The Federal Trade Commission and the Federal Communications Commission may be part of the same government, but that hasn’t stopped them from reaching widely different conclusions about what is permissible when it comes to telemarketing.
The FCC, for example, has taken the position that prerecorded telemarketing calls are allowed, as long as they are placed to someone with whom the company has an existing business relationship. But the FTC caused a stir last fall when it announced that it would start aggressive enforcement against companies that use prerecorded telemarketing calls, even to existing customers. (The FTC was supposed to begin its enforcement of its position on Jan. 2, but it is holding off for the time being.)
Sanscrainte
Straddling the horns of such a regulatory dilemma is none too comfortable for companies. Still, “there’s nothing unique about any governmental agencies disagreeing with each other,” says Joseph Sanscrainte, with the law firm of Bryan Cave. What does make the telemarketing conflict notable is that Congress specifically instructed the FCC and the FTC to try “to make their rules work together”—and so far, despite assurances to Congress that the agencies will aim for consistency, stark differences in their approaches remain.
Regulatory conflicts are actually “much more common” than people may think, says Jonathan Fink, a partner with the Buchalter Nemer law firm. “There are numerous government agencies [with] concerns that sometimes butt heads.”
Fink
Fink gives the example of the Department of Commerce, which often has opinions that differ from the those taken by the Environmental Protection Agency, since each entity has a different focus. “The Department of Commerce is designed to promote business and the EPA’s mandate is to protect the environment,” Fink says. “Sometimes those interests conflict.”
Sanscrainte says the FTC and the FCC likewise encounter similar tensions, even though neither agency sets out to trump the other. “Both agencies went through their own rulemaking procedures. As a result of the information they had at hand, and as a result of the comments they received, they reached certain conclusions,” he says. “It’s their role to draft regulations based on the information they had at hand.”
BACKGROUND
An excerpt follows explaining what types of entities are subject to the FTC’s Telemarketing Sales Rule.
Who Must Comply with the Amended TSR?
The amended TSR regulates “telemarketing”— defined in the Rule as “a plan, program, or campaign … to induce the purchase of goods or services or a charitable contribution” involving more than one interstate telephone call. (The FCC regulates both intrastate and interstate calling. More information is available from www.fcc.gov.) With some important exceptions, any businesses or individuals that take part in “telemarketing” must comply with the Rule. This is true whether, as “telemarketers,” they initiate or receive telephone calls to or from consumers, or as “sellers,” they provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. It makes no difference whether a company makes or receives calls using low-tech equipment or the newest technology—such as voice response units (VRUs) and other automated systems. Similarly, it makes no difference whether the calls are made from outside the United States; so long as they are made to consumers in the United States, those making the calls, unless otherwise exempt, must comply with the TSR’s provisions. If the calls are made to induce the purchase of goods, services, or a charitable contribution, the company is engaging in “telemarketing.”
Certain sections of the Rule apply to individuals or companies other than “sellers” or “telemarketers” if these individuals or companies provide substantial assistance or support to sellers or telemarketers. The Rule also applies to individuals or companies that provide telemarketers with unauthorized access to the credit card system.
Exemptions to the Amended TSR
Some types of businesses, individuals, and activities are outside the FTC’s jurisdiction, and therefore, not covered by the TSR. Certain calls or callers are exempt from the Rule, too. Moreover, some of the exemptions from the original Rule have been narrowed in the Amended Rule. As a result, some calls or callers may be completely exempt or they may be partially exempt—that is, they may have to comply with some of the Rule’s provisions. The following sections explain the coverage of the Rule and the exemptions. Be aware that the FCC also regulates telemarketing practices; its jurisdiction extends to some entities and activities that are not subject to regulation by the FTC. For more information about the FCC’s rules, visit www.fcc.gov.
Some Types of Businesses and Individuals
Some types of businesses are not covered by the Rule even though they conduct telemarketing campaigns that may involve some interstate telephone calls to sell goods or services. These three types of entities are not subject to the FTC’s jurisdiction, and not covered by the Rule:
banks, federal credit unions, and federal savings and loans.
common carriers—such as long-distance telephone companies and airlines—when they are engaging in common carrier activity.
non-profit organizations—those entities that are not organized to carry on business for their own, or their members’, profit.
These types of entities are not covered by the Rule because they are specifically exempt from the FTC’s jurisdiction. Nevertheless, any other individual or company that contracts with one of these three types of entities to provide telemarketing services must comply with the Rule.
