Pay-Per-Call Rule Review: 900 Number #20

Submission Number:
20
Commenter:
Ronald S. Goldbrenner, Esq., Linda A. Goldstein, Esq.
Organization:
Promotion Marketing Association of America
Initiative Name:
Pay-Per-Call Rule Review: 900 Number
Matter Number:

R611016

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
Washington, D.C. 20580

900-Number Rule Review And Request for Comment

FTC File No. R611016

COMMENTS OF
THE PROMOTION MARKETING ASSOCIATION OF AMERICA, INC.

Ronald S. Goldbrenner, Esq.
General Counsel
PROMOTION MARKETING
ASSOCIATION OF AMERICA, INC.
257 Park Avenue South
New York, N.Y. 10010-7304
212/ 420-1100
Linda A. Goldstein, Esq.
Marc S. Roth, Esq.
HALL DICKLER KENT FRIEDMAN AND WOOD
909 Third Ave.
New York, N.Y. 10022
212/339/5465

May 12, 1997

TABLE OF CONTENTS [Deleted]

 

Before the
FEDERAL TRADE COMMISSION
Washington, D. C. 20580

900 Number Rule Review And Request For Comment

FTC File No. R611016

COMMENTS OF THE
PROMOTION MARKETING ASSOCIATION OF AMERICA, INC.

The Promotion Marketing Association of America, Inc. ("PMAA") through its undersigned counsel, respectfully submits these comments in response to the Federal Trade Commission's ("FTC " or "Commission") rule review and request for public comment concerning the Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992, 16 C.F. R. Part 308 ("900 Number Rule" or "Rule"). The PMAA has, under separate cover, notified the Commission of its desire to participate in the public workshop conference on the 900 Number Rule scheduled for June 19-20, 1997.

INTRODUCTION

The PMAA has been the leading non-profit association representing the promotion marketing industry since 1911. Its membership consists of more than 700 companies representing diverse aspects of the industry, including Fortune 500 consumer goods and service companies, advertising and promotion agencies, and university faculty who educate about promotional activities as part of a business curriculum. PMAA's membership list is attached hereto as Exhibit A.

A primary mission of the PMAA is to educate its members on the laws that govern promotions through its annual law conferences and other educational seminars and conferences and through its legal bulletins detailing trends in legislation affecting the industry. PMAA also serves as a resource to state legislatures, state attorneys general and federal regulatory agencies in drafting appropriate and focused legislation and rules to combat deceptive advertising and marketing practices.

Since the 900 Number Rule went into effect, there has been substantial industry compliance and little enforcement activity. Due in large part to the effectiveness of the 900 Number Rule in eradicating abuses in the pay per call industry, 900 numbers today represent a viable marketing and promotional tool for many legitimate marketers of consumer products and services. The FTC, through its promulgation of effective yet balanced regulation, deserves much of the credit for this development. Many marketers today subscribe to an integrated marketing approach which involves the use of a combination of different media and marketing tools to execute a marketing plan. 900 number services can play an important role in such an integrated marketing program, due in large part to the interactive capabilities associated with its use. The PMAA thus has a keen interest in ensuring that the 900 number industry remains free of the abuses that plagued it prior to the enactment of the 900 Number Rule, but that the medium not be subject to additional burdensome regulation which might render its use unattractive to legitimate sectors of the marketing industry.

As the Commission may recall, the PMAA played a significant role in the development of the 900 Number Rule and provided the Commission with a unique industry perspective on how various contemplated proposals might affect the use of 900 number services by legitimate segments of the marketing industry. The PMAA looks forward to offering the same input and perspective in connection with this rule review proceeding.

EXECUTIVE SUMMARY

The FTC has asked for comment on a variety of issues relating to billing and collection, advertising, and possible expansion of the scope of the Rule. The PMAA's interests relate principally to those areas which would impact the use and viability of 900 number services as a promotion and marketing tool and the PMAA's comments are therefore principally focused on those issues.

The PMAA believes that the Rule has been extremely effective in curtailing unfair and deceptive pay per call practices while encouraging the growth of legitimate pay per call applications. Accordingly, the PMAA supports the continuation of the 900 Number Rule in its current basic form. In particular, the PMAA does not believe that any additional advertising regulations should be imposed nor does it believe that sweepstakes promotions should be subject to any additional regulation. The PMAA does believe, however, that certain modifications to the Rule would be beneficial to address certain industry problems, marketing practices and regulatory changes that have occurred since the implementation of the Rule.

