The Spam Cases: New York and Texas Attorney General Actions Show the Effectiveness of States’ Retained Powers to Regulate Spam

The enactment of the Federal CAN-SPAM Act preempted many State laws that attempted to prohibit marketers from sending mass commercial emails. However, CAN-SPAM did leave one key area of enforcement open to the states. The State may still enforce laws restricting commercial emails to the extent that such laws prohibit “falsity or deception.” 15 U.S.C. § 7707(b)(1). However, this exception is proving about as narrow as the Grand Canyon.

The latest examples of State enforcement of spam are the actions by the New York and Texas Attorneys General against Tagged, Inc., which were both resolved in the past week. See Attorney General of New York, Internet Bureau, In the matter of: Tagged, Inc., Assurance of Discontinuance (Nov. 6, 2009), Texas v. Tagged, Inc., Travis County District Court, No. D-1-GV-09-002032, Agreed Final Judgment and Permanent Injunction (Nov 9, 2009).

Tagged, which was founded by serial Internet entrepreneur Greg Tseng, has been reported to be the third-largest social networking site in the world by Hitwise. While its market share traffic is still a fraction of that enjoyed by Facebook and MySpace, according to Hitwise, it is in a major growth phase, and has increased its share by 47% from September 2008 to September 2009. Id.

However, according to the statements made by the New York and Texas AG’s, much of this growth was due to Tagged’s deceptive marketing and spamming practices. These practices allegedly included the following:

• Tagged allegedly accessed the email address books of visitors, without clear and conspicuous disclosure that this was occurring, or obtaining permission. Tagged then used these contacts to initiate a campaign to sign up additional members.

• It sent invitation email messages to visitor contacts that falsely stated that a person who had signed up on Tagged had sent photos to the recipient that could be viewed on Tagged. According to the New York AG, “In reality . . . Tagged generated the email invitation automatically without regard to whether the person had ever uploaded photographs to or intended to share them with her contacts.”

• Even though the invitation emails were generated by Tagged, Tagged inputted the name and email address of the person who had registered at Tagged in the “from” field of each email. If the registrant had uploaded a photo, the invitation emails also included this photo.

• The invitation message body included a box for the recipient to click “yes” or “no” in response to whether she wanted to view the photos. The message also said “Please respond or [name] may think you said no :(” — despite the fact that the registrant had nothing to do with the sending of the invitation email. The purpose of this was to play on the emotions of the recipient, falsely suggesting that their friend’s feelings might be hurt if they did not visit the Tagged site and view the photos.