New Zealand: Closing The Lid On Spam

Anti-spam legislation has always been envisaged as part of a multi-faceted approach to a problem which now accounts for a significant proportion of all electronic mail traffic. But, Belinda Barclay, an associate with the Christchurch Lawlink firm of Wynn Williams & Co asks, what will the proposed anti-spam Bill do for New Zealand businesses and what should they be doing now?

A European Union study suggests that the worldwide cost of spam to internet subscribers is in the vicinity of 10 billion Euros a year. An American study estimated in 2003 that spam is costing US$874 a year per office worker with an email account.

In New Zealand, ihug stopped 5.1 million spam emails in September 2003 and 6.5 million in November that year. Undoubtedly, the numbers are higher now. Spam accounts for 75% of the email received by ihug customers using its spam filter.

If the internet is the information super highway, it is developing a problem that Aucklanders should relate to. So what is the New Zealand government doing about it?

The Unsolicited Electronic Messages Bill ("the Bill") was introduced to Parliament on 28 July 2005.

Industry participants were asked to provide submissions on the proposed Bill by 31 March 2006. The Bill is currently before the Commerce Select Committee with a report due on 31 August 2006.

The government is aiming to curb the growth of spam in New Zealand and to provide for New Zealand’s participation in international regulatory and enforcement code operations.

Legislation is seen internationally as an important element in addressing the problem of spam along with industry self-regulation, technical measures and consumer and business education.

What Is Spam?

It is proposed in the legislation that "spam" will cover unsolicited electronic messages sent in bulk using services such as email, instant messaging and SMS (text messaging). It is not proposed to apply to facsimile or voice mail.

Regulatory powers may extend the scope of the Bill to cover new technologies as they are developed.

How Will The Bill Combat the Problem Of Spam?

The legislation will help in combating spam by:

  1. Setting out acceptable business practices in New Zealand for the purposes of marketing by electronic means.
  2. Enabling legal action to be taken against spammers based in New Zealand.
  3. Preventing New Zealand being seen as an international haven for spam.
  4. Assisting New Zealand in efforts to obtain international co-operation to combat overseas sources of spam.
  5. Prohibiting the use of software to harvest electronic addresses, and use of harvested address lists.
  6. Requiring all electronic messages with a New Zealand link to identify the person who authorised the sending of the message and how that person may be contacted, including a functional "unsubscribe" imbedded in that electronic message.
  7. Prohibiting promotional electronic messages that have a New Zealand link, where the recipient has indicated it does not want to receive those messages anymore.
  8. Prohibiting the sending of commercial electronic messages that have a New Zealand link, except where the message is sent to people who have given their prior written consent to receiving those messages.
The New Rules To Can Spam

The Bill applies only to electronic messages with a New Zealand link.

The definition "New Zealand link" is very wide and covers not only messages originating in New Zealand, but also any electronic messages accessed by a computer located in New Zealand.

Liability for breaches of the Act (once in force) applies only to people resident in or organisations carrying on business in New Zealand.

The Bill is a hybrid of overseas anti-spam legislation, as it provides both "opt-in" and "opt-out" approaches depending on what kinds of messages are being sent. The Bill distinguishes between "unsolicited commercial electronic messages" and "promotional electronic messages".

Unlike the Australian equivalent, the Spam Act 2003 (Commonwealth), the Bill proposes an "opt-out" approach to promotional emails. That is, it is not an offence to send an unsolicited promotional email per se, so long as the recipient is given the opportunity to say they do not wish to receive any further emails from that sender. This is similar to the position in the United States in relation to commercial emails under the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN SPAM Act) 1993.

However, like Australia, with regard to "commercial electronic messages" an "opt-in" principle applies, that is, the user must obtain the consent of the proposed recipient before such messages are sent. This will be the approach applied to the bulk of messages.

A "commercial electronic message" is a message whose:

  • primary purpose is the marketing or promoting of goods and services; or whose
  • object is to assist or obtain a dishonest financial advantage.

A "promotional electronic message" is an electronic message that is not a commercial electronic message and that has as its primary purpose the promotion or marketing of an organisation.

There are other exceptions to what a "commercial electronic message" is and these include:

  • quotes or estimates (if requested);
  • messages facilitating, completing or confirming an already agreed commercial transaction;
  • messages providing warranty, product recall or safety and security information about goods used or purchased by the recipient;
  • messages that provide the recipient with information about goods or services offered by a government body, court or tribunal;
  • messages providing notification of information about subscription, membership, account, loan or similar ongoing relationships;
  • messages providing information directly related to an employment relationship or related benefit plan.
Consent

The Bill wishes to avoid the United States "opt-out" approach because it places the onus on the recipient, who must indicate that he or she does not wish to receive such messages. As a result not only is the recipient forced to waste time (time being something businesses and individuals alike wish to protect) but in responding he or she inadvertently confirms the relevant electronic address.

