Child Protection Registry Acts: Big Trouble for the Gaming Industry
By Robert W. Stocker II and Peter J. Kulick

On Aug. 10, 2006, the Michigan Attorney General filed criminal and civil charges against two senders of unsolicited messages to minors whose e-mail addresses were registered under the Michigan Child Protection Registry Act. 1 The Michigan Act declares that it is the Legislature’s intent “to provide safeguards to prevent certain messages regarding . . . gambling . . . from reaching minor children of this state.” 2 In reality, the Michigan Act exposes the gaming industry to criminal and civil prosecution for a wide variety of lawful commercial business activities.

On July 21, 2004, and Aug. 15, 2005, variations of the so-called Child Protection Registry Act became effective in Michigan and in Utah 3 The Michigan and Utah Child Protection Registry Acts 4 (collectively, the “Child Protection Registry Acts”) prohibit sending or causing to be sent electronic communications to communication devices a minor has access to that are registered in a state-maintained database. 5 A violation of the Child Protection Registry Acts is subject to both criminal and civil sanctions. 6

While the Child Protection Registry Acts have received considerable attention from the direct-marketing industry, they have received little attention from the gaming industry. Ignoring the Child Protection Registry Acts exposes businesses within the gaming industry that advertise by sending e-mail messages, cell phone text messages, facsimile messages and other electronic messages (“spam”) to significant liability.

The extent of liability of a gaming business is not limited to the sanctions of the Child Protection Registry Acts. Violations of these acts can result in adverse licensing actions initiated by state gaming regulators. Particularly troublesome is the fact the Child Protection Registry Acts extend to gaming businesses that unintentionally send an electronic communication to a Michigan or Utah e-mail address or phone number that is a prohibited destination. 7

Historical Background and Summary

The Child Protection Registry Acts, on their surface, are feel good legislations that appear to accomplish a noble goal: protecting minors from receiving advertisements that promote products or services that are illegal for a minor to possess or consume. 8 Prohibited products and services include promoting tobacco, alcohol, gaming, illegal drugs and other undefined illegal products (leaving to the marketer to determine what constitutes an “illegal product”). 9 The inclusion of “gaming” within the scope of the Child Protection Registry Acts directly raises red flags for any business conducting activities within the global gaming industry. 10

The legislative history of the Michigan Child Protection Registry Act states that the policy underlying the act is to eliminate “the potential that a child will be exposed to inappropriate material.” 11 Evidence cited in the legislative history supporting the enactment of the Michigan Child Protection Registry Act included that “80 percent of children online report receiving inappropriate unsolicited e-mail messages on a daily basis.” 12 And that “it is estimated that 791,000,000 text messages containing sexual content will be sent to cell phones in the United States by 2007, and approximately 60 percent of teenagers in the country already have cell phones.” 13 Such facts motivated, at least in part, the Michigan Legislature and, presumably, the Utah Legislature to enact the Child Protection Registry Acts.

The Michigan and Utah Child Protection Registry Acts prohibit a person from sending or causing to be sent electronic communications containing proscribed content. A violation of the Child Protection Registry Acts occurs when: first, a person 14 sends, causes to be sent, or conspires to send a message to a “contact point” that has been registered on a state registry list for more than 30 days; 15 and second, the primary purpose of the message is to directly or indirectly “advertise or otherwise link to a message that advertises a product or service that a minor is prohibited by law from purchasing, viewing, possessing, participating in or otherwise receiving.” 16

The term “contact point” is broadly defined. Contact points include instant message identities, wireless numbers, facsimile numbers, e-mail addresses and other electronic addresses. 17 Any contact point that a minor may have access to can be registered pursuant to the Child Protection Registry Acts. 18 Contact points are initially registered for a three-year period and may subsequently be extended for an additional three year period. 19

The text of the Child Protection Registry Acts and administrative regulations promulgated under the acts “are clear that advertisements promoting gambling are products and services which are prohibited from being advertised to registered contact points.” What is not clear under either of the acts or related rules is the breadth of the reach of the prohibition. By way of example, do the acts prohibit advertising by a Las Vegas casino? Moreover, what are the “other illegal products” the acts refer to? Consequently, those gaming businesses that do not directly operate commercial casinos and, additionally, businesses tangently connected with the gaming industry may also face liability exposure under the acts.

