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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-593

======================================================================



 
                    JUNK FAX PREVENTION ACT OF 2004

                                _______
                                

  July 9, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Barton of Texas, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4600]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4600) to amend section 227 of the Communications 
Act of 1934 to clarify the prohibition on junk fax 
transmissions, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     5
Background and Need for Legislation..............................     5
Hearings.........................................................     7
Committee Consideration..........................................     7
Committee Votes..................................................     7
Committee Oversight Findings.....................................     7
Statement of General Performance Goals and Objectives............     7
New Budget Authority, Entitlement Authority, and Tax Expenditures     7
Committee Cost Estimate..........................................     7
Congressional Budget Office Estimate.............................     7
Federal Mandates Statement.......................................     9
Advisory Committee Statement.....................................     9
Constitutional Authority Statement...............................     9
Applicability to Legislative Branch..............................     9
Section-by-Section Analysis of the Legislation...................     9
Changes in Existing Law Made by the Bill, as Reported............    13

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Junk Fax Prevention Act of 2004''.

SEC. 2. PROHIBITION ON FAX TRANSMISSIONS CONTAINING UNSOLICITED 
                    ADVERTISEMENTS.

  (a) Prohibition.--Subparagraph (C) of section 227(b)(1) of the 
Communications Act of 1934 (47 U.S.C. 227(b)(1)(C)) is amended to read 
as follows:
                  ``(C) to use any telephone facsimile machine, 
                computer, or other device to send, to a telephone 
                facsimile machine, an unsolicited advertisement, 
                unless--
                          ``(i) the unsolicited advertisement is from a 
                        sender with an established business 
                        relationship with the recipient, and
                          ``(ii) the unsolicited advertisement contains 
                        a notice meeting the requirements under 
                        paragraph (2)(D),
                except that the exception under clauses (i) and (ii) 
                shall not apply with respect to an unsolicited 
                advertisement sent to a telephone facsimile machine by 
                a sender to whom a request has been made not to send 
                future unsolicited advertisements to such telephone 
                facsimile machine that complies with the requirements 
                under paragraph (2)(E); or''.
  (b) Definition of Established Business Relationship.--Subsection (a) 
of section 227 of the Communications Act of 1934 (47 U.S.C. 227(a)) is 
amended--
          (1) by redesignating paragraphs (2) through (4) as paragraphs 
        (3) through (5), respectively; and
          (2) by inserting after paragraph (1) the following new 
        paragraph:
          ``(2) The term `established business relationship', for 
        purposes only of subsection (b)(1)(C)(i), shall have the 
        meaning given the term in section 64.1200 of the Commission's 
        regulations, as in effect on January 1, 2003, except that--
                  ``(A) such term shall include a relationship between 
                a person or entity and a business subscriber subject to 
                the same terms applicable under such section to a 
                relationship between a person or entity and a 
                residential subscriber; and
                  ``(B) an established business relationship shall be 
                subject to any time limitation established pursuant to 
                paragraph (2)(G).''.
  (c) Required Notice of Opt-Out Opportunity.--Paragraph (2) of section 
227(b) of the Communications Act of 1934 (47 U.S.C. 227(b)(2)) is 
amended--
          (1) in subparagraph (B), by striking ``and'' at the end;
          (2) in subparagraph (C), by striking the period at the end 
        and inserting a semicolon; and
          (3) by adding at the end the following new subparagraph:
                  ``(D) shall provide that a notice contained in an 
                unsolicited advertisement complies with the 
                requirements under this subparagraph only if--
                          ``(i) the notice is clear and conspicuous and 
                        on the first page of the unsolicited 
                        advertisement;
                          ``(ii) the notice states that the recipient 
                        may make a request to the sender of the 
                        unsolicited advertisement not to send any 
                        future unsolicited advertisements to a 
                        telephone facsimile machine or machines and 
                        that failure to comply, within the shortest 
                        reasonable time, as determined by the 
                        Commission, with such a request meeting the 
                        requirements under subparagraph (E) is 
                        unlawful;
                          ``(iii) the notice sets forth the 
                        requirements for a request under subparagraph 
                        (E);
                          ``(iv) the notice includes--
                                  ``(I) a domestic contact telephone 
                                and facsimile machine number for the 
                                recipient to transmit such a request to 
                                the sender; and
                                  ``(II) a cost-free mechanism for a 
                                recipient to transmit a request 
                                pursuant to such notice to the sender 
                                of the unsolicited advertisement; the 
                                Commission shall by rule require the 
                                sender to provide such a mechanism and 
                                may, in the discretion of the 
                                Commission and subject to such 
                                conditions as the Commission may 
                                prescribe, exempt certain classes of 
                                small business senders, but only if the 
                                Commission determines that the costs to 
                                such class are unduly burdensome given 
                                the revenues generated by such small 
                                businesses;
                          ``(v) the telephone and facsimile machine 
                        numbers and the cost-free mechanism set forth 
                        pursuant to clause (iv) permit an individual or 
                        business to make such a request during regular 
                        business hours; and
                          ``(vi) the notice complies with the 
                        requirements of subsection (d);''.
  (d) Request to Opt-Out of Future Unsolicited Advertisements.--
Paragraph (2) of section 227(b) of the Communications Act of 1934 (47 
U.S.C. 227(b)(2)), as amended by subsection (c) of this section, is 
further amended by adding at the end the following new subparagraph:
                  ``(E) shall provide, by rule, that a request not to 
                send future unsolicited advertisements to a telephone 
                facsimile machine complies with the requirements under 
                this subparagraph only if--
                          ``(i) the request identifies the telephone 
                        number or numbers of the telephone facsimile 
                        machine or machines to which the request 
                        relates;
                          ``(ii) the request is made to the telephone 
                        or facsimile number of the sender of such an 
                        unsolicited advertisement provided pursuant to 
                        subparagraph (D)(iv) or by any other method of 
                        communication as determined by the Commission; 
                        and
                          ``(iii) the person making the request has 
                        not, subsequent to such request, provided 
                        express invitation or permission to the sender, 
                        in writing or otherwise, to send such 
                        advertisements to such person at such telephone 
                        facsimile machine;''.
  (e) Authority to Establish Nonprofit Exception.--Paragraph (2) of 
section 227(b) of the Communications Act of 1934 (47 U.S.C. 227(b)(2)), 
as amended by subsections (c) and (d) of this section, is further 
amended by adding at the end the following new subparagraph:
                  ``(F) may, in the discretion of the Commission and 
                subject to such conditions as the Commission may 
                prescribe, allow professional or trade associations 
                that are tax-exempt nonprofit organizations to send 
                unsolicited advertisements to their members in 
                furtherance of the association's tax-exempt purpose 
                that do not contain the notice required by paragraph 
                (1)(C)(ii), except that the Commission may take action 
                under this subparagraph only by regulation issued after 
                public notice and opportunity for public comment and 
                only if the Commission determines that such notice 
                required by paragraph (1)(C)(ii) is not necessary to 
                protect the ability of the members of such associations 
                to stop such associations from sending any future 
                unsolicited advertisements; and''.
  (f) Authority to Establish Time Limit on Established Business 
Relationship Exception.--Paragraph (2) of section 227(b) of the 
Communications Act of 1934 (47 U.S.C. 227(b)(2)), as amended by 
subsections (c), (d), and (e) of this section, is further amended by 
adding at the end the following new subparagraph:
                  ``(G)(i) may, consistent with clause (ii), limit the 
                duration of the existence of an established business 
                relationship to a period not shorter than 5 years and 
                not longer than 7 years after the last occurrence of an 
                action sufficient to establish such a relationship, but 
                only if--
                                  ``(I) the Commission determines that 
                                the existence of the exception under 
                                paragraph (1)(C) relating to an 
                                established business relationship has 
                                resulted in a significant number of 
                                complaints to the Commission regarding 
                                the sending of unsolicited 
                                advertisements to telephone facsimile 
                                machines;
                                  ``(II) upon review of such complaints 
                                referred to in subclause (I), the 
                                Commission has reason to believe that a 
                                significant number of such complaints 
                                involve unsolicited advertisements that 
                                were sent on the basis of an 
                                established business relationship that 
                                was longer in duration than the 
                                Commission believes is consistent with 
                                the reasonable expectations of 
                                consumers;
                                  ``(III) the Commission determines 
                                that the costs to senders of 
                                demonstrating the existence of an 
                                established business relationship 
                                within a specified period of time do 
                                not outweigh the benefits to recipients 
                                of establishing a limitation on such 
                                established business relationship; and
                                  ``(IV) the Commission determines 
                                that, with respect to small businesses, 
                                the costs are not unduly burdensome, 
                                given the revenues generated by small 
                                businesses, and taking into account the 
                                number of specific complaints to the 
                                Commission regarding the sending of 
                                unsolicited advertisements to telephone 
                                facsimile machines by small businesses; 
                                and
                  ``(ii) may not commence a proceeding to determine 
                whether to limit the duration of the existence of an 
                established business relationship before the expiration 
                of the 3-year period that begins on the date of the 
                enactment of the Junk Fax Prevention Act of 2004.''.
  (g) Unsolicited Advertisement.--Paragraph (5) of section 227(a) of 
the Communications Act of 1934 (47 U.S.C. 227(a)(4)), as so 
redesignated by subsection (b)(1) of this section, is amended by 
inserting ``, in writing or otherwise'' before the period at the end.
  (h) Regulations.--Except as provided in clause (ii) of section 
227(b)(2)(G) of the Communications Act of 1934 (as added by subsection 
(f) of this section), not later than 270 days after the date of the 
enactment of this Act, the Federal Communications Commission shall 
issue regulations to implement the amendments made by this section.

