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Posts Tagged ‘Federal Communications Commission’
May 20
2014

Sprint Gets a Wallop of a Reminder – Company-Specific Do Not Call Lists Still Matter – $7.5 Million Record Do Not Call Consent Decree

Yesterday, the Federal Communications Commission (“FCC”) announced a consent decree with Sprint Corporation for federal do not call violations. Specifically, under the terms of the agreement, Sprint will make a $7.5 million “voluntary contribution” to the United States Treasury.  This payment represents the largest do not call settlement reached by the FCC.  Sprint also agreed to various ongoing compliance initiatives, including enhanced training and reporting requirements.  Importantly, the action also serves as an important reminder on an often overlooked section of the do not call rules – the requirement that companies maintain and abide by “company-specific” or internal do not call lists.

Under the federal do not call rules, organizations making telemarketing calls to residential customers (including mobile phones) are required to scrub the federal do not call database before initiating those calls, unless the calls meet certain exceptions – the called party has an existing business relationship (“EBR”) with the caller or has provided prior express consent for the calls or the call is from a tax-exempt non-profit.  Of course, as we have written before, there are additional requirements for autodialed or prerecorded calls to mobile mobiles and prerecorded telemarketing calls to residential lines.

Another, sometimes overlooked requirement is that companies making permissible calls (for instance, after scrubbing the do not call database or with an existing business relationship or prior express consent) must maintain an internal, company-specific do not call list where companies log individuals’ subsequent requests not to be called.  In other words, even if a consumer has an existing business relationship or has given prior express consent to be called, once the consumer tells the company not to call again, that request trumps the existing business relationship/prior consent or the do not call scrub.  This company-specific do not call request must be implemented within 30 days and  honored for five years from the date the consumer made the request.  (The federal do not call registration, in contrast, lasts indefinitely).  A company must also have a do not call policy, available upon request.

In 2009, the FCC investigated Sprint for do not call violations relating to the company-specific do not call list.  Sprint subsequently settled that enforcement action in 2011 through a consent decree (which included a $ 400,000 payment).  The decree required Sprint to report to the FCC’s Enforcement Bureau, for two years, any noncompliance with the consent decree or the FCC’s company-specific do not call rules.

In March 2012, Sprint disclosed to the FCC that it had discovered additional issues involving human error and technical malfunctions relating to Sprint’s or its vendor’s do not call processes that caused potential noncompliance with consumers’ do not call or do not text preferences, or prevented the timely capture of the preferences.  Sprint represented that it had subsequently implemented improvements in its do not call data management systems.  It had also ceased telemarketing and text campaigns to investigate the issues.  The FCC investigated Sprint’s do not call compliance and ultimately entered into this record-setting $7.5 million settlement.

Under the terms of the consent decree, in addition to the settlement payment, Sprint will designate a Compliance Officer to administer a new compliance plan and to comply with the consent decree.  Sprint also must implement a compliance manual which will instruct “covered personnel” (including Sprint personnel and independent contractors who provide telemarketing services for Sprint) on Sprint’s do not call policies.  The consent decree further requires Sprint to establish and maintain an annual compliance training program, and to file several compliance reports with the FCC at designated time frames.  Significantly, Sprint acknowledges that actions or inactions of any independent contractors, subcontractors, or agents that result in a violation of the company-specific do not call rules or the consent constitute an act or inaction by Sprint – in other words, Sprint is specifically on the hook for third parties’ actions.

The consent decree and $7.5 million payment serve as a useful reminder of the company-specific do not call rules.  Once a consumer indicates they do not wish to receive further telemarketing calls or texts, the FCC’s rules require that the telemarketer place that consumer on its internal, company-specific do not call list.  This consumer requests trumps even an established business relationship or prior express consent.  It can only be revoked by subsequent express consent – which we would recommend be in writing.  Even if a consumer does business with your company every day, if he or she has asked not to receive telemarketing calls – don’t call!  Compliance with the company-specific do not call rule means your organization does not call someone who has indicated they do not want to be called.  And, it can also save your company great time, resources, and money spent defending private litigation or an FCC enforcement action.  Further, if your organization utilizes third parties for telemarketing campaigns, your company should make sure the third party is taking do not call requests, logging them, and passing those to your company for future campaigns.