The Utah Child Protection Registry Act provides that a person may not send a message that advertises a “product or service that a minor is prohibited by law from purchasing; or … that is harmful to minors.” 20 The precise types of products and services banned by the Utah Child Protection Registry Act are not identified in the text of the statute. The Utah Department of Commerce has issued a policy statement that identifies gambling as a product and service that is illegal or harmful to minors. 21

The Child Protection Registry Acts impose an affirmative obligation on a person who desires to send advertisements to contact points with prohibited content to use the state-developed mechanism to purge all registered contact points from advertising lists. 22 In other words, businesses within the gaming industry — even if they do not operate a commercial casino — that send spam messages will be forced to use the state-maintained cleansing program to limit liability exposure. Gaming businesses must pay a fee to check each registered contact point within the state registries. The financial costs to gaming businesses are exponential because of the infinite number of registered contact points and the continuing obligation to cross-verify advertising lists for registered contact points. Thus, compliance with the Child Protection Registry Acts will increase the regulatory costs for the gaming industry.

There are two forms of sanctions for violations of the Child Protection Registry Acts. First, a violation of the Child Protection Registry Acts can result in criminal punishment. Most violations, but not all, are misdemeanors. 23 A violation, however, can be punishable as a felony depending on the nature of the violation and surrounding circumstances. 24

Second, the Child Protection Registry Acts provide for comprehensive civil penalties. The Michigan and Utah acts each create a private cause of action permitting the recovery of monetary damages. 25 Monetary damages available under the Michigan Child Protection Registry Act include either actual damages (including attorney fees) or the lesser of $5,000 per message or $250,000 for each day the violation continues. 26 The Utah Child Protection Registry Act authorizes civil damages for violations of the act equal to the greater of $1,000 or actual damages. 27 As a significant incentive to plaintiffs’ attorneys, the Utah Child Protection Registry Act authorizes the prevailing party to recover legal fees. 28

What is not addressed in the Child Protection Registry Acts, but which may be far more draconian than the civil or criminal penalties, is the impact on licensure of a business that violates the Child Protection Registry Acts. This is particularly the case for companies with gaming licenses and businesses with liquor licenses.

Substantial Compliance Costs

Complying with the Child Protection Registry Acts imposes significant costs on regulated businesses using electronic media to advertise. There are three basic categories of compliance costs. First, regulated businesses must identify the extent to which electronic communications may be within the purview of the Child Protection Registry Acts. Second, there are costs associated with developing a compliance program. Finally, regulated businesses face costs in the form of the criminal and civil penalties assessable under the Michigan and Utah Child Protection Registry Acts, and the impact of the imposition of such penalties on licensure of the business.

Regulated businesses must first identify what electronic advertising communications it sponsors may be subject to regulation under the Michigan and Utah Child Protection Registry Acts. Liability exposure is not limited solely to businesses that directly send electronic advertisements. The electronic advertisements of a person are also subject to regulation under the acts when the regulated business indirectly sends messages to registered contact points with prohibited content. 29 Moreover, a person who conspires with another to send electronic advertisements is subject to the Child Protection Registry Acts. 30

Second, the Child Protection Registry Acts prohibit sending a message to a registered contact point that contains a link to an advertisement with prohibited content. 31 For instance, regulated businesses can face civil and criminal liability under the Child Protection Registry Acts even where third parties conduct advertising campaigns on behalf of the regulated business. 32

The Child Protection Registry Acts cast an endless geographic net that is not limited solely to those regulated businesses that actively conduct activities in Michigan or Utah. Neither the Michigan nor the Utah Act limits compliance to businesses with active operations in their respective jurisdictions. 33 Therefore, by way of example, any gaming business that may send an electronic communication to a contact point in either Michigan or Utah faces the minimum task of assessing whether its advertising program must comply with the Child Protection Registry Acts.