SEC. 3. FCC ANNUAL REPORT REGARDING JUNK FAX ENFORCEMENT.

  Section 227 of the Communications Act of 1934 (47 U.S.C. 227) is 
amended by adding at the end the following new subsection:
  ``(g) Junk Fax Enforcement Report.--The Commission shall submit a 
report to the Congress for each year regarding the enforcement of the 
provisions of this section relating to sending of unsolicited 
advertisements to telephone facsimile machines, which shall include the 
following information:
          ``(1) The number of complaints received by the Commission 
        during such year alleging that a consumer received an 
        unsolicited advertisement via telephone facsimile machine in 
        violation of the Commission's rules.
          ``(2) The number of such complaints received during the year 
        on which the Commission has taken action.
          ``(3) The number of such complaints that remain pending at 
        the end of the year.
          ``(4) The number of citations issued by the Commission 
        pursuant to section 503 during the year to enforce any law, 
        regulation, or policy relating to sending of unsolicited 
        advertisements to telephone facsimile machines.
          ``(5) The number of notices of apparent liability issued by 
        the Commission pursuant to section 503 during the year to 
        enforce any law, regulation, or policy relating to sending of 
        unsolicited advertisements to telephone facsimile machines.
          ``(6) For each such notice--
                  ``(A) the amount of the proposed forfeiture penalty 
                involved;
                  ``(B) the person to whom the notice was issued;
                  ``(C) the length of time between the date on which 
                the complaint was filed and the date on which the 
                notice was issued; and
                  ``(D) the status of the proceeding.
          ``(7) The number of final orders imposing forfeiture 
        penalties issued pursuant to section 503 during the year to 
        enforce any law, regulation, or policy relating to sending of 
        unsolicited advertisements to telephone facsimile machines.
          ``(8) For each such forfeiture order--
                  ``(A) the amount of the penalty imposed by the order;
                  ``(B) the person to whom the order was issued;
                  ``(C) whether the forfeiture penalty has been paid; 
                and
                  ``(D) the amount paid.
          ``(9) For each case in which a person has failed to pay a 
        forfeiture penalty imposed by such a final order, whether the 
        Commission referred such matter for recovery of the penalty.
          ``(10) For each case in which the Commission referred such an 
        order for recovery--
                  ``(A) the number of days from the date the Commission 
                issued such order to the date of such referral;
                  ``(B) whether an action has been commenced to recover 
                the penalty, and if so, the number of days from the 
                date the Commission referred such order for recovery to 
                the date of such commencement; and
                  ``(C) whether the recovery action resulted in 
                collection of any amount, and if so, the amount 
                collected.''.

