Small Business

Needed Now: Laws to Can Spam


By Mike France If the junk e-mail in your in-box is piling higher, join the crowd. Over the past year, the volume of "spam" has more than tripled. The number of unsolicited electronic come-ons intercepted in August by Brightmail, a San Francisco outfit that helps Microsoft (MSFT), Cisco Systems (CSCO), and others block unwanted mass mailings, was a record-setting 5,065,858 -- up from just 1,504,043 in August, 2001. Spam now accounts for 38% of all

e-mail traffic, up from 8% last year, according to Brightmail. "In the last 12 months, it has gone from something that I could manage manually by deleting e-mails into something that's out of control," says David J. Farber, former chief technologist at the Federal Communications Commission.

Like many other computer cognoscenti, Farber counterattacks with a software filter designed to stop spam. But it takes a lot of time to decide what to screen out. And cleverly disguised sex ads still break into his computer, while some legitimate messages are bounced away. As a result, Farber doubts filters can ever be a complete solution to the spam plague -- a verdict increasingly shared by other technology experts.

THE FAX PRECEDENT. That's why it's time for a legal assault. Already, more than two dozen states have passed measures against garbage mail. California, Colorado, and five other states, for instance, now require mass e-mailers to label advertising missives "ADV:" in the header line, which makes them much easier to block with filters. But state statutes are unenforceable against nonresidents and vary from jurisdiction to jurisdiction. One unified federal rule, such as the Telephone Consumer Protection Act of 1991, which banned unsolicited faxes, needs to be passed in Washington and then evangelized in other countries. If not, spam will continue to eat up time, decrease productivity, tax computer capacity -- and ultimately weaken one of the most powerful communications tools in history.

Yet federal legislation won't come easily. As reviled as spam is, the idea of regulating it is surprisingly controversial. Left- and right-wing libertarians alike are skeptical of any laws that impede commercial free speech. Noting that many ads have political overtones -- for example, promotions for abortion clinics, gun fairs, or medical marijuana -- they argue that any restrictions on spam could muzzle socially valuable information. "Once the government starts deciding which speech is valid and which isn't, then you are in a dangerous area," says David G. Post, an Internet-law expert at Temple University. "That's exactly what the First Amendment is about."

What's more, many companies in consumer industries with high marketing costs, such as retail, travel, and insurance, are worried that lawmakers will prevent them from using a powerful ad tool. Amazon.com, the Securities Industry Assn., the Direct Marketing Assn., and others have all lobbied against--and thus far blocked --any federal spam laws. They argue that bulk e-mail gives consumers more choice and lower prices while helping small companies take on big ones. "It is a cheap way to advertise, so the savings can be passed on to the consumer," says Joe Rubin, director of congressional affairs for

the U.S. Chamber of Commerce.

AN EMPTY ARGUMENT. Some of these are seductive arguments. But ultimately, they are outweighed by the utter pointlessness of most spam. Response rates to bulk commercial e-mail are thought to be as low as .005%. That means the typical message appeals to 50 people and annoys 999,950. All the highbrow defenses of spam start sounding overblown when you consider the sordid reality of the stuff itself -- unwanted pyramid schemes, anti-aging gimmicks, and live shower-cam promos. The cacophony drowns out any valuable messages, in any event.

It might seem as if the minuscule response rates would doom spammers to failure. Quite the contrary. E-mail is so cheap that they can make money even with almost no click-through. Marketers now pay $150 for a compact disk with 70 million e-mail addresses--or 3,500 new customers. Not a bad deal.

And here's the really troubling development: the economics of spam are only getting worse from a public standpoint. Thanks to aggressive new techniques for harvesting e-mail accounts, the cost of hooking new customers is constantly plummeting. For example, some programs automatically raid public message boards looking for addresses. Others bombard Internet service providers with random name combinations (asmith@businessweek.com, bsmith@businessweek.com, csmith@businessweek.com) until they hit pay dirt. Such tools are a key reason the volume of spam has exploded in recent months.

WARNING LABEL. This development means one simple thing: that private solutions to curbing spam won't work. This is a classic case of free-market failure. Consumers can ignore junk e-mail to their hearts' content, but no amount of rejection will ever make mass e-mailing unprofitable. Only the government can change the cost-benefit analysis enough to make a difference.

How so? First of all, by following California's lead and enacting federal legislation requiring unsolicited bulk e-mail messages to include "ADV:" in the headers. That would turn filters into a far more effective tool while respecting the rights of spammers and consumers who want to receive their offers. Just as is the case with junk faxes, anybody who violated the law would be subject to an automatic fine of, say, $25.

Better yet, the government could offer consumers a choice. People who don't want junk e-mail could sign up for a national database of prohibited addresses. Spammers that ignored the list would, again, be forced to pay a penalty. Similar programs have been established privately by the Direct Marketing Assn. to help people avoid telemarketing.

Despite the protests of First Amendment absolutists, both of these measures would probably be constitutional. Commercial free speech is protected, but it is not immune from regulation. So long as they have good cause, lawmakers are allowed to place reasonable restrictions on the conduct of commercial speakers. University of Southern California constitutional law professor Erwin Chemerinsky believes that a national "ADV:" law or opt-out list would be upheld. "Giving recipients a choice is different than banning spam," says Chemerinsky.

FOREIGN INVADERS. Of course, these steps would not kill junk e-mail. Offshore e-mailers, including many of the Net's most notorious scam artists and pornography merchants, could still invade U.S. in-boxes at will. Indeed, this loophole is often cited as an argument why spam shouldn't be regulated at all. But the problem is exaggerated. Well over half of all bulk commercial e-mail, including most of the offers for legitimate products and services, originates domestically, according to Brightmail CEO Enrique Salem.

Although it isn't easy to do so, senders can be tracked down and prosecuted--a prospect that, by itself, would frighten many spammers into compliance. Look at the junk fax law, which has all but eliminated that once-widespread problem.

Nobody wants politicians mucking around with the Internet. But sometimes they're needed. And, as every morning's spam barrage attests, this is one of those times. BusinessWeek Legal Affairs Editor France isn't looking for diet pills, psychic advice, or a new mortgage.


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