Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
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In addition, the law prohibits marketers from mixing e-mail messages tied to e-commerce transactions-order confirmation e-mails, for instance-with promotional messages.
The law also makes it easier for plaintiffs to prove harm from spam in prosecutions that can now cross state borders, and it provides penalties that hit to the heart of spammers` ability to make money, legal experts say. In the past, plaintiffs had to come to court with reams of hard evidence, including the false headers of hundreds of thousands of spam e-mails, to prove that spammers had damaged their e-mail system, then hope the court would impose significant fines, says an attorney who filed a CAN-Spam lawsuit for one of the ISPs. But CAN-Spam shifts most of the burden of proof to the defendants, who must prove that they used legitimate headers to send all of their e-mail and met other requirements of CAN-Spam, he adds.
And because the law provides for a fixed amount that plaintiffs can recover in damages-$100 for each false e-mail header and $25 for each additional violation-it`s designed to financially cripple spammers while sending a warning to others that spam is no longer economically feasible. CAN-Spam carries penalties of up to $250 per spammed e-mail message, with a cap of $2 million that can be tripled for aggravated violations. There is no cap on penalties for e-mail sent with false or deceptive headers. Defendants can also face up to five years in prison.
While the law doesn`t allow for consumer-initiated class-action lawsuits, it allows for suits to be brought by Internet service providers and state attorneys general as well as by the federal government. The law`s designers justify that provision by saying they wanted to concentrate legal action among entities with the best vantage point for suing. "We wanted to empower ISPs to take legal action, because they know better than anyone who`s sending messages over their servers and causing ISPs real economic harm," says a spokesman for Sen. Ron Wyden (D., Ore.), who introduced CAN-Spam along with Sen. Conrad Burns (R., Mont.).
But attorneys who represent retailers in spam issues note that the threat of consumer lawsuits was one of the strengths of operating before CAN-Spam under 36 state anti-spam laws, about half of which permitted consumer-initiated suits. "The view of many marketing companies was that spam wasn`t worth the risk, partly because of the risk of consumer lawsuits under state laws," says Scot Dailard, an attorney who represents major retailers and specializes in marketing law.
Pizza Hut cooks up e-mail marketing innovations-within the law
At Pizza Hut Inc., new e-mail marketing campaigns are reaching customers in innovative ways while fulfilling CAN-Spam`s requirement to run separate promotional and transactional messages. Working with e-mail marketing message templates provided by Postfuture Inc., PizzaHut.com sends out a series of follow-up e-mails after customers place orders online.
The first follow-up message, which arrives as an order confirmation, adheres strictly to the rules of CAN-Spam by arriving in the customer`s inbox as a text-only message with no promotional information. "We want customers to take online confirmations seriously, so we don`t include promotions and we use text-only messages in case their computers can`t accept graphic messages," says Kelly Rader, manager of Internet ordering.
But because many online customers are placing their orders days early, Pizza Hut realized it had the opportunity to send repeated follow-up messages. Pizza Hut does much of its business on weekend evenings, so a growing number of online customers place orders mid-week to assure early delivery on a Friday or Saturday evening. After sending the initial confirmation order, Pizza Hut will send additional follow-up messages to remind customers of scheduled deliveries. Those messages include what Pizza Hut considers soft promotions that may inform customers of new features, for example, its loyalty program that offers discounts for multiple purchases or new features on PizzaHut.com that provide for easier ordering.
Pizza Hut will send more aggressive promotional messages related to other types of customer transactions, while staying within CAN-Spam rules that allow for promotions directly related to an interest already expressed by a customer. PizzaHut.com encourages visitors to register online, then follows up with e-mailed promotions to new registered users who have yet to place an order.
The Postfuture template includes an opt-out feature designed to help Pizza Hut assure that CAN-Spam is followed by all its franchisees, Rader says. While Pizza Hut maintains 1.6 million e-mail addresses in its national customer database, individual restaurant franchisees use parts of that database to target local customers through their own campaigns using Postfuture`s templates. The templates allow franchisees to customize the marketing promotions, but not alter or delete the opt-out link. "That lets us feel more confident about franchise partners sending messages on our behalf," Rader says.
Rival ISPs launch first CAN-Spam suit
More commonly market enemies out to grab as much of the Internet pie as possible, four of the top Internet service providers joined together to simultaneously kick off the legal action under the new federal CAN-Spam Act.
An attorney who filed one of the lawsuits says he expects the suits to be successful because, unlike prior laws used to fight spam, the CAN-Spam Act is the first law to specifically cite spam as a target while putting the major burden of proof on the defendants, the first to support consistent suits across state borders, and the first to set fixed penalties per e-mail message in an effort to make it financially impossible for spammers to operate. With penalties of up to $250 per e-mail message, "spammers can go bankrupt soon after they start an e-mail database," he says.