shall be
and will be made part of the record of this hearing.
STATEMENT OF RANDALL BOE, ASSOCIATE GENERAL
COUNSEL, AMERICA ONLINE
Mr. Boe: Thank you, Senator Burns. And thank you for the opportunity
to testify here. I do have a written statement that we will supply
you, but I would like to give you a few comments first, if that
is all right.
I am the Associate General Counsel at America Online, and
helped develop AOLís unsolicited bulk E-mail policies, and I also
head up our litigation efforts against spammers. And what I would
like to do very briefly is give you a dispatch from the front
lines of our war against spam. And that is how we view it at America
Online. It has quickly become the largest single complaint of
our members, and it is threatening to engulf the entire Internet.
We handle right now on a daily basis almost 30 million E-mail
messages. And to give you an idea about the growth, 18 months
ago we handled about 5 million E-mail messages every day. Our
estimate is that as much as 30 percent of those 30 million E-mail
messages may be junk E-mail.
You correctly identified an important distinction between
junk mail in the offline world and junk mail in the online world.
Last night, when I arrived home from work, I did what millions
of Americans do, I picked up the mail and browsed through it.
And there were four or five pieces of junk mail. But there are
a couple of important differences between the junk mail I get
in my mailbox on the front door of my house and the junk mail
that floods Internet usersí E-mailboxes.
First I do not pay a dime to receive junk mail delivered by
the Postal Service. I do pay, through higher service fees and
through hourly plans if I am an hourly subscriber to an online
service, to receive junk E-mail. Second, the person delivering
or the company delivering the junk mail in the online world pays
nothing to have that delivered. Whereas in the offline world,
the junk mailers are required to at least pay the cost of delivering
Third, I can identify from whom I receive U.S. mail. Fourth,
and I think a very critical point, I do not have a concern about
my 6-year-old daughter wading into the mail in the mailbox at
home and receiving inappropriate or pornographic images. I do
not have that same assurance right now using the Internet and
None of those distinctions apply for spammers. First of all,
consumers have to pay for the cost, in many instances, of receiving
spam. Secondly, service providers, like AOL, bear enormous costs
in terms of additional servers, additional capacity on the computer
network, as well as personnel and time to deliver this huge flood
of unsolicited mail.
Third, the standard operating procedure for spammers is to
falsify the transmission data, so that it is impossible to tell
with any accuracy where the mail actually came from. Which is
intended, first of all, to prevent angry consumers from actually
being able to reply to the person sending the E-mail, and secondly,
to defeat the technological efforts of companies like AOL to prevent
the spam from getting into the network.
And, fourth, and I think most problematically, while we offer
tools to help parents select the right content for their children
online, spammers, by sending pornographic E-mail without regard
to the age or the sensibilities of the recipients, almost make
a mockery of that entire process. And that is a significant problem
We are fighting spam on a number of fronts at AOL. First of
all, we have deployed probably the most stringent anti-spam policies
in cyberspace. We strictly prohibit the use of AOL accounts to
send unsolicited junk mail. We prevent the use of AOL accounts
to harvest screen names to compile mailing addressed, or to do
anything else that facilitates the transmission of junk mail.
In addition, we do not sell or distribute lists of our membersí
E-mail addresses. And we take extensive precautions to maintain
our membersí privacy. Second, we have developed some of the most
robust technological tools available to try and block spam before
it even enters our network, and before it gets distributed to
Third, we have created an extensive set of tools for our members
to give them control over the E-mail they receive. Our members
have the ability to create a list of people from whom they would
like to receive E-mail, as well as blocking E-mail that they do
not want to receive.
And, finally, we have waged a long and costly battle against
spammers. In the last 9 months, we have filed suit against more
than 20 junk E-mailers, and will probably sue five to six more
We are pleased to see other companies step into the fray,
but we think that there is a role for the government, as well.
We think that any legislative proposal should, one, outlaw the
falsification of transmission data in E-mail, clarify that existing
statutes, like the Computer Fraud and Abuse Act, do apply to E-mail,
and add statutory civil penalties for spammers who are sending
E-mail in an unauthorized fashion, and give ISPís the ability
to recover the costs of bringing suit against these people to
stop the sending of junk E-mail.
We think that junk E-mail is a problem that pervades the entire
Internet, and poses a risk to the development of Internet commerce.
