Taxing Email "for the Children"

One of the email service providers I met at the Email Authentication Summit in New York, expressed strong negative feelings about the recent laws attempting to protect children from inappropriate email passed in Utah and Michigan.

Well, he is not alone...

Silverpop's CEO, Bill Nussey, wrote a good piece on this subject:

While I applaud the effort to protect children, there's a problem. These laws, designed by people who don't understand direct marketing, risk creating massive headaches for legitimate marketers. Ironically, the laws will be completely ignored by the bad emailers they seek to block. And, if other states decide to follow suit, the costs and efforts of legitimate, permission email marketing could go up, maybe a lot.

Let's look at how these laws work. While it would be easy if states just shared the "do-not-email" (DNE) list with marketers, the risk of these lists being abused by criminal spammers is just too high. Therefore, the states are requiring that marketers UPLOAD their house lists to state-run systems, which will then check the lists and send back the names that should be removed. Marketers will need to check their house lists against the states' DNE list at least every 30 days. The states will charge between $7 and $30 CPM for EACH NAME SUBMITTED for scrubbing.

This sounds simple enough. What could go wrong? A lot.

For instance, if you market automobiles to a list of 1 million names, and don't have reliable data on home state, you could be paying $120,000 per year (12 scrubs of 1MM names at $10 CPM) just to avoid breaking the laws in those states. If another 10 states adopt similar laws, email marketers could face over $1 per name per year just to scrub a tiny handful of children from their lists. At the very least, these states need a more realistic price for this service.
...
Furthermore, these laws allow for a private right-of-action. This means citizens can sue any sender they believe violated the law. The result could be that spam is no longer the most lucrative way to abuse email. All the email bad guys will move to Michigan and add their children's email to the registries. Then, they will opt-in their kids for every car, porn, beer, tobacco and gun newsletter they can find. On day 31, they'll start suing every poor marketer who hasn't been paying their hundreds of thousands of dollars a year in scrubbing fees. All of sudden, making $250,000 a year pumping out Viagra ads looks like small change to the millions in settlements you can collect from the legitimate marketers of disallowed products.

The economics are indeed interesting. Ed Felten at Princeton sees it simply as a tax - Michigan Email Registry as a Tax on Bulk Emailers:

The main effect of the fee is to turn the whole program into a tax on bulk emailing. The tax operates even if only a few kids’ addresses are registered, so parents worried about leaking their kids’ addresses can safely decline to register them. So let’s look at this as a tax scheme rather than a child protection program.

The road to hell is paved with good intentions.