FTC Opts to Perpetuate Inconsistency in FCC and FTC Prerecorded Telemarketing Rules
Decision Effectively Seeks to Trump FCC Rule and Would Ban Prerecorded Telemarketing by Entities Subject to the FTC Jurisdiction
Posted by Ronald London
Two years after the Federal Trade Commission sought comment on a proposal to reconcile parts of its Telemarketing Sales Rule ("TRS") that appeared to prohibit all prerecorded message telemarketing with Federal Communications Commission rules that permit such calls in some circumstances, the FTC has pulled an about face and decided not only not to harmonize the rules, but to propose a new rule specifically underscoring a more stringent FTC prohibition. In taking pains to chart a more restrictive course notwithstanding what FCC rules permit, the FTC stated that, “While regulatory uniformity may be a laudable goal, it is not a sufficient basis for conforming [our rules] to the FCC’s regulations,” especially since “compliance with the more restrictive” TSR prohibition “does not violate FCC regulations.” The proposed change would mean that all telemarketers within the FTC’s jurisdiction – which does not reach banks, credit unions, savings and loans, common carriers, non-profit organizations, and those engaged in the business of insurance – would be prohibited from using prerecorded messages that are part of a plan, program or campaign to induce purchases of goods or services or charitable contributions, even if FCC rules otherwise would permit the call.
The discrepancy arises from the FTC’s and FCC’s adoption of what were supposed to be parallel telemarketing regulations in 2003, which resulted in rule changes that among other things created the National Do-Not-Call Registry. At the same time, the agencies adopted rules to regulate “abandoned” telemarketing calls. They defined abandoned calls as those answered by a person but that do not connect to a live sales agent within two seconds of the recipient’s completed greeting. This sometimes occurs when callers use predictive dialers – as almost all contemporary telemarketing does – that place calls and then, only once they connect, transfer them to a live operator. This maximizes the time agents spend making sales pitches and minimizes the amount of time they spend waiting to connect to called parties, but sometimes results in a call connecting but there being no operator available to field it, thus causing it to be terminated, or “abandoned” with a recipient on the line. The FTC adopted an abandoned call rule based on claims that such calls invade consumers’ privacy and cause inconvenience by requiring them to answer their phones only to hear “dead air,” and that the calls frighten some recipients who may be mislead to believe they are being “cased” to see if anyone is at home. The FTC rule, which the FCC adopted a rule to mirror, requires telemarketers to abandon no more than three percent of calls, and to play a recorded message stating the name and phone number of the called party for all abandoned calls.
However, the FTC definition of “abandoned call” had the consequence of making all prerecorded message telemarketing calls “abandoned” by implication, because by definition they do not connect to a live operator within two seconds, and such campaigns accordingly maintain an impermissible 100% “abandonment” rate under the rule. This is problematic since, while the FCC’s rules generally prohibit prerecorded message calls to residential numbers, they also have an exemption for calls where, among other things, there is an established business relationship (an “EBR”) between the caller and called party, or the call is for commercial purposes but does not introduce an unsolicited advertisement or constitute a telephone solicitation (FCC rules also prohibit, with no EBR or other such exceptions, prerecorded messages to wireless numbers – including text messaging – unless the sender has obtained the recipient’s prior express consent).
The FTC recognized the discrepancy between its abandoned call rule and the FCC rule permitting some prerecorded messages calls when the agencies adopted their abandoned call rules in 2003. At the time, it indicated it would not enforce the rule against prerecorded messages permitted by the FCC until the agencies reconciled their rules. In 2004, the FTC acted on a petition for rulemaking that would have reconciled the rules. Specifically, it proposed to exempt prerecorded message calls from the definition of abandoned calls under a “safe harbor” that required those sending such messages to, among other things, let the phone ring at least four times before disengaging the call and prefacing the recorded message with the caller’s name and phone number and an automated opportunity for recipients to end the call and/or to exercise their do-not-call rights. At the time, the FTC indicated it would continue to forbear from enforcing the abandoned call prohibition against permissible prerecorded message provided they complied with the proposed safe harbor.
This week, however, the FTC reversed course, denied the rulemaking petition, declined to adopt the safe harbor provision proposed in 2004, and instead proposed a new rule that effectively prohibits all prerecorded messages under the TSR’s abandoned call provision. Specifically, the FTC determined that, notwithstanding its belief that the current abandoned call rules make sufficiently clear that prerecorded message telemarketing violates the rule as a matter of course, the rule should include a new provision expressly stating the prohibition. Accordingly, the FTC specified that “a telemarketing campaign that consists solely of prerecorded messages … would violate” the abandoned call rule, and it proposed to add the language to the TSR stating that the following conduct constitutes a prohibited abusive telemarketing practice:
Initiating any outbound telemarketing call that delivers a prerecorded message when answered by a person, unless the seller has obtained the express agreement, in writing, of such person to place prerecorded calls to that person. Such written agreement shall clearly evidence such person’s authorization that calls made by or on behalf of a specific party may be placed to that person, and shall include the telephone number to which the calls may be placed and the signature of that person[.]
In proposing the new rule, the FTC announced (ostensibly regardless of when and how the rulemaking resolves and regardless of the ultimate dispensation of its proposed rule), that as of January 2, 2007, the currently effective forbearance from enforcing the abandoned call rule against prerecorded messages will terminate.
In proposing the new rule the FTC stressed that “the proposed prohibition will not prevent telemarketers from transmitting prerecorded informational messages … that are not part of a plan program or campaign … conducted to induce the purchase of goods or services or a charitable contribution.” It also indicated the proposed amendment would prohibit only prerecorded messages that reach a person, not an answering machine or voicemail (though it sought comment on whether the rule should extend to calls that reach such devices and highlighted some reasons why such extension may be appropriate), and also that the proposed amendment would permit digital and electronic signatures to the extent recognized by applicable federal or state contract law. Nonetheless, the new rule effectively prohibits prerecorded message campaigns to sell goods or services or solicit charitable contributions (albeit only with respect to interstate calls, as the FTC lacks jurisdiction over intrastate calls, which remain subject to the FCC rule, as do certain industry segments as noted above), and the FTC makes quite clear it intends for those subject to both its rules and more lenient FCC rules to comply with the FTC’s prohibition.
It is not clear what the implications of the new rule are for text messaging. The FCC has indicated text messaging falls under the prerecorded message rules. Such calls directed to wireless numbers – which by definition is the case for text messaging – are prohibited unless there is prior express consent. The FTC does not discuss text messaging at all. And while the impact of its rule in this context might be mitigated by the fact that it includes a prior written agreement exemption similar to the prior express consent requirement in the FCC rules (though the FCC does not require the consent to be written), the FTC also mischaracterizes the FCC rule as “absolutely prohibit[ing] all live and prerecorded calls to [wireless phones] regardless of any [EBR] or prior express consent.”
This may be one of the issues explored as the FTC receives public comment on the new rule, the deadline for which input is November 6, 2006.