Telemarketing Review Comment
FTC File No. P994414
Comments of the
Electronic Retailing Association
The Electronic Retailing Association ("ERA") appreciates the opportunity to submit these comments on the Federal Trade Commission's ("FTC" or "Commission") Telemarketing Sales Rule, 16 C.F.R. Part 310, as the Commission conducts its required review of the regulations since they took effect in 1995.
ERA is a leading trade association representing electronic retailers - marketers that promote a diverse range of goods and services to consumers through various electronic media including telemarketing, television, radio, and the Internet. ERAs members include household names like America Online, JCPenney, QVC, Home Shopping Network, ValueVision, and leading direct response commercial producers, the principal membership club marketers, as well as small start-ups and individual entrepreneurs. Membership also encompasses companies that provide critical support services to electronic retailers, including the major teleservices providers, fulfillment houses, and media buyers. Most of ERAs retail members transactions include a telephone conversation with the consumer to complete a sale. Many members have their roots in direct response television advertising, and have thus relied for many years on inbound calls. Many sales also lead to follow-up, outbound telephone solicitations, and members increasingly rely on outbound telemarketing to complement marketing through other media.
In broad terms, ERA believes that the current Telemarketing Sales Rule ("TSR" or "the Rule") represents a reasonably balanced approach to addressing both the shared and, sometimes, competing concerns of businesses, state and federal regulators, and consumers. Thus, we limit our comments to three (3) basic sets of issues: (1) the scope of the TSR; (2) retention of current exemptions, particularly for calls in response to general media advertising and business-to-business marketing; and (3) the do-not-call requirements.
II. SCOPE OF THE RULE
The Commissions request for public comment in this Rule review proceeding poses a number of questions relating to the appropriate scope and coverage of the TSR. ERA believes that the current reach of the TSR is generally appropriate, insofar as possible given the limitations of the Commissions jurisdiction, and should not be expanded at this time. The Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6101, et seq., and the implementing regulations reflected in the TSR, have unquestionably imposed significant added burdens and costs on businesses that promote goods and services by telephone. Anecdotal evidence, such as experiences related at the Commissions Public Workshop on the Do Not Call provision of the rule in January 2000, suggest that some consumers have still encountered problems in connection with telemarketing calls they receive. Viewed as a whole, however, the TSR has provided important protections for consumers while establishing a set of standards that convey, with reasonable predictability, what businesses must do to comply.
ERA believes that discrete problems that may arise despite the TSRs requirements and protections can be best addressed through self-regulatory efforts or the Commission's existing authority (under the TSR or its authority to prevent unfair or deceptive trade practices). First, self-regulation can achieve a more prompt and individually tailored response to marketplace demands, especially consumer demands. In today's fast-paced retail market, one size does not fit all. Regulation, however, forces all consumers and businesses to accept one way the governments way of doing things. In addition to individual companies efforts, industry guidelines are also an important mechanism for promoting truthful marketing practices that serve both industry and consumer interests, particularly as new marketing technologies and techniques are introduced. In fact, ERA is in the process of finalizing its Guidelines for Telemarketing, which will apply to telemarketing campaigns conducted by, or on behalf of, ERA members, to encourage fair, ethical, and responsible telemarketing practices that will promote consumer confidence.
Second, no collection of government regulations can realistically anticipate, or keep pace with, the constantly evolving tactics of unscrupulous businesses that capitalize on technicalities or emerging technology to deceive consumers for profit. No matter how detailed or comprehensive the TSR is, the unfortunate reality is that there will always be a handful of bad actors that will migrate to unregulated methods or, worse, flatly disregard the applicable rules. Disclosure requirements, do-not-call and verification procedures, recordkeeping obligations, and the like have not and will not deter these entities. Thus, if the Commission tries to respond to such problems with more cumbersome TSR mandates, the result will be that conscientious industry participants will be left saddled with unnecessary, burdensome, and costly obligations while unscrupulous marketers reap financial gains through fraud and deception. Case-by-case enforcement of existing laws and regulations is a more effective tool for responding to these concerns.
