Constitutional Attack on Maine Privacy Law Results in Negotiated Order: Challenger

This posting was written by John W. Arden.

A lawsuit challenging the constitutionality of a new Maine privacy law that prohibits the collection of personal information for marketing purposes from minors without parental consent and bars “predatory marketing” to minors has apparently culminated in a negotiated order, according to one of the plaintiffs.

A blog posting by NetChoice—a coalition of trade associations, eCommerce businesses, and online consumers—indicated that, on September 8, federal judge John Woodcock instructed the plaintiffs and Maine officials to work out acceptable language for an order settling the lawsuit.

The parties agreed to an order:

(1) Acknowledging the constitutional defects of the law,

(2) Documenting the state’s promise to refrain from enforcing the law,

(3) Citing the legislature’s promise to revise the law in the next session, and

(4) Putting Maine plaintiff attorneys on notice that suits brought under the law would have to overcome the constitutional questions raised in the action.

Text of the blog item appears here on “The Voice of the eCommerce Industry.”

Statutory Prohibitions

The statute at issue (“An Act to Prevent Predatory Marketing Practices Against Minors,” Public Law 230, see text here) was enacted on June 2, 2009 and became effective on September 12, 2009.

It specifically prohibits the collection of health-related or personal information from a minor for marketing purposes without first obtaining verifiable parental consent. It further bars the sale or transfer of unlawfully collected information. Use of such health-related or personal information for the purpose of marketing a product or service to the minor is prohibited as “predatory marketing.”

Violations of the statute are unfair trade practices under the Maine Unfair Trade Practices Act and are also subject to civil penalties of up to $20,000 per violation.

A person about whom information is unlawfully collected or who is the object of predatory marketing in violation of this statute may bring an action for injunctive relief and actual damages or up to $250 in statutory damages for each violation, whichever is greater. The statute provides for an award of attorneys fees and costs upon the finding of a violation.

Constitutional Challenge

On August 26, the challengers filed an action for injunctive relief in the federal district court in Maine, claiming that the statute violates the First Amendment rights of adults, as well as minors and online operators; violates the Commerce Clause; and is preempted by the federal Children’s Online Privacy Protection Act.

The plaintiffs’ memorandum in support of its motion for injunctive relief alleged that the prohibitions against collecting, transferring, or using information about minors impermissibly regulates protected speech and unconstitutionally restricts the ability of minors to receive information. The statute also violates the Commerce Clause by subjecting interstate Internet commerce to inconsistent regulatory rules, according to the plaintiffs.

On September 2, Maine Attorney General Janet Mills announced that she would not enforce the law, due to her concerns about its constitutionality. (See September 3, 2009 posting on Trade Regulation Talk.)

Neither the Attorney General’s decision not to enforce the law nor the negotiated order between the parties to the lawsuit precludes a private plaintiff from bringing a action under the law.

Thus, the blog item’s conclusion that “This Court Order squashes the threat of the [Maine privacy law]” may be overly enthusiastic.

Maine Attorney General Will Not Enforce New Privacy Law for Minors

This posting was written by John W. Arden.

Maine Attorney General Janet Mills has announced that—because of constitutionality concerns—she will not enforce a recently-enacted state privacy law that prohibits the collection of personal information for marketing purposes from minors without parental consent and bars “predatory marketing” to minors.

According to a story posted yesterday on Digits, the Wall Street Journal technology blog, the attorney general indicated that, pending review of the law by the Senate Judiciary Committee in January, she will not prosecute parties that fail to comply with the law.

Constitutional Issues

“Attorney General Mills shares many people’s concerns about the constitutional issues presented by the statute and the rights of minors to access information, and therefore she will not be enforcing the law,” said Kate Simmons, spokesperson for Attorney General Mills.

Those voicing concerns about the constitutionality of the law include a group of companies and organizations (including AOL, eBay, Reed Elsevier, and Yahoo) that filed an August 26 lawsuit, claiming that the statute violates the First Amendment rights of adults, as well as minors and online operators.

Private Right of Action

The attorney general’s refusal to prosecute will not preclude enforcement of the law by private parties, who have a private right of action under the privacy law and under the Maine Unfair Trade Practices Act.

Violations of the privacy statute constitute unfair trade practices under the Maine Unfair Trade Practices Act, which subjects violators to civil penalties of up to $20,000 per violation.