Examples:
A nonbank company that contracts with a bank to provide telemarketing services on the bank’s behalf is covered.
A non-airline company that contracts with an airline to provide telemarketing services on behalf of the airline is covered.
A company that is acting for profit is covered by the Rule if it solicits charitable contributions on behalf of a non-profit organization.
Keep in mind that a company soliciting a charitable contribution is not required to comply with the Rule’s National Do Not Call Registry provisions.
Under the provisions of the Telemarketing Act, a number of entities and individuals associated with them that sell investments and are subject to the jurisdiction of the Securities and Exchange Commission or the Commodity Futures Trading Commission are not covered by the Rule, even if they engage in a plan, program, or campaign to sell through interstate telephone calls. These entities and individuals are covered by the FCC’s telemarketing rules. For more information, visit www.fcc.gov.
Source
Who Must Comply With The Amended TSR? (Federal Trade Commission; January 2004)
For companies that engage in telemarketing, the question of which rules to obey depends on whether the company is subject to FTC regulation. The FTC, despite stricter rules on telemarketing, has much more limited jurisdiction than the FCC—which has authority over all communications. The FTC doesn’t regulate intrastate conduct and has no jurisdiction over banks, credit unions, savings and loans, and common carriers.
If a company is not subject to FTC jurisdiction, it can abide by the FCC rules. If, however, a company is subject to the jurisdiction of the FCC and the FTC, the company must worry about obeying the tougher FTC rules.
“You have to default to the more restrictive rule,” Sanscrainte says.
Stepping On Toes
Ferree
Regulatory spats arise for a variety of reasons, lawyers say. Consider the conflict between the FTC and the FCC; while their jurisdictions might overlap on a practical level, the two actually oversee very different concerns. The FTC generally protects against unfair and deceptive acts and practices, says Ken Ferree, a partner with the law firm Sheppard Mullin and a former FCC staffer. The FCC’s mandate, in contrast, “is to protect the public interest, whatever that is. That’s a broad vessel that you can fill up any way you want,” Ferree says.
John Feldman, a partner with the Reed Smith law firm, notes that the FTC and the FCC are also interpreting different laws regarding telemarketing. The FCC takes its lead from the Telephone Consumer Protection Act, while the FTC’s telemarketing sales regulations come under the Telemarketing and Consumer Fraud Abuse Prevention Act.
Feldman
Often—but not always—agencies will try to “work it out so there [are] not contradictory situations or conflicts,” Feldman says. He cites drug labeling and advertising as an example: The Food & Drug Administration oversees the labeling of drugs, while the FTC concerns itself with actual advertising.
There’s a greater likelihood of companies “stepping on each others’ toes” when Congress delegates oversight to multiple agencies without delineating clear boundaries, Feldman says. And in telemarketing particularly, “things have been changing so rapidly that sometimes its hard to get good cooperation,” he says.
Fones
Roger Fones, a former Justice Department lawyer now with the firm Morrison & Foerster, says circumstances often give multiple agencies jurisdiction over the same thing. “It’s really not a conflict of law unless one says you have to do ‘A’ and [the other] says you can’t do ‘A,’” he explains. “In other circumstances, you just have to obey them all.”
And Don’t Forget The States
Conflicting rules among federal agencies can just be the tip of the iceberg when it comes to compliance concerns—because, unless Congress has pre-empted state regulations, states are free to come up with their own rules. “What oftentimes happens is you’ll see state-by-state [regulation] in a particular area, until you start to see almost a patchwork of regulation,” says Char Pagar, a partner with the law firm Manatt Phelps & Phillips.
That is precisely what has happened with consumer-privacy regulations, and telemarketing has gone down the same path, Sanscrainte says. “Certainly there are conflicts between the FTC and [the] FCC, but on top of that you have 50 individual jurisdictions, each with its own rules that will impact teleservices in a different way,” he says.
The challenge for companies that do telemarketing is to determine where the campaigns are going to be focused, and be aware of the existence of any state provisions that might come into play, Fink says.
“How do you do this practically? You do 50-state surveys, plus federal, and you create a matrix that has all of the regulations,” he says. “You’ve got to be very organized. You’ve got to be very careful. And you’ve got to keep it updated.”
Pagar notes that some companies look for “one-shot solutions” and will just conform their practices to the most restrictive rule, whether it comes from a state or federal agency
The bottom line, Fones says, is that companies “have to be aware of all the bases that they have to touch. They have to anticipate whatever differences there might be in the laws and enforcement policies of the various agencies that they have to deal with.”
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