Telemarketing Calls Keep ComingTelemarketing Calls Keep Coming

FCC proceedings have opened the possibility of companies being held liable for what third-party telemarketers do on their behalf. Here's the state of play today.

I hate to beat a dead horse, but despite all sorts of newly enforceable regulatory hurdles, those obnoxious telemarketing calls keep coming. The good news is that the Federal Communications Commission (FCC), as the lead agency enforcing the newly tightened telemarketing rules, is taking action, but the bad news is that the calls keep coming because they are effective.

Not at my house, and likely not at yours, but someone's buying what telemarketers are selling. Any hungry sales person knows that when obstacles are placed in the path, you work around them. Telemarketers and those who rely on their services are no different from any other industry that is quasi-regulated: As new legal and regulatory hurdles are placed in front of them, telemarketers devise creative ways to re-interpret or completely ignore them altogether.

Hiring third-party telemarketers to make calls on an entity's behalf is one such approach. This makes sense for a number of reasons--it frees up the company to do what it does best, but it also insulates (or USED TO insulate) the company from liability for behavior that is beyond the boundaries of the Telecommunications Consumer Protection Act (TCPA).

While violations of the TCPA have always brought the potential for hefty penalties (between $500 and $1,500 per call/fax/text), the reach of the TCPA has been repeatedly clarified, as a result of both regulatory and judicial activity. Those hiring telemarketers, whether directly or indirectly, need to understand the risks and liabilities associated with sub-optimal behavior no matter who is actually making the calls.

The TCPA has been around since 1991. Since then, the number of businesses and charities relying on telemarketing services has grown substantially. So too has the number of different technologies used to reach customers.

Interestingly, interpretations of this legislation have taken more twists and turns than an Olympic bobsled run. The initial concept was to protect consumers from calls that have become "an intrusive invasion of privacy," according to the 2004 case Mainstream Marketing Services, Inc. v. FTC. Since then, the hairsplitting of interpreting those rules is what legal careers are made of...and, of course, the calls keep coming.

Annoying as those calls are, at least one of the companies that has found telemarketing calls most effective has been the loudest in raising objections and refining the act's definitions. Dish Network, LLC, whose petition prompted the 2013 ruling, clearly views telemarketing as a highly effective sales tool regardless of the cost.

In February 2012, the FCC issued an order aiming to curtail some telemarketing practices. One of the most important changes included in this order was the requirement that telemarketers obtain prior written consent before initiating calls to consumers.

However, a year later in the spring of 2013, the FCC issued a declaratory ruling following pressure from disgruntled telemarketers. With this step, the FCC took on the issue of vicarious liability--the legal doctrine by which a defendant can be held liable for the actions of a third-party marketing company that it employs. The 2013 ruling held that this "vicarious liability doctrine" could be applied in the case of companies that hire telemarketers who proceed to violate the TCPA.

In the action In re Dish Network, the FCC provided guidance with a five-pronged test to determine whether vicarious liability applies to the entity on whose behalf calls are being made.

The test requires a showing that:

1. The seller allows the outside sales entity access to information and systems that normally would be within the seller's exclusive control
2. The outside sales entity had the ability to enter information into the seller's systems
3. The seller gave the outside sales entity the authority to use the seller's trade name, trademark and service mark
4. The seller approved, wrote or reviewed the telemarketing scripts
5. The seller knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller's behalf, and the seller failed to take effective steps to stop the violations

Currently, there remain 15 pending petitions before the FCC seeking clarification of TCPA rules. These include questions such as:

1. What constitutes call initiation for purposes of TCPA?
2. What constitutes "prior written consent?"
3. Is an electronic signature from a customer acceptable?
4. Does a one-time response to a consumer-initiated text message requesting future text offers trigger TCPA compliance?

What's the solution when there's liability to an entity that doesn't actually make telemarketing calls but retains a third party to do so? If third-party telemarketers must be used (and again, as unpleasant as being on the receiving end of one of these calls clearly is, they MUST be effective, or companies wouldn't still be using them), the entity doing the retaining must understand the incumbent risks.

With 15 pending petitions currently before the FCC, and numerous class actions working their way through the courts seeking some sort of clarification of the TCPA rules (not to mention guidelines), this is an area where it's critical to stay current. Or make sure that the third party that's doing the work knows what it's doing.