As our readers are aware, on September 1, 2023, Judge Lindsay C. Jenkins of the Northern District of Illinois granted the Federal Trade Commission ("FTC') partial summary judgment in its telemarketing lawsuit against Day Pacer LLC and associated defendants (collectively "Day Pacer"). FTC v. Day Pacer LLC, et al., filed in 2019, is part of a series of significant FTC telemarketing lawsuits brought against businesses alleged to have violated the Telemarketing Sales Rule ("TSR"). Enacted in 1995, the TSR prohibits telemarketing businesses from engaging in certain abusive practices that invade upon consumer rights to privacy. The FTC and state attorneys general have the authority to initiate enforcement actions for violations of the TSR.
One takeaway from recent FTC proceedings is that businesses engaged in buying and selling consumer data need to reevaluate their understanding of what the breadth of the critical term "consent" is. In his Opinion and Order, Judge Jenkins makes clear that Day Pacer engaged in abusive telemarketing practices when it called (or facilitated the calling to) consumers who provided consent for job opportunities with for-profit educational opportunities.
How Did the Day Pacer's Consent Practices Violate the FTC's Telemarketing Rule
The FTC is authorized by Congress to promulgate telemarketing regulations under 15 U.S.C. § 6102(a)(3)(A). Specifically, the telemarketing statute requires that the FTC include in its rules: "a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of such consumer's right to privacy." Under the TSR:
It is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer to engage in, or for a seller to cause a telemarketer to engage in ... (iii) Initiating any outbound telephone call to a person when: . . .
(B) That person's telephone number is on the 'do-not-call' registry . . . unless the seller or telemarketer" can demonstrate that the seller either (1) "has obtained the express agreement, in writing, of such person to place calls to that person"; or (2) "has an established business relationship with such person . . . "
In its pleadings, Day Pacer contended that the FTC only has authority to regulate "unsolicited" telephone calls. As such, Day Pacer argued, it did not violate the TSR because it did not initiate any outbound calls to consumers for whom it did not obtain express agreement, or consent, to the receipt of telemarketing calls.
The Court explained that Day Pacer bore the burden of demonstrating that it had obtained consent from the subject consumers to call them. Day Pacer could not offer more than a few call transcripts indicating that some consumers were interested in its educational opportunities. In contrast, the FTC provided evidence that consumers entered their contact information on websites primarily marketing job opportunities, not educational opportunities. Based primarily on the FTC's evidence, the Court ruled that Day Pacer violated the TSR because it did not obtain proper consent to initiate telemarketing calls to the subject consumers concerning education-based offers.
How does the Day Pacer Decision Affect your Business?
The Day Pacer decision makes clear that, according to the FTC, it is improper for consumers to receive telemarketing calls about one area of interest where they have specifically provided consent for another. The consumer consent must have been obtained for the particular industry vertical or type of product or service offered by the dialing entity.
As part of its recently launched "Operation Stop Spam Calls," the FTC went after what it termed "consent farms," or companies allegedly selling consumer lead data en masse. In particular, one company that was included in the FTC's investigation operated job search websites, which were designed in a manner to lead consumers to believe that they would find job openings if they provided their information (including phone numbers) to the sites' operator. Embedded in the sites' consent language were marketing partners lists containing entities providing products/services unrelated to job opportunities. Once consumers provided consent on the landing pages, their data was shared with these third parties. As a result, consumers who entered their contact information received solicitations from life insurance companies, cruise lines, and disability insurance providers, among others. This company eventually settled with the FTC for $913,636.00.
Whether your company is in the business of acquiring and selling lead information or placing telemarketing calls, consumer consent must be reevaluated in light of "Operation Stop Spam Calls." Note that, in most cases, the TSR does not afford a private right of action – only state or federal agencies may file enforcement actions under the statute. However, the Telephone Consumer Protection Act ("TCPA") also regulates telemarketing to consumers. Given that fact, courts evaluating the TCPA may employ the same close reading of "consent" in private rights of action that come before them.
In light of recent government enforcement action, businesses should retain telemarketing law attorneys that are experienced in advising companies on compliance with various state and federal telemarketing regulations, including the TSR and TCPA.
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