And we think it requires a coordinated approach. We look forward
to working with you, as well as the rest of our industry, to try
and resolve this matter in a way that is beneficial for consumers
and the Internet as a whole.
Thank you for the opportunity to testify.
[The prepared statement of Mr. Boe follows:]
Senator Burns: Thank you, Mr. Boe.
Now, Jerry Cerasale.
STATEMENT OF JERRY CERASALE, SENIOR VICE
PRESIDENT,GOVERNMENT AFFAIRS, DIRECT MARKETING ASSOCIATION, INC.
Mr. Cerasale: Thank you, Senator. I appreciate the opportunity
to be here. And thank you very much, Senator. We appreciate the
fact that you are holding this hearing and inviting us here to
I am Jerry Cerasale, the Senior Vice President for Government
Affairs for the Direct Marketing Association. I have a longer
statement that I ask to be put in the record.
Senator Burns: Your full statement will be made a part of
Mr. Cerasale: Thank you.
The DMA represents over 3,600 corporate members who are direct
marketers, both domestic and international, their suppliers and
support services. And DMA is very interested in regulation of
electronic commerce. Over 85 percent of our members are involved
in some form of B-commerce. We estimate that B-commerce last year
totalled about $4 billion.
With rapid changes in communications technology, we believe
that no method of communication for commerce should be eliminated,
however. But the DMA agrees that many current uses of unsolicited
E-mail are not appropriate for legitimate marketing and must be
curtailed. And we think that Congress should examine approaches
to eliminate these inappropriate uses without eliminating the
The unsolicited E-mail of today may not be the unsolicited
E-mail of tomorrow. Our marketers have been very creative in providing
products that American consumers want through the traditional
media of mail, telephone and direct advertising, and the DMA believes
that the new option of electronic communication should remain
open and not be eliminated by government regulation.
We also think that there are a lot of market forces discouraging
legitimate companies from engaging in mass, unsolicited E-mail.
The field is very customer oriented. Legitimate companies must
provide good customer service and not anger their customers. Therefore,
we agree with Senator Torricelli and Senator Murkowski that marketers
should identify themselves. And that is required, I think, in
S. 1618 that was just recently passed.
Direct marketing is a growing business. It is $1.2 trillion
every year, and creating jobs for over 12 million Americans. It
is also growing rapidly internationally. And E-commerce helps
that growth. American companies can export products without the
need to build any infrastructure in foreign countries. All that
is needed is the means to solicit orders -- electronic commerce
offers that; to accept orders -- electronic commerce offers that;
and delivery of the product.
Electronic commerce is really new. And it is not mature yet.
And we are going through a great deal of growing pains. And the
government, however good its intentions, should not strangle electronic
commerce at its birth. We think that there are many means to combat
fraud in existence. And there are in fact bills in Congress which
now can provide American consumers with mechanisms to avoid unsolicited
The Direct Marketing Association, along with the Interactive
Services Association, has come up with some principles for marketing
online, which will be included in the record, I ask. But let me
tell you about electronic E-mail and the DMAís positions.
First, we think that any marketer should abide by the rules
of the forum of the Internet service provider. We understand that
unsolicited E-mail increases costs and uses server capacity of
Internet service providers. We think that they should establish
rules and that marketers should be required to follow them. This
is an approach that was included by Senator Torricelli in S. 875.
We think that there should also be an opt out program, and
a two-pronged opt out program. The first prong is that the recipient
of unsolicited bulk E-mail should be able to request that the
marketer not send any more B-mails to that address. This could
be done by a reply key. It is the approach taken in S. 771, introduced
by Senator Murkowski, and which was merged with S. 1618 and passed
by the Senate.
There is a second prong, however. The DMA is actively working
on a universal opt out. We are reviewing proposals to create an
E-mail preference service, and hope to announce the award of that
contract very soon. An E-mail preference service would allow consumers
to add their E-mail address online to a list, at no charge. Marketers
would then use this list to delete the addresses from their E-mail
lists. It is very similar to the mail preference service and telephone
preference service of the DMA that have been in existence since
1971 and 1985.
This is an approach that was also included by Senator Torricelli
in S. 879. We think with these two prongs, plus a requirement
that you honor the rules of the forum, that consumers can limit
all E-mail through the EMPS, and company-specific E-mail through
the opt out key. We think this approach is far superior to banning
the use of E-mail to reach prospective customers.
