FTC: Consumer Privacy Comments Concerning IEMMC--P954807
June 12, 1997
Consumer Privacy 1997 -- Comment, P954807
Dear Commissioner Varney,
I write to submit answers to the Federal Trade Commission's questions as outlined in the Notice Requesting Public Comment and Announcing Public Workshop on consumer information privacy. As President of the Internet E-Mail Marketing Council (IEMMC), a newly-formed trade association for direct e-mail marketers and Internet Service Providers, my comments will focus primarily on FTC's questions about unsolicited commercial e-mail.
On behalf of IEMMC, thank you for the opportunity to participate in today's workshop on consumer information privacy. Although we were not able to contact you until late in the process, we feel the collective expertise and experiences of IEMMC's membership are crucial to FTC's information-gathering and deliberative processes as it works through consumer privacy issues towards a policy proposal. We commend FTC and its staff for putting together this thoughtful and representative workshop, and thank you for your flexibility in allowing direct e- mail marketers a voice in the discussions.
The Internet E-Mail Marketing Council (IEMMC) was formed in April of this year. IEMMC's membership represents approximately 90 percent of the e-mail marketing industry. It includes a major Internet backbone provider, the five leading direct e-mail marketing companies, and their affiliate organizations. In addition, our backbone provider is the only major service provider on the Internet whose policies permit direct e-mail. We are therefore the leading voice of the e-mail marketing industry.
IEMMC was founded to be an industry-wide trade association which promotes ethical e- mail marketing practices. IEMMC has established a strong statement on Industry Standards and a Code of Ethics (attached) to internally regulate the industry. IEMMC will also serve as a watchdog for the prevention of e-mail marketing abuse and will police violations of the IEMMC Code by its member organizations. IEMMC's Code of Ethics is presently in effect.
In addition, IEMMC has created and implemented a new technology to filter out direct e- mail so that recipients who do not want to receive e-mail will not have to. This new technology represents a significant improvement over previous technological attempts because it screens e- mail out at the source (increasing accuracy and preventing unnecessary consumption of bandwidth), stamps e-mails with the proper identification and return-address footer if the required information is missing, and automatically screens all lists and transmissions from IEMMC members. Further, by preventing the transmission of undesired e-mails it removes all costs -- direct and indirect -- from both consumers and Internet Service Providers (ISPs). Finally, the system will be maintained by a third-party manager and IEMMC Members will not be able to access the names on the not-send list. This unique filtration system is in place and is undergoing testing as we speak. It will become fully operational by the end of this month.
In general, IEMMC's goal is to invest in the long-term future of the direct e-mail marketing profession. We therefore seek to standardize and improve the ethics of e-mail marketing practices to increase direct e-mail's credibility with and acceptance by mainstream consumers. Increased consumer confidence in the information conveyed by direct electronic communications will improve response rates and will allow mainstream advertisers to take part in this new marketing technique.
Because IEMMC is investing in the long-term health of the industry, we are very aware of and concerned about the risks, benefits, and controversial issues associated with direct commercial e-mail. In formulating our Code of Ethics and related IEMMC policies, and in designing the filtration system, IEMMC has worked hard to address the concerns of all parties involved -- consumers, ISPs, and marketers -- in a comprehensive self-regulatory policy. We believe we have successfully addressed these concerns and have a viable solution to the e-mail marketing issue. IEMMC should be allowed a chance to fully implement its plan before government officials pass laws or adopt regulations which excessively impact direct e-mail marketing.
It is in this context that we submit our answers to FTC's questions. The next section provides an over-view of the IEMMC self-regulatory plan in greater detail, and we then continue on to specific answers to FTC's questions.
Summary of Self-Regulatory Plan
IEMMC's self regulatory plan consists of three parts -- one for each of the three groups involved in the e-mail marketing equation: consumers, ISPs, and marketers.