SEC. 4. GAO STUDY OF JUNK FAX ENFORCEMENT.

  (a) In General.--The Comptroller General of the United States shall 
conduct a study regarding complaints received by the Federal 
Communications Commission concerning unsolicited advertisements sent to 
telephone facsimile machines, which shall determine--
          (1) the mechanisms established by the Commission to receive, 
        investigate, and respond to such complaints;
          (2) the level of enforcement success achieved by the 
        Commission regarding such complaints;
          (3) whether complainants to the Commission are adequately 
        informed by the Commission of the responses to their 
        complaints; and
          (4) whether additional enforcement measures are necessary to 
        protect consumers, including recommendations regarding such 
        additional enforcement measures.
  (b) Additional Enforcement Remedies.--In conducting the analysis and 
making the recommendations required under paragraph (7) of subsection 
(a), the Comptroller General shall specifically examine--
          (1) the adequacy of existing statutory enforcement actions 
        available to the Commission;
          (2) the adequacy of existing statutory enforcement actions 
        and remedies available to consumers;
          (3) the impact of existing statutory enforcement remedies on 
        senders of facsimiles;
          (4) whether increasing the amount of financial penalties is 
        warranted to achieve greater deterrent effect; and
          (5) whether establishing penalties and enforcement actions 
        for repeat violators or abusive violations similar to those 
        established by section 4 of the CAN-SPAM Act of 2003 (15 U.S.C. 
        7703) would have a greater deterrent effect.
  (c) Report.--Not later than 270 days after the date of the enactment 
of this Act, the Comptroller General shall submit a report on the 
results of the study under this section to Committee on Energy and 
Commerce of the House of Representatives and the Committee on Commerce, 
Science, and Transportation of the Senate.

                          Purpose and Summary

    H.R. 4600, the ``Junk Fax Prevention Act of 2004,'' 
reestablishes an ``established business relationship'' 
exception to allow entities to send commercial faxes to their 
customers and members without first receiving written 
permission, and establishes new opt-out safeguards to provide 
additional protections for fax recipients.

                  Background and Need for Legislation

    As part of the Telecommunications Consumer Protection Act 
(TCPA), passed in 1991, along with the more well-known ``Do-
Not-Call'' provisions, Congress also included language 
regulating unsolicited commercial faxes. (P.L. 102-243; 47 
U.S.C. 227) The law prohibited anyone from faxing an 
``unsolicited advertisement,'' which is defined as ``material 
advertising the commercial availability or quality of any 
property, goods, or services which is transmitted to any person 
without that person's prior express invitation or permission.'' 
47 U.S.C. 227(a)(4).
    In creating the rules to implement the TCPA junk fax 
prohibition, the Federal Communications Commission (Commission) 
stated that ``the TCPA leaves the Commission without discretion 
to create exemptions from or limit the effects of the 
prohibition.'' 1992 TCPA Order, 7 FCC Rcd 2736 at 8779, para. 
54, n. 87. It noted, however, that facsimile transmissions from 
persons or entities that have an established business 
relationship with the recipient can be deemed to be invited or 
permitted by the recipient. Ibid. For over ten years, the 
Commission enforced the TCPA junk fax provisions under this 
interpretation.
    In 2003, the FCC revisited the TCPA and amended its junk 
fax rules. After reviewing the record and the underlying 
statute, the Commission reversed its longstanding 
interpretation of how a sender could satisfy the TCPA's 
requirement for ``prior express invitation or permission'' 
before transmitting an unsolicited fax advertisement. The 
Commission concluded that the ``express invitation or 
permission'' required the consent be in writing and must 
include the recipient's signature. 2003 TCPA Report and Order, 
FCC 03-153, p. 111 (June 26, 2003). The Commission reached this 
conclusion by noting that although the TCPA provided a specific 
statutory exemption for an established business relationship 
for the ``do not call'' provisions, there was no such similar 
language relating to junk faxes. In fact, Congress initially 
included such an exemption in the TCPA for junk faxes, but 
removed it from the final version of the statute.
    In practice, the revised ``prior express invitation or 
permission'' requirement would have significant consequences. 
For instance, if one were to call a restaurant and request a 
faxed menu, the restaurant could not send such a fax without 
first obtaining written permission. A potential purchaser 
requesting information from a realtor on a home sale would have 
to wait to receive that information from the realtor until he 
or she provided a signed written permission slip to the 
realtor. The cost and effort of compliance could devastate the 
profits of some businesses, particularly those small businesses 
that rely heavily on the efficiency and effectiveness of fax 
machines.
    Following the release of the amended TCPA rules, there was 
a flurry of petitions for reconsideration filed with the 
Commission requesting that the Commission maintain its earlier 
interpretation of the junk fax rules. Businesses, associations, 
and other organizations argued that to require written 
permission to fax every customer or client was overly 
burdensome, expensive and unnecessary. In particular, 
organizations such as trade associations and other non-profits, 
that have hundreds of thousands of members, would be charged 
with a huge burden to collect signatures from each member just 
to send an unsolicited fax. For instance, the National 
Association of Wholesaler-Distributors claimed that its member 
companies expected to pay an average of $22,500 to obtain 
consent forms and an average of $20,000 for annual compliance. 
The National Association of Realtors estimated that it would 
have to collect over 67 million permissions to sustain the 
roughly 6 million home sales from last year. Other economic 
impacts included the costs of training, making multiple 
contracts to obtain signatures providing consent, and obtaining 
permission for each fax machine when the recipients change 
location. On August 25, 2003, the Commission stayed the 
implementation of its revised TCPA junk fax rules for 16 
months. The revised rules are currently set to go into effect 
January 2005.
    In light of the fact that the Commission has indicated it 
may not reverse its new rule removing the established business 
relationship exception from the general ban on sending 
unsolicited facsimile advertisements, it became apparent that a 
legislative remedy was required. H.R. 4600, the ``Junk Fax 
Prevention Act of 2004'' specifically provides an exception 
from the general prohibition on sending unsolicited 
advertisements if the fax is sent based on an established 
business relationship and certain conditions are met. This 
legislation is designed to permit legitimate businesses to do 
business without the unnecessary andexpensive burden of 
collecting written permission to send faxes. In reinstating the 
established business relationship, the Committee determined it was 
necessary to provide recipients with the ability to stop future 
unwanted faxes sent pursuant to such relationship. As such, the 
Committee also added the strong consumer protection measure of 
requiring every unsolicited facsimile advertisement to contain an opt-
out notice that gives the recipient the ability to stop future unwanted 
fax solicitations.