Electronic commerce, and E-mail in particular, are going to
be growing and changing. A ban on the use of commercial E-mail
is premature at best, and may be counterproductive by chilling
advancement of certain new technologies.
The DMA also believes that the government should enhance its
efforts to combat fraud on the Internet, and specifically in E-mail.
And we applaud the efforts of the FTC, Postal inspectors, and
other law enforcement agencies to step up their anti-fraud campaigns.
The DMA will continue its efforts to cooperate with them and their
law enforcement efforts.
The DMA has consistently referred any ethics complaints it
receives involving fraud or other violations of the law to the
FTC, attorneys general, and the Postal inspectors.
Fraud should be severely punished, whether it is made on paper,
over the airwaves, over phone lines, or on the Net. It is a cancer
to all commerce regardless of the medium used, and it should be
eradicated. And the DMA wishes to work with you and your subcommittee
to work on legislation to try and help solve this problem.
And I thank you for the opportunity, and am willing to answer
[The prepared statement of Mr. Cerasale follows:]
Senator Burns: Thank you very much. I would call on Dierdre
Mulligan, staff counsel for the Center for Democracy Technology.Thank
you for coming this morning, and we look forward to your testimony.
STATEMENT OF MS. DIERORE MULLIGAN, STAFF
COUNSEL, CENTER FOR DEMOCRACY AND TECHNOLOGY, 1634 I STREET, N.W.,
11TH FLOOR, WASHINGTON, D.C.
Ms. Mulligan: Thank you very much. I want to first take the
opportunity to thank the chairman. My organization, as you know,
works on First Amendment, privacy, and other issues that are critical
to the Internet, and we have really appreciated your leadership
on issues such as encryption, and also to thank Senators Murkowski
and Torricelli for their ongoing effort to look at the use issue
in partnership with you and Senator McCain.
I am very pleased to have the opportunity to talk about use
today as many of you have commended, the growth of the Internet,
and particularly E-mail, is leading to a rapidly evolving, what
the Supreme Court recently called world-wide conversation. E-mail
particularly is giving us the opportunity to communicate, share
information, and spread ideas in a way that no other medium has
ever been able to mirror.
However, the same traits -- the low barriers to access, the
ability to communicate both one-to-one and one-to-mass that are
so powerful for freedom of speech are also very powerful for some
of the marketing community and, as the Federal Trade Commission
has found out, generally a fairly unscrupulous section of the
marketing community to use this medium to send hundreds, thousands,
and even millions of messages to consumers which they frequently
are not interested in receiving.
Unlike postal mail, as Senator Torricelli pointed out, the
cost of E-mail is not borne by the sender, it is borne by the
intermediaries, the ISPís, the backbone provider. It is borne
by the recipients and, unfortunately for the recipients in rural
areas such as Montana and Alaska, those costs, when there are
dial-up accounts, when there is storage on local ISPís, can be
quite substantial and, at times, I think some of your constituents
have found prohibitive.
Both the frustrations of the Internet community and the complexities
of addressing the quandary of unsolicited commercial E-mail in
a way that meshes with our constitutional protections for speech
were aired at the Federal Trade Commissionís half-day work shop
on use that was held last June.
At its conclusion, and at the request of then-Commissioner
Varney, the participants at the workshop agreed to undertake an
effort to look at these issues, to look at a broad array of possible
solutions. I think too often we tend to seek Government solutions
and regulatory solutions and what we have found, and I think particularly
what the Communications Decency Act and the Supreme Court decision
striking it down have told us is that in this medium those tools
may need to be coupled with other tools that are more appropriate
to this medium that deal with the decentralized and the global
So some of the solutions that we have looked at are not just
legislative and regulatory but also include technical approaches,
such as the filtering tools that are employed in different E-mail
programs, the technical measures such as the companies such as
AOL and Compuserve have put in place to deal with protecting their
consumers, and many of the self-regulatory efforts that have ranged
from opt-in E-mail to global opt-out lists, to free services that
offer cleaning of lists so that when marketers want to send messages
they ensure that they do not send them to people who have indicated
they have no desire to receive them.
For the past year, CDT has coordinated this working group,
and it has been a privilege to work with organizations and companies
-- everyone who is represented at this table this morning has
participated, or someone else from their organization, along with
While the report is not yet available, it is our intention
and it will be our pleasure to share that report with the committee,
and I think that you will find that it both maps out the issues,
helps identify both the role that Government can play and also
the role that the private sector and that technical tools can
play in dealing with this very complex issue.
