The Federal Trade Commission announced yesterday that it as charged seven companies with violating federal laws by sending unlabelled pornographic email to draw users to adult Web sites. The FTC has already reached settlements with four of the companies—Florida’s BangBros.com, Inc. and APC Entertainment, Michigan’s MD Media, and Louisiana’s Internet Matrix Technology—who have agreed to pay nearly $1.16 million in civil penalties. The remaining three firms—Nevada’s T.J. Web Productions, Arizona’s Cyberheat, and Washington’s Impulse Media Group—are either still negotiating with federal officials or (less likely) plan to take the case to trial.
The FTC specifically charges the companies violated the 2004 CAN-SPAM Act by sending sexually explicit email messages which violated the Adult Labelling Rule (which requires subject lines of commercial sexually explicit mail contain the phrase “sexually explicit”), lacked a clear and conspicuous opt-out mechanism, and failed to contain a valid postal address for the business sending the message. The investigation examined thousands of messages sent to the FTC’s spam reporting address (spam@uce.gov) and received assistance from Microsoft Corporation‘s antispam efforts, which examined messages sent to over 100,000 so-called "honeypot" email addresses on its HotMail and MSN services. Honeypot addresses have never been used to send mail; therefore, with the exception of possible administrative mail from the services themselves, nearly any message they receive is unsolicited spam.
The companies charged did not send the sexually explicit email themselves, but instead operated affiliate programs which paid third parties to promote adult Web sites, and paid the affiliates on the basis of the number of paying customers their promotions generated. Under the CAN-SPAN legislation, the companies are liable for the actions of the affiliates because the companies "initiated" the email by paying others to send it on their behalf.
The settlement agreements, if approved by the court, would permanently bar the companies from future violations of the CAN-SPAM act and require defendants closely monitor the activity of their affiliate marketers to ensure they are not violating the law.
The pornographic email messages have been characterized as "electronic flashing" because they potentially display graphic sexual content to unwitting recipients, including children.
