The Telephone Consumer Protection Act
The Telephone Consumer Protection Act ("TCPA") provides generally that it is unlawful for any person to "use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine." 47 U.S.C. §227(b)(1)(C). The TCPA provides that an individual may "if otherwise permitted," bring a private right of action in state court, for receipt of an unsolicited facsimile ad and allows recovery of actual damages or $500 per unsolicited facsimile, which may be trebled upon establishing a knowing and willful violation. 47 U.S.C. §227(b)(3).
A "cottage industry" of TCPA unsolicited facsimile ad litigation has arisen. Plaintiff's counsel have filed TCPA unsolicited facsimile ad class actions in jurisdictions across the country. In Chicago alone, within the last year there have been approximately 70 TCPA unsolicited facsimile ad class actions filed in the Circuit Court of Cook County. The potential exposure for defendants is significant. As a result of these filings, a number of insurers have also filed declaratory judgment actions seeking declarations that they are not liable for coverage on these claims. Recent coverage decisions have found a duty to defend, and one U.S. District Court in Georgia recently found an insurer had the duty to indemnify for a TCPA class action verdict.
The "Established Business Relationship" Exemption
Congress required the FCC to adopt rules to implement the TCPA. The FCC enacted rules and in its September 17, 1992 Report and Order it stated that it was permissible to send an unsolicited facsimile ad to a recipient with whom the sender had an established business relationship ("EBR"). 1992 TCPA Order, 7 FCC Rcd at 8779, para. 54 n.87, 1992 FCC Lexis 7019 *70. The FCC determined that the existence of a prior business relationship provided a business with the necessary express permission to send faxes to their customers. Thus a consumer who had transacted business with a company was deemed to have consented to receive facsimile ads from that company.
FCC Amends the TCPA Rules
Noting that it had been over ten years since it had adopted rules to implement the TCPA, on September 18, 2002 the FCC issued a Memorandum Opinion and Order and Notice of Proposed Rulemaking seeking comment on whether the Commission's rules needed to be revised. As a result of this Notice of Proposed Rulemaking, on June 26, 2003, the FCC issued a Report and Order revising the TCPA rules. Amongst the revisions the FCC promulgated was an amendment to 47 C.F.R. 64.1200(a)(3)(i) to provide that "a facsimile advertisement is not ‘unsolicited' if the recipient has granted the sender prior express invitation or permission to deliver the advertisement, as evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the sender." This amendment eliminated the EBR exemption. Thus, the amendment eliminated the presumption that a consumer who had transacted business with a company had consented to receive facsimile ads from that company.
The amendment would require that a company obtain the express written permission to send facsimile ads. The effective date of the amendment was August 25, 2003. This caused considerable angst among companies who utilized facsimile ads in marketing their goods and services to businesses and consumers.
FCC Reconsiders and Extends the Effective Date of the Amendment Eliminating the EBR
Several associations filed petitions with the FCC for clarification or stay of the FCC's June 26, 2003 Report and Order. In response, on August 18, 2003 the Commission issued an Order on Reconsideration which extended the effective date of the amendment of 47 C.F.R. 64.1200(a)(3)(i) to January 1, 2005. The Commission stated that:
The comments filed after the release of the (June 26, 2003) Report and Order indicate that many organizations may need additional time to secure this written permission from individuals and businesses to whom they fax advertisements. We believe that, in light of this new information, the public interest would best be served by allowing senders of such advertisements additional time to obtain such express permission before the new rules become effective. In addition, this extension will allow the Commission the opportunity to consider any petitions for reconsideration and other filings that may be made on this issue. We retain the discretion to extend the effective date further should circumstances warrant such an action.FCC, Order on Reconsideration, CG Docket No. 02-278 at § 5 (rel. August 18, 2003).
Therefore, pursuant to the FCC's August 18, 2003 Order, the Commission has stated that a business may continue until January 1, 2005 to send unsolicited facsimile ads to those persons with whom it has established business relationships, without obtaining express written permission. It should be noted that the author is aware of some plaintiffs' counsel who have asserted that the FCC's determination that an EBR exists is not binding and have continued to press forward with TCPA litigation in the face of a demonstrated EBR.
The FCC Has Not Delayed the Effective Date of its Amendment of the Definition of an Established Business Relationship
What may be lost on many businesses is the fact that the FCC has not delayed the effective date of its amendment of 47 C.F.R. 64.1200(f)(3) which defines an EBR. The FCC specifically stated in its August 18, 2003 Report and Order that "the effective date of our amended definition of an ‘established business relationship' is not affected by our determination here." FCC Order on Reconsideration, CG Docket No. 02-278 at ¶ 6 (rel. August 18, 2003). Prior to the FCC's June 26, 2003 Report and Order, the definition of what constitutes an EBR was open-ended. There were no specified time parameters to determine the existence of an EBR. The FCC's June 26, 2003 order amends 47 C.F.R. 64.1200(f)(3) to provide specific time parameters to be utilized in determining the existence of an EBR. Thus, effective August 25, 2003, 47 C.F.R. 64.1200(f)(3) is amended as follows:
(3) The term established business relationship means a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of the subscriber's purchase or transaction with the entity within the eighteen (18) months immediately preceding the date of the telephone call or on the basis of the subscriber's inquiry or application regarding products or services offered by the entity within the three months immediately preceding the date of the call, which relationship has not been previously terminated by either party.Therefore, effective August 25, 2003, the FCC has taken the position that an EBR exists only for 18 months from the date of a purchase or for three months from the date of an inquiry.
Businesses should be aware of the fact that while the FCC has extended the date the EBR will be eliminated, the Commission has also acted to tighten the definition of an EBR. Therefore in order to comply with the FCC's new definition of an EBR, procedures must be implemented to ensure that facsimile lists are "scrubbed" to remove customers who have not made a purchase within the past 18 months, and to remove potential customers within three months of the date of their last inquiry.