Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

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Hypertouch, Inc. v. ValueClick, Inc.
FACTS Hypertouch, Inc., provides e-mail service to customers located inside and outside California. ValueClick, Inc., and its subsidiaries provide online marketing services to third party advertisers that promote retail products. ValueClick contracts with these advertisers to place offers on its Web sites. ValueClick also contracts with affiliates that send out commercial e-mail advertisements. The advertisements include links redirecting consumers to promotions on ValueClick's Web sites. If a consumer clicks through an e-mail advertisement and participates in a promotional offer, the affiliate that sent the initial e-mail is compensated for generating a customer "lead." The affiliate, rather than ValueClick, controls the content and headers of the e-mails. Hypertouch filed a complaint against ValueClick, its subsidiaries, and others for violating a California state statute that prohibits e-mail advertising that contains deceptive content and headings. The trial court held that the federal CAN-SPAM Act preempts the California statute and granted a summary judgment in favor of ValueClick. Hypertouch appealed.
ISSUE Does the federal CAN-SPAM Act preempt California's statute on deceptive e-mail advertising (spam)?
DECISION No. California's anti-spam statute is not preempted by the federal CAN-SPAM Act.
REASON The CAN-SPAM Act expressly exempts from preemption state laws that prohibit "falsity or deception" in commercial e-mail. The trial court had interpreted this exemption to apply only to state statutes that require a plaintiff to establish the elements of common law fraud. But the appellate court disagreed, finding that "sections of the CAN-SPAM Act indicate that the phrase 'falsity and deception' was not intended to apply only to common law fraud." According to the court, the states are "free to regulate the use of deceptive practices in commercial e-mails in whatever manner they [choose]."
The California statute imposes strict liability on anyone who advertises in a commercial e-mail that contains false, deceptive, or misleading information, whether or not the advertiser has knowledge of the violation. Evidence showed that ValueClick had advertised in more than 45,000 e-mails received by Hypertouch customers that contained deceptive "header information" in violation of the statute. Therefore, the court reversed the lower court's decision and remanded the case for trial.
CRITICAL THINKING-Social Consideration How might the heading of an e-mail advertisement be deceptive? Describe several ways.