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Attorney General Lockyer Files Lawsuit Against One of Nation's Largest Junk Fax Businesses

Complaint Against Fax.com Seeks More than $15 Million in Penalties and Other Relief
Tuesday, July 22, 2003
Contact: (415) 703-5837

(SAN DIEGO) – Attorney General Bill Lockyer today filed a consumer protection lawsuit against Aliso Viejo-based Fax.com, seeking more than $15 million in penalties and other relief and alleging the firm committed rampant violations of state and federal law in sending unsolicited advertisements via fax and prerecorded phone messages.

"Fax.com, with high-level technology and low-level respect for the law, runs a 24-hour privacy invasion operation that continually spews unsolicited faxes and prerecorded phone calls," said Lockyer. "Junk faxes cost consumers, businesses and taxpayers tens of millions of dollars every year. Consumers' privacy, choice and pocketbooks have to be protected. With this action, and through our other efforts to fight spam and quiet telemarketers, that's exactly what my office intends to do."

Filed in federal court in San Diego, Lockyer's complaint alleges Fax.com operates its junk fax business around the clock, and has committed millions of "willful and knowing" violations of the federal Telephone Consumer Protection Act (TCPA). The TCPA prohibits sending unsolicited advertisements via fax, and disseminating prerecorded messages by phone, without consumers' prior consent. Under a state law enacted in 2002 – AB 2944 by Assembly Speaker pro Tempore Christine Kehoe, D-San Diego – California specifically was placed under the federal statute prohibiting junk faxes.

"I personally receive several junk faxes each and every week – everything from vacation opportunities to executive search scams," said Kehoe. "These companies show a blatant disregard for the law. Junk faxes are illegal and will not go unpunished. I encourage Attorney General Lockyer to take aggressive action against all junk fax companies."

Added Senator Debra Bowen, D-Redondo Beach, a co-author of AB2944: "Junk faxes are an annoying, postage-due invasion of your privacy that cost you time and money. Nobody buys a fax machine for their home or business so Fax.com can fire in non-stop ads for satellite TV systems, vacation packages, cell phone deals and toner cartridges."

Lockyer's complaint also alleges Fax.com violated state laws that prohibit unfair competition and regulate transmittal of unsolicited, prerecorded phone messages. Additionally, the lawsuit charges Fax.com with false or misleading advertising, in violation of state law.

The false advertising allegations are based largely on Fax.com's statements to consumers that Fax.com has permission to send the faxes, that consumers can remove their numbers from the distribution list, and that consumers can take certain steps to ensure they receive only one unsolicited fax per week. The defendants often fail to honor consumers' requests to be removed as a recipient, the complaint alleges.

The complaint, filed on behalf of the People of California, seeks $500 for each violation of the TCPA, and asks the court to award $1,500 for each of the millions of willful, knowing violations.

In addition to relief under the TCPA, the complaint seeks civil penalties for each alleged violation of state laws prohibiting unfair competition, and false or misleading advertising. The lawsuit asks the court to award not less than $15 million in penalties.

Lockyer's complaint also asks the court to permanently prohibit the defendants from engaging in the alleged unlawful conduct. The enjoined conduct would include sending unsolicited faxes and making telephone calls introduced by prerecorded messages.

Besides Fax.com, the complaint names as defendants: Kevin Katz of Laguna Beach, president of Fax.com; and Eric Wilson of Sierra Madre, chief technical officer of Fax.com.

The dissemination of unsolicited faxes shifts the printing costs of such advertisements to the recipients, who are forced use their own toner and paper to receive the ads. Additionally, receiving and handling junk faxes requires additional labor and prevents receipt of other, requested messages. More generally, the complaint alleges, the defendants' junk faxes "are bothersome and a harassment to recipients."

Fax.com charges its business clients a fee to send faxes on their behalf. Fax.com's web site boasts the firm owns "the world's largest fax database." The web site also states that in 2001, Fax.com planned to have the capacity to deliver 3 million faxes each day. Additionally, company officials have told lawmakers that each fax costs recipients up to 2 cents.

So, if Fax.com has reached the 3 million-fax capacity, and if it fully utilizes that capacity, its faxes could cost recipients up to $60,000 a day, according to the firm's own estimates. Multiplied by 365 days, that adds up to roughly $21.9 million in potential expense incurred by recipients.

Frequently, taxpayers bear the cost associated with junk faxes. "Facsimile machines owned by the State of California are among those receiving unsolicited faxes from Defendants," the complaint alleges. "In the case of Defendants sending faxes to State-owned machines, the cost of materials and time is charged to the taxpayers of California."

Consumers who believe they have been victimized by Fax.com, or who have questions or complaints about similar misconduct by other businesses, should contact the Public Inquiry Unit of the Attorney General's Office, P.O. Box 944255, Sacramento, CA 94244-2550, or file a complaint online at http://www.ag.ca.gov/consumers/mailform.htm.

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