On October 4, 2006, the Federal Trade Commission ("FTC") issued a notice in which it proposed two modifications to its Telemarketing Sales Rule ("TSR"). The first of these modifications would require express prior written agreement to send prerecorded telemarketing messages. The second would liberalize the TSR's calculation of "abandonment rate" in telemarketing campaigns using a predictive dialer.

Of more immediate significance, the FTC also announced the revocation, effective January 2, 2007, of its policy of forbearance from enforcing its rules against companies that send prerecorded telephone messages to existing customers and that comply with certain other safe harbor requirements.

Interested companies and individuals are urged to consider the issues on which the FTC seeks comment. These specific matters are presented in a total of 21 questions posed by the FTC in its notice. Written comments must be received by the FTC on or before November 6, 2006.

Impact on Businesses

The FTC's revocation of its forbearance policy, and its proposed rule prohibiting prerecorded messages without express prior written agreement, require the prompt attention of companies that use prerecorded messages to communicate with customers or prospects. The FTC maintains jurisdiction over most companies other than telecommunications common carriers, financial institutions and insurance companies.

Telecommunications carriers and other companies not subject to FTC jurisdiction should also remain mindful of the Federal Communication Commission's (FCC) rules, however, as the telemarketers to whom they may outsource telemarketing campaigns are likely subject to FTC jurisdiction.

The FTC's proposed modification to the "abandonment rate" calculation, in contrast, has the potential to ease compliance burdens for FTC-governed companies who use predictive dialers for telemarketing. The proposed modification would change the method for measuring the maximum allowable call abandonment rate in the call abandonment safe harbor provision from "3% per day per calling campaign" to "3% per 30-day period per calling campaign." This will free companies, and their hired telemarketers, from being required to ensure no greater than a 3% call abandonment during each day of a campaign.

Recommendations

Companies under FTC jurisdiction should immediately assess their telemarketing practices and determine whether prerecorded messages are used to communicate with customers and prospects. If so, those companies should consider the following points, among others:

• EBR safe harbor expires January 2, 2007. Effective January 2, 2007, no safe harbor, for prior written consent or otherwise, will exist for prerecorded telemarketing calls. The FTC may issue final rules allowing the use of prerecorded messages for telemarketing purposes, but subject them to requirements such as obtaining the recipient's express prior written agreement. There is likely to be a gap between January 2, 2007, and the effective date of any such rules.

• Only "telemarketing" messages are affected. The TSR, including its call abandonment provisions, applies only to "telemarketing," defined in pertinent part as "a plan, program or campaign which is conducted to induce the purchase of goods or services." The TSR does not prohibit prerecorded informational calls unless the calls also contain a sales invitation or promotional pitch.

• Entities under FCC jurisdiction may continue to rely on the EBR exception. Subject to the caveat mentioned above regarding outsourced services, entities regulated by the FCC, such as wireless carriers, may continue to send prerecorded telemarketing messages to those with whom they have an EBR.

• Consider prospective compliance. Companies subject to FTC jurisdiction who may wish to use prerecorded telemarketing messages in 2007 and beyond should consider their capacity for implementing means to obtain express prior written agreement from recipients. Under the proposed rules, express prior written agreement must:
  • be in writing;

  • be obtained prior to the call;

  • include the recipient's authorization that calls made by or on behalf of a specific party may be placed to the recipient;

  • include the number to which the calls may be placed; and

  • include the recipient's (electronic or written) signature.

• Remain mindful of state law. Many states have enacted their own laws restricting the use of recorded messages. State law governs calls that are placed within a state rather than among multiple states. Where state rules are more restrictive than either the FCC's or FTC's rules, businesses must also comply with these state rules.

Resources

16 C.F.R. Part 310: Telemarketing Sales Rule: Denial of Petition for Proposed Rulemaking; Revised Proposed Rule With Request for Public Comments; and Revocation of Non-Enforcement Policy (Oct. 4, 2006): http://www.ftc.gov/os/2006/10/R411001telemarketingruleFRN.pdf