                                Hearings

    The Subcommittee on Telecommunications and the Internet 
held a hearing on ``H.R. __, ``The Junk Fax Prevention Act of 
2004'' on June 15, 2004. The Subcommittee received testimony 
from: Mr. K. Dane Snowden, Chief, Consumer & Governmental 
Affairs Bureau, Federal Communications Commission; Mr. Walt 
McDonald, President, National Association of Realtors; Mr. John 
H. Graham IV, President and Chief Executive Officer, American 
Society of Association Executives; and Ms. Cheryl Kaechele, 
Publisher, Allegan County News, on behalf of the National 
Newspaper Association.

                        Committee Consideration

    On Thursday, June 24, 2004, the Full Committee met in open 
markup session and ordered H.R. 4600 reported, as amended, by a 
voice vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 4600 reported. A motion by Mr. Pickering to order H.R. 
4600 reported to the House, as amended, was agreed to by a 
voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 4600 is to maintain the general 
prohibition on faxing unsolicited advertisements while allowing 
a reasonable exception for faxing unsolicited advertisements to 
persons based upon an established business relationship, and 
creating the ability of such persons to opt-out of future 
unsolicited advertisements.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4600, the Junk Fax Prevention Act of 2004, would result in no 
new or increased budget authority, entitlement authority, or 
tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 7, 2004.
Hon. Joe Barton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4600, the Junk Fax 
Prevention Act of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman.
            Sincerely,
                                         Elizabeth Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 4600--Junk Fax Prevention Act of 2004

    H.R. 4600 would amend current law and regulations relating 
to unsolicited advertisements sent via telephone facsimile 
machine. The bill would direct the Federal Communications 
Commission (FCC) to issue regulations to control unsolicited 
advertisement sent via telephone facsimile machine. It would 
require the FCC and the General Accounting Office to issue 
reports to the Congress on the effectiveness of these 
regulations. The FCC currently enforces laws relating to 
unsolicited advertisements, including assessing and collecting 
civil penalties for violations of such laws. (Civil penalties 
are recorded in the federal budget as revenues.) Based on 
information from the FCC, CBO estimates that implementing H.R. 
4600 would not have a significant effect on revenues or 
spending subject to appropriation. Enacting the bill would not 
affect direct spending.
    H.R. 4600 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments.
    H.R. 4600 would impose private-sector mandates, as defined 
in the UMRA, on senders of unsolicited facsimile 
advertisements. The bill would require senders to include an 
opt-out notice that is clear, conspicuous, and on the first 
page. Such a notice would allow recipients to contact the 
sender to prevent them from sending unsolicited advertisements 
in the future. Additionally, the opt-out notice must include 
``a domestic contact telephone and facsimile machine number for 
the recipient to transmit such a request to the sender; and a 
cost-free mechanism for a recipient to transmit a request.'' 
The cost-free mechanism might include either a toll-free or a 
local telephone number.
    Regulations passed by the Federal Communications Commission 
in July 2003 that are slated to take effect in January 2005 
would require written permission from recipients prior to 
senders' transmission of any unsolicited fax advertisements. If 
this bill were enacted, it would eliminate the requirement to 
obtain written permission from customers but replace this 
requirement with the opt-out mechanism. Based on information 
from industry sources, CBO expects that the aggregate direct 
cost of mandates in the bill would be fully offset by savings 
from the bill and thus would fall below the annual threshold 
established by UMRA for private-sector mandates ($120 million 
in 2004, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Melissa E. 
Zimmerman (for federal costs), Sarah Puro (for the state and 
local impact), and Karen Raupp (for the private-sector impact). 
The estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 establishes the short title as the ``Junk Fax 
Prevention Act of 2004.''

Section 2. Prohibition on fax transmissions containing unsolicited 
        advertisements.

