Now that the fate of the National Do Not Call Registry (the "Registry") lies in the hands of the 10th Circuit Court of Appeals and Registry enforcement efforts have been undertaken by the Federal Trade Commission ("FTC"), the Federal Communications Commission ("FCC") and state Attorneys General, practical questions of compliance have arisen as telemarketers begin scrambling to keep up with the fast pace of developments in this area.
As direct marketers of goods and services consider their options in moving forward with telephone solicitations, there are several key factors that are critical from a do not call compliance perspective under the FTC's Telemarketing Sales Rule (the "TSR") and the FCC's rules under the Telephone Consumer Protection Act (the "TCPA Rules"). Generally, in order to ensure compliance, it is imperative that telemarketers:
- develop, implement, and follow a written Do Not Call Policy;
- train personnel in procedures established as part of the Do Not Call Policy;
- scrub calling lists against the Registry as well as any state specific lists that remain (According to the FTC, thirteen of the twenty-seven states with a do not call registry hadn't merged their lists with the Registry as of December 18, 2003;)
- become knowledgeable about the parameters for relying on the existing business relationship exemption, in general, and more specifically, for affiliates;
- ensure compliance with company-specific internal do not call obligations;
- keep accurate and detailed records of compliance; and
- appoint a specific person to be a "Chief Telemarketing Officer."
Develop a Written Do Not Call Policy
Under both the TSR and TCPA Rules, there is a "safe harbor" pursuant to which telemarketers will not be liable for calling a number listed on the Registry. In order to take advantage of the safe harbor, the call that was made to the number on the Registry must be the result of an error and the telemarketer must be able to demonstrate that, as part of its routine business practice:
- it has established and implemented a written policy setting forth procedures for compliance;
- it has trained its personnel, and any other entities assisting in compliance, in the procedures established as part of such written policy;
- it has maintained and recorded a company-specific list of telephone numbers that must not be called;
- it uses a process to prevent calling any numbers on the Registry; and
- it monitors and enforces compliance with the written policy on an on-going basis.
The creation of a written Do Not Call Policy is key to qualifying for the safe harbor. It is the necessary first step to establish compliance and without it, telemarketers will never be able to meet the remaining prongs of the safe harbor test. The written policy need not be complex or extremely detailed, but must at least set forth the relevant aspects of how the telemarketer will implement procedures for, and abide by, the requirements of the Registry. The policy should, at a minimum, address the following:
- Subscribing to and paying for the use of the Registry.
- Downloading telephone numbers on a timely and quarterly basis from the FTC's website.
- Procedures for accepting and recording company-specific do not call requests, and maintaining a company-specific do not call list ("Company Specific List").
- Time frame for responding to requests to be placed on the Company Specific List.
- Scrubbing calling lists against the Registry and the Company Specific List.
- Procedures for dealing with a person who claims his or her number is on the Registry or the Company Specific List.
- Procedures for dealing with an inadvertent call to a person whose number is on the Registry or the Company Specific List.
- Training personnel and telemarketers to comply with the requirements of the Registry and the Company Specific List.
- Use of the Registry list and the Company Specific List for other purposes (the Registry list must not be used for any purpose other than preventing telemarketing calls to the telephone numbers on the Registry).
- Ensuring that calls are not made to numbers on the Registry and the Company Specific List and that procedures exist for monitoring compliance.
Once the written Do Not Call Policy has been completed, it can be used as a road map for working out the specific technical details of how to comply. The written Do Not Call Policy should be used as general guidance for all internal and external operations that are implicated in telemarketing activities so that specific measures and actions of the telemarketer will match the general principles of the policy. For example, specific processes will need to be put in place in order to ensure that calls are not made to numbers on the Registry. This will likely involve changes to software programs to alert sales or customer service representatives that a particular individual should not be solicited - a change normally handled by a company's Information Technology department.
Train Personnel and Vendors
A written Do Not Call Policy is useless if it is completed and then sits in a drawer. Telemarketers must periodically train their own personnel, and any telemarketing vendors acting on their behalf, with respect to the specific practices and procedures that are necessary to comply with the policy and ideally, the federal and state laws that impact upon telemarketing activities. As a reminder, this type of training is necessary for compliance with the do not call safe harbor.
Scrub Calling Lists
While the Do Not Call safe harbor is helpful, by no means can telemarketers rely upon it as a substitute for actually scrubbing calling lists against the telephone numbers on the Registry and on any Company Specific List. It seems obvious, but the simple fact remains - calling lists must be regularly scrubbed against the Registry and Company Specific Lists in order to comply with the TSR and the TCPA Rules. While the FTC currently requires telemarketers to scrub their lists against the Registry on a quarterly basis, the Appropriations Bill passed by the House on December 8, 2003 contains language that, if enacted, would amend the Registry to require telemarketers to scrub their lists against the Registry on a monthly basis. On the state level, the frequency with which telemarketers must scrub their lists against state do not call lists varies by state to state.
Don't Forget About State Specific Lists
There are two important issues to be aware of with respect to state-specific lists. First, the states have been given approximately eighteen months to download any existing state do not call registries into the Registry. Even though most states have folded their state specific lists into the Registry, there are a few states that are hold outs, including Alaska, Georgia, Idaho, Indiana, Louisiana, Missouri, Texas, Wisconsin, and Wyoming, which have not adopted the Registry as their state do not call list. Therefore, absent federal preemption, marketers must still scrub against these state lists in addition to the Registry. In November 2003, the State of Texas evidenced its enforcement posture with respect to its state do not call list when the Texas Attorney General brought lawsuits against fifteen telemarketers that were alleged to be in violation of the "Texas No-Call" law, seeking civil penalties in amounts between $1,000 and $3,000 per violation.
