Monday, August 01, 2005
The FCC's Attempt to Increase Telemarketing Calls
At least in theory, the FCC is supposed to be protecting people from unwanted telemarketing calls. That supposedly was the purpose behind the Do Not Call List, where people could sign up their phone numbers so that they wouldn't be pestered by telemarketers.
But the FCC has now become friendly with the telemarketers, and together, they're dreaming up new ways to make sure we get more unwanted phone calls. After all, we love being disturbed during dinner, and the FCC wouldn't want to deny us this simple pleasure in life.
The FCC is attempting to issue a rulemaking that will interpret the Telephone Consumer Protection Act (TCPA) -- the law giving the FCC the authority to establish the Do Not Call List -- to preempt state anti-telemarketing laws.
If there's already a federal Do Not Call List, why would telemarketers care to preempt state laws? The reason is that there's a big loophole in the Do Not Call List -- it exempts calls when there's an "established business relationship." That means that any merchant or company you do business with can pester you telephonically and be exempt from the Do Not Call restrictions. Think of all the businesses you've done business with, and that's a big exception. Some state anti-telemarketing laws don't have this loophole, and that's why telemarketers want these state laws preempted.
As EPIC explains on its website:
Major retailers like the Sports Authority, telemarketing companies, and the big banks have a plan to make the Do-Not-Call Registry irrelevant. These groups have petitioned the Federal Communications Commission, asking the agency to "preempt" or supercede anti-telemarketing laws in five states--Florida, New Jersey, Indiana, Wisconsin, and North Dakota.
Three of these states (New Jersey, Indiana, and Wisconsin) do not recognize the "established business relationship" exception. This loophole to the Do-Not-Call Registry allows companies to contact their current customers. While that may sound reasonable, the devil is in the details: If you make any purchase, no matter how small, or request any information from a business, you have created an "established business relationship." In the case of purchases, the business may call you over the next 18 months; if you merely requested information, they may call for 3 months. This means that merely buying a cup of coffee create a "relationship" that would allow the coffee shop to call you, even if you are on the Do-Not-Call Registry.
Two of these states (North Dakota and Florida) do not allow telemarketers to send "pre-recorded voice" messages to individuals. In this marketing technique, a computer is programmed to call thousands of people and play a recorded message. Telemarketers add "ums" and background noises to the recorded message to fool the listener into thinking that the call is from a live person. Unlike live telemarketing, pre-recorded voice requires the Sports Authority and the banks to use fewer resources, allowing them to initiate millions of calls a day.
If the Federal Communications Commission preempts these five states, and forces them to recognize these loopholes, telemarketing will increase dramatically. These five states are protecting the whole nation from unwanted telemarketing. If their laws are invalidated, telemarketers will begin invasive tactics that they currently can't use.
So thanks, FCC, for helping telemarkers rather than consumers. With an agency like the FCC, who needs enemies?
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I don't think this is being quite fair to the FCC or to those in favor of a uniform standard. Without preemption, the costs imposed on businesses who want to both be in compliance with the law and initiate calls to their customers is enormous. It is a mistake to think the law applies only to professional telemarketing calls -- it applies to all calls, from any business to any consumer. Without an "established business relationship" clause, the local flower shop cannot call you to tell you there was a problem with your order (they're out of tulips) unless they remembered to get express written permission beforehand. And if there are varying state laws, this means any nationwide business placing calls has to do the infamous "50-state-survey" or risk heavy fines and a negative PR hit. Those who contract such work out to telemarketing firms will still want to review their vendors' practices to make sure they are compliant, so they don't lose customers. 50-state-surveys are greatly expensive, difficult to comply with, and no fun to research even as a lawyer getting paid for the work. Plus, in this modern age, why should a 50-state survey be necessary? What's wrong with a uniform standard? (I anticipate your response: the FCC isn't being tough enough. One response is above re: EBRs. There has to be some flexibility to avoid unnecessary costs on legitimate businesses. Second, the FTC also has enforcement responsibility here -- they administer the DNC list after all -- so it's not just the FCC.)
Posted by: Bruce | Aug 2, 2005 3:54:50 PM
It is a mistake to think the law applies only to professional telemarketing calls -- it applies to all calls, from any business to any consumer.
I find that unlikely. There's really no way to press you on the point, since after all we're talking about 50 different potential state laws here. But the chances of a state law being so unbelievably poorly drafted that they attempt to regulate calls with current customers about current transactions (as opposed to sales pitches for new transactions), and such law surviving constitutional muster even as commercial speech, seems very low.
Do you have any cites?
Posted by: Paul Gowder | Aug 2, 2005 4:08:02 PM
Paul, that's kind of my point. The "established business relationship" exception allows calls concerning current (and relatively recent) transactions. Without it, businesses would need express written consent before making such calls.