    Section 2(a) amends section 227(b)(1)(C) of the 
Communications Act of 1934 by creating an exception to the 
general prohibition against sending unsolicited commercial 
advertisements to fax machines. This provision essentially 
mirrors previous Commission rules permitting unsolicited 
commercial advertisements to be sent to recipients if the fax 
is sent based on an ``established business relationship.'' This 
section also includes a new requirement that such faxes be sent 
with an opt-out notice. In the event a recipient opts out of 
receiving future unsolicited advertisements, it is unlawful for 
a sender to fax any additional unsolicited advertisements to 
such recipients.
    In order for the TCPA to apply, the fax must be an 
``unsolicited advertisement'' which requires a communication be 
``advertising the commercial availability or quality of any 
property, goods or services * * *.'' Faxes that are merely 
transactional, or that fail to contain an advertisement for a 
commercial product or service, do not meet this definition and 
are therefore not subject to the restrictions of the TCPA. By 
transactional faxes, the Committee refers to faxes similar in 
nature to a ``transactional or relationship message'' defined 
under paragraph 17, Section 3 of P.L. 108-187, the CAN-SPAM Act 
of 2003. Additionally, H.R. 4600 does not alter the treatment 
of faxes sent by charitable organizations in furtherance of its 
tax-exempt purpose, which, under most situations, are not 
considered ``unsolicited advertisements'' under the TCPA.
    Section 2(b) defines the term ``established business 
relationship'' by incorporating the definition of ``established 
business relationship'' in 47 C.F.R. 64.1200 as those 
regulations were in effect as of January 1, 2003, except that 
the definition now applies to both residential and commercial 
entities. Additionally, section 2(b) allows the Commission to 
limit the duration of the established business relationship 
pursuant to section 2(f).
    Section 2(c) adds a new subparagraph (D) to section 
227(b)(2) of the Communications Act of 1934 by setting forth 
the necessary elements of an opt-out notice. The opt-out notice 
must be clear and conspicuous and on the first page of the 
unsolicited advertisement. The Committee used the phrase 
``first page of the unsolicited advertisement'' as opposed to 
the ``first page of the facsimile'' to ensure that senders of 
unsolicited fax advertisements inadvertently would not be 
liable if such faxes were sent and the clear and conspicuous 
notice was not on the first page received by the recipient 
because pages were faxed or received in the wrong order. An 
opt-out notice will comply with this section if the opt-out 
notice clearly and conspicuously appears on the first page of a 
fax, such as a fax cover page, or on the first page of the 
underlying unsolicited advertisement.
    The opt-out notice must inform the recipient of his or her 
ability to opt-out of future unsolicited advertisements to any 
fax machine or machines, and that request must be complied with 
in the shortest reasonable time. The notice must include a 
domestic telephone and facsimile number that will receive an 
opt-out request, and a cost-free mechanism for the recipient to 
send such a request to the sender. For businesses that focus on 
local commerce, the cost-free requirement should not pose any 
undue financial burden. However, for those businesses that have 
interstate business relationships, the requirement of providing 
a cost-free mechanism to opt-out of future faxes could be an 
expensive proposition. This provision should not be interpreted 
as a mandate for such businesses to establish a toll-free 
number to receive opt-out requests. Businesses should be 
allowed to exercise some flexibility and creativity in 
providing cost-free options, such as e-mail, walk-ins, etc. In 
order to minimize the possible financial consequences of this 
provision, section 2(c) gives the Commission the authority to, 
by rule, exempt certain classes of small business senders from 
the requirement to provide the additional cost-free mechanism 
if the Commission determines that the costs to those businesses 
is unduly burdensome given the revenues generated by that class 
of small business.
    Section 2(c) also requires that the telephone and facsimile 
machine numbers and the cost-free mechanism provided to a 
recipient must permit an individual or business to make an opt-
out request during regular business hours. Finally, the opt-out 
notice must comply with the currentprovisions of section 
227(d), which require that any fax being sent contain in the margins at 
the top or bottom of each page the date and time it is sent, the 
identification of the sender of the message, and the telephone number 
of the sending machine.
    Section 2(d) adds a new subparagraph (E) to section 
227(b)(1) of the Communications Act of 1934 by setting forth 
what a recipient must do to opt-out of future unsolicited 
advertisements. The Commission, by rule, shall provide that an 
opt-out request is valid if it (1) identifies the telephone 
number or numbers of the fax machine or machines subject to the 
request; (2) is made to the telephone or fax number of the 
sender that is provided under subparagraph (D)(iv), or by any 
other method as determined by the Commission; and (3) is made 
by a person who has not subsequently provided express 
invitation or permission to receive unsolicited advertisements. 
Although the ``established business relationship'' has been 
defined on the basis of a commercial transaction or inquiry, 
with or without the exchange of consideration, the Commission 
should take precautions to ensure that even if a recipient opts 
out of receiving unsolicited facsimile advertisements, that any 
subsequent purchases or inquiries do not create or renew the 
``established business relationship'' exemption without some 
affirmative opt-in by the recipient.
    Section 2(e) adds a new subparagraph (F) to 227(b)(1) of 
the Communications Act of 1934 by giving the Commission the 
authority to establish an exemption from the opt-out notice 
requirements for tax-exempt, nonprofit trade or professional 
associations if those faxes are in furtherance of the group's 
tax-exempt purpose. Section 2(e) is designed to apply to 
certain entities classified under the Internal Revenue 
Service's definition of section 501(c)(6) organizations, which 
include such groups as business leagues, chambers of commerce, 
real estate boards, and boards of trade which are not organized 
for profit and no part of the net earnings inures to the 
benefit of any private shareholder or individual. This section 
is not designed to apply to charities. This provision is 
discretionary, and the Commission may create a rule only if the 
Commission finds that such opt-out notices are not necessary to 
protect the ability of association members to stop future 
unsolicited facsimile advertisements sent by the association. 
The Committee provided the Commission with this authority 
because members of tax-exempt, nonprofit trade and professional 
associations have chosen to affirmatively join a particular 
organization, which typically requires the payment of annual 
dues. Arguably, these members may have an expectation of 
communications, including faxes, as part of their membership 
and have a greater degree of control in effectuating their 
preferences with respect to how their association communicates 
with them.
    Although under section 2(e), the Commission may decide to 
exempt tax-exempt, nonprofit trade and professional 
associations from the opt-out notice requirements, nothing in 
H.R. 4600 is designed to exempt these organizations from the 
requirement to honor a request to opt-out of future unsolicited 
facsimile advertisements from their members.
    Section 2(f) adds a new subparagraph (G)(i) to section 
227(b)(2) of the Communications Act of 1934 by giving the 
Commission the authority to establish a time limit on the 
``established business relationship'' exemption. Under the TCPA 
junk fax rules as interpreted prior to January 1, 2003, there 
was no specific time limit on the length of the established 
business relationship. During the hearing in the Subcommittee 
on Telecommunications and the Internet, there was testimony by 
the Commission suggesting that it receives approximately 1,500 
junk fax complaints monthly. The Commission, however, was 
unable to tell the Committee whether those complaints arose 
from faxes sent under an established business relationship, or 
whether those complaints arose from faxes that are already 
illegal under the general ban on junk faxes.
    The Committee is mindful that the financial and 
administrative costs incurred by senders to implement a 
specific time limit on the established business relationship 
could be burdensome. On the other hand, the costs of not 
implementing a specific time limit could also harm fax 
recipients. In the event the ability to opt-out does not remedy 
the complaints relating to faxes sent under an established 
business relationship, the Committee has given the Commission 
the authority to create such a specific time limit. Three years 
after enactment of H.R. 4600, the Commission may by rule create 
a time limit for the established business relationship 
exemption for junk faxes that may be no less than 5 years and 
no more than 7 years. The Commission may only create a rule if 
it (1) determines that the existence of the established 
business relationship exception has resulted in a significant 
number of complaints to the Commission regarding the sending of 
unsolicited advertisements to telephone facsimile machines; (2) 
upon review of such complaints, the Commission has reason to 
believe that a significant number of such complaints involve 
unsolicited advertisements that were sent based on an 
established business relationship that was longer than the 
Commission believes is consistent with the reasonable 
expectations of consumers; (3) the Commission determines that 
the costs to senders of demonstrating the existence of an 
established business relationship within a specified period of 
time do not outweigh the benefits to recipients of establishing 
a limitation on the established business relationship; and (4) 
the Commission determines that for small businesses, the costs 
are not unduly burdensome given the revenues generated by small 
businesses and taking into consideration the number of specific 
complaints to the Commission involving faxes sent by small 
businesses.
    Section 2(g) amends section 227(a)(4) of the Communications 
Act of 1934 by clarifying that ``express invitation or 
permission'' may be secured in writing or otherwise, as 
determined by the Commission.
    Section 2(h) requires the Commission to issue its 
regulations no later than 270 days after enactment of this Act.