May 19
2014

TCPA Plaintiff Loses—Express Consent Given to Health Insurance Plan Trumps Claim

In a recent case in the U.S. District Court for the Eastern District of Missouri, the district court held that the plaintiff’s Telephone Consumer Protection Act (“TCPA”) claim should be dismissed. The court ruled that the plaintiff gave prior express consent when she agreed to the terms of her health insurance plan, which stated that the company could share her number with other businesses who work for the plan.

The plaintiff Suzy Elkins enrolled to receive prescription benefit management services through a group plan offered by her employer. The plaintiff then reenrolled after her employer changed plans to receive prescription management services from the Defendant, Medco Health Solutions, Inc. (“Medco”) through Coventry Health of Missouri (“Coventry”). On the reenrollment form, Elkins provided her cell phone number as her home phone number and certified that the information she provided was true and accurate. Ms. Elkins refilled several prescriptions using Medco’s retail pharmacy network.

Elkins filed a complaint alleging that the automated and prerecorded calls she received from Medco through her enrollment in her employer’s health insurance plan, Coventry, violated the TCPA’s prohibition on autodialed/prerecorded calls to mobile phones and the federal “do not call” rules. Elkins had registered her number in the federal do not call database. Elkins alleged that Medco called her cell phone twice utilizing autodialed, prerecorded calls in an attempt to sell prescription medications. Medco claimed that it was attempting to make Elkins aware of certain pharmacy benefits, such as obtaining refills at reduced prices. Both parties disputed whether the calls were actually autodialed or prerecorded, and the court did not address that issue.

Instead, the district court found that the plaintiff’s TCPA claim was barred because she gave her express prior consent to be called at the number she provided when she gave that number at the time of enrollment as hercontact number related to healthcare benefits. The court noted that the Certificate of Coverage that the plaintiff agreed to with Coventry stated that Coventry could use or share her personal information with “other businesses who work for the Plan . . . [t]o tell you about treatment options or health related services.” The Certificate of Coverage also provided that members have certain rights including the right to ask for restrictions.However, the plaintiff never provided notice requesting that she not be contacted at that number with respect to her health benefits.

The court concluded that the calls that were the basis of the complaint were made by a pharmacy benefits specialist on behalf of her existing health plan regarding the pharmacy benefits she was receiving on an ongoing basis. The court reasoned that the provision of her cell phone number reasonably evidenced prior express consent by the plaintiff to be contacted at that number regarding pharmacy benefits.

The district court also found that the plaintiff had an established business relationship with the defendant which barred liability under the “do not call” rules. The court held that it was uncontroverted that there was an established business relationship since the plaintiff had utilized Medco’s prescription benefit management services to fill twelve prescriptions in a six month period before the calls that served as the basis for the complaint.

This decision represents a victory for TCPA defendantsin that the court found that prior express consent was given by the plaintiff when she gave her phone number and agreed to the terms of the Certificate of Coverage, which authorized Coventry to share her phone number. TCPA litigation has been increasing significantly in the past few years. While this court did not address the recent changes that have gone into effect that placed stricter requirements on businesses that engage in marketing via mobile messaging and prerecorded telephone calls, this decision does serve as guidance for consent, at least to non-telemarketing calls.

It is unclear whether the consent in this case would pass muster as “prior express written” consent for prerecorded or autodialed telemarketing calls to mobile phones and residential lines under the new rules, but since the calls at issue in this case predated the new rules the court did not need to address that point. We recommend businesses obtain “prior express written” consent for TCPA-covered calls and texts, consistent with the requirements under the new rules. It is important to note, however, this this court acknowledged that express consent can be extended to third parties through the plaintiff’s agreement to the terms if those terms are sufficiently broad to cover third parties. Finally, for non-autodialed or prerecorded telemarketing calls to mobile phone and live telemarketing calls to residential lines, this case is a useful reminder that an existing business relationship still constitutes a valid defense.