The PMAA shares the concerns expressed by others in the industry concerning consumer abuse of the pay per call system, as evidenced by the high chargeback rates. This problem undermines the confidence of legitimate marketers in the viability of pay per call services as a marketing tool. Just as there was a need in 1994 to curtail abusive industry practices which stood in the way of the growth and maturity of the pay per call industry, it is now necessary to address the problem of consumer abuse which also threatens the willingness of legitimate marketers to embrace pay per call services as a marketing vehicle. The PMAA is sensitive to the fact, however, that this issue cannot be addressed in a manner which would undermine the important consumer protection provisions contained in the Rule. The PMAA thus supports the recommendations of the Interactive Services Council regarding billing and collection. Specifically, the PMAA recommends that the Commission (1) modify its consumer billing notice requirement under Section 308.7(n) to ensure that consumers are better informed of their responsibilities if they fail to pay 900 number charges, and (2) initiate a review of LEC refund and credit practices.

The PMAA also recommends that the Commission modify its current preamble rules to ensure that marketers are not unduly restricted in their ability to offer premium incentives such as periods of free time, in conjunction with pay per call services. The use of premium incentives as a marketing tool is of extreme importance to PMAA members since such incentives are part of the traditional arsenal of promotional tools relied upon by marketers to induce consumer trial and sampling of products and services. The PMAA believes that marketers utilizing pay per call services as a marketing vehicle should have the same flexibility to offer "free" samples as they would in any other form of traditional media. The PMAA would therefore recommend that the Commission amend the current preamble rules to clarify that if the information provider elects to offer some period of time at no cost, no additional tone or signal is required at the end of that free period.

With respect to the Commission's inquiry concerning sweepstakes promotions, the PMAA believes that the current rules have been effective in eliminating fraudulent and deceptive pay per call sweepstakes and that no further regulation in this regard is required. To the extent that some marketers may continue to engage in deceptive prize promotions utilizing 900 numbers, the PMAA does not believe that such practices are attributable to any unique aspects of 900 number service or to any deficiencies in the 900 Number Rule. The PMAA further believes that any additional regulation in this area will only serve to perpetuate the stigma previously associated with 900 number sweepstakes and continue to thwart the growth of such promotions as a legitimate marketing tool for consumer product and service companies.

With respect to the various issues raised by the Commission concerning on line services, the PMAA feels strongly that no attempts should be made to regulate on line services within the context of this rule review proceeding. On line technology is far more complex and diverse in its application than the traditional telephone and is continually evolving at a rapid pace. The PMAA does not believe that sufficient information or data about the technological capabilities and limitations of on line services has been developed to justify the imposition of regulation at this point. The PMAA believes that such regulation, if any, should be considered in the context of a separate and independent proceeding in which the issues unique to that medium can be considered and those with expertise in the area can fully participate. In particular, the PMAA does not believe that the advertising guidelines set forth in the 900 Number Rule can be practically applied to this new medium. In addition, the PMAA believes that any attempt to impose regulations on audiotext services provided over the Internet or through other on line services at this juncture would be premature as this medium is still in its infancy.

Finally, with respect to the FTC's 800 Number presubscription rules, the PMAA would encourage the Commission to revise its rules to make them consistent with the Federal Communications Commission's (FCC") existing rules.

GENERAL ISSUES

The 900 Number Rule Should Be Retained

The PMAA strongly supports the continuation of the 900 Number Rule in substantially its current form (subject to the recommendations set forth herein). Although the 900 Number Rule has resulted in some additional costs to the industry, particularly as a result of the preamble and advertising disclosure requirements, the PMAA believes that the Rule has been highly effective in eliminating abuses within the industry and restoring the integrity of this medium. On balance, therefore, the PMAA believes that the additional costs are outweighed by the overall benefit the Rule has had in restoring consumer confidence and hence marketer acceptance of this medium.