In addition to the complexity of identifying whether communications may be subject to the Michigan and/or Utah Child Protection Registry Acts, fulfilling the requirements of the acts will be costly for regulated businesses. Both the Michigan and Utah Acts require any person sending electronic messages with prohibited content to regularly update advertising lists and purge from such lists any registered contact points. 34 A regulated business will thus likely be forced to verify its advertising list each time an advertisement is sent by electronic means. Further costs will be incurred because the Child Protection Registry Acts mandate each person to pay an administrative fee to verify whether each contact point is a registered contact point. 35

The Child Protection Registry Acts also produce compliance costs due to the criminal and civil sanctions for violations. 36 That is, the Child Protection Registry Acts impose criminal and civil monetary penalties. The Michigan Child Protection Act imposes significant civil monetary fines — in an amount up to $250,000 per day that a violation continues. 37 In addition to any actual penalties imposed under the Child Protection Registry Acts, businesses also will incur costs in defending against criminal investigations and civil lawsuits. The ability to bring private causes of action magnifies the potential costs of defending against civil penalties.

The gaming industry is placed in a unique position because a violation of the Child Protection Registry Acts could result in state gaming licensing sanctions. For example, any person holding a Michigan gaming license is obligated to file a report with the Michigan Gaming Control Board upon “[t]he initiation of any investigation that could, or any action that does, result in the imposition of any civil, criminal, or administrative sanction or penalty upon a person who applies for or holds a casino license or supplier license.” 38 A licensee is subject to disciplinary action for failing to comply with the administrative rules of the Michigan Gaming Control Board. 39 Therefore, violations of the Child Protection Registry Acts could produce gaming license issues, and even gaming license sanctions.

Legal Challenges

The Michigan and Utah Child Protection Registry Acts are constitutionally suspect. The Child Protection Registry Acts may not survive scrutiny under the federal dormant Commerce Clause and may also be preempted by other federal laws. 40 The dormant Commerce Clause prohibits states from regulating commerce in a manner that infringes upon interstate commerce. The broad reach of the Child Protection Registry Acts may conceivably violate the dormant Commerce Clause. Additionally, it is possible that courts may find that the federal CAN-SPAM 41 Act preempts both the Michigan and Utah Acts.

The Michigan and Utah Child Protection Registry Acts would seemingly be prohibited under the doctrine of federal preemption, which has its roots in the Supremacy Clause of the U.S. Constitution: 42

“State action may be foreclosed by express language in a congressional enactment, see, e.g., Cipollone v. Liggett Group Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992), by implication from the depth and breadth of a congressional scheme that occupies the legislative field, see, e.g., Fidelity Fed. Sav. & Loan Assn. v. De la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982), or by implication because of a conflict with a congressional enactment, see, e.g., Geier v. American Honda Motor Co., 529 U.S. 861, 869-874, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000).” 43

Developing a Compliance Program

While the Michigan and Utah Child Protection Registry Acts are constitutionally suspect, they have yet to be struck down as unconstitutional by any court. The prudent course of action for a regulated business is to develop a program to comply with the Michigan and Utah Child Protection Acts. Furthermore, the current enforcement actions in Michigan and Utah against advertisers promoting Internet tobacco sales, alcohol sales and gaming strongly militates in favor of developing a compliance program. 44

To successfully develop a compliance program, a regulated business must first identify whether it directly or through third parties advertises using electronic communications. Next, it must be determined whether any contact points on the advertising lists used in connection with electronic advertising campaigns are sent to recipients located in either Michigan or Utah. 45 If the answer to both the foregoing inquiries is “Yes,” then the regulated business must develop a process to ensure that advertising campaigns comply with the requirements of the Michigan and Utah Child Protection Registry Acts. As has been discussed more fully above, a regulated business will face substantial costs in ensuring that its advertising lists do not have registered contact points. That is, the business must pay the administrative fee to check contact points and must also use the purging programs approved by Michigan and Utah, respectively. 46

Conclusion

Michigan and Utah have both enacted versions of the Child Protection Registry Act. The Child Protection Registry Acts have received considerable attention in the direct-marketing industry but have flown under the radar screen in the gaming industry. The Child Protection Registry Acts specifically prohibit sending communications promoting regulated products or services to registered contact points. A wake-up call has also been directly sent to regulated industries by way of Michigan and Utah commencing criminal and civil actions for violations of the Child Protection Registry Acts by sending advertisements that promote gambling and alcohol products and services.