Sep 16
2013

Appeals Court Rules TCPA Does Not Violate First Amendment

The U.S. Court of Appeals for the Fourth Circuit recently ruled that the Telephone Consumer Protection Act (TCPA) does not violate the First Amendment by requiring robocallers to identify themselves when making calls.

Three months before the Maryland gubernatorial election in 2010, political consultant Julius Henson and his company Universal Elections, Inc., were hired to assist with efforts for the Republican candidate. On Election Day, Universal Elections made 112,000 robocalls to voters that did not identify the campaign as the source of the message, nor did the calls include the campaign’s phone number. The State of Maryland filed a civil suit against Henson and Universal Elections for violating the TCPA. The state alleged that the defendants violated the TCPA by failing to identify the campaign as the sponsor of the message as required under the statute.

The TCPA and its implementing regulations require that automated and prerecorded messages state clearly at the beginning of the message the identity of the business, individual, or other entity that is responsible for initiating the call. If a business or other corporate entity is responsible, the prerecorded voice message must contain that entity’s official business name. In addition, the telephone number of the business must be provided either during or after the prerecorded voice message. This disclosure applies regardless of the content of the message.

Political calls are exempt from some of the TCPA’s requirements, but other requirements do apply — including the disclosure requirement at issue here and the restrictions on autodialed or prerecorded calls or texts to wireless phones, which require prior express consent. Last year the Federal Communications Commission issued an enforcement advisory regarding political robocalls to cellphones and cited two marketing companies for making millions of illegal robocalls.

In its supplemental motion to dismiss, the defendants asserted a First Amendment defense, arguing that the TCPA is a content-based burden on political speech that cannot withstand a high strict-scrutiny standard of review. The United States intervened to defend the constitutionality of the TCPA. The district court ruled in favor of Maryland, holding that the TCPA withstands First Amendment challenges, and granted a $1 million judgment in favor of the state.

The Fourth Circuit affirmed the district court. The appeals court had previously issued the opinion in July, but as an unpublished opinion. The court issued an order amending its previous opinion to change it to a published opinion after a request from the government that it be published.

The Fourth Circuit held that the TCPA provisions requiring all automated and prerecorded telephone messages to disclose the source of the message are content-neutral and thus subject to an intermediate scrutiny level of review. Content-neutral laws that regulate speech are valid if they further a substantial governmental interest. The Fourth Circuit noted that at least three important governmental interests are advanced by the TCPA’s identity disclosure provision, including protecting residential privacy, promoting disclosure to avoid misleading recipients of recorded calls, and promoting effective law enforcement. Since the TCPA advances important governmental interests and the appellants did not raise an argument to the contrary, the Fourth Circuit affirmed that the TCPA’s identity disclosure provisions are constitutional.

TCPA litigation continues to increase, and potential liability can be significant. All businesses should review their TCPA compliance policies carefully to ensure that their procedures and scripts comply with all requirements. In addition to the identification requirements that have been in effect for many years, companies should make sure that they are prepared for the upcoming TCPA rule changes. These changes will require a called party’s prior express written consent for autodialed or prerecorded calls to wireless phone numbers and for prerecorded telemarketing calls to residential lines, among other requirements.

Aug 29
2013

A Report From Affiliate Summit East, 2013

Since 2003, online marketers and merchants have been gathering twice a year to take part in the Affiliate Summit Conferences. In recent years, Ifrah Law has become a fixture at these shows, and our associate Rachel Hirsch is not only widely recognized as the face of the Ifrah Law Power Booth station, but also as a well-respected and preferred attorney counseling online advertisers on compliance-related matters and representing them in nationwide litigation.

After Rachel recently returned from this year’s Affiliate Summit East conference in Philadelphia, we interviewed her about new and emerging trends at this conference and in the industry.

Q. What struck you about the crowd at the conference this year?
A. In addition to the new venue, there were plenty of new faces at the conference this year. Surprisingly, however, despite the conference’s name, there weren’t as many affiliates there as there have been in the past. Traditionally, affiliates, sometimes known as “publishers,” are independent third-parties who generate or “publish” leads either directly for an advertiser or through an affiliate network. This year, with a reported crowd of about 4,000 people, the conference included more individuals representing networks, brokers, and online merchants than affiliates. (Official conference statistics bear this out. Only 29 percent of attendees were affiliates.)

