Even with states easing COVID-19 related restrictions, suggestions that social distancing could last through the summer (or even longer) have led many companies that traditionally rely on in-person promotional visits to consider other options. One obvious alternative is telephone or text marketing, but companies that are new to the practice should be aware of the numerous federal and state laws and regulations governing telemarketing, which impose significant fines or statutory damages for violations. In one notable example, Dish Network was assessed $280 million in penalties in an action brought by the FTC and state attorneys general for alleged violations of the Telemarketing Sales Rule (TSR) and related state laws, and in a separate class action, plaintiffs were awarded $61 million in statutory damages.
Both the federal government and all 50 states plus the District of Columbia have laws applicable to the use of telephones for marketing purposes. Some of the restrictions may also apply to non-marketing communications. This post provides a high-level overview of the rules applicable to the space; but before engaging in telemarketing activities, companies should be sure to review both federal and state laws to ensure their practices are fully compliant.
The key point is to ensure that companies request clear, affirmative consent to use information for marketing purposes. A documented consent process can facilitate considerable flexibility down the road, and a failure to have clear consent can create a complex and challenging environment. Once consent is obtained, it is also important to design and implement a compliance program, including policies and procedures regarding telephone marketing, checking against Do-Not-Call lists, training, and enforcement so that some of the more challenging requirements of telemarketing laws do not limit business options
Telephone Privacy and Telemarketing Laws Overview
At the federal level, the primary telephone privacy rules come from the Telephone Consumer Privacy Act (TCPA) and the Telemarketing Sales Rule (TSR). Together, the federal rules implement a “do-not-call” registry, place limitations on the use of automatic telephone dialing systems (auto-dialers) and pre-recorded phone calls and impose additional restrictions on “abusive” practices such as calling after certain evening hours, blocking caller identification information, and abandoning answered calls.
At the state level, telemarketing laws have been passed in all 50 states. The rules vary considerably by state; among other things, they place restrictions on the time and content of telemarketing calls and require certain disclosures in addition to other technical requirements, such as the number of times the dialer must ring before hanging up. Some states require telemarketers to register with state authorities and in some instances place a bond.
Important exceptions may apply to both federal and state telemarketing laws. Many of these laws, including the TSR, do not apply, for instance, to business to business (“B2B”) communications. Even then, companies must ensure that they do not inadvertently contact personal as opposed to business numbers.
Automatic Dialing and Pre-Recorded Phone Calls
The TCPA and many state laws impose restrictions on using certain technologies in making calls. One of the most heavily litigated areas of telephone privacy pertains to the use of automatic telephone dialing systems (“ATDS” or “auto-dialers”). Under the TCPA, subject to exceptions, companies are prohibited from using auto-dialers to contact cell phones and certain hospital or emergency lines without the recipient’s prior express consent. Telemarketing calls require prior express written consent. Exceptions may apply, for example, where a covered entity or business associate make calls for a health care purpose.
There is currently considerable uncertainty about what constitutes an “auto-dialer.” Circuit courts are currently split on the issue. The broadest interpretation of the term considers any system that can store and dial telephone numbers without human intervention an auto-dialer—which could potentially include any modern smart-phone. Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. 2018). That interpretation is far from universal, however, with other courts taking the view that the auto-dialer must itself generate sequential or random numbers, rather than simply store a list. See Gadelhak v. AT&T Services, Inc., 950 F.3d 458 (7th Cir. Feb. 19, 2020); Glasser v. Hilton Grand Vacations, 948 F.3d 1301 (11th Cir. 2020); Gary v. Trueblue, Inc., 786 Fed. Appx. 555 (6th Cir. 2019), Dominguez v. Yahoo, 894 F.3d 116 (3rd Cir. 2018).
Many state telemarketing laws also include restrictions on the use of auto-dialers. Companies wishing to use telephone dialing technologies either for phone calls or text messages, therefore, should be careful to ensure that they are not inadvertently using a technology that could constitute an “auto-dialer” in their jurisdiction, and if they are doing so, design an effective compliance program for the use of such technologies.
Both federal and state laws also impose restrictions on the use of pre-recorded phone calls. As with auto-dialer restrictions, the TCPA prohibits prerecorded calls made to cell phones and certain hospital or emergency lines without prior express consent or prior express written consent for telemarketing calls. Unlike with auto-dialers, the TCPA also prohibits prerecorded calls to residential phone lines unless the caller has received prior express consent. Again, exceptions may apply.
Probably the most well-known restriction on telemarketing is the federal government’s Do-Not-Call-List. Subject to exceptions, the TSR prohibits any call to numbers on the list unless the caller has either obtained the called party’s prior express consent in writing or has an established business relationship with the individual. Even companies with well-developed compliance programs can make mistakes in conducting telemarketing campaigns, however, and so the TSR provides a safe harbor for companies that can show that they have written compliance programs and related procedures, conduct trainings, enforce the program, and the call in question was the result of an error.
In addition to the federal list, companies conducting telephone solicitations are required to keep their own company-specific Do-Not-Call-List when called parties ask not to be called again. Many states, likewise, maintain their own Do-Not-Call-Lists, and so it is important for any company conducting telemarketing to determine the geographical jurisdictions where it will be calling and obtain the relevant lists. Companies should also be sure to periodically update their lists to ensure they are not calling recently added numbers.
Time and Manner Restrictions
Telemarketing calls are also subject to various time and manner restrictions. These restrictions vary by state, and so, again, it is important to understand where call recipients are located. As one example, the TSR and many state laws place restrictions on when calls can be made. The federal rule prohibits calling other than between the hours of 8am and 9pm. New York follows the federal standard, but in Rhode Island, the window is 9am to 6pm. Among other things, many states also require that certain disclosures be made at the beginning of a call and prohibit blocking caller ID.
With such numerous obligations, and variance between the laws applicable depending on the jurisdiction in which calls are made, companies should consider putting in place a global compliance program covering their telemarketing activities.