The Child Protection Registry Acts appear to be constitutionally infirm and, thus, highly suspect to a constitutional challenge. Neither act, however, has successfully been constitutionally challenged. Pending initiation of a successful legal challenge to the Child Protection Registry Acts, the prudent approach for regulated businesses is to: 1) assess current electronic advertising programs to determine whether the Child Protection Registry Acts are implicated; and 2) if so, develop a compliance program.

Robert W. Stocker II is a founding member and Vice President of the International Masters of Gaming Law, and a member of Dickinson Wright PLLC. He can be reached at rstocker@dickinsonwright.com. Peter J. Kulick is a tax and regulatory attorney resident in Dickinson Wright’s Lansing, Mich., office. He can be reached at pkulick@dickinsonwright.com.

1 Hereinafter the “Michigan Act”.

2 See MICH. COMP. LAWS ANN. § 752.1061. In addition to the gaming industry, the Michigan Act, similar to its Utah counterpart, reaches messages sent to minors regarding tobacco, alcohol, pornography, illegal drugs and other vaguely defined similar products. Id.

3 See MICH. COMP. LAWS ANN. §§ 752.1061 et seq. and UTAH CODE ANN. § 13-39-101.

4 The Michigan version of the Child Protection Registry Act was enacted with the popular name of “Michigan Children’s Protection Registry Act.” MICH. COMP. LAWS ANN. § 752.1061(1). For convenience, the uniform state law popular name, “The Child Protection Registry Act,” is used in this article when referring to the Michigan Children’s Protection Registry Act.

5 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1).

6 See MICH. COMP. LAWS ANN. § 752.1067 and UTAH CODE ANN. § 13-39-301(1).

7 See Free Speech Coalition Inc. v. Shurtleff, No. 2:05CV949DAK, 2007 U.S. Dist LEXIS 21556 (D. Utah Mar. 23, 2007).

8 See, e.g., MICH. COMP. LAWS ANN. § 752.1061(2) and MICH. ADMIN. CODE r. 484.501(j). The Michigan version of the Child Protection Registry Act provides that “the intent of this act is to provide safeguards to prevent certain messages regarding tobacco, alcohol, pornography, gambling, illegal drugs, and other illegal products from reaching minor children in this state.“ MICH. COMP. LAWS ANN. § 752.1061(2) (emphasis added).

9 See MICH. COMP. LAWS ANN. § 752.1061(2) and MICH. ADMIN. CODE r. 484.501(j).

10 For example, although it may not be intuitively clear from the Child Protection Registry Act, the ambit of the act may reach hotel promotions by commercial casino operators, advertisements of a cruise ship company that has an onboard casino, and even gaming equipment suppliers.

11 Michigan Senate Fiscal Agency, S.B. 1025 (S-3) Bill Analysis (May 25, 2004).

12 See id.

13 See id.

14 “Person” is broadly defined under the Michigan and Utah Child Protection Registry Acts. The Michigan act defines a “person” to mean “an individual, corporation, association, partnership or any other legal entity.” MICH. COMP. LAWS ANN. § 752.1062(d).

15 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1). In Michigan, the registry is maintained by the Michigan Public Service Commission. In Utah, the registry is maintained by the Utah Department of Commerce.

16 Id. The Utah Child Protection Registry Act provides that a person shall not send to a registered contact point a communication with “the primary purpose of advertising or promoting a product or service that a minor is prohibited by law from purchasing; or … that is harmful to minors.” UTAH CODE ANN. § 13-39-202(1).