In addition, a person about whom information is unlawfully collected or who is the object of predatory marketing in violation of this statute may bring an action under the privacy law for injunctive relief and actual damages or up to $250 in statutory damages for each violation, whichever is greater. The statute provides for an award of attorneys fees and costs upon the finding of a violation.

The Maine statute (“An Act to Prevent Predatory Marketing Practices Against Minors,” Public Law 230) was signed by the Governor on June 2, 2009, and is scheduled to take effect on September 12, 2009. Text of the law appears here on the Maine State Legislature’s website.

The article—by report Marisa Taylor—appears here on the Wall Street Journal’s Digits blog. Further details about the law appear in an August 12, 2009 posting on Trade Regulation Talk.

Trade Regulation Tidbits

This posting was written by John W. Arden.

News, updates, and observations:

 A recent article in The Economist magazine asks whether the Obama Administration will back up its “tough talk” on antitrust enforcement (“Return of the Trustbusters,” August 27 print edition). “Companies are likely to find themselves scrutinised at least as intensively as they were under the administration of Bill Clinton, when many senior antitrust officials in the justice department and Federal Trade Commission (FTC) cut their teeth on a celebrated anti-monopoly lawsuit against Microsoft.” While new antitrust chief Christine Varney believes that the Bush Administration’s lax antitrust enforcement contributed directly to the economic crisis, that view is “debatable, to say the least,” according to the article. The Bush Administration did pursue cartel activity enthusiastically, obtaining record convictions, jail sentences, and fines, the story contends. Varney’s efforts to ramp up enforcement will face several obstacles, including the U.S. Supreme Court (which has issued several decisions narrowing trustbusters’ room to maneuver) and the “possible disagreement within Mr. Obama’s cabinet.” Given the “wretched state of the economy,” some administration officials are questioning whether to “risk upsetting the few bits that are growing strongly with gratuitous antitrust cases.” Text of the article appears here.

 On August 17, the American Antitrust Institute filed an amicus brief, urging the U. S. Court of Appeals in New Orleans to adopt a presumption of illegality for resale price maintenance agreements and to overturn the lower court's dismissal of the amended complaint filed in PSKS, Inc. v. Leegin Creative Leather Products, Inc. The brief, which appears here, also argues that the lower court erred in requiring the plaintiff to meet a strict test of market definition. In 2007, the Supreme Court reversed the Court of Appeals’ decision (PSKS, Inc. v. Leegin Creative Leather Products, Inc., 2006-1 Trade Cases ¶75,166), applying the per se rule to uphold an award of $3,975,000 to a retailer that was terminated by its manufacturer for discounting. The high court declared that vertical price restraints are no longer per se illegal, but instead should be evaluated under the rule of reason standard (2007-1 CCH Trade Cases ¶ 75,753).

 Maine’s new privacy law—which prohibits the collection of personal information for marketing purposes from a minor without parental consent and bans “predatory marketing” to minors—is being challenged in a lawsuit brought by media and online companies, including AOL, eBay, and Yahoo. The lawsuit, filed August 26 in the federal district court in Maine, claims that the law violates the First Amendment rights of adults, as well as minors and online operators. The Maine statute (“An Act to Prevent Predatory Marketing Practices Against Minors,” Public Law 230) was signed by the Governor on June 2, 2009, and will take effect on September 12, 2009. Text of the law appears here on the Maine State Legislature’s website. Further details about the law appear in an August 12, 2009 posting on Trade Regulation Talk.

New Maine Law Bans Collection of Personal Information, “Predatory Marketing” to Minors

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

A new Maine statute prohibits the collection of health-related or other personal information for marketing purposes from a minor without parental consent and “predatory marketing” to minors.

Under the “predatory marketing” provisions of the new law, a person may not use any health-related information or personal information regarding a minor for the purpose of marketing a product or service to that minor or promoting any course of action for the minor relating to a product.

Violations of the statute are unfair trade practices under the Maine Unfair Trade Practices Act and are also subject to civil penalties of up to $20,000 per violation.

A person about whom information is unlawfully collected or who is the object of predatory marketing in violation of this statute may bring an action for injunctive relief and actual damages or up to $250 in statutory damages for each violation, whichever is greater. The statute provides for an award of attorneys fees and costs upon the finding of a violation.

“An Act to Prevent Predatory Marketing Practices Against Minors” (Public Law 230) was signed by the Governor on June 2, 2009, and will take effect on September 12, 2009.

Text of the law appears here on the Maine State Legislature’s website. It will be reported at CCH Privacy Law in Marketing ¶31,902.