Finally, I want to come to the recent bill, the amendments
to S. 1618 by Senators Torricelli and Murkowski. believe that
S. 1618 is a very important first step in addressing this issue
and that if it was enacted, that it would lead to a reduction
in unsolicited commercial E-mail, and I will get to why in a second.
However, I think it is unclear whether 5. 1618 on its own
will be the silver bullet. I think the reason that it will reduce
unwanted commercial E-mail on the Net is that if the history of
E-mail has told us anything, and the history of the Internet,
it is that Internet users are a very vocal bunch, and that when
they are able to respond to practices that they do not like, they
do so vociferously loudly, and in the case of unsolicited commercial
E-mail with a fairly resounding no, and I think that there is
one example I would point you to.
Canter & Siegel are real Internet lore, and they have
often been called one of the most hated folks on the Net, and
they sent out a massive blast to over 6,000 Use Net news groups,
which are groups that are usually very issue-focused for discussions
among like-minded individuals, but they put their return address.
Very quickly, their ISP not only crashed once, but crashed
15 times, and Canter & Siegel business people who were trying
to operate in this medium found out that they could not get an
ISP to carry them. I think the recent incident with Sanford Wallace
also tells us that when people are identified as using this medium
in a way that the community thinks is inappropriate, that they
find the community is not ready to open their door.
That said, I believe that the impact of legislation, whether
it is S. 1618, if passed by the House and Senate, or others has
to be monitored. Regulating activities on the Internet poses really
unique issues. As I said earlier, this is a global decentralized
medium. I do not think legislation in this medium will ever provide
a full answer and that it is going to need to be coupled with
technical tools, with self-regulation, to really create a robust
infrastructure to provide individuals with the ability to control
the information coming into their homes.
I very much look forward to working with you, and appreciate
the opportunity to be here. Thanks for your time.
[The prepared statement of Ms. Mulligan follows:]
Senator Burns: Thank you. We appreciate your time and your
efforts on this.
Mr. Ray Everett-Church, cofounder, Coalition Against Unsolicited
STATEMENT OF MR. RAY EVERETT-CHURCH, CO-FOUNDER,
COALITION AGAINST UNSOLICITED COMMERCIAL E-MAIL, 1617 S.W. Street,
N.W., #30, Washington, D.C. 20009
Mr. Everett-Church: Thank you, Mr. Chairmen, and to the members
of the committee, I appreciate the chance to address you. I hope
your staff warned you that by the end of this year you will be
such an expert in technology that your grandchildren will expect
you to program the VCR.
Mr. Everett-Church: I come here today on behalf of the Coalition
Against Unsolicited Commercial E-mail. I have also been authorized
to say that my remarks today represent the views of our coalition
partners, the Internet Service Providers Consortium and the Forum
for Responsible and Ethical E-mail.
The coalition is an all-volunteer ad hoc group of technology
professionals, consumer activists, Internet servers, provider
owners and operators, and the operators of many Internet-based
businesses. In just a year of existence we have become one of
the Nationís largest Internet advocacy groups with over 10,000
registered members from nearly every State.
Our coalition was formed for just one purpose, to advocate
for a legislative solution to the problem of junk B-mail. We took
on this task because as technology experts we found that the technology
and self-regulatory solutions have proven to be no solution at
all in stopping the damage done by junk E-mail.
As you have heard from many people, and I will not recount
all of it, the problem of junk E-mail imposes tremendous cost
on many parts of the system, including Internet service providers
and users, particularly customers in rural communities, but there
is a larger issue at stake.
As a greater and greater percentage of our gross domestic
product revolves around the explosion of computer-related and
Internet-related commerce, 1 do not exaggerate when I say that
junk E-mail has the potential to harm our economy in ways that
terrorists could only dream about.
With alarming frequency, media report system crashes and network
outages caused by junk E-mail attacks knock out systems by large
providers such as AT&T, Pacific Bell, Netcom, GTE and others.
Just to give you an idea of the volumes we are talking about on
an individual level, during calendar year 1997, the E-mail account
I use for my business received over 6,000 pieces of unsolicited
commercial E-mail. That is an average of about 16 messages per
day, for a total volume of 41 megabytes.
While the costs of becoming a junk B-mailer are tiny, as you
have heard, the cost to those who have to transport, process,
store, and retrieve that E-mail are quite tremendous. Particularly
for users in rural communities and Internet service providers
serving those users, the costs can be extraordinary.
