Although the use by businesses of prerecorded message telemarketing has been prohibited for years for most calls, many companies have continued to lawfully deliver prerecorded telemarketing calls to their existing customers or others with whom they are deemed to have an existing business relationship (“EBR”). The Federal Trade Commission’s (“FTC”) recent amendments to its Telemarketing Sales Rule (“TSR”) will greatly restrict that practice. Effective September 1, 2009, companies subject to FTC jurisdiction will not be able to make interstate prerecorded telemarketing calls to EBR consumers absent the prior express written agreement of the consumer.
Effective December 1, 2008, any company that continues to make such calls must comply with new restrictions that will continue even after September 1, 2009 when prior express written consent of the consumer is mandatory. The restrictions require that the prerecorded message: (1) state at the outset that the call recipient can be asked to be placed on the caller’s company specific do not call list; (2) make available an automated opt-out mechanism for “live” recipients of a call that enables the recipient to place the number on the company’s do not call list; and (3) if the call is answered by an answering machine or voicemail, leave a toll free number where the recipient can call and be connected to an automated system where they can opt-out of further calls. In addition, such calls must ring for at least 15 seconds or 4 rings before they are disconnected and any message must begin within two seconds of the call recipients’ greeting. The new TSR amendments do not govern purely informational calls (e.g., a doctor’s appointment reminder), intrastate calls, or calls made by entities not regulated by the FTC. Most of those calls will continue to be subject to Federal Communications Commission (“FCC”) rules that permit prerecorded telemarketing calls to EBR consumers subject to the recipient requesting to be placed on a company’s own internal do not call list.
Businesses engaged in telemarketing or that hire telemarketers to make calls on their behalf are potentially subject to two different federal regulatory regimes. The FTC, under the Telemarketing and Consumer Fraud and Abuse Prevent Act (“TCFAPA”) has jurisdiction over most entities engaged in interstate telemarketing. Excluded are insurance companies (to the extent they are regulated by state law), banks, certain regulated brokers, common carriers and non-profit organizations, although third party telemarketers calling on these excepted entities’ behalf generally are subject to FTC jurisdiction. The FCC, under the Telephone Consumer Protection Act, (“TCPA”) has jurisdiction over all entities engaged in telemarketing, whether interstate or intrastate. In 2003, both the FTC and the FCC enacted rules to implement the national do not call registry. Under both sets of rules, businesses could continue to make live calls to any EBR consumer even if the consumer has enrolled in the national Do Not Call registry, unless the consumer has made a “company-specific” Do Not Call request to the calling entity. EBR consumers are current customers, consumers that have purchased, rented or leased goods and services within the last 18 months, and consumers that have made an inquiry or application within the last 3 months.
The Differing FTC and FCC Approaches to Prerecorded Calls to EBR Consumers
The two agencies’ rules initially differed regarding prerecorded calls to EBR consumers. The FCC permitted such calls. The FTC, however, considered such calls to violate its rules on “call abandonment” – a rule that requires 97 % of calls per day of a calling campaign to be connected to a live sales representative within two seconds of a call recipient’s completed greeting (if the call is answered by a live person and not an answering machine). In November 2004, the FTC, responded to a petition for a rule change to conform its approach concerning prerecorded calls with the FCC’s rules. It issued a Notice of Proposed Rulemaking to expressly permit prerecorded calls to EBR consumers (without the calls being considered abandoned) as long as specific conditions were met. The FTC also announced it would forbear from enforcing its call abandonment restrictions on prerecorded calls to EBR consumers pending completion of its rulemaking.
Despite strong industry support for the FTC’s position in the November 2004 NPRM, the FTC on October 3, 2006, in a surprise move, announced that it was not going to adopt its November 2004 proposal and instead proposed the approach that ultimately led to its most recent rule revisions. The FTC’s rule revisions also modified the call abandonment rate to allow it to be calculated over 30 days rather than on a daily basis, which is similar to a related FCC rule provision.
Significance of the FTC Decision
The FTC’s decision has far-reaching significance for the marketing activities of the many businesses subject to FTC jurisdiction under the TCFAPA. Prerecorded calls to EBR customers made with autodialers are a cheap and efficient way for businesses to reach their existing customers and notify them of new services. Companies not subject to FTC regulation and companies that make such calls intrastate only, will be able to continue to follow the FCC’s approach. Others must be aware of the FTC restrictions.