Third, some entities or types of calls are statutorily exempt from complying with the TSR (or similar state requirements). Yet, they may be a significant cause of concern about whether the TSR has been effective in curbing consumer complaints about telemarketers failing to honor do-not-call requests or calling too early or late in the day. For instance, telephone solicitations for charitable donations or political contributions are generally not subject to the TSR, and tightening the requirements applicable to companies that are subject will not reduce the number or type of complaints and problems those calls may spawn. The extent to which perceived problems with telemarketing are traceable to calls placed by uncovered entities would be difficult, and perhaps virtually impossible to quantify accurately, but in assessing the impact of the TSR over the past five (5) years the Commission can not ignore the role they play.
The TSR contains several exemptions for teleservices activities that have not been subject of conduct or abuses the TSR is designed to address, where there are other means for a seller to convey material information about an offer (e.g., in a general media advertisement or mail piece, or at a face-to-face meeting), or that are governed by another regulatory framework. The reasoning underlying these exemptions continues to support them, and the Commission should retain all of them. 16 C.F.R. § 310.6.
In particular, inbound calls that consumers make in response to most general media advertising should not be subject to the strictures of the TSR. As the Commission noted in adopting the final Rule, these calls have not been subject to the abusive practices that the TSR was intended to remedy. Furthermore, the Commissions well-established authority to prevent unfair and deceptive practices under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and the arsenal of enforcement tools the Commission is empowered to use to carry out this mandate, are ample to address any individual problems that arise. See Prohibition of Deceptive and Abusive Telemarketing Acts; Final Rule, Statement of Basis and Purpose, 60 Fed. Reg. 43842, 43860 (1995). Inbound calls also, like sales following a face-to-face meeting, involve other opportunities for a seller to disclose material information about an offer and for consumers to consider that information.
In addition, the current exemption for most business-to-business transactions should be retained. ERA believes that successful sellers will work to meet the needs of all their customers and generate and maintain their goodwill. Thus, market demands will best ensure that sellers are truthful and ethical in their dealings. This is especially true of business-to-business telephone solicitations, which involve uniquely sophisticated purchasers in the sense that that they are highly educated independent of a sellers representations and long before they place or receive a telephone sales call about the goods and services the businesses they represent need or want. Business purchasers are skilled in evaluating and negotiating for competing offers and terms of sale; indeed, ERA submits that most would find a seller's rote adherence to the requirements of TSR annoying and disruptive to ordinary business negotiations.
IV. DO-NOT-CALL REQUIREMENTS
The Commissions public workshop on the do-not-call provisions of the TSR was a valuable forum for airing many of the important issues surrounding this aspect of the Rule. In particular, ERA opposes calls for the establishment of a nationwide do-not-call database. We share the view expressed by several parties at the workshop that a nationwide do-not-call list would be excessively costly to develop and administer and consumers will in one form or another ultimately bear those costs yet would lack corresponding benefits. Indeed, unlike company-specific do-not-call lists, a national list would deprive consumers of the freedom to choose which companies they want to hear from and which they do not.
ERA believes it is imperative that the Commission retain the current limitation of liability for a do-not-call violation when a seller or telemarketer has instituted procedures to honor such requests. Innocent mistakes are inevitable in any industry, and even the most careful will undoubtedly make occasional mistakes or oversights in processing a do-not-call request. The Commissions current Rule properly recognizes, however, that strict liability is inappropriate where a company has in good faith endeavored to honor each request, and has implemented reasonable procedures to do so.
Congress and this Commission, in establishing the standards embodied in the current TSR, weighed carefully the needs and interests of consumers, industry and law enforcement. The balance ultimately achieved is not flawless, but is on the whole a reasonably good one and has already imposed substantial burdens on industry. ERA, therefore, urges the Commission to resist calls to expand the TSR or add to the requirements it imposes.