Q. What about vendors?
A. According to the organizers, one out of every 10 people there was a vendor. The term “vendor,” however, is something of a misnomer. A vendor can be another term for an online merchant – someone who is actually selling a product on the market – or it can be a generic category for marketers who do not fit into the traditional categories of affiliates, merchants, or networks.

Q. What new industry trends did you notice?
At every conference, one or two markets always seem to have a dominant presence. At the Las Vegas conference in January, there was a large turnout of marketers in the online dating space. This year, two different markets emerged– diet/health and downloads.

Some of the exhibitors this year were manufacturers of neutraceuticals, which can include weight-loss products or testosterone-boosting products. The trend seems to be for online marketers to “white label” or “private label” neutraceuticals from bigger manufacturers. What this means is that online marketers or advertisers actually attach their brand names to a product and product label that they purchase from a manufacturer, either based on their own formulations or based on the manufacturer’s product specifications. Well-known products that would fall into this category include Raspberry Ketone, Green Coffee Bean, and Garcinia Cambogia.

There were also a lot of individuals and companies there in the so-called “download” space. This often means the use of browser plug-ins that the consumer can download himself or herself. These can install targeted advertising (often pop-ups or pop-under ads) on an existing web page.

Q. Are there any risks involved in private labeling?
A. Definitely. If your name is on the label, it doesn’t matter that you didn’t manufacture the product. Your company and your label are subject to FTC scrutiny to the extent that you make claims about the product that you cannot substantiate. And beyond that, the Food and Drug Administration will also flex its enforcement power to the extent you or your manufacturer fail to institute good manufacturing practices, or “GMPs.” While many companies claim that they are GMP-certified, many do not have practices and processes in place to account for defective product batches, serious adverse events resulting from product use, or product recalls.

Q. What are some other hot areas of enforcement by the federal government?
A. Well, how you market your product may be as closely scrutinized as the underlying message. Online marketers who make outbound calls to consumers, or who engage third-party vendors (such as call centers) to make these calls can run afoul of the Telephone Consumer Protection Act. Under the TCPA, anyone who calls customers without their express advance consent, or who hires anyone else to do so, can be hit with a $500 fine for each violation. That adds up, and the TCPA can be enforced by the Federal Communications Commission or by private plaintiffs. Upcoming changes in the TCPA, which will be effective in October 2013, make it even harder to stay on the right side of the law.

Q. How would you put it all together as far as the legal issues?
A. It’s not just the FTC any more. These days, online marketers need to be aware of other agencies with broad enforcement powers, such as the CFPB, the FDA, and the FCC. And don’t forget about the threat of private consumer litigation.

Aug 28
2013

Appeals Court Rules Consumers Can Revoke Consent Under TCPA

On August 22, 2013, the U.S. Court of Appeals for the Third Circuit ruled unanimously that under the Telephone Consumer Protection Act (TCPA), consumers may withdraw their consent to have robo-callers call them. The full text of the opinion is available here.

The appeals court ruled in favor of Ashley Gager, who was contacted by Dell Financial Services after she revoked her prior express consent to be contacted. In 2007, Gager applied for a line of credit from Dell, which she received and upon which she later defaulted. Gager’s application for a credit line required that she provide her home phone number. In that place in the application she listed her cell phone number. After she defaulted on her credit line, Dell began calling Gager from an automated telephone dialing system. In 2010, Gager sent Dell a letter listing her phone number, which she did not indicate was a cell number, asking Dell not to call her anymore. Gager alleged that after receiving her letter, Dell called her cell phone using an automated dialing system approximately 40 times over a three week period. The TCPA, among other things, bars companies from using an automatic telephone dialing system or a prerecorded voice to call mobile phones, absent prior express consent or an emergency.