Due in large part to the stigmas which plagued the 900 number industry in its earlier days, many of PMAA's members were reluctant to embrace 900 number services as a marketing tool. PMAA's members recognize, however, that there are many unique advantages to 900 number services which can be utilized in connection with an overall marketing plan. Specifically, 900 number services afford the marketer the ability to interact more directly with the consumer and also provide marketers with an option to conduct programs on a self liquidating basis. As the problems associated with 900 number services have declined, the use of such services by legitimate segments of the industry has increased. The PMAA believes that the maintenance of strong, balanced regulation is important to the continued growth and development of 900 number services among its members. The PMAA believes that the current rule strikes the appropriate balance between providing the necessary consumer protections and not unduly burdening the industry with regulations which would hinder its use by legitimate marketers.

No Additional Advertising or Operating Regulations Should be Added to the Rule

While the PMAA supports the continuation of the Rule, it also believes that any further regulation at this point would be counterproductive. The absence of any significant enforcement activity by the FTC against 900 Number Service providers is the best evidence of the fact that the Rule has been highly effective in preventing deception and other industry abuses.

The PMAA believes that the current advertising and operating requirements appropriately ensure that all material information is properly disclosed to the consumer so that the consumer can make an informed purchase decision. The Commission's decision in 1994 to avoid imposing specific type size requirements on the advertising disclosures appears to have been a prudent one. The current rules afford the advertiser and marketer some flexibility in making these disclosures without compromising the quality and effectiveness of the disclosure. Similarly, the current preamble requirements ensure that the consumer knows that he or she has reached the intended service and has not misdialed, reiterates the cost of the call and informs the caller as to precisely what he or she must do to avoid incurring charges. Any additional requirements would necessarily result in additional costs to the industry, and frankly, the PMAA cannot think of any additional information which would be beneficial to include in the preamble announcement.

ADVERTISING

The Commission Should Not Adopt Specific Advertising Disclosure Requirements To Regulate On line and Internet Advertising of 900 Numbers

The 900 Number Rule currently requires that certain information, including the "cost of the call," be disclosed "clearly and conspicuously" in all advertising. The Commission has now asked whether it should clarify further what is meant by "clear and conspicuous" in the context of on line and Internet advertising, and further, whether specific advertising disclosure requirements should be adopted for on line and Internet advertising.

The PMAA strongly urges the Commission to refrain from imposing any additional advertising disclosure requirements at this time on on line and Internet advertising. As the Commission is well aware, the Internet and on line environment is very different from other forms of traditional media and raises a whole host of unique issues. The PMAA believes it would be both dangerous and premature to attempt to impose specific regulations on this medium before there has been an opportunity to fully consider and explore all of the unique aspects of this new and constantly evolving medium. Moreover, because significant differences exist between on line and Internet technology and the broadcast and print media, many of the specific type size and format regulations contained in the 900 Number Rule would simply be unworkable when applied to Internet and on line advertising.

For example, an image that appears as one size on a Web site maintenance computer monitor may appear as a different size on an end user's screen due to the (1) the size of the end user's monitor, (2) the software used, (3) variable set ups, and a whole host of other factors. Framing techniques and hyperlinks may also affect the positioning and placement of materials on the end user's screen. Further, as information from a Web site is downloaded to an end user's computer, a 900 number may be displayed while required information such as the cost of the call, may be delayed due to a slow computer, slow phone line or other glitch in the computer operating system or Internet service provider. Similarly, because images appear on the screen in a scrolling fashion while all information is received, the scrolling could result in a 900 number being displayed with the cost of the call and other important information being delayed for seconds or minutes.

On line and Internet advertising is also distinct from any other form of traditional media, in that it is ultimately the end user, rather than the information provider, who determines the flow of the information. Hypertext links also provide a unique opportunity for handling disclosure of important information.

Similarly, the Commission has asked whether audio and non audio messages promoting 900 number services received on computers should be treated the same as telephone solicitations and accordingly be subject to Section 308.3(h). This proposal again highlights the danger in attempting to apply regulations which were adopted for one type of media to an entirely different and distinct media. Section 308.3(h) requires that telephone solicitations promoting pay per call services disclose the cost of the call in a "slow and deliberate manner and in a reasonably understandable volume." While on its face this provision seems rather benign, unlike the telephone, the volume and speed of audio messages on the computer can be controlled by the user. Thus, the information provider may not necessarily be able to control the speed and volume of the audio messages ultimately received by the end users.

