In February of 2008, Congress passed the Do-Not-Call Registry Fee Extension Act of 2007 requiring a biennial report on the National Do Not Call Registry. The Report contains a summary of the current operations of the Registry, the impact on the Registry of new telecommunication technologies and the impact of the established business relationship exception upon the FTC’s enforcement efforts.
The FTC believes that advancements in technology have increased the number of illegal telemarketing calls made to telephone numbers on the Registry. For example, according to the agency, technological developments allow illegal telemarketers to easily fake the caller ID information that accompanies their calls, which allows them to conceal their identity from consumers and law enforcement.
In 2017, reports of “neighborhood” caller ID spoofing, where the caller displays a caller ID number with the same area code and exchange as the called party, have increased. As has the use of automated dialing technology to make calls that deliver prerecorded messages.
The FTC believes that “the net effect of these technological developments is that individuals and companies who do not care about complying with the Registry or other telemarketing laws are able to make more illegal telemarketing calls cheaply and in a manner that makes it difficult for the FTC and other law enforcement agencies to find them.”
FTC staff has undertaken a number of initiatives designed to combat the technologies that telemarketers use to make illegal calls, including refining its complaint intake process, and increasing the amount and frequency of consumer complaint data that it makes publicly available.
The impact of the established business relationship exception on consumer and businesses is discussed at length in the Report.
The Telemarketing Sales Rule contains exemptions that permit a seller or telemarketer to call a person who has listed his or her telephone numbers on the Registry if the call is to a person with whom the seller has an “established business relationship.”
The FCC’s rules similarly include an exemption for live-voice calls to consumers with whom the seller has an established business relationship. These exemptions do not apply if the person has asked to be on the seller’s “entity-specific” do-not-call list by telling the seller or its representatives that he or she does not wish to receive telemarketing calls from the seller.
An established business relationship under the TSR is a relationship based on: (i) the consumer’s purchase, rental, or lease of the seller’s goods or services, or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call; or (ii) a consumer’s inquiry or application regarding a product or service offered by the seller within the three months immediately preceding the date of a telemarketing call.
The EBR exception permits sellers and their telemarketers to call customers who have recently made purchases or made payments, and to return calls to prospective customers who have made inquiries, even if their telephone numbers are on the Registry. Sellers and telemarketers have the burden of proof to demonstrate the existence of an established business relationship.
Many businesses rely on this exemption to conduct telemarketing campaigns directed at recent or long-time customers, or consumers who have expressed an interest in becoming customers. Many consumers, however, perceive telemarketing calls that fall within this exemption to be inconsistent with the Registry because the consumers are unaware of the exception or do not realize that they have a relationship with the seller that falls within the definition of an established business relationship.
Such perceptions by consumers are especially likely when the relationship between the consumer and the seller arises from a brief, one-time transaction, or when the seller identified in the telemarketing call and the seller with whom the consumer has a relationship are part of the same legal entity, but are perceived by consumers to be different because they use different names or are marketing different products.
Both the FTC and the FCC have stated that the issue of whether calls by or on behalf of sellers who are affiliates and subsidiaries of an entity with which a consumer has an established business relationship fall within the exception depends on consumer expectations. The FTC characterizes the issue as follows: “would consumers likely be surprised by that call and find it inconsistent with having placed their telephone number on the national ‘do-not-call’ registry?”
For both the FTC and the FCC, the factors to be considered in this analysis include whether the subsidiary’s or affiliate’s goods or services are similar to the seller’s, and whether the subsidiary’s or affiliate’s name is identical or similar to the seller’s name.
The greater the similarity between the nature and type of goods or services sold by the seller and any subsidiary or affiliate and the greater the similarity in identity between the seller and any subsidiary or affiliate, the more likely it is that the call will fall within the established business relationship exemption.
Some businesses, seeking to circumvent the Registry, have sought to exploit the established business relationship exemption by making calls to persons who have not had the requisite contact with the seller.
For example, some marketers claiming a business relationship have improperly placed telemarketing calls to consumers after acquiring the consumers’ telephone numbers from others.
The Report points out that lead generators collect information on consumer interests through web advertising, by offering coupons or samples, or simply by “cold calling” consumers in order to determine whether the consumer has any interest in a particular product or service, such as debt relief or home alarms. Lead generators responsible for “call verified,” “permission-based,” or “opt-in” leads” often fail to remove numbers listed on the Registry before calling consumers.
Lead generating companies that have engaged in this type of “cold calling” have agreed to pay civil penalties to settle charges that their calls violated the TSR.
At the same time, telemarketers and sellers acquire leads from lead generators and use them in telemarketing campaigns without screening the numbers to remove those listed on the Registry. A single sales pitch can produce multiple illegal calls, generating one or more calls from both the lead generators and the telemarketer.
Telephone calls from telemarketers to phone numbers provided by lead generators generally do not fall within the established business relationship exception because, while the consumers may have a relationship with the lead generator, they do not have an established business relationship with the seller who has purchased the leads.
Unless the consumer inquired into the services of a specified seller, or the lead generator made disclosures that would alert the consumer that he or she should expect telemarketing calls from the seller as a result of his or her communications with the lead generator, the seller cannot claim that it has a relationship with the consumer such that it can ignore the consumer’s request not to receive telemarketing calls.
In several enforcement actions, businesses that made telephone calls to consumers on the Registry after acquiring the consumers’ names from a lead generator agreed to pay civil penalties to settle charges that their calls violated the TSR. See United States v. Versatile Mktg. Sols., Inc. et al., No. 1:14-cv-10612-PBS (D. Mass. filed Mar. 10, 2014); United States v. Central Florida Investments, Inc., Civ. No. 6:09-cv-00104PCF-GJK (M.D Fla. filed Jan. 15, 2009); United States v. Ameriquest Mortgage Company, Civ. No. 8:07-cv-01304-CJC-MLG (C.D. Cal. filed Nov. 6, 2007).
A copy of the Report can be seen, here.
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