For many of the victims of junk E-mail attacks, these unsolicited
commercial messages are like a telemarketerís phone call to their
cellular phone. They have paid to receive a message they did not
ask for and invariably do not want.
For this reason, many people have called junk E-mail a form
of postage-due marketing. I am not so charitable. I quite simply
call it theft. It is the stealing of time and resources from others
against their will.
Now, you have heard several different legislative approaches
discussed today, and what I want to share with the committee is
that the coalition feels that any legislation which would legalize
the sending of any form of junk E-mail is nothing short of legalizing
a type of theft. If this committee gets a chance to review junk
E-mail legislation, I urge you to reject any solution which gives
legal sanction to the practice.
Now, outlawing junk E-mail such as Congressman Smithís approach
would not make it impossible to advertise on the Internet, not
in the least. It will simply require that marketers show some
more creativity in convincing consumers to opt in for their messages.
Now, you have already recognized the differences between postal
mail and E-mail, and we believe that the postal opt-out approach
is a misguided approach for the E-mail venue. We favor an opt-in
Now, legislation mandating opt-in approaches for situations
where costs are shifted to the recipients is not unheard of. In
fact, the existing statute outlawing junk fax transmissions has
been on the books for almost a decade now, more than a decade,
and has been extremely successful.
The economics of junk faxes and junk E-mail are quite similar
in that they both consume the resources of the recipient at much
lower cost to the sender. However, there is an important difference.
With junk faxes, it is much more difficult to press one button
and send to 10 or 20,000 people very easily without some incremental
cost, but in the world of junk E-mail, the 10-millionth E-mail
message costs no more than the 11-millionth E-mail message.
Just as we find H.R. 1748 a clear solution we find Senators
Murkowski and Torricelliís approach inadequate and, indeed, something
of a threat. Although CAUCE certainly endorses the intent behind
their approach, we are concerned that their proposal will increase
the burden on businesses and consumers by setting a very low threshold
for the legitimacy of junk E-mail.
Now, some have questioned the constitutionality of an outright
ban on junk E-mail. Let me assure you that there is ample precedent
for supporting Congressman Smithís legislation.
In the case of Rowan v. U.S. Post Office, the Supreme Court
held that nothing in the Constitution compels citizens to view
unwanted communications and specifically the Court held that "a
mailerís right to communicate must stop at the mail box of an
unreceptive addressee. To hold any less would be licensing a form
Certainly, in the junk E-mail context a Federal district court
held, "There is no constitutional requirement that the incremental
cost of sending mass quantities of unsolicited advertisements
must be borne by the recipients."
In conclusion, Mr. Chairman, like the fax machine before it,
electronic mail is a marvelous tool of business and personal communication.
It is simple and accessible, but unless Congress acts to stop
the growing flood of advertisements, the viability of the media
will be severely threatened.
Thank you very much.
[The prepared statement of Mr. Everett-Church follows:]
Senator Burns: Thank you. Thank you, Mr. Church.
I want to direct a question, and we are supposed to open up
here in a little bit with a conference, but Mr. Boe, is there
a way that a member of AOL, is there a way technically that you
can block for that member what he or she receives?
Mr. Boe: We have tools that allow members, if I understand
your question correctly, that allow members to decide what they
will or will not receive, so I can establish a list, for example,
of the E-mail, known E-mail addresses -- her grandparents -- and
she will receive E-mail only from those people and all other mail
will be blocked, and we allow the members to do that themselves.
Senator Burns: And that is done on the computer of the member
Mr. Boe: Correct, and we believe that allows the members to
choose what mail they will receive.
Senator Burns: Can you do that for the customer at a cost?
Mr. Boe: Well, we do have technical solutions that are designed
to try and identify junk E-mail and block it from ever entering
the AOL network, and we do that, and there is a substantial cost
associated with that.
Senator Burns: How do you do that?
Mr. Boe: It gets very complicated.
Senator Burns: I know, but just give me the outer shell.
Mr. Boe: Well, we do a couple of things. We identify domains
-- we call them spam havens, domains from where spam originates.
We also look at the characteristics of the transmission. So, for
example, if we see a batch of a million E-mails all coming at
the same moment from the same place, we are likely to identify
that as junk E-mail and take efforts to block part of it. That
is a thumb-nail sketch of how that works.
Senator Burns: Okay.