IEMMC addresses the needs of marketers by establishing a set of Industry Standards and a consistent Code of Ethics. Industry-wide guidelines and ethics will standardize and increase the credibility of the industry and ultimately increase the effectiveness of direct e-mail marketing. The major mechanism by which this is accomplished is the universal filtration system. With this system, IEMMC members are provided a reliable and consistent tool which will scrub "dead" entries from lists, thereby improving response rates and preserving marketers scarce resources. IEMMC members who violate the Code of Ethics will policed by a membership-elected Judicial Review Panel; repeated violations will result in termination of access to the AGIS network. IEMMC will encourage all e-mail marketers and backbone providers to adopt its policies.
IEMMC addresses the concerns of ISPs by shifting the responsibility for preventing and troubleshooting direct e-mail from the ISP to the marketer. In addition, IEMMC's filtration system prevents undesired e-mail from ever being sent and thereby prevents wasteful consumption of bandwidth, disk space, processor and personnel time, and other ISP resources. Importantly, it is a violation of the IEMMC Code of Ethics to falsify a return address or to send bulk e-mail by unauthorized relay (known as "hijacking"). These enforced policies will prevent the most notorious kinds of ISP-resource consumption by IEMMC members. Finally, the IEMMC plan even addresses the alleged cost redistribution issue by offering ISPs financial compensation for use of an ISPs resources when accessing its subscribers.
Most importantly, IEMMC addresses the concerns of consumers by providing a reliable mechanism by which consumers may opt-out of direct e-mail solicitations if they wish. IEMMC plans to initiate several programs which educate consumers about the value of receiving direct e- mail and the personalized information it provides. To the extent that such programs provide valuable consumer information, IEMMC supplies another benefit to the Internet public.
FTC, interested parties, and the public can learn more about IEMMC (or add names to the opt-out list) by visiting our Web site at http://www.iemmc.org/.
2.9 (Self-Regulation) What industry principles, recommendations, or guidelines have emerged since the June 1996 Workshop? Please discuss whether they are permissive or mandatory, whether they include sanctions for non-compliance, and the extent to which they have been implemented within the industry.
IEMMC was formed in April 1997 with the express purpose of initiating an industry- wide self-regulatory effort to standardize the practice and improve the ethics of direct e-mail marketing. The organization intends to promote membership in IEMMC to effectively mandate membership for businesses who wish to participate in the Email marketing industry. IEMMC is in the midst of a sixty-day phase-in of groups affiliated with its founding members. At the end of this period, IEMMC will have greatly increased its membership.
The IEMMC Code of Ethics is mandatory for members of the organization. Violation results in fines, suspension of membership, and ultimately termination of access to the IEMMC's backbone provider, AGIS. Because AGIS will not relay transmissions from non-IEMMC marketers, and because AGIS is the only backbone provider which currently permits direct e- mail marketing, IEMMC's policies are, in effect, mandatory.
Violations of the Code of Ethics can be reported by IEMMC members, ISPs, or the Internet public on the IEMMC Web site. Reports of such violations should attach as evidence the offending e-mails, complete with routing information contained in headers and footers in order to verify the violation. The violations will be reviewed by the membership-elected judicial review panel.
The IEMMC self-regulatory plan has been in effect since the group was organized. IEMMC's filtration system is undergoing testing on this very day and will enter its first phase of operation by the end of the month.
2.16 How widespread is the practice of sending unsolicited commercial e-mail? Are privacy or other consumer interests implicated by this practice? What are the sources of e- mail addresses used for this purpose?
The extent and scope of commercial e-mail is difficult to estimate and no good data has been collected on this topic. However, IEMMC's educated estimates place the rate of commercial e-mail transmissions at approximately 10 million pieces per day for the entire industry. This is up from roughly 5 million pieces per day, industry-wide, from six months ago.
