Lead Buyers Beware: The FTC Clarifies and Tightens the EBR Exemption

By Marc RothApril 20, 2016

Late last year, the FTC dealt the lead generation industry a subtle yet significant blow. In two separate statements, the agency clarified certain obligations of lead buyers that rely on an existing business relationship exemption to avoid scrubbing intended call lists against the DNC registry and narrowed the scope of the exemption for contacting prospective and existing customers. Companies that purchase leads are well advised to take note of these developments to avoid liability under the Telemarketing Sales Rule.

Last November, the FTC released a final rule setting forth a number of amendments and clarifications to the Do Not Call (DNC) regulations under the Telemarketing Sales Rule (TSR). The agency declared that companies that rely on an existing business relationship (EBR) or an express written authorization (EWA) by a consumer to receive calls bear the burden of proving the relationship or authorization if relied upon to avoid scrubbing the DNC registry. While seemingly obvious, the FTC apparently grew tired of companies claiming that they did not have such an obligation under the TSR and decided to make this responsibility crystal clear. As a result, companies that purchase and contact leads obtained from third parties and do not scrub against the DNC registry should review their internal policies and procedures to ensure they obtain and possess proof of the opt-in lead, including time and date stamps, IP address and appropriate opt-in copy.

Of greater concern to all companies in the lead generation space are statements by the FTC that question whether a marketer can even rely on a third-party lead for an inquiry EBR exemption. The FTC warned that an inquiry EBR or authorization belongs only to the “specific seller” that obtained it directly from the consumer. The agency added: “Cold calls to consumers whose names and numbers appear on a calling list purchased from a third party list broker are prohibited . . . because the calls are not placed by the specific seller that obtained the EBR or EWA.” Pretty scary stuff.

But just a month later the agency appeared to backpedal on its position in a report to Congress where it acknowledges that third parties may generate leads for marketers so long as the marketer is sufficiently identified to the consumer: “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.” Given these statements, marketers need to ensure that they are clearly identified in all third-party lead generation campaigns if they intend to avoid scrubbing these leads against the DNC registry.

But third-party lead generation wasn’t the FTC’s only concern as 2015 came to a close. The agency also gave companies that rely on a purchase EBR exemption to call their own customers something to think about. The agency cautions these companies to consider the context under which these consumers became customers and their expectations of being called if they placed themselves on the DNC registry. The FTC asks companies to consider whether or not a consumer who has placed her number on the DNC registry and makes a one-off purchase from you has a reasonable expectation of receiving call from you. The FTC does not directly answer this question, but has in effect introduced a subjective “consumer expectation” element to the equation, where one did not previously exist.

Worse, the FTC suggests that the exemption may not even exist if a consumer is not aware that she has effectively waived her DNC request by making a single purchase: “Many consumers . . . [may be] unaware of the exception or are not aware that they have a relationship with the seller that falls within the definition of an established business relationship.” Companies that call customers under the name of an affiliated brand also need to consider whether consumers understand the connected relationship or will perceive the call to be a cold call, in violation of their DNC request.

Marketers that call prospective and existing customers need to carefully consider these issues before commencing an outbound call campaign. The FTC has declared that DNC is a high agency priority in protecting consumers from unwanted and unexpected marketing calls, and has now made known its expectations for companies that engage in these activities.

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