The district court granted Dell’s motion to dismiss the complaint for failure to state a claim, holding that Gager could not revoke her prior express consent to receive calls. The district court held that because Dell did not qualify as a “debt collector,” the revocation rules under the Fair Debt Collection Practices Act (FDCPA) did not apply. Thus, the court reasoned that since the revocation rules were inapplicable and the TCPA is silent on revocation of consent, such a right did not exist. The court also noted that the Federal Communications Commission, which has the power to implement rules and regulations under the TCPA, had not issued any advisory opinions at the time that specifically addressed the right to revoke consent.

The Third Circuit reversed the district court’s ruling and found that consumers do have a right to revoke consent. The court rejected Dell’s argument that because the TCPA is silent as to whether a consumer may revoke consent to be contacted via an autodialing system, such a right to revoke did not exist. The Third Circuit’s opinion emphasized that the TCPA is a remedial statute that was passed to protect consumers from unwanted calls and should be construed to benefit consumers. Preventing consumers from revoking their consent to receive calls would not be consistent with the purpose of the statute.

The Third Circuit also noted that the FCC issued a declaratory ruling In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, SoundBite Communications Inc., after the district court dismissed Gager’s claim, which primarily addresses other issues under the TCPA, but also touched on the issue of the right of consumers to revoke express consent. The SoundBite decision notes that neither the text of the TCPA, nor the legislative history, directly addresses how prior express consent can be revoked, but also notes that “consumer consent to receive . . . messages is not unlimited.” The Third Circuit relied on the SoundBite decision in finding that a consumer may revoke informed consent after it has been given and that there is no temporal limitation on the revocation period.

Dell will still be able to call Gager regarding her delinquent account, but the TCPA prohibits Dell from using an automated dialing system to do so, since the TCPA prohibits autodialed or prerecorded calls to mobile phones without express written consent (or in an emergency). Presumably, Dell can still contact Gager via live calls or through technology that does not amount to an automatic telephone dialing system.

In light of this decision in the Third Circuit, businesses should review their TCPA policies to ensure that they are complying with all rules and regulations. Additionally, on October 16, two additional changes to the TCPA rules will go into effect that impose stricter requirements on claiming exceptions to TCPA liability and all TCPA policies should be reviewed to account for these changes. Businesses should also specifically review their TCPA policies to endure that there is a procedure in place for consumers to opt out of receiving calls and text messages, even if they have previously provided consent. Taking and respecting opt-out requests is an important compliance practice that, if not followed, can lead to significant litigation — and potential damages and penalties.

Dec 03
2012

FCC Ruling Permits Confirmation Text Messages for ‘Opt-Out’ Customers

The Federal Communications Commission recently ruled that companies may send a one-time text message confirming a consumer’s opt-out of texts without violating the Telephone Consumer Protection Act (“TCPA”), and potentially facing large class action lawsuits.

This pro-business ruling represents a victory for SoundBite, the company that sought a declaratory ruling from the FCC, as well as for other businesses that use mobile texting to communicate with customers. Many businesses (including SoundBite) are facing class actions under the TCPA for sending this type of confirmatory message.

The TCPA prohibits, among other things, autodialed calls to mobile phones, unless the sender has received prior express consent from the recipient for such calls. The FCC has ruled that text “calls” are covered by this prohibition. Thus, under the TCPA, an autodialed call that sends a text to a mobile phone without prior express consent (irrespective of the type of message) is prohibited. The TCPA provides for FCC and state attorney general enforcement as well as private litigation. Plaintiffs’ lawyers have latched onto the TCPA for several years and have recovered substantial amounts in judgments and settlements.

SoundBite sends text messages on behalf of a number of companies that have obtained express consent to send texts to particular wireless subscribers, including banks, utilities, and retailers. SoundBite follows the Mobile Marketing Association’s best practices which include the transmission of a text message to a subscriber confirming that subscriber’s request to opt-out of receiving future messages. When a consumer opts-out of receiving future text messages, a one-time reply is sent back (usually within minutes) via text confirming receipt.