These are but a few examples of the many technological issues that need to be considered before any specific advertising regulations are adopted for on line and Internet advertising. As the Commission may recall, the specific type size and placement requirements contained in the current 900 Number Rule were developed only after careful consideration of empirical data and other input presented by the industry as to the effectiveness and feasibility of various type size and format requirements. The Commission should proceed at least with equal if not greater caution and prudence before attempting to impose any specific advertising regulations on this developing media.

Indeed, the question of what constitutes "clear and conspicuous" in terms of on line and Internet advertising has ramifications well beyond the advertising of 900 number services. A determination of this issue will have an impact on all on line and Internet advertising , and accordingly should not be made within the confines of this limited rule review proceeding, but, if at all, in a separate independent proceeding in which the focus can be wholly on the unique aspects of this medium and in which those with the requisite expertise can participate. To the extent that any information providers are engaged in fraudulent or deceptive advertising of 900 number services on the Internet, the FTC still has the authority to prosecute such activity under Section 5 of the Federal Trade Commission Act.

The Current Cost Disclosure Requirement Are Adequate

The Commission has requested comment on whether the current cost disclosure requirements are adequate for disclosing the cost to consumers prior to making a call to a 900 number service.

The PMAA believes that the current cost disclosures are adequate to achieve the intended purpose. As the Commission may recall, during the initial rulemaking proceeding, the PMAA strongly advocated against a specific type size requirement and urged the FTC to adopt a performance standard consistent with more recent FTC policy. The PMAA believes that the current type size requirement of one-half the size of the pay per call number has been effective in ensuring that this disclosure is clearly and conspicuously communicated. Unlike a specific type size requirement, this approach allows the marketers some creative flexibility in designing the advertising yet ensures that the cost disclosure is prominent relative to the size of the 900 number. The additional requirement that the cost be disclosed immediately adjacent to the 900 number further ensures the prominence of the disclosure.

The PMAA is unaware of any evidence to suggest that consumers placing calls to 900 number services today are unaware of the cost. Moreover, the industry's desire to avoid high chargeback rates constitutes a built in incentive to the industry to avoid inadequate disclosure of the cost of the call.

The Required Disclosures For Services that Advertise Sweepstakes are Adequate

Sweepstakes promotions constitute an important marketing tool for many of PMAA's members. Moreover, it is also part of PMAA's mission to ensure that there is a healthy regulatory environment which does not unduly restrict the use of sweepstakes in the marketplace through any medium. Accordingly, this issue remains of great concern and interest to the PMAA.

As with the other disclosure requirements set forth in the Rule, the PMAA believes that the sweepstakes disclosure requirements are working. Since the implementation of the Rule, there has been a marked decline in the number of information providers conducting fraudulent or deceptive pay per call programs. Indeed, many of the "fly by night" purveyors of fraudulent pay per call promotions were simply unable to operate within the confines of the regulatory framework established by TDDRA and the 900 Number Rule and have simply gone out of business.

The PMAA believes that the Rule's sweepstakes disclosure requirements adequately provide consumers with all material information about the promotion. In addition to complying with the general advertising requirements applicable to all pay per call applications, advertisements for pay per call sweepstakes must disclose the odds of winning as well as the fact that no telephone call is necessary and the existence of the free alternate method of entry.

As the PMAA pointed out when the 900 Rule was initially being developed, 900 number sweepstakes are functionally no different from most other types of sweepstakes conducted in the marketplace in which persons can enter either by making a purchase or payment or by an alternate free method of entry. The only aspect of a 900 number sweepstakes which is somewhat unique is the fact that the 900 number by its very nature always results in a cost to the consumer and accordingly always requires that some other free alternative method of entry be provided. The current 900 number rule addresses this issue by specifying specific requirements for disclosure of the alternate method of entry to ensure that this information is adequately disclosed to the consumer. The PMAA would oppose the imposition of any additional regulations of 900 number sweepstakes as excessive and unwarranted.

To the extent that any abusive or deceptive prize promotions involving the use of 900 numbers remain in the marketplace, the PMAA would respectfully submit that they represent a small minority of marketers and are not representative of the manner in which legitimate marketers conduct such prize promotions.

