MARKETING Lawsuits, rulings pose strong threat to bulk-fax industry

About 100 lawsuits targeting junk faxes are pending nationwide.
LOS ANGELES (AP) -- 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 past six months against faxed ads. The industry's days could be numbered.
"As a mass medium of advertising, fax could be dead," ventured John Kamp, a marketing industry attorney who represents several fax companies.
The legal wrangling reflects a broader backlash against such advertising nuisances as prerecorded phone 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 individual states also have their own do-not-call laws.
1991 law
At issue in both court decisions targeting faxes was the federal Telephone Consumer Protection Act of 1991, which bans faxing advertisements without prior consent from recipients. It lets consumers sue senders of the ads for $500 to $1,500 per unsolicited fax.
In March, the 8th U.S. Circuit Court of Appeals in St. Louis ruled in support of the act, overturning a lower court ruling that held the law was an unconstitutional restriction on the First Amendment rights of fax advertisers.
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 telemarketing company. 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, Illinois, Michigan, New Jersey, California, Kentucky, Missouri 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.
Useful to some
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, junk fax companies blanket consumers with ads without their 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 industry, said a handful of renegade companies are 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.
In addition, consumer complaints against telemarketers increased from about 1,300 in the first quarter of 2002 to nearly 4,100 during the first quarter of this year. FCC officials said the figures could reflect greater efforts to inform consumers about telemarketing issues.
Permission requirement
Meanwhile, the FCC has approved a rule requiring companies that want to fax advertisements to obtain written permission from consumers. Companies would need permission even for faxes sent to customers who already might 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 consumers and attorneys general in California, Missouri and Kentucky.
In August 2002, the FCC levied a $5.3 million fine against Fax.com, the largest from the commission for violations of the act. The company has appealed.
Aliso Viejo, Calif.-based 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 are 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 to get their message out.