Section 3. FCC annual report regarding junk fax enforcement

    Section 3 adds a new section (g) to section 227 of the 
Communications Act of 1934 that requires the Commission to 
report annually to the Congress on the enforcement of the junk 
fax provisions of the TCPA. Specifically, the report must 
include the following: (1) the number of complaints received by 
the Commission annually alleging a violation of the general ban 
on sending unsolicited advertisements; (2) the number of such 
complaints received during the year on which the Commission has 
taken action; (3) the number of such complaints thatremain 
pending at the end of the year; (4) the number of citations issued for 
sending unsolicited advertisements; (5) the number of notices of 
apparent liability issued for sending unsolicited advertisements; (6) 
for each such notice (a) the amount of the proposed forfeiture; (b) the 
person to whom the notice was issued; (c) the length of time between 
the date on which the complaint was filed and the date the notice was 
issued; (d) the status of the proceeding; (7) the number of final 
orders imposing forfeiture penalties for sending unsolicited 
advertisements; (8) for each such forfeiture order (a) the amount of 
the penalty; (b) the person to whom the order was issued; (c) whether 
the penalty was paid; and (d) the amount paid; and (9) for each case 
that was referred for recovery (a) the number of days from the date the 
Commission issues such order to the date of referral; (b) whether an 
action has been commenced to recover the penalty; and (c) whether the 
recovery action resulted in any amount collected.

Section 4. GAO study on junk fax enforcement

    Section 4(a) requires the Comptroller General of the United 
States (GAO) to conduct a study regarding complaints received 
by the Commission dealing with unsolicited advertisements that 
shall determine the following: (1) the mechanisms established 
by the Commission to receive, investigate and respond to such 
complaints; (2) the level of enforcement success by the 
Commission; (3) whether complainants are adequately informed by 
the Commission regarding their complaints; (4) whether 
additional enforcement measures are necessary to protect 
consumers, including recommendations for additional enforcement 
measures.
    Section 4(b) requires the Comptroller General to 
specifically examine (1) the adequacy of existing statutory 
enforcement actions available to the Commission; (2) the 
adequacy of existing statutory enforcement actions and remedies 
available to consumers; (3) the impact of existing statutory 
enforcement remedies on senders of facsimiles; (4) whether 
increasing the amount of financial penalties is warranted to 
achieve greater deterrent effect; and (5) whether establishing 
penalties and enforcement actions for repeat violators similar 
to those established in section 4 of the CAN-SPAM Act of 2003 
(15 U.S.C. 7703) would have a greater deterrent effect.
    Section 4(c) states that the Comptroller General shall 
submit a report to Congress no later than 270 days after 
enactment of this Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

             SECTION 227 OF THE COMMUNICATIONS ACT OF 1934

SEC. 227. RESTRICTIONS ON THE USE OF TELEPHONE EQUIPMENT.