The PMAA would also remind the Commission that the prize promotion category is already subject to a myriad of federal and state regulations. Specifically, in addition to the federal and state lottery laws governing prize promotions, there are over thirty one states{1} with specific statutes governing games of chance. These statutes impose various types of mandatory disclosures depending upon the nature of the promotion, the types of representations being made and the medium in which the promotion is advertised. While there is a wide divergence among the various state laws, in general, they require disclosure of key elements of the promotion such as the alternate free method of entry, deadline dates, sponsor, odds of winning and retail value of prizes. Virtually all legitimate marketers run a unified promotion that complies with the most comprehensive set of regulations on a nationwide basis. Thus, it is not as though there is a regulatory gap which the Commission must fill. Given the safety net of existing regulations, and the effectiveness of the current rule in drastically reducing the incidence of fraudulent 900 number sweepstakes, there is simply no basis for additional regulations at this juncture. The PMAA is also concerned that the imposition of any additional regulation on 900 number sweepstakes at this point would send a signal to the industry that the Commission continues to regard such promotions as inherently flawed, thus further deterring legitimate marketers from utilizing a pay per call application in connection with a sweepstakes promotion.

OPERATION AND STANDARDS

The Commission Should Amend the Preamble Rule to Clarify That Information Services Offering Free Time to Callers Do Not Require A Signal or Tone Signifying the End of the Free Time Period

The PMAA urges the Commission to reconsider its position that information service programs offering free time to callers must include a signal or tone signifying the end of the free period.

"Free offers," sampling programs and similar premium incentive offers, are common promotional tools widely used by marketers to stimulate consumer trial and purchase of the sponsor's products and services. The PMAA is thus concerned that the opportunity to utilize such tools in the context of pay per call programs not be unduly restricted or burdened.

Last year, the Commission staff issued an opinion stating that if an information provider elects to offer a certain period of time at no cost to the consumer, there must be a signal or tone signifying the end of that free time period. The PMAA is concerned that the Commission's position is at odds with widely accepted marketing practices in the non 900 number environment and goes well beyond the intended purpose of the preamble provisions of the 900 Number Rule.

Section 308.5 of the 900 Number Rule provides that the provider of pay per call services must include in each pay per call message an introductory free message that identifies the name of the provider, specifies the cost of the service and informs the caller that charges for the call begin and that to avoid charges the call must be terminated three seconds after a clearly discernible signal or tone following the end of the preamble.

In reaching its opinion, the Commission staff appeared to take a very literal approach to Section 308.5. Specifically, the Staff concluded that because Section 308.5 requires a signal or tone at the end of the free introductory message, there must be an additional signal or tone at the end of any "free" period of time, irrespective of the balance of the free period. The PMAA respectfully disagrees with this interpretation.

In analyzing this issue, it is important to consider the stated purpose of the preamble. The purpose of the preamble is to ensure that certain important information is disclosed to the consumer and that the consumer is afforded the opportunity to hang up without being charged, if, after hearing the information disclosed, the consumer does not wish to participate in the information service program. This purpose is not obviated or compromised by the offer of a certain period of time at a zero cost. Specifically, the offer of free time does not prevent or in any way interfere with the consumer's ability to hang up without being charged after the preamble disclosures have been made. If the consumer is not interested in the service after hearing the preamble disclosure, he or she is free to hang up at that time. This is all that Section 308.5 of the Rule requires. This section has no application to any portion of the program that occurs after the free introductory message. More specifically, this provision does not require that an information provider who voluntarily elects for marketing purposes to reduce the cost of the service to "zero" for some specified period of time, keep track of that time for the consumer. Once the consumer elects to stay on the line beyond the statutorily mandated preamble, the consumer is on his or her own as the consumer has in effect indicated that he or she wants to participate in the program on the terms offered by the information provider. Those terms are, in this case, that a certain amount of time will be billed at a zero rate and that the other minutes will be billed at a higher rate. It is important to remember that, unlike the preamble period which is statutorily regulated, the "free" period of time that kicks in after the preamble has ended is a part of the information service itself, and the information provider is free to set the price for that service at whatever level he or she wishes. The preamble requirements of TDDRA and of the 900 Number Rule are no longer applicable because the consumer has made the decision to stay on the line and purchase the service on the sponsor's terms. If it is the consumer's intention to use only the free time and not continue into the paid segment, then the consumer needs to make sure that he or she keeps track of the time. If the consumer wants to be absolutely certain that he or she does not incur any charges for the call, then he or she should simply hang up after the preamble.

