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In a move that will have a profound effect on direct marketers, the UK is poised to implement strict EU controls on the use of e-mail and SMS marketing. Known as the Privacy and Electronic Communications Directive, the law aims to do what it says on the tin - to protect consumers and businesses against unsolicited approaches from marketers and third parties by requiring a prior opt-in by recipients. As such, it will mark the biggest shake-up of data protection law since 1998.

In March, fears of the apparently draconian nature of the directive were somewhat reduced when the Department of Trade and Industry published its draft version of how it proposes to implement the directive in the UK.

The DTI is proposing to take a business-friendly approach to the directive.

In a nutshell, the UK law would insist that:

- marketing via the internet, fax, automated calling systems, e-mail and SMS be permitted only if the sender has obtained the prior consent (ie opt-in) of the recipient. For existing customers of the sender, electronic marketing can continue but only with an obvious opportunity to opt out from future communications;

- if planning to allow a third party, for example a business partner, to send marketing material to your customers, you must obtain customers' explicit consent, the so-called 'hard' opt-in;

- it is essential that internet users are informed about their privacy choices, particularly in relation to the use of cookies. A clearly signposted privacy policy that explains how cookies are used on a site is recommended.

The UK version of the directive is far from set in stone, as the DTI has invited consultation from interested parties that includes the DMA UK. The deadline for this is 19 June, with the directive scheduled to become law in October.

But while the DTI gathers its feedback, what are the predictions as to how the directive will impact UK e-commerce, and e-lists in particular?

Policing the cowboys

The DTI's draft has been largely welcomed by e-marketers. Double Click data protection director Amanda Chandler says: "Before the draft document was published the legislation was something of a moving target, which accounts for some of the uncertainty among marketers. Now we know the directive will help distinguish legitimate e-marketing from spam and that's a positive move."

Digital Impact UK general manager and chairman of the DMA's Email Marketing Council Nick McConnell is optimistic the law will flush out rogue e-marketers and raise the quality of e-lists.

"It will root out cowboys, while making e-mail more useful for retention marketing," he says. "A richer dialogue will develop because consumers will be opting in to relevant content that they genuinely want to receive on a regular basis."

The potential downside of this is that opt-in will undoubtedly cut the volume of data available to e-marketers. Statistics show that only 25 per cent of consumers regularly opt in to marketing, around half waver and 25 per cent opt out.

As opt-in data is more complex to collect, and therefore more expensive, only major list players will be able to bear the burden, argues Claritas Interactive general manager Matthew Kelleher. The immediate concern, he adds, is what to do about existing third-party opt-out databases.

"From October these must be opt-in. That means going back to customers and asking them to opt in, but that could be commercially unviable because, as the statistics show, up to 75 per cent will refuse," he says. "A lot of small list operators are going to fall by the wayside because they can't absorb the additional expense of opt-in."

The flipside is that opt-in lists will offer highly responsive names and command a higher value on the market. HLB managing director Gerry Scott, argues that you need only small amounts of quality data to conduct an effective campaign.

"The directive will reinforce the value of opt-in lists and help hold their market price. This will boost the reputation of e-marketing and, in the long term, opt-in data volumes will grow as consumers gain confidence in the media," she says.

Guy Marson, chief executive officer of e-marketing bureau and broadcaster Mailtrack, argues that no one should be put off building a database or from selling to their own customers.

"This legislation is not intended to cripple e-marketers," he says. "While list acquisition will reduce in size it will increase in quality, and that can only be good for the industry."

Meanwhile, the DMA UK has a number of concerns about the draft regulation which it is presenting to the DTI. Primarily, it is keen to ensure the law does not disadvantage European businesses competing against international players that are not bound by similar laws.

The DMA is anxious, too, about the impact on smaller businesses. E-marketing provides a low-cost route to market for SMEs. But, unlike large companies, SMEs do not have limitless budgets with which to create expensive, permission-based databases.

"SMEs have the potential to bring greater competition and consumer choice, but the growth of e-commerce may be slowed if they are restricted in their use of e-mail marketing," says DMA UK head of interactive media Robert Dirskovski.

Ironically, the legislation will be powerless to stop the bulk of spam clogging up European e-mail address boxes. That's because over 80 per cent of all spam originates from the US, where there is currently no restriction on e-mail marketing.

Dirskovski urges marketers to screen lists against bona fide e-mail preference services, such as the international service offered by the DMA in the US via the DMA UK.

Another solution could lie in one of the many home-grown commercial suppression specialists, such as UK Data IT, which sells what it claims to be the first industry network-level system ensuring e-mail and SMS compliance.

E-SMS/Mail Gard, officially unveiled at the International Direct Marketing Fair in March, sits outside company boundaries ensuring all outgoing traffic can be screened against the preference service to see it meets EU regulations.

Ironically, because most unsolicited e-marketing originates outside Europe and is beyond the reach of Brussels, the directive will be about as effective as King Canute in its aim to turn the tide of spam. Which means the e-marketing sector may yet be left to police itself in the interest of building customer confidence.

CASE STUDIES: HOT VS COLD E-MAIL DATA

Hot e-list: ATOC

A campaign by ATOC (Association of Train Operating Companies) to boost sales of the Young Persons' Railcard involved e-mailing an 18,000-strong customer database with which the organisation had built a one-to-one relationship.

To drive traffic to YPRC's website, www.dontbealocal.co.uk, ATOC incentivised e-mails with a free prize draw offering a weekend away for ten friends.

The response rate speaks for itself - 34 per cent clicked through to YPRC's website. Cold e-shots were also sent to prospects collected via ambient and online marketing such as beer mats and banner ads. This generated a 16 per cent response rate.

Cold e-list: Book Club Associates

Book Club Associates has been using PDV's e-mail lists totalling 470,000 names to recruit new customers across its wide range of clubs, ranging from general fiction to cooking and DIY. Names are garnered through PDV's lottery site, www.dailydraw.com. Entry is free on the condition that visitors agree to receive e-marketing.

BCA's campaign involved banners and emails targeted according to consumers' taste in books and magazines, hobbies, age and gender. BCA would not disclose response levels. But PDV e-CRM director Nick Fuller says cold list campaign results can range from one to 25 per cent.

LEGAL TIPS ON E-MAIL LISTS

1: Always provide the individual with information about yourself and the purposes for which you wish to use their personal data before sending them marketing communications.

2: Before sending e-mail or SMS marketing material to any person other than existing customers, contact them with a view to obtaining their express consent (opt-in).

3: When sending e-mail or SMS marketing material to existing customers without their express consent, make sure that the material relates to goods and services similar to those previously purchased by them.

4: Set up your contacts database in a way which clearly shows if a contact has opted in, opted out or just NOT opted out.

5: Respect any opt-out request received from any contact and clean your mailing list regularly against the various preference service lists operated by the DMA (Direct Marketing Association).

6: Consider sending all direct marketing e-mails on an opt-in basis in order to simplify your database. Targeted marketing is likely to be more successful and you might save IT costs.

7: Don't disclose your customer's personal e-mail data to any third party without the customer's consent.

Source: Judith Rauhofer, solicitor, Lewis Silkin Solicitors. For further information go to www.lewissilkin.com or e-mail Judith at: judith.rauhofer@lewissilkin.com.