As for the breadth of the law, the FCC's implementation of the TCPA (47 C.F.R. s 1200) covers all calls to residential lines made for a commercial purpose, unless it fits within one of the permitted exceptions. One is for EBRs, but I interpreted Dan's post as arguing for doing away with the EBR exception. Another is for calls that do not introduce an unsolicited advertisement or constitute a telephone solicitation. Does my tulip example clearly fall within that exception? Well, it depends. Suppose there are daffodils available, but they are $10 more. Is that an "advertisement" or "solicitation"? A "solicitation" is "the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment
in, property, goods, or services, which is transmitted to any person . . . ." It seems at least debatable, but thankfully the flower shop can rely on the EBR exception, but only if it exists. And the FTC rule (16 C.F.R. Part 310; available here: http://www.ftc.gov/os/2003/01/tsrfrn.pdf) is somewhat different, so you'd need to consider whether *that* applies. The FTC rule applies to any "telemarketer," defined as "any person who, in connection with telemarketing, initiates or receives telephone calls to or
from a customer or donor." "Telemarketing" means "a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call." Does the tulips case count? Probably not, but what if you have a "plan" to always upgrade to the daffodils?
Now throw all the state variations on this issue on top of the FCC and FTC rules. My original post was arguing that the EBR exception should be reasonably clear and broad to avoid unnecessary burdens, and businesses shouldn't be required to do a 50-state survey before making commercial calls.
Posted by: Bruce | Aug 2, 2005 10:40:29 PM
1. A 50 state survey isn't the end of the world. This is how many businesses must operate when they deal with tort law or other forms of regulation. This is one of the costs of having a federalist society. And the info is relatively easy to find -- after all, the states with the differing laws are all known, so what's the big problem? Moreover, we see in numerous other contexts (medical privacy, banking, insurance, etc.) that businesses seem to be able to cope. I just don't buy the argument that because it's so hard for businesses to learn the law in the states they operate in that people in a particular state can't protect themselves through legislation if they want to. You seem to suggest that business costs count as more important than the ability of the people within states to have the laws they desire. I don't see why this is so.
2. There's no reason why cutting out an EBR exception must inevitably prevent the poor flower shop from calling people about their flowers. Why can't there be a more narrowly crafted exception than the broad EBR exception? What's wrong with states creating less of a gigantic loophole than the EBR exception if they want to? Obviously businesses should be able to contact people in regards to the existing transaction; it is soliciting new transactions that can be barred. But if you want to protect the ability of businesses to call with regard to existing transactions, the EBR exception does this with a gigantic sledgehammer -- in other words, the exception is far broader than necessary to accomplish this goal. And many businesses already ask if I want to receive emails about new products and other solicitations; I can click a box if I want this. Why is doing that for phone calls so onerous?
3. Don't forget that the federal Do Not Call list is a Johnny-Come-Lately to all this. Many states were doing this before the federal Do Not Call List, which was inspired by the states. Perhaps if the federal privacy laws protected privacy more robustly, the states wouldn't need to regulate. But the problem is that the federal laws (and enforcement thereof) have often been deficient. And then businesses get a federal law enacted so as to preempt states from regulating more effectively and protectively. I used to be very much against federalism, but the story in privacy law is that some of the states seem to be the ones that are genuinely interested in protecting people rather than Congress and federal agencies (like the FCC and the FTC), which more and more these days seems to be more concerned about the needs of businesses than the needs of everyday people. I'm starting to rethink my views on federalism because I see less blatant capture by businesses at the state level and a greater and quicker responsiveness to protecting people's privacy. Thus far, in light of the rash of security breaches that have been announced earlier this year, all the legislative action thus far has been at the state level, where dozens of laws have been passed. I sure wish I could have California's privacy laws, for example, and if I lived in California, I'd sure be flaming mad if my better more effective laws are wiped out by some federal law ghostwritten by businesses that provides far less protection than the laws of my state.
That said, of course there are good people in Congress and in federal agencies who really do want to address the problem, but there are also others who seem to only be concerned about what the businesses want.
Posted by: Daniel Solove | Aug 2, 2005 11:10:36 PM
Dan, we obviously disagree at some level, but to be clearer, I don't believe business costs always trump consumer costs, and I don't believe that preemption is always a good thing. However, in this case, I believe the EBR exception is a reasonably clear one that imposes minimal uncertainty about its scope; it will not have a substantial impact on the number of unwanted calls that can be placed (you made a coffee purchase example -- my intuition is that coffee telemarketing is rare); the number of interstate business callers is large; the problem is of relatively recent vintage, meaning there aren't decades of settled state practices at issue; and consumers actually *want* to be contacted by businesses about some things, so there are interests at stake on both sides. You're right that 50-state-surveys are do-able, but why create more of them if you don't have to? On balance, I believe an easily implementable and uniform EBR exception is the way to go.
Also my point about the flower shop is not that it "inevitably prevents" such calls, but that it makes the situation considerably more murky, entailing either substantial additional risk or legal costs for the business, or both.
Posted by: Bruce | Aug 3, 2005 12:20:14 PM
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