The PMAA would further submit that even a literal reading of Section 308.5(3) supports its position. Specifically, this section of the Rule refers to a "signal or tone indicating the end of the preamble." The "preamble" in turn is identified in Section 308.5(a) as "an introductory disclosure message." The "free" period of time offered by the information provider is clearly not the disclosure message referenced in Section 308.5(a); rather it is part of the information service itself. Thus, there is nothing in Section 308.5(a) (3) to support the proposition that a signal or tone is required at the end of any period other than the free introductory preamble message containing the mandated disclosures.

The PMAA is particularly interested in this issue because the free period of time is in essence analogous to a premium routinely offered by providers of consumer products and services as a means of incentivizing consumers to purchase or sample the product. It is quite common today for on line service providers or long distance carriers to offer consumers a certain amount of "free" on line time or long distance service to entice consumers to switch , to sample the product or service. In all instances, there is an expectation that the consumer will become a paying customer, yet the free time is offered as an added inducement. The analogy to the on line and long distance services is, we would submit, particularly compelling because in those instances the consumer must keep track of their own time if they simply want to avail themselves of the free offer. While the clear purpose of the preamble provisions was to ensure that certain important information be disclosed to the consumer at no cost, there is nothing in the legislative history of TDDRA or in the statement of Basis and Purpose to the 900 Number Rule which would suggest an intention to restrict information providers in the offering of free minutes of service.

The strength of the PMAA's position is underscored by the fact that the Commission staff itself acknowledged the fact that if instead of "free" time, the information provider offered a similar amount of time for one cent or some similar nominal amount, the information provider would be under no obligation to include a signal or tone at the end of this period. Indeed, the 900 Number Rule itself provides for the offering of variable rate calls, and never suggests that the information provider must keep track for the consumer of when the rates change. The PMAA would respectfully submit that it is within this same framework that an information service program offering some period of free time must be viewed. Specifically, the PMAA proposes that free time offers be treated the same as any other variable rate call. More specifically, information services programs offering some period of free time should be viewed as variable rate calls with the rate for the free time being equivalent to a charge of $0.00 per minute.

Accordingly, the PMAA would propose that Section 308.5(a)(2)(iii) would be amended to read as follows:

"If the call is billed on a variable rate basis, the preamble shall state in a accordance with §§308.5(a)(2)(i) and (ii) the cost of the initial portion of the call, any minimum charges, and the range of rates that may be charged depending on the options chosen by the caller. For purposes of this provision, if any portion of the call is billed at a rate of zero cents, the preamble may disclose the cost of said portion either as "free" or as "zero."

Section 308.5(3) would be amended to read as follows:

"Informs the caller that charges for the call begin and that to avoid charges, the call must be terminated three seconds after a clearly discernible signal or tone indicating the end of the preamble. For purposes of this provision, charges billed at the rate of zero cents per call or per minute shall be considered charges for the call.'"

In an attempt to address the concerns the Commission might have regarding proper use of the term "free," the PMAA would support the addition of a new Section 308.3(j) to the advertising section as follows:

"(j) Use of the term "free"

The provider of any pay per call services that advertises the pay per call service or any portion thereof as free shall not use such term in any manner that is misleading or deceptive."

The FTC Should Increase the Preamble Nominal Cost Threshold

The 900 Number rule currently exempts from the preamble requirement calls whose total cost is less than $2.00. The PMAA supports the recommendation of the Interactive Services Association that the threshold be increased to $3.00 in light of the data presented by the ISA in its comments.

The Parental Consent Disclaimer Should Only Be Required On Programs Directed to Persons Under the Age of Eighteen

The PMAA believes that the current requirement that a parental consent disclaimer be included on preambles for all programs be modified to provide that the disclaimer be included only on programs directed to persons under the age of 18.

The PMAA is aware that the FTC staff has taken the position that TDDRA requires that all preamble messages include a parental consent disclaimer. The PMAA believes that such a message may be confusing on programs which are directed to adults only. Specifically, if a program is directed to adults only, yet then contains a disclaimer stating that persons under 18 must have parental permission, minors may mistakenly conclude that they can participate in the program provided they have parental consent.

Accordingly, the PMAA recommends that the Commission recommend to Congress that TDDRA be modified to require the parental consent warning only in programs directed to persons under the age of 18.

BILLING AND COLLECTION

A.The Consumer Billing Notice Requirement of The Rule Should be Modified

While the 900 Number Rule has been highly effective in combatting the abusive practices that deterred many legitimate marketers from conