---

A recent Morrison & Foerster LLP Bulletin described the October 4, 2006 Order of the Federal Trade Commission (“FTC” or “Commission”), announcing that agency’s intention to bring enforcement actions against telemarketers that deliver prerecorded voice messages, even when the called party has an established business relationship (“EBR”) with the caller.  The Order, which conflicts directly with the telemarketing regulations of the Federal Communications Commission (“FCC”), also calls for comments on a proposed amendment to the FTC’s rules that would make this restriction on prerecorded messages explicit.  Comments are due to be filed on or before December 18, 2006. 

For the following reasons, businesses that will be affected by tightened restrictions on prerecorded telemarketing should consider filing comments on the proposed rule.

The Proposed Order Would Affect Every Line of Business, Including Those Outside the FTC’s Jurisdiction

A number of businesses, including banks, insurance companies, and common carriers, are expressly exempted from the FTC’s enforcement jurisdiction.  Ordinarily, those businesses could confidently continue to follow the telemarketing rules of the FCC, which permit telemarketers to place prerecorded voice calls to persons with whom the caller has an EBR, rather than the more restrictive regulations proposed by the FTC.  In fact, the FTC might be preparing an unpleasant surprise for those companies.

Specifically, although the FTC in past decisions has confirmed that its telemarketing regulations do not apply to businesses that are outside its jurisdiction, the Commission also has said that it would enforce its rules against telemarketing firms that work for those businesses.  In other words, a bank, insurance company, or common carrier might hire a telemarketing firm to conduct a prerecorded message campaign that is perfectly lawful under the FCC rules, yet run the risk that the telemarketer will be attacked by the FTC for violating regulations to which the bank, insurance company, or carrier is not itself subject.  This means that a business outside the FTC’s jurisdiction could only conduct a prerecorded message campaign using in house telemarketing personnel – a task for which many companies are not staffed or otherwise prepared.

The FTC’s belief that it can enlarge its jurisdiction by indirect means is highly questionable.  Such a tactic would undermine the clear jurisdictional lines the Congress has drawn between the FTC and other agencies, exacerbate the conflict between the FCC’s telemarketing rules and those of the FTC, and favor companies that can conduct their own telemarketing campaigns over companies that lack this capability.  Accordingly, businesses that are outside the FTC’s jurisdiction should urge the Commission:  (1) not to adopt the proposed, restrictive rule concerning prerecorded messages; and (2) in the event the rule is adopted, not to enforce it against telemarketing firms that conduct campaigns on behalf of companies that are exempt from FTC jurisdiction.

The Business Community Should Be More Visible in the Comment Process

The FTC’s recent Order is based upon its review of comments submitted in response to petitions filed in 2004 by Voice Mail Broadcasting Corporation (“VMBC”) and the Direct Marketing Association (“DMA”).  (The VMBC petition asked the FTC to permit prerecorded telemarketing calls to be made to persons with whom the caller has an EBR; the DMA petition asked the Commission to amend the prescribed method for measuring the maximum allowable call abandonment rate.)  As the Order points out, of the nearly 13,600 “unique comments” the Commission received in that proceeding, only 23 were filed by business interests.  The balance of the comments were filed by consumers and advocacy groups, mostly in opposition to the requested relief.

Although the FTC does not base its decisions upon the relative number, weight, or volume of filings that come down on each side of a question, the number of businesses that choose to comment on a proposal sends a signal as to the seriousness with which the business community views the issue.  In the comment period that will end December 18, a large group of filings from individual companies and associations, and especially from those that have not commented on previous FTC telemarketing proposals, could improve the odds of a favorable outcome.