2257 Information from the Free Speech Coalittion

While I'll write up my own thoughts and beliefs on this subject, Free Speech Coalition has been wonderful in their support and work in this matter.

2257 Industry Statement for Public Comment PeriodBy:
Posted: 9/6/2007

With regard to the proposed rules and regulations for 18 U.S.C.section 2257, the undersigned members of the adult entertainment industry would like to voice our concern.
The proposed rules and regulations in support of 2257 issued on July 12, 2007, will cause considerable burden, both financially and logistically, to the adult entertainment industry. This burden is so onerous that it would force many small companies completely out of business. For those able to stay in business, the proposed 2257 would severely diminish their ability to succeed.
The cost to collect and maintain 2257 records, as suggested by the DOJ in its proposed rules and regulations, is astronomical to businesses in the industry, both large and small. Staffing costs to collect records, assure proper documentation and filing processes, updates and maintenance, including cross-referencing requirements are excessive. For larger businesses this record keeping requires new, well-trained staff of a dozen or more plus supervisory personnel to comply. For smaller businesses, hiring additional staff is not an option. Many of the industry's small businesses are one- to two-person operations with a profit margin so thin that the additional expense of record-keeping staff would make the difference between the business being viable and incurring a net loss; thus, eventually causing the business to close.
Due to the complexity of 2257's regulations and record-keeping requirements, adult businesses require expensive attorney services to assure compliance and mitigate their risk of 2257 violations. Some larger companies have staff attorneys who do nothing but oversee 2257 record-keeping and compliance. Smaller businesses keep attorneys on retainer and pay for their services from time to time to audit their 2257 records for compliance. Some businesses that cannot afford an attorney do their best to comply with their understanding of the law. Attorney fees for 2257 compliance add a great deal of expense to the cost of operation of an adult business, again cutting into these businesses' net profit - often resulting in a net loss and/or eventual closure. All of the aforementioned businesses live with the added stress of this restrictive law potentially imposing prison time for inadvertently misfiled or misplaced records.
Some businesses in the industry are associated with thousands of websites. Some are responsible for literally millions of individual pieces of content. Besides the expense of gathering and maintaining the records, the storage for that quantity of materials is nearly impossible to fathom. Many small adult business owners work out of their homes and do not have the space to store the quantity of records required to comply with 2257. Renting storage space adds additional expense and poses the problem of non-compliance as the records are to be available at the "place of business" when the compliance officer is present.
A number of adult businesses have developed and/or purchased software to facilitate compliance. This has proven to be very costly, especially for small businesses. It does nothing to alleviate the previous problems, and, with the proposed regulations requirement of hard copy records, it may prove futile.

For small businesses, the requirements for the custodian of records are particularly burdensome. As mentioned previously in this statement, many small business owners of adult entertainment companies work out of their homes. Some have full-time jobs outside of the adult entertainment industry. For adult small business owners, the requirement that the custodian of records be present at the place of business 20 hours a week between the hours of 9:00 a.m. and 5:00 p.m. is unrealistic, often impossible.
Business owners who have jobs outside the industry would have to quit those jobs to be present. This means that entrepreneurial start-ups are all but impossible for someone who relies on another income during the start-up phase of their small business.
As discussed previously, profit margins are so thin for these businesses that hiring someone for 20 hours/week to wait for a potential FBI inspection is not an option. Conversely, being in non-compliance is not an option either, resulting in the business owner being left in a Catch-22 situation with grave consequences.

Moreover, business owners who operate their businesses out of their homes are understandably uncomfortable with the idea of FBI agents conducting an inspection in their home, causing undue neighborhood stigma to them and their families when agents appear. Finally, the requirement to post the address for "custodian of records" on content presents an undue burden on small business owners when, as stated, in many cases the location is the owner's residence. This puts the adult business owner and his/her family at potential personal risk.
The proposed requirement that the custodial statement be on every page is excessive and impractical. A reasonable interpretation of HR 4472 would allow a hyperlink on every page rather than the full physical address. The proposed regulation requirement could result in scores or even hundreds of addresses visible on each website page.
The statute is limited to recordings. There is no legal justification for requiring webcam operators to record any part of their performances. The Department has no authority to require persons to engage in behavior that they would ordinarily not do, in order to bring webcam operators within the scope of a statute.
For "secondary producers" (anyone who does not direct-hire talent or hold the camera, actually producing the original content), the proposed regulations are particularly egregious. "Secondary producers" rarely, if ever, come in contact with the performer in the content they are displaying. It is physically impossible for them to "inspect the original ID" of the performers in their content.

Therefore it is literally impossible for secondary producers to comply with the statutory requirement. Secondary producers are reliant on primary producers to ship all documentation to them for record-keeping purposes. They are also reliant on the primary producers for initial compliance, yet they have no ability to know if the primary producer's records are accurate. In this situation, the "secondary producer" is at risk of non-compliance, despite having done everything within his/her ability to comply. As mentioned before, some webmasters have thousands of sites and millions of pieces of content; therefore, the mere shipping of these materials would prove cost-prohibitive, both for primary and secondary producers, not to mention the added staff needed for shipping and receiving.

We urge the Department to make the rules non-retroactive. No image should be required to be compliant unless it was recorded after the effective date of the regulations. How can a "secondary producer" be expected to know what records to acquire and in what condition to maintain them until the rules are final? What if in the rule-making process, the provision allowing edited identification (eliminating unnecessary personal data) is changed? How can a "secondary producer" rely upon and make significant economic decisions about content acquisition without knowing what the rules are?

Even limiting implementation retroactivity to July 27, 2006, would be immensely burdensome to many producers. Producers who in good faith acquired or who will acquire content after July 27, 2006, must now go back and acquire additional documentation or face the loss of that content, resulting in yet another undue financial burden on these businesses.
During the previous public comment period for proposed 2257 regulations, the Free Speech Coalition recommended an alternative to the onerous record-keeping requirements proposed by the current and proposed regulations. In this plan, for-profit, third party keepers of records accredited by the government would keep performer information updated and maintained to government standards. Performers would register with a third party keeper of records, performer records would be kept safe, the government would have access to the records when necessary and the adult businesses would be responsible for listing where the performer's records were on file. This alternative would allow businesses to comply without producing the record-keeping nightmare present with the proposed 2257 regulations and inspection regime.
As we understand it, the purpose of 2257 is to ensure that underage performers are not being used in adult entertainment productions. The adult entertainment industry has no interest in using underage performers in its productions and, to that extent, has no conflict with a law that is designed to monitor performer ages within the industry.

However, the proposed 2257 regulations do nothing more than create an insurmountable bureaucracy, spending millions of dollars of government resources on the problem of underage performers in the adult industry which adult entertainment businesses already screen out. Furthermore, as proposed, 2257 effectively dismantles small business models within the industry as well as seriously compromises the profits of many of the industry's larger businesses. We ask that you consider the burdens addressed in this statement and revise the proposed regulations accordingly in order to avoid devastating a vital, responsible, and legal industry.