17 See MICH. COMP. LAWS ANN. § 752.1062(a) and UTAH CODE ANN. § 13-39-102(1).

18 See MICH. COMP. LAWS ANN. § 752.1063(2) and UTAH CODE ANN. § 13-39-201(3).

19 See MICH. COMP. LAWS ANN. § 752.1063(3) and UTAH CODE ANN. § 13-39-201.

20 See UTAH CODE ANN. § 13-39-202(1).

21 See Utah Department of Commerce, Policy Statement (July 8, 2005).

22 See MICH. COMP. LAWS ANN. § 752.1063(7) and UTAH CODE ANN. § 13-39-201(4).

23 See MICH. COMP. LAWS ANN. § 752.1067 and UTAH CODE ANN. § 13-39-301(1).

24 See MICH. COMP. LAWS ANN. § 752.1067 and UTAH CODE ANN. § 13-39-301(1).

25 See MICH. COMP. LAWS ANN. § 752.1068 and UTAH CODE ANN. § 13-39-302.

26 See MICH. COMP. LAWS ANN. § 752.1068(5).

27 See UTAH CODE ANN. § 13-39-302(2).

28 See id.

29 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1).

30 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1).

31 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1).

32 See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39-202(1).

33 See MICH. COMP. LAWS ANN. § 752.1065(1) (no limitation on application of the act to messages sent by a person domiciled outside of Michigan); UTAH CODE ANN. § 13-39-202(1); see also Laura Dunlop Don’t Send that E-Mail to a Minor!: Complying with State Child Protection Registry Statutes, 3 SCHINDLER J.L COM. & TECH. 4 (2006).

34 See MICH. COMP. LAWS ANN. § 752.1063(7) and UTAH CODE ANN. § 13-39-201(4).

35 See MICH. COMP. LAWS ANN. § 752.1063(7) and UTAH CODE ANN. § 13-39-201(4).

36 See MICH. COMP. LAWS ANN. § 752.1068(5) and UTAH CODE ANN. § 13-39-302(2).

37 See MICH. COMP. LAWS ANN. § 752.1063(7).

38 See MICH. ADMIN. CODE r. 432.1224(b).

39 See MICH. ADMIN. CODE r. 432.11101(2).

40 See Dunlop supra note 45. The strongest constitutional arguments to challenge the Michigan and Utah Child Protection Registry Acts are under the dormant Commerce Clause and Supremacy Clause of the federal Constitution. Accordingly, this article focuses an analysis of the Child Protection Registry Acts under such constitutional clauses. Other constitutional grounds exist that could be asserted in an effort to have the Child Protection Registry Acts declared unconstitutional. In particular, it could be argued that the Child Protection Registry Acts unconstitutionally restrict commercial free speech and are overbroad. See id. For a discussion of the commercial free speech and overbroad constitutional issues facing the Child Protection Registry Acts, see Saylin & Webster, note 33, supra.

41 15 USCA § 7701.

42 U.S. CONST. art. VI (“This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding”). See also McCullogh v. Maryland, 4 Wheat. 316 (1819) (“It is of the very essence of supremacy, to remove all obstacles to its action within its own sphere, and to modify every power vested in subordinate governments”).

43 Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541 (2001).

44 The Michigan Attorney General has announced that criminal and civil charges have been filed against RR Media Inc. and Data Stream Group Inc. for sending advertisements promoting Internet gambling sites to registered contact points.

45 The more-savvy gaming business will not simply rest easy if it concludes that it does not send advertisements to contact points in Michigan or Utah. As discussed supra, the Michigan and Utah Child Protection Registry Acts are not limited in geographic scope. See MICH. COMP. LAWS ANN. § 752.1065(1) and UTAH CODE ANN. § 13-39- 202(1). That is, there is a great deal of uncertainty with respect to identifying whether a contact point is associated with a minor residing in Michigan or Utah. Thus, the practical approach would be to verify all contact points to ensure that no contact point appears on the Michigan or Utah registration list.

46 See MICH. COMP. LAWS ANN. § 752.1063(7) and UTAH CODE ANN. § 13-39-201(4).