Attorneys share Federal Trade Commission thoughts on spam with Summit (first of three parts).

At iMedia's May Summit, attendees got an update on the latest FTC thinking about spam. The session, moderated by iMedia's Alan Gerson, featured Lew Rose, partner in the law firm of Collier Shannon Scott, and Reed Freeman, chief privacy officer of Claria Corp. Here is a transcript of their presentation. Follow along with the presentation slides here.

Rose: Before I start, I just wanted to ask a question: Anyone here able to tell us what CAN-SPAM actually stands for, the acronym? Anyone want to take a guess? It's sort of an interesting acronym. It stands for Controlling the Assault of Non-Solicited Pornography and Marketing Act.

Our presentation today is titled "12 Essential Things the FTC Wants Every Email Marketer to Know." I want to stress that what we're going to say today is, in fact, what the FTC would like you to know. And so this is sort of the highlights of how to comply with the law, and very importantly, some of the things are still being developed because there's a whole rulemaking proceeding going on and new rules will be coming out under the CAN-SPAM Act in December and a lot will be coming out over the summer. But we'll try to highlight those issues for you. Reed will get to those in a bit.

Let me set up the scene. Among the things the FTC is doing is actually suing folks who are sending out unsolicited email. And to do that, they have asked the public to send examples of unsolicited emails to the FTC. The FTC has a server, which they affectionately refer to as the "refrigerator," and that email is uce@ftc.gov -- unsolicited commercial email @ftc.gov. And they just recently brought two cases and in the papers for those two cases they filed there's some interesting facts that came out, at least from my perspective. One is the size or the magnitude of the problem -- for each of these cases the FTC said they received upwards of 500,000 complaints from consumers, and that would be 500,000 people who sent in these examples of these unsolicited commercial emails, which is just an extraordinary amount when you think about it.

And the second fact was quite interesting as well because like all of you in the room, I get a lot of unsolicited email -- maybe not quite as much as Esther Dyson, I think she said she gets a thousand a day, I think that's perhaps a new record. But I probably get 100 or 200 unsolicited emails a day and you sort of wonder when you look at them, those that get through your spam filter, who's sending them out? What is this? How does this really work?

The FTC's recent cases both involved diet patches. These are diet patches you put on your skin to help you lose all the weight you want, without ever changing any of your diet or without exercising, and while you sleep. The FTC alleged that one of them, Phoenix, was getting revenue of about $100,000 per month. The average price of those products is about $50, so for that example about 2,000 people each month responded, which I thought was pretty interesting. And of course, you guys who live in conversion rates and the like can figure out the math on that -- pretty low, but enough to make it worthwhile for these folks.

Point 1: truth and fairness rules apply to email, too

I think it's very important to understand, before we get to the CAN-SPAM rules themselves, that the typical rules for false advertising and truth in advertising apply to email -- just the same way they apply to any technology from handbills to television, to newspapers, to radio, to the Internet, to email as well. Advertising has to be truthful and non-deceptive. Implied in every single ad is a claim that you can back up your claim with proof that you have a reasonable basis for those claims. And so it's important to have substantiation for advertising claims. Then, in addition, advertisements cannot be unfair, and we'll spend a little bit of time looking at each one of those.

What is deception? Deception can be what you say, a statement. It is a statement that is likely to mislead consumers who are acting reasonably under the circumstances and is material. And for that, there are three different criteria I would like to point out. First is what you say. Second, it has to be -- it's measured from your target audience. And so you're held to a higher standard if you're marketing to kids or the elderly than you are if you're marketing to folks who are attending this conference: sophisticated purchasers of marketing services. And third, it has to be material. It has to affect the consumer's purchase decision.

That last point is very, very important to note … a lot of what Reed and I do, we hear from folks who are getting into trouble, who say, "but everything I said is true." Truth is actually not a defense, not a complete defense to a false advertising action. It's not a defense because you can be held responsible for things you don't say, if you omit something material, such as if there's a side effect on some safety or health issue. Or if you forget to tell people how much something costs on a price issue. And you can also be held for libel for not only what you say, but for what people take away, and the messages they take away even if it's something you didn't intend to communicate. It's very important to identify those claims and we'll come back to that.

It's also important to watch for unfair practices, and there a lot of unfair practices historically that the regulators have taken a look at. One that comes to mind is the effort in the 1970s for advertising directed to children on television. Another one is the effort by the FTC some years ago to claim that Joe Camel, the cartoon character Joe Camel by RJ Reynolds, was itself unfair, illegal because it caused children to start smoking. There's nothing deceptive about Joe Camel, it's just that on a cost-benefit analysis, the FTC has decided for public policy grounds that the injury to children from starting to smoke is outweighed by the benefit to RJ Reynolds from using Joe Camel as an advertising icon.

Another very, very recent example: AOL just got sued by the Federal Trade Commission in the last year for its efforts to save customers who were calling up to cancel their memberships. Much like any other subscription-based model, AOL has a series of customer service reps who are paid on a commission basis for every person who calls up to cancel to try to save that cancel. And the FTC said that process itself, and AOL's failure to have adequate safeguards in place to ensure folks were not lying in that process of saving people who called to cancel was unfair. Nothing deceptive about it, nothing false about it, it's just they didn't like the processes AOL employed.

It's very easy to identify what express claims are that are false, the meaning is clear from the ads alone. In the instance of most of the unsolicited email I seem to get which tries to offer things that are big to make smaller or things that are small to make bigger, the claims themselves are quite clear and no evidence is needed to prove what the ad is communicating. However, as I said, most of the action notwithstanding the fact that there are all sorts of pretty egregious stuff sold via email is sold via implied claims and that is things that people take away that aren't necessarily expressed.

And so an example of that would be take this pill to ease the aches of your joints and knees, and so the express claim there is that this pill will relieve joint pain. The implied claim there is that this product will help you if you have arthritis, sort of will be a drug, and so the FTC people might have substantiation that it helps your joint pain, but they may not have substantiation for arthritis claims. And for that, what they do is look at perception studies that are done through expert testimony. So the first thing you should take a look at is to try to identify the claims made in your email. And what the FTC wants you to do is first identify the express claims, to look at the entire ad as a whole, figure out what the net impression is, including the pictures. Try to determine a reasonable interpretation of each claim and then have substantiation and a basis for each of those.

Keep an eye on your claims

There are certain claims that I just want to mention very briefly -- because we really want to go through the CAN-SPAM Act in some detail, that you should keep an eye out for when you're creating email campaigns. First of all, if you can establish a higher level of substantiation, you can say "our survey shows," "our tests prove."  You might be able to rely on the opinions of experts, or even your own internal marketing folks, but you've established a higher level of substantiation required for your claims. Obviously, if you're using a comparative claim, nothing irks a competitor more than being singled out by name in their ads, and so you should have a much higher level of substantiation for that.

And finally, any kind of dietary claims, medical claims, health, environmental claims, anything where you're charging a premium for your product, you should have a higher level of substantiation. Those are the kinds of cases that get the FTC's attention. So with that, I'm going to turn it over to my colleague Reed Freeman, to talk about the particulars of the CAN-SPAM Act.

Tomorrow: The other 11 rules for complying with CAN-SPAM.