While many of the FCC’s rulings on the TCPA have not been viewed as business-friendly, this latest ruling represents a victory for businesses. Several large associations and businesses filed in support of SoundBite’s petition, including the American Bankers Association and the Consumer Bankers Association. SoundBite also had the support of the National Association of Consumer Advocates. The parties argued that confirmation messages are, in fact, consumer-friendly as they provide important information to the consumer to let him or her know that the opt-out was received and the messages will stop.

The FCC concluded that, as long as prior express consent of the receiving party exists before sending any messages, a one-time text confirming an opt-out request does not violate the TCPA: “We conclude that a consumer’s prior express consent to receive text messages from an entity can be reasonably construed to include consent to receive a final, one-time text message confirming that such consent is being revoked at the request of the consumer.”

Importantly, the FCC stated that these opt-out texts may only confirm the opt-out request and may not include any marketing or promotional information (or an attempt to convince the consumer to reconsider his or her opt-out) and can be the only additional message sent to the consumer after the receipt of the opt-out request. In addition, if the confirmation message is sent more than five minutes after the opt-out, the burden will fall on the sender to demonstrate that the delay was reasonable. The FCC also asserted that it will monitor consumer complaints and take action if senders are using confirmation texts as an additional opportunity.

Businesses that receive threats of TCPA lawsuits for confirmatory texts will now be able to use this FCC ruling in their defense. Plaintiffs may challenge the FCC’s interpretation of the strict statutory language, however, as they have done in other instances. Organizations wishing to use confirmatory opt-out texts should review the FCC’s ruling and ensure that their confirmations comport with the FCC’s guidance, especially regarding timing and ban on advertising and promotional messages

Sep 12
2011

Prepaid Phone Companies Dial a Wrong Number at the FCC

Companies marketing prepaid phone cards should be on the lookout: the Federal Communications Commission is threatening more-severe penalties for deceptive advertising.

The prepaid phone card business is pretty profitable, with the industry raking in billions every year. Plastering phone cards with names like “Africa Magic” and “Hola Amigo,” prepaid calling card companies target immigrant populations, advertising thousands of minutes of talk time to immigrants’ native countries for just a few dollars.

The problem is that there are tons of hidden costs that erode the value of these cards before the card user can say “adios.” So while a card purchased for $2 or $5 may say in a big font that it will provide 1000 minutes of talk time, in a tiny font on the detachable “hanger” for the card are additional fees that may reduce the talk time by 45 percent or more.

The major discrepancies between the big-font value and the small-font reality of these prepaid calling cards have made the industry a popular target for state and federal regulators as well as plaintiffs’ attorneys. State attorneys general, the Federal Trade Commission, the FCC, and class action attorneys have pursued prepaid calling card companies for deceptive advertising.

Year after year there are announcements of companies paying out hefty multi-million dollar sums. But the marketing techniques continue. And many of these companies are repeat players. For instance, the company Epana Networks has been pursued in – and settled or been fined in – federal, state, and private actions.

Perhaps prepaid calling card companies have considered responding to legal actions for deceptive advertising as part of the cost of doing business. Getting people to buy their cards under misleading pretenses and paying a fine or settlement is a lot more lucrative than just being more up front about calling fees.

These companies may not be able to make the “cost-of-doing-business” decision for long, though. The FCC announced forfeitures by four different telecommunications companies earlier this month. Each of the companies was fined $5 million. The notice for each forfeiture, in the form of a No Action Letter (NAL), was almost a mirror of the next. One thing that bears repeating is how the FCC could have calculated the fines against these companies: $150,000 for each violation AND each card purchased as a separate violation. The FCC opted not to calculate out these prospective sums and instead determined that a $5 million fine would be sufficient to protect consumers and deter future bad behavior.

But, in each NAL, the FCC also noted that should the company continue to engage in “unjust and unreasonable practices” (deceptive advertising), the FCC would issue more NALs imposing substantially greater forfeitures and revoking each company’s operating authority. The takeaway here: current practices of hidden fees may be a thing of the past if prepaid calling card companies want to have a future.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, healthcare, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen, David Deitch, and associates Rachel Hirsch, Jeff Hamlin, Steven Eichorn, Sarah Coffey, Nicole Kardell, Casselle Smith, and Griffin Finan. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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