  (a) Definitions.--As used in this section--
          (1) * * *
          (2) The term ``established business relationship'', 
        for purposes only of subsection (b)(1)(C)(i), shall 
        have the meaning given the term in section 64.1200 of 
        the Commission's regulations, as in effect on January 
        1, 2003, except that--
                  (A) such term shall include a relationship 
                between a person or entity and a business 
                subscriber subject to the same terms applicable 
                under such section to a relationship between a 
                person or entity and a residential subscriber; 
                and
                  (B) an established business relationship 
                shall be subject to any time limitation 
                established pursuant to paragraph (2)(G).
          [(2)] (3) The term ``telephone facsimile machine'' 
        means equipment which has the capacity (A) to 
        transcribe text or images, or both, from paper into an 
        electronic signal and to transmit that signal over a 
        regular telephone line, or (B) to transcribe text or 
        images (or both) from an electronic signal received 
        over a regular telephone line onto paper.
          [(3)] (4) The term ``telephone solicitation'' means 
        the initiation of a telephone call or message for the 
        purpose of encouraging the purchase or rental of, or 
        investment in, property, goods, or services, which is 
        transmitted to any person, but such term does not 
        include a call or message (A) to any person with that 
        person's prior express invitation or permission, (B) to 
        any person with whom the caller has an established 
        business relationship, or (C) by a tax exempt nonprofit 
        organization.
          [(4)] (5) The term ``unsolicited advertisement'' 
        means any material advertising the commercial 
        availability or quality of any property, goods, or 
        services which is transmitted to any person without 
        that person's prior express invitation or permission, 
        in writing or otherwise.
  (b) Restrictions on the Use of Automated Telephone 
Equipment.--
          (1) Prohibitions.--It shall be unlawful for any 
        person within the United States, or any person outside 
        the United States if the recipient is within the United 
        States--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(C) to use any telephone facsimile machine, 
                computer, or other device to send an 
                unsolicited advertisement to a telephone 
                facsimile machine; or]
                  (C) to use any telephone facsimile machine, 
                computer, or other device to send, to a 
                telephone facsimile machine, an unsolicited 
                advertisement, unless--
                          (i) the unsolicited advertisement is 
                        from a sender with an established 
                        business relationship with the 
                        recipient, and
                          (ii) the unsolicited advertisement 
                        contains a notice meeting the 
                        requirements under paragraph (2)(D),
                except that the exception under clauses (i) and 
                (ii) shall not apply with respect to an 
                unsolicited advertisement sent to a telephone 
                facsimile machine by a sender to whom a request 
                has been made not to send future unsolicited 
                advertisements to such telephone facsimile 
                machine that complies with the requirements 
                under paragraph (2)(E); or