These transmissions originate from a diverse group of thousands of individuals and companies. The industry is dominated by perhaps 100 mid- to large-sized companies. The five e-mail companies which founded IEMMC host and provide services for approximately 90 percent of the e-mail industry. Of the hundreds of clients housed and serviced by the IEMMC founding members (see Appendix), some originate their own e-mail, some take on their own clients, and some merely hire the companies to send e-mail on their behalf.
The number of e-mails transmitted vary daily with advertiser demand. It is important to understand that in most cases, direct e-mail transmissions are advertiser-driven. In other words, e-mail marketing companies do not originate most of the content of direct solicitations, but rather act merely as the transmitting agent. Direct e-mail marketing firms help approximately 4,000 clients deliver their message to a targeted audience. These clients will collectively provide an approximate $10 million in revenues for the e-mail marketing industry this year. This is up from approximately $2 million in revenues one year ago.
Revenues and number of transmissions are expected to climb as e-mail marketing techniques standardize and become more mainstream. As they do, mainstream companies will begin to invest more funds in reaching their markets through this new medium.
It is also difficult to generalize about the source of lists used to send direct marketing e- mail. Some lists come from list brokering firms, others are traded and swapped by marketers and ISPs, and some are created by gathering names from posted sources and databases on the Internet. Note that part of the IEMMC self-regulatory policy is a plan to pay ISPs for use of their lists. The large e-mail marketing companies maintain a large database from which they draw subsidiary lists for specific mailings. Databases can range in size from 1,000 to contain 10 million e-mail addresses.
2.17 What are the risks and benefits, to both consumers and commercial entities, of unsolicited commercial e-mail? What are consumers' perceptions, knowledge, and expectations regarding the risks and benefits of unsolicited commercial e-mail?
The benefits of direct e-mail marketing to both advertisers and consumers are the delivery and receipt of specialized information. In the relationship between advertisers and consumers, e- mail marketing firms are brokers which seek to arrange the maximum number of "happy marriages" between a solicitor of a good or service and a consumer who has a need for the good or service. Unlike other media, e-mail has the ability to very specifically tailor communications to an individual consumer's interests and needs. Coupled with e-mail's relatively low cost, high delivery and receipt rate, direct e-mail becomes a powerful marketing tool. It also enables smaller or less wealthy organizations to market their services to a large audience when they would not otherwise be able to.
It is important to note that more than just commercial organizations can benefit from e- mail marketing. Marketing, at root, is simply the successful delivery of a message to a target audience, and the subsequent persuasion of that audience to take certain actions. IEMMC members have, for example, donated in-kind services to non-profit charitable organizations for publicity and fundraising purposes. In one case an IEMMC member was able to help a women's shelter for victims of domestic violence publicize its new Web site which contained information on how to donate time or money. Such grassroots charitable organizations would not normally be able to get their message out to so broad an audience.
Specifically, the advantages of e-mail marketing are:
E-mail marketing poses little risks to consumers. As with all other media, there is a risk of fraudulent communications. IEMMC supports the application and full enforcement of all anti- fraud laws to the Internet and e-mail marketing.
The real risks of the medium are borne by marketers. As with any new venture, e-mail marketing must build credibility with both advertisers and consumers. Many companies have refrained from engaging in e-mail marketing precisely because of this credibility problem. To avoid offending consumers, e-mail marketers must standardize and improve the ethics of industry practices. This is precisely what the IEMMC self-regulatory plan sets out to accomplish.
There is very little good data on consumer attitudes about unsolicited commercial e-mail. It is possible that no scientifically-sound survey has been conducted. However, a survey run by World Research, Inc. reported that over 60 percent of those surveyed received some, very little, or no direct marketing e-mail. In addition, a majority of 57 percent said they did NOT hate marketing e-mail and almost a third (32.12 percent) loved, were indifferent to, or considered marketing e-mail "okay." This survey can be viewed at http://www.survey.com/junkresults.html.
