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From Antitrust Law Daily, April 3, 2017

FCC order requiring opt-out notices on solicited fax ads overturned

By Robert B. Barnett Jr., J.D.

The FCC overstepped its regulatory authority when it issued a rule in 2006 requiring businesses to include an opt-out notice in solicited fax advertisements (where the sender has the recipient’s permission to send the fax), the U.S. Court of Appeals in Washington, D.C. has ruled. As a result, the court has concluded that the Junk Fax Prevention Act requires businesses to include an opt-out notice only in those limited circumstances where unsolicited fax advertisements are permitted (Bais Yaakov of Spring Valley v. Federal Communications Commission, March 31, 2017, Kavanaugh, B.).

Congress enacted in 2005 the Junk Fax Prevention Act, which forbade the sending of unsolicited advertisements via fax. Unsolicited fax advertisements were, however, permitted in limited circumstances, such as where the sender and the recipient had an established business relationship, as long as the sender included an opt-out notice on the first page of the transmission. The law includes a private right of action for recipients to sue senders that violate the requirements, including the right to obtain at least $500 for each violation. In 2006, the FCC issued what is known as the Solicited Fax Rule, which extended the requirement that senders include an opt-out notice to all fax advertisements, both solicited and unsolicited. A solicited fax advertisement is one in which the recipient has given the sender permission to send the fax.

In 2008, plaintiff pharmacies brought a class action in Missouri state court for $150 million in damages against Anda, a generic drug seller, for violating the FCC’s Solicited Fax Rule. Anda’s fax advertisements contained drug pricing information and weekly specials. The faxes were considered to be solicited faxes because Anda had permission from the small pharmacies to send the advertisements. The pharmacies brought suit, however, because the faxes contained no opt-out notice. In 2010, Anda sought a declaratory ruling from the FCC clarifying that the Junk Fax Protection Act did not require an opt-out notice on solicited fax advertisements. The FCC, citing the Solicited Fax Rule, declared that the opt-notice was required on all fax advertisements, including solicited fax advertisements. Anda appealed the decision.

FCC authority. The question for the court was whether the Junk Fax Prevention Act’s requirement that businesses include opt-out notices on unsolicited fax advertisements gave the FCC the authority to extend that requirement to solicited fax advertisements. The majority of the court concluded that it did not, because Congress expressly stated in the statute that opt-out notices were required for unsolicited fax advertisements but it remained silent about solicited faxes. Thus, the law neither required opt-notices on solicited fax advertisements nor gave the FCC the authority to reach such a conclusion. The FCC, the court said, is permitted only to take action that Congress has authorized; to argue that the FCC is free to act so long as Congress has not prohibited that act is to get the separation of powers "backwards."

Dissent. The dissent argued that the majority failed to appreciate Congress’s intent in enacting the Junk Fax Prevention Act, which was to protect recipients from unwanted fax advertisements. Thus, in the dissent’s opinion, the FCC was reasonably interpreting Congressional intent when it extended the opt-out notice requirement to solicited fax advertisements. Otherwise, if a recipient were to give permission to receive the fax advertisements, what happened if the recipient were to change its mind? Because the focus of the law was on protecting the recipient, the FCC’s decision to require that senders provide a ready means for a recipient to opt out of any and all fax advertisements was reasonable. The dissent also took issue with the FCC"s decision to waive the opt-out notice for all faxes sent before April 30, 2015, arguing that the FCC failed to establish good cause for such a sweeping, retroactive waiver. As a result, the dissent would have upheld the FCC’s authority to issue the Solicited Fax Rule, and it would have overturned the retroactive waiver.

The case is No. 14-1234.

Attorneys: Aytan Y. Bellin (Bellin & Associates LLC) for Bais Yaakov of Spring Valley and Crown Kosher Meat Market Inc. Matthew J. Dunne for the Federal Communications Commission.

Companies: Bais Yaakov of Spring Valley; Crown Kosher Meat Market Inc.

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