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January 2010: Hot Off the Presses - The FTC Reports

by Joseph Sanscrainte, an attorney specializing in telemarketing law.

On January 4, 2010, the FTC released two more reports to Congress: (1) a one-time report on enforcement efforts and consumers' perceptions of the Registry's effectiveness (the "Enforcement Report"); and (2) a biennial report focusing on the use of the Do Not Call Registry by both consumers and businesses, as well as the impact that new technologies have had on the Registry (the "Tech Report.") (These two reports join the National Registry Data Book for 2009 released by the FTC in December.) What follows are the highlights of these two new reports.

The FTC's enforcement round-up indicates that since early 2004, the FTC has brought 61 telemarketing cases alleging do-not-call violations. 48 of these cases have been resolved with final court orders that cumulatively require payment of nearly $21 million in civil penalties and $12 million in redress or disgorgement. (Interestingly, after reviewing its experience across these enforcement actions, the FTC has determined that there is no evidence indicating that telemarketers have targeted senior citizens or immigrant communities.) As for the FCC, since 2003, it has issued five Notices of Apparent Liability and two forfeiture orders addressing do-not-call violations, with forfeiture amounts totaling $838,000. In addition, the FCC has settled four do-not-call investigations with consent decrees providing for payments totaling $1,490,000. (The FCC has also issued over 1,000 warning citations to do-not-call violators since 2003.)

The FTC recognizes that a substantial percentage of complaints received from consumers are of the "false positive" variety, i.e., generated as a result of calls that are for one or more reasons not subject to the Do Not Call registry restrictions (e.g., B2B calls, calls with an established business relationship, calls with express permission). One area that has always been open to interpretation, however, is the use of initial calls for (arguably) "survey" purposes, where no sale or offer takes place, followed by another separate round of calls to individuals who answered the "survey" in a manner that indicates that a solid lead exists. A true survey, of course, is a program designed to ask a random sampling of consumers a set of predetermined questions to generate statistically relevant information. The FTC and FCC's broad interpretation of the terms "telemarketing" and "telephone solicitation" have lead many in the telemarketing industry to conclude that an initial survey designed only to identify leads for subsequent calls would be considered to be part of the "campaign" designed to induce sales, and thus, the original "survey" call would be subject to the national DNC rules. It remains a fact, however, that a strict reading of the statutes/regulations involved does not necessarily lead to this conclusion.

The FTC could have taken the opportunity in the Enforcement Report to clarify that initial calls styled as "surveys" to generate leads would be considered part of the overall campaign to induce sales, and thus subject to national DNC. Instead, however, the FTC states: "under both the TSR and the FCC rules, 'telemarketing' is not limited to telephone calls in which a purchase is made or solicited during the telephone conversation. The 'inducement' in a telemarketing campaign 'could be made during the telephone call, or it could be in the form of setting up a subsequent face-to-face meeting at which an additional sales presentation could take place.' For the record, I count two options here: (1) inducement during the telephone call, and (2) inducement in the form of setting up a face-to-face meeting.

So a call to set up a subsequent face-to-face meeting where a sales presentation takes place? That's a telemarketing call. A call where no sale attempt occurs, where the only reason for the call is to ask the consumer some questions? Let's put it this way - it's . . . well, it's not as clear as it could be. As the FTC states later in the Enforcement Report, "telephone surveys that are not part of a plan, program, or campaign to induce the purchase of, rental of, or investment in property, goods or services or charitable contributions . . . do not qualify as telemarketing." The FTC also goes on to say that "information-only" calls that also involve direct or indirect solicitation, such as airline flight upgrade and re-booking offers, or subscription expiration and renewal reminders, would be considered to be telemarketing calls, and thus subject to the national DNC rules. Again, the solicitation occurs during the call that is otherwise for "information-only" purposes. In other words (and you didn't hear this from me), the FTC has to my knowledge never expressly indicated that a call with no sales offer during the call or attempt to set up a face-to-face meeting, involving only a few questions regarding habits or purchasing practices of the recipient of the call, necessarily is subject to the national DNC rules.

Moving on to a more clear cut area of the rules - the FTC also provides some summary statistics on its enforcement in the robocall arena:

    Since 2004, the FTC has initiated 18 actions against entities using robocalls for mass telemarketing . . . In the six civil penalty actions that have been concluded, the judgments require civil penalty payments totaling over $9.4 million. . . . Since December 2003, the FCC has issued three Notices of Apparent Liability for Forfeiture and three forfeiture orders addressing pre-recorded message violations, with forfeiture amounts totaling $77,500. The FCC's Enforcement Bureau has also issued over 950 warning citations to pre-recorded message violators since December 2003.

2009 was definitely the "Year of Living Dangerously" for any entity involved in the delivery of prerecorded telemarketing messages. Expect to see both the FTC and the FCC add to the enforcement numbers, above, in 2010 and beyond.

The FTC's Tech Report offers some transparency into the process of removing disconnected and reassigned numbers from the national DNC registry. Specifically, the FTC states that the subcontractor responsible for removing numbers from the national DNC registry uses directory assistance databases to compile information about disconnected and reassigned phone numbers. Wireless and VoIP service providers, however, are not required under FCC rules to share their directory assistance data with anyone. The subcontractor is working on compiling wireless data, and also estimates that 75% of the VoIP numbers are already included in the national directory assistance data that it compiles.

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