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Fax Advertisers Find Themselves on Receiving End

As legal challenges pile up, some observers are predicting the demise of the machines as tools for mass marketing.

September 08, 2003|Jeremiah Marquez | Associated Press

Graphic designer Sheridan Obrien is fed up with the flood of ads for vacation cruises and penny stocks that routinely emerge from her fax machine. The unsolicited pitches use up her toner and paper and wake her late at night.

"I feel very invaded and very angry and very helpless," said Obrien, 53, who works from her home in Orange County.

That kind of frustration has led to dozens of lawsuits and two major court rulings in the last six months against faxed ads. The industry's days could be numbered.

"As a mass medium of advertising, fax could be dead," said John Kamp, a marketing industry attorney who represents several fax companies.

The legal wrangling reflects a broader backlash against such advertising nuisances as prerecorded telephone messages and telemarketing calls.

A national do-not-call list that blocks phone sales pitches has grown to more than 48 million numbers since it began accepting submissions June 27. At least 32 states have their own do-not-call laws.

At issue in both court decisions targeting faxes was the federal Telephone Consumer Protection Act of 1991, which bans the faxing of advertisements without prior consent from recipients. It lets consumers sue senders of the ads for $500 to $1,500 for each unsolicited fax.

In March, the U.S. 8th Circuit Court of Appeals in St. Louis ruled in support of the act, overturning a lower-court ruling that held that the law was an unconstitutional restriction on fax advertisers' 1st Amendment rights.

The judgment was echoed last month by a California appellate court decision that essentially gave state residents the go-ahead to sue over unsolicited faxes.

About a hundred suits targeting unwanted faxes are pending around the country. They range from small claims to about two dozen class actions.

In one case, a judge in Georgia ordered a Hooters restaurant to pay nearly $12 million in 2001 for sending unsolicited faxes through a local telemarketer. The award was later reduced to about $9 million through a settlement, said Harry Revell, an attorney for the plaintiff.

In addition, attorneys general in Arkansas, California, Illinois, Kentucky, Michigan, Missouri, New Jersey and Texas have sued companies in recent years.

"Hopefully, the junk fax industry will get a clue ... and get out of the business," said Nick Connon, who represents plaintiffs in an $8-million lawsuit that was revived after last month's California appellate decision.

Silicon Valley entrepreneur Steve Kirsch announced state and federal lawsuits last year seeking $2.2 trillion in compensation from Fax.com Inc., its telecommunications provider and its advertisers. Although seemingly far-fetched, the figure represents an amount to which Kirsch says consumers are entitled under the Telephone Consumer Protection Act for unwanted faxes.

"I hate junk faxes," Kirsch said. "I don't know anyone who enjoys being woken at 3 a.m. to the sound of a fax tone."

There is a legitimate market for mass faxing. It helps pharmaceutical companies send drug information to doctors. Hotels and cruise lines use it to reach travel agents.

By contrast, senders of junk faxes act without consumers' approval. They are normally hired by small companies and get paid a few cents for each fax.

Maury Kauffman, a consultant for the $300-million-a-year industry, said a handful of renegade firms were making it difficult for two dozen legitimate companies that "would like to see these other firms go away."

In its fight against junk faxes and illegal telemarketing, the Federal Communications Commission has issued nearly 200 fines and citations since 1999.

Complaints by consumers against telemarketers increased to nearly 4,100 in the first quarter of this year from about 1,300 in the comparable period a year earlier. FCC officials said the figures could reflect greater efforts to inform consumers about telemarketing issues.

Meanwhile, the FCC has approved a rule requiring companies that want to fax ads to obtain written permission from consumers. Companies would need permission even for faxes sent to customers who already may have requested that information be sent to them.

The new regulation was scheduled to take effect last month but was delayed until Jan. 1, 2005, after the FCC received hundreds of complaints and requests to clarify the changes.

Among the most heavily targeted faxing companies is privately held Fax.com, which has been sued by attorneys general in California, Kentucky and Missouri.

In August 2002, the FCC levied a $5.4-million fine against Fax.com, the largest ever by the commission for violations of the act. The company, based in Aliso Viejo, has appealed.

Fax.com also has been accused of sending junk faxes to consumers who requested that their names be removed from its dialing lists.

Mary Ann Wymore, an attorney for Fax.com, called that allegation unfounded and said many complaints were being driven by attorneys trying to take advantage of the law. She defended the mass-faxing industry, saying it helps small businesses without deep pockets get their messages out. Fax.com's customers include travel agencies, mortgage lenders, restaurants and distributors of office furniture and business equipment.

"I think the industry is in great peril," Wymore said. "We're talking about wiping out an entire medium of advertising."

Elliott Kim, owner of a textbook store in Los Angeles, says he doesn't want to see the industry disappear. He just wants ads for printer ink and real estate to stop clogging his fax machines.

"It's awful," said Kim, 36, who gets about six pages of fax ads daily at his home and business. "I wish they would stop and just leave me alone."

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