Second, even in those states which have merged their lists into the Registry, state regulators retain their ability to enforce do not call violations made to state residents under state specific statutes, even where a state do-not-call list was folded into the Registry. This leaves open the possibility of both state and federal regulatory action, as well as private causes of action, for violation of both state and federal do not call provisions.
Be Wary of Affiliates' Existing Business Relationships
A telemarketer can take advantage of an exemption to the do not call provisions of both the TSR and TCPA Rules, if there is an "existing business relationship" ("EBR") between the telemarketer and the person being called. An EBR exists where a purchase or transaction has occurred within eighteen months, or where an inquiry or application regarding offered products or services has been made within three months, immediately preceding the solicitation, and the relationship has not been previously terminated by either party.
Whether an affiliate or company otherwise related to the company with which the EBR exists can also take advantage of the EBR is a much more complicated issue. The test here is the reasonable expectation of the consumer. The FTC has indicated that "[a]n established business relationship is between a seller and a customer; it is not necessarily between one of the seller's subsidiaries or affiliates and that customer. The test for whether a subsidiary or affiliate can claim an established business relationship with a sister company's customer is: would the customer expect to receive a call from such an entity or would the customer feel such a call is inconsistent with having placed his or her number on the National Do Not Call Registry."
The factors that must be considered in whether or not a consumer would reasonably expect to be called by an affiliate include the nature and type of goods or services offered and the identity of the affiliate. In other words, are the affiliate's goods or services similar to the seller's and is the affiliate's name identical or similar to the seller's? The greater the similarity between (1) the nature and type of goods sold by the seller and any subsidiary or affiliate, and (2) the identity between the seller and any subsidiary or affiliate, the more likely it is that the call would fall within the EBR exemption.
The FTC has given some specific examples of affiliates that can or cannot take advantage of the EBR. In one scenario, a consumer who purchased aluminum siding from "Alpha Company Siding," a subsidiary of "Alpha Corp.," likely would not be surprised to receive a call from "Alpha Company Kitchen Remodeling," also a subsidiary of Alpha Corp. The name of the seller and the subsidiary are similar, as are the type of goods or services offered - home repair and remodeling. In another example, in a situation where a consumer buys a subscription to a magazine from a magazine publisher that happens to be owned by a corporation with diverse holdings, the customer's established business relationship would exist only with the magazine publisher, not the corporate parent or any other corporate subsidiaries.
One of the important things to remember here is that both the FCC and the FTC make specific use of the words "affiliate" and "subsidiary" under their respective rules, and these terms generally have established meaning under corporate law. Under corporate law principles, an "affiliate" is generally understood to mean a company, whether incorporated or not, in which a certain percentage or greater interest is owned, either directly or indirectly, by another company. A "subsidiary," on the other hand, is generally understood to mean a company that is owned by another company, and such other company has the ability to control the subsidiary. Accordingly, entities such as franchisees or independent car dealerships, both of which are independently owned entities, would not typically be considered "affiliates" or "subsidiaries" of a marketer under general corporate law principles. Accordingly, a strict interpretation of the EBR exemption would suggest that these and similar types of entities could not take advantage of the EBR exemption with their franchisor or motor vehicle manufacturer, respectively, despite the fact that the goods and services offered and the names of the entities are likely to be virtually identical.
Don't Forget About Company-Specific Do Not Call Obligations
Probably one of the most important factors to remember in complying with the do not call provisions of the TSR and TCPA Rules is the need to maintain a Company Specific List. As a practical matter, scrubbing a calling list against the Registry is not enough, since a consumer's request to be place on a company-specific do not call list trumps any exemptions that may exist under the Registry between the telemarketer and the consumer. Therefore, once a calling list has been scrubbed against the Registry, it must always also be scrubbed against any Company Specific List.
Keep Records
Even if you have developed a written Do Not Call Policy, and have otherwise established and implemented all of the procedures and practices necessary to meet the Do Not Call safe harbor specified above, your efforts will be wasted if you cannot demonstrate compliance through the records you keep. In general, the TSR requires records to be kept for a period of twenty-four months, and under the TCPA Rules, the retention period, for records of those consumers who have requested not to be called, is five years. Therefore, a comprehensive company document retention policy relating to telemarketing records must be put in place and followed. Detailed and accurate records may be a telemarketer's only defense against consumer complaints relating to a Do Not Call violation.
Put Someone in Charge
Of course, all of the foregoing is meaningless if someone is not appointed to oversee and ensure compliance with the TSR, TCPA Rules and state telemarketing laws. A responsible person must be appointed to monitor and ensure compliance with the company's Do Not Call Policy and the applicable laws - a "Chief Telemarketing Officer." This person must be familiar with the telemarketer's practices and procedures and the telemarketing laws and act as a central point of contact for coordination and compliance questions. Without designating such a person, adherence to applicable regulations and policies is likely to lapse, and the risk of regulatory action is likely to rise.
Conclusion
Telemarketing can still be an effective part of any sales and marketing strategy. However, in the new era of the Do Not Call Registry and increased regulatory and private actions, it is essential that telemarketers know how to comply with the law, and ultimately, understand how to reduce their legal risks. With enforcement actions likely to increase in the months to come, now, more than ever, taking the steps outlined above will help achieve that goal.