Mr. Boe: But I should add, it is very difficult to do that,
and the spammers are very adept at defeating the countermeasures,
disguising the source of their transmissions, falsifying the transmission
data to prevent us from doing that effectively.
Senator Burns: Ms. Mulligan, you mentioned encryption, and
I have often said -- and correct me if I am wrong -- robust encryption
is one of the keys that the individual American is going to have
to understand and use in order to prevent some of this. Is that
a correct assumption, and it also goes a long way in protecting
the integrity of the service that Mr. Boe offers.
Ms. Mulligan: There are a number of folks that are experimenting
with the role cryptography may play in addressing E-mail issues.
There is some work going on in a number of very important technical
labs looking at, for example, a way in which -- it is not quite
a costing of Email, but it would allow me to indicate that I want
to communicate with a specific person. You can certainly use public
key cryptography to selectively identify people with whom you
want to communicate and those with whom you do not.
However, whether or not cryptography will be a central tool
in addressing, on the technical side, unsolicited Email, I am
not so sure.
I think that some of the filtering tools that have been discussed
such as the ones my colleague here was talking about are probably
more likely to be effective, and one of the important things that
he pointed out was what makes filtering difficult today is the
falsification of information, the fact that people are falsifying
domain names so that when AOL blocks a spam haven the spam haven
will then try to disguise itself as somewhere else, and so some
of the accuracy requirements we think would go a long way to help
with that specific kind of filtering.
Senator Burns: Jerry, tell me about your organization. Has
your organization developed a code of ethics and guidelines for
direct marketing, and if there are violators, do they lose their
membership, or how do you police that if you have set up an ethical
means of doing business?
Mr. Cerasale: Yes. Yes, we have. We have set up -- we have
an ethical -- an ethics program with ethics committees that have
the authority to try and correct a problem that comes up and also
the authority to bring to the board to throw someone out.
We have started a new program that there are certain requirements
that will be mandatory that people, members participate in to
remain members. That will begin in July of 1999. They have to
give the ability to opt out, the notice and ability to opt out,
and honor that opt out. They must use our mail preference service,
our telephone preference service, and when we get it up, our E-mail
preference service. That would be for all members.
And also our guidelines, our principles for electronic Email
would be that they have to follow the rules of the forum, and
so in essence trying to send unsolicited E-mail, a big batch to
AOL, and AOL says they do not accept it, that is the rule of the
forum of AOL. Our guidelines would say that you cannot send that
batch to AOL, and we have a committee that works and looks at
The committee also, when it finds fraud, we immediately send
that information to either the FTC, the State Attorneys General,
or the Postal Inspection Service, or to all three if it is appropriate,
and so we work in that way. That is our ethics program.
Senator Burns: Tell me about, do your members use the tool
of unsolicited E-mail?
Mr. Cerasale: We do not think so. There maybe one -- we believe
there is one. There ~s one member who uses unsolicited E-mail
and offers an opt-out. As I said in my testimony, this is a new
medium, and our marketers have not found it to be useful at the
moment. They are looking at it. We do not want it closed up, but
they are not using unsolicited E-mail, basically.
This is a very customer-oriented business, and if your customers
are angry about it you do not want to use that, so we are looking
at new ways -- as technology and creativity continues, there may
be ways to use unsolicited E-mail, but right at the moment I would
have to say basically the Direct Marketing Association members
do not use it.
Senator Burns: Mr. Church, we are going to have to draw this
down, but there will be questions from other members on this committee,
because we are in this sort of a compact situation here today
about moving some information of our own.
In your testimony -- and I have not read your testimony, I
am sorry -- did you specifically lay out some of the concerns
that you have with the pending legislation?
Mr. Everett-Church: Yes, we did. In fact, we attached a copy
of the letter that we sent along to Senator Murkowskiís office
prior to the introduction of that legislation outlining the major
concerns that we had with that bill.
Senator Burns: Oh, I am sure you will be hearing, all four
of you be hearing from us on the committee as that legislation
moves and takes its shape.
I am just sorry we have to cut everything -- I thought we
did pretty well, getting everything into an hour, and your recommendations,
and we will certainly recommend to other members if they want
to visit with you, I would certainly recommend that they do so
on a personal basis. Any questions that you might return to individual
Senators I wish you would also copy in the committee.
We appreciate that, and your coming down here this morning.
[Whereupon, at 10:35 a.m., the subcommittee adjourned.]