           *       *       *       *       *       *       *

          (2) Regulations; exemptions and other provisions.--
        The Commission shall prescribe regulations to implement 
        the requirements of this subsection. In implementing 
        the requirements of this subsection, the Commission--
                  (A) * * *
                  (B) may, by rule or order, exempt from the 
                requirements of paragraph (1)(B) of this 
                subsection, subject to such conditions as the 
                Commission may prescribe--
                          (i) * * *
                          (ii) such classes or categories of 
                        calls made for commercial purposes as 
                        the Commission determines--
                                  (I) * * *
                                  (II) do not include the 
                                transmission of any unsolicited 
                                advertisement; [and]
                  (C) may, by rule or order, exempt from the 
                requirements of paragraph (1)(A)(iii) of this 
                subsection calls to a telephone number assigned 
                to a cellular telephone service that are not 
                charged to the called party, subject to such 
                conditions as the Commission may prescribe as 
                necessary in the interest of the privacy rights 
                this section is intended to protect[.];
                  (D) shall provide that a notice contained in 
                an unsolicited advertisement complies with the 
                requirements under this subparagraph only if--
                          (i) the notice is clear and 
                        conspicuous and on the first page of 
                        the unsolicited advertisement;
                          (ii) the notice states that the 
                        recipient may make a request to the 
                        sender of the unsolicited advertisement 
                        not to send any future unsolicited 
                        advertisements to a telephone facsimile 
                        machine or machines and that failure to 
                        comply, within the shortest reasonable 
                        time, as determined by the Commission, 
                        with such a request meeting the 
                        requirements under subparagraph (E) is 
                        unlawful;
                          (iii) the notice sets forth the 
                        requirements for a request under 
                        subparagraph (E);
                          (iv) the notice includes--
                                  (I) a domestic contact 
                                telephone and facsimile machine 
                                number for the recipient to 
                                transmit such a request to the 
                                sender; and
                                  (II) a cost-free mechanism 
                                for a recipient to transmit a 
                                request pursuant to such notice 
                                to the sender of the 
                                unsolicited advertisement; the 
                                Commission shall by rule 
                                require the sender to provide 
                                such a mechanism and may, in 
                                the discretion of the 
                                Commission and subject to such 
                                conditions as the Commission 
                                may prescribe, exempt certain 
                                classes of small business 
                                senders, but only if the 
                                Commission determines that the 
                                costs to such class are unduly 
                                burdensome given the revenues 
                                generated by such small 
                                businesses;
                          (v) the telephone and facsimile 
                        machine numbers and the cost-free 
                        mechanism set forth pursuant to clause 
                        (iv) permit an individual or business 
                        to make such a request during regular 
                        business hours; and
                          (vi) the notice complies with the 
                        requirements of subsection (d);
                  (E) shall provide, by rule, that a request 
                not to send future unsolicited advertisements 
                to a telephone facsimile machine complies with 
                the requirements under this subparagraph only 
                if--
                          (i) the request identifies the 
                        telephone number or numbers of the 
                        telephone facsimile machine or machines 
                        to which the request relates;
                          (ii) the request is made to the 
                        telephone or facsimile number of the 
                        sender of such an unsolicited 
                        advertisement provided pursuant to 
                        subparagraph (D)(iv) or by any other 
                        method of communication as determined 
                        by the Commission; and
                          (iii) the person making the request 
                        has not, subsequent to such request, 
                        provided express invitation or 
                        permission to the sender, in writing or 
                        otherwise, to send such advertisements 
                        to such person at such telephone 
                        facsimile machine;
                  (F) may, in the discretion of the Commission 
                and subject to such conditions as the 
                Commission may prescribe, allow professional or 
                trade associations that are tax-exempt 
                nonprofit organizations to send unsolicited 
                advertisements to their members in furtherance 
                of the association's tax-exempt purpose that do 
                not contain the notice required by paragraph 
                (1)(C)(ii), except that the Commission may take 
                action under this subparagraph only by 
                regulation issued after public notice and 
                opportunity for public comment and only if the 
                Commission determines that such notice required 
                by paragraph (1)(C)(ii) is not necessary to 
                protect the ability of the members of such 
                associations to stop such associations from 
                sending any future unsolicited advertisements; 
                and
                  (G)(i) may, consistent with clause (ii), 
                limit the duration of the existence of an 
                established business relationship to a period 
                not shorter than 5 years and not longer than 7 
                years after the last occurrence of an action 
                sufficient to establish such a relationship, 
                but only if--
                                  (I) the Commission determines 
                                that the existence of the 
                                exception under paragraph 
                                (1)(C) relating to an 
                                established business 
                                relationship has resulted in a 
                                significant number of 
                                complaints to the Commission 
                                regarding the sending of 
                                unsolicited advertisements to 
                                telephone facsimile machines;
                                  (II) upon review of such 
                                complaints referred to in 
                                subclause (I), the Commission 
                                has reason to believe that a 
                                significant number of such 
                                complaints involve unsolicited 
                                advertisements that were sent 
                                on the basis of an established 
                                business relationship that was 
                                longer in duration than the 
                                Commission believes is 
                                consistent with the reasonable 
                                expectations of consumers;
                                  (III) the Commission 
                                determines that the costs to 
                                senders of demonstrating the 
                                existence of an established 
                                business relationship within a 
                                specified period of time do not 
                                outweigh the benefits to 
                                recipients of establishing a 
                                limitation on such established 
                                business relationship; and
                                  (IV) the Commission 
                                determines that, with respect 
                                to small businesses, the costs 
                                are not unduly burdensome, 
                                given the revenues generated by 
                                small businesses, and taking 
                                into account the number of 
                                specific complaints to the 
                                Commission regarding the 
                                sending of unsolicited 
                                advertisements to telephone 
                                facsimile machines by small 
                                businesses; and
                  (ii) may not commence a proceeding to 
                determine whether to limit the duration of the 
                existence of an established business 
                relationship before the expiration of the 3-
                year period that begins on the date of the 
                enactment of the Junk Fax Prevention Act of 
                2004.

           *       *       *       *       *       *       *

  (g) Junk Fax Enforcement Report.--The Commission shall submit 
a report to the Congress for each year regarding the 
enforcement of the provisions of this section relating to 
sending of unsolicited advertisements to telephone facsimile 
machines, which shall include the following information:
          (1) The number of complaints received by the 
        Commission during such year alleging that a consumer 
        received an unsolicited advertisement via telephone 
        facsimile machine in violation of the Commission's 
        rules.
          (2) The number of such complaints received during the 
        year on which the Commission has taken action.
          (3) The number of such complaints that remain pending 
        at the end of the year.
          (4) The number of citations issued by the Commission 
        pursuant to section 503 during the year to enforce any 
        law, regulation, or policy relating to sending of 
        unsolicited advertisements to telephone facsimile 
        machines.
          (5) The number of notices of apparent liability 
        issued by the Commission pursuant to section 503 during 
        the year to enforce any law, regulation, or policy 
        relating to sending of unsolicited advertisements to 
        telephone facsimile machines.
          (6) For each such notice--
                  (A) the amount of the proposed forfeiture 
                penalty involved;
                  (B) the person to whom the notice was issued;
                  (C) the length of time between the date on 
                which the complaint was filed and the date on 
                which the notice was issued; and
                  (D) the status of the proceeding.
          (7) The number of final orders imposing forfeiture 
        penalties issued pursuant to section 503 during the 
        year to enforce any law, regulation, or policy relating 
        to sending of unsolicited advertisements to telephone 
        facsimile machines.
          (8) For each such forfeiture order--
                  (A) the amount of the penalty imposed by the 
                order;
                  (B) the person to whom the order was issued;
                  (C) whether the forfeiture penalty has been 
                paid; and
                  (D) the amount paid.
          (9) For each case in which a person has failed to pay 
        a forfeiture penalty imposed by such a final order, 
        whether the Commission referred such matter for 
        recovery of the penalty.
          (10) For each case in which the Commission referred 
        such an order for recovery--
                  (A) the number of days from the date the 
                Commission issued such order to the date of 
                such referral;
                  (B) whether an action has been commenced to 
                recover the penalty, and if so, the number of 
                days from the date the Commission referred such 
                order for recovery to the date of such 
                commencement; and
                  (C) whether the recovery action resulted in 
                collection of any amount, and if so, the amount 
                collected.