To avoid such consequences, the Bill instead adopts the "opt-in" approach to commercial messages. This approach requires the sender to obtain the recipient’s consent before sending the relevant message. The burden is therefore on the sender.

Consent is fundamental to stopping unsolicited commercial electronic messages. Consent can be either express or inferred (from the conduct and business or other relationship between the parties). The Bill also deems consent to have occurred where:

  • the message sent is relevant to the business, role, functions or duties of that person;
  • there is no accompanying statement that there is no consent to the sending of messages; and
  • an electronic address has been published by a person in a business capacity.

The Bill requires that any electronic messages to which it applies must clearly and accurately identify the person who authorised the sending of the message and include accurate information about how to contact that person "readily". The information must be reasonably likely to be valid for at least 30 days after the message is sent.

In relation to the "opt-out" provisions, the Bill also requires that electronic messages must include a functional "clear and conspicuous" unsubscribe facility which allows the recipient to opt out from receiving further messages. This facility must be reasonably likely to be functional for at least 30 days after the principal message is sent.

Defences

Alleged spammers have a defence if they can show that a message was sent by mistake or without their knowledge (for example, because of a computer virus).

Proposed Regulations And Code

The Bill itself does not provide a complete framework for dealing with electronic messaging prohibition. Regulations and/or a Code will be created to particularise its application further. Some areas of importance that may be affected by such Regulations or Code include:

  • what amounts to inferred consent;
  • exceptions to the definition of "commercial electronic message";
  • who is in the e-marketing industry.

In relation to the latter, the Law Council of Australia’s e-Commerce Committee noted whilst reviewing the development of a proposed e-Marketing Code of Practice in conjunction with the Spam Act 1999, that there is a gap in the Act for distinguishing between companies that occasionally e-market, amongst other things, on behalf of another company (for example a law firm) and those whose core business can properly be described as "e-marketing activities". They say that the latter should be subject to a Code but the former not. This will undoubtedly be an issue to be considered under the proposed Bill.

Enforcement

Clearly the Bill on its own is a "toothless tiger".

The difficulty is that only ten percent of spam originates in New Zealand. Therefore the enforcement of any anti-spam legislation will be dependent on international co-operation. Communications Minister David Cunliffe has admitted that the Bill "will really only be enforceable in New Zealand". He has indicated that he hopes to follow up on past discussions with Australia, UK, South Korea and other nations on joint enforcement of the new legislation. Hopefully such talks will eventuate with a clear plan of attack.

The Bill itself uses a three-tier system to implement the regime of civil penalties.

Customer complaints of spam will initially be referred to the relevant Internet Service Provider ("ISP") which will bear the burden of adopting appropriate technical measures to combat spam whilst being able to refer certain matters to the Department of Internal Affairs for further investigation and enforcement.

The ISP may also seek an injunction, apply to the High Court for compensation or damages (if the service provider has also suffered loss), or apply to join any court action initiated by the enforcement department.

The enforcement department on receiving a complaint may not only initiate legal proceedings for breach of the new Act, but can also apply for and execute search warrants, issue formal warnings and issue contravention notices (which will require the payment of a fine). Breach of contravention notices will result in "fast track" legal remedies before the court.

A key feature of the Bill is the requirement restricting the enforcement department from considering complaints except from service providers. The victim of a spam "attack" (who is not also a service provider) cannot directly initiate an enforcement action through the Department of Internal Affairs. However, the Department does retain the discretion to start its own legal proceeding.

Penalties And Fines

An individual faces fines up to $200,000 while an organisation faces fines of up to $500,000.

A breach of the prohibition on promotional electronic messages can result in a fine up to $50,000.

Factors to be assessed in deciding the level of fine include:

  • the number of messages sent;
  • the number of addresses to which an electronic message is sent;
  • whether the perpetrator has previously contravened the Bill.
What Can Businesses Do Now?

Below are some things businesses should consider doing in preparation for the anti-spam legislation:

  1. Review existing email electronic message policies and practices and identify whether the business currently sends messages which may be prohibited or restricted under the Bill.
  2. Review the methods by which the business obtains consent from others to send commercial electronic messages.
  3. Conduct training to ensure staff are aware of the major breaches of the legislation and are familiar with the restrictions on sending commercial electronic messages.
  4. Ensure that all commercial electronic messages sent by the business include or contain a link to the identity and current contact details of the business.
  5. Implement a functional unsubscribe facility for all commercial electronic messages sent by the business - or alternatively ensure that agreements for customers and suppliers expressly state that a functional unsubscribe facility will not be included in electronic messages. The latter option may involve reviewing website terms and conditions of use and competition conditions of entry.
  6. Include a statement on the corporate website that electronic addresses are published on the website for the purpose of communications only and do not constitute an invitation to send unsolicited commercial emails which are not related to the business.

Businesses should also use this opportunity to ensure they are compliant with related laws such as privacy legislation.

This article was first published in LawLink, Volume 22, Issue 2 (Winter 2006)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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