In contrast to the vast number of commercial e-mail recipients and the significant number of survey respondents, the small size of anti-e-mail activists should be noted. While unsolicited commercial e-mail has been heavily criticized by grassroots activists on the Internet, the group of people responsible for most of the denouncements literally number no more than 50 or 60 individuals. These activists' names show up on every list and newsgroup criticizing direct e- mail. They tend to make a disproportionate amount of noise simply by aggressively posting a large number of messages, or by forwarding multiple copies of direct e-mail they receive to reporters. Nonetheless, when taken in context of the five to ten million messages sent out daily, 60 activists is truly is a small number.
2.18 What costs does unsolicited commercial e-mail impose on consumers or others? Are there available means of avoiding or limiting such costs? If so, what are they?
Marketing e-mail imposes no direct costs on the consumers. The only scenario under which direct costs may occur is if ISPs charged subscribers on a per-item basis. To IEMMC's knowledge no ISPs operates under such a policy. In fact, market pressures would almost certainly preclude such a billing scheme.
Marketing e-mail can pose a number of indirect costs to consumers. If consumers do not desire e-mails, they may expend a small amount of extra time downloading a e-mail (literally several seconds). For some subscribers who place long-distance calls to link to their e-mail account, this additional time will translate into an additional cost. While this cost is very small for each item (from several pennies to a fraction of a penny), the costs could conceivably add up to a significant amount over time.
However, IEMMC's self-regulatory plan removes all costs from the consumer by filtering out all unwanted e-mail. If consumers do not want to receive marketing e-mail they simply add their name to the global filtration system. The system prevents unwanted e-mails from ever being sent -- thus avoiding time and hypothetical long-distance costs for the consumer. If, on the other hand, consumers do not remove their name from the list they in effect choose to receive marketing e-mail and assume the indirect costs of these items along with all other e-mail received in their account. It is important to note that consumers can opt-in or out of specific categories of e-mails -- thus screening marketing e-mail by subject and narrowing the amount of e-mail received.
Costs to ISPs are potentially more significant. E-mail that is not desired by ISPs' subscribers can consume bandwidth, disk space, processor and personnel time, and other ISP resources. In addition, marketers who violate the IEMMC Code of Ethics can consume even more of these resources if they engage in such practices as sending e-mails with falsified return addresses or "hijacking" other ISPs' computers to transmit their messages.
Again, however, IEMMC's filtration system solves the ISP-cost problem completely by screening out all undesired e-mails. (It is the unwanted portion of e-mails to which ISPs object.) Since IEMMC's filtration system prevents undesired e-mail from ever being sent, it avoids wasteful consumption of ISP resources. Further, the filter mechanism shifts the responsibility for preventing and troubleshooting direct e-mail from the ISP to the marketer. In addition, IEMMC has a policy offering ISPs financial compensation for access to their subscribers. Importantly, it is a violation of the IEMMC Code of Ethics to falsify a return address or to send bulk e-mail via an unauthorized relay (i.e. no hijacking). These enforced policies will prevent the most notorious kinds of ISP-resource consumption by IEMMC members.
2.19 Are there technological developments that might serve the interest of consumers who prefer not to receive unsolicited commercial e-mail? If so please describe.
IEMMC has pioneered a technological fix to the problem of undesired marketing e-mails. IEMMC, with the assistance of its backbone provider, AGIS, has created a universal relay- coordination filtration system which blocks undesired transmissions at the source (rather than the receiving end). The system also automatically stamps e-mails with the proper identification and return-address footer if the required information is missing. The system will be managed and maintained by a third-party operator, and the not-send list will be inaccessible to IEMMC members.
No group has ever before attempted to develop or implement such a system. This new technology represents a significant improvement over previous technological attempts because its source-based filtration increases screening accuracy and operates on a backbone-wide basis (thus working consistently for all e-mail marketing transmissions -- regardless of company or destination).
This unique filtration system is in place and is undergoing testing as we speak. It will move fully into its first phase of operation by the end of June, 1997.
Please refer to the attachment entitled "IEMMC Global Filtration System" for more information.
2.10 How many commercial entities have implemented the Principles for Unsolicited Marketing E-mail presented at the June 1996 Workshop by the Direct Marketing Association and the Interactive Services Association?
Implementation of the "Principles for Unsolicited Marketing E-mail" by the industry is imperfect, at best. However, the IEMMC Code of Ethics is now in place and applies to all IEMMC members, who represent 90 percent of the e-mail industry.
A major improvement of IEMMC's code over industry standards published thus far is the technical mechanism (universal, source-based filtration system) and enforcement of compliance.
3.16 through 3.20: Unsolicited Commercial E-mail as it relates to children.
All of the policies described above work to protect children as well as the rest of the public. IEMMC's filtration system affords parents a reliable mechanism with which to protect their children if they desire.
Note that e-mail marketing companies act predominantly as the transmitters, not the originators, of e-mail content.
It may be possible to label e-mail as containing adult content. However, no technical solution will replace adequate parental supervision. For example, children may log onto the Internet using their parents' accounts, thereby by-passing any age-based safeguards. Parental supervision of e-mail boxes is as important as it is for any other conventional postal mailbox.
Internet E-Mail Marketing Council
The mission of the IEMMC is to promote responsible commercial E-Mail marketing as an industry and to establish an industry standard code of procedures and ethics which will internally regulate and govern the commercial E-Mail marketing industry.
IEMMC Industry Standards and Code of Ethics
The following is the Code of Ethics and industry standards which all IEMMC members must adhere to. To report a violation of the IEMMC code, click HERE. When reporting a violation, please include evidentiary E-Mail, including full headers, for verification. Members who violate the code will have their membership status reviewed by the membership elected judicial review panel. Penalties may include warnings, fines, and suspension of membership status. Repeated violations will result in permanent revocation of membership status.
INDUSTRY STANDARDS & CODE:
1) GLOBAL REMOVAL LIST:
A third party will technically administer and maintain a list of addresses which will be included in the global removal database. ALL E-Mail of a commercial unsolicited nature must pass through a filter which utilizes this database. The filter will disallow the sending of ANY commercial Email to any address on the list. Future enhancements will include sub-lists which may filter based on subject categories such as adult material, business-only, consumer-only, business opportunity only, etc. ALL unsolicited commercial Email must pass through the filtration system, which will also append a footer to each message identifying the sender as an approved member of the IEMMC, with pointer to the IEMMC website. Individuals may add themselves to the global remove system via double-confirmation (unique coded plus return mail) email, which can be e-mailed directly to email@example.com or interfaced at the IEMMC website (in the Opt-In/Opt-Out list section) .
2) COMPLETE AND ACCURATE HEADERS AND RELAY INFORMATION:
No forging of any type or dishonest representation of source IP's or domains is allowed in any E-Mail transmission by IEMMC members.
IEMMC members may ONLY utilize authorized SMTP resources for origination of E-Mail transmissions, and may ONLY relay through approved and authorized SMTP relays, which MUST point to the filter SMTP machine for removal filtration as in #1 above. Non-authorized relays through any other third party machines is expressly prohibited.
ANY electronic retaliatory strikes are expressly prohibited by IEMMC members. Legal representation is an acceptable avenue used by the IEMMC to address illegal terrorist actions from individuals and groups who are opposed to commercial E-Mail Marketing.
ALL entities which engage in the business practice of originating unsolicited commercial E-Mail must at all times be members in good standing of the IEMMC, and must adhere to the policies, practices, and code of the IEMMC.
Other policies as may be adopted by the IEMMC board of directors or by the general membership in voting of issues.
IEMMC Founding Members:
The following 6 companies represent the founding members of the IEMMC, and represent an unprecedented partnership between a major Internet backbone provider and the largest Direct E-Mail advertisers on the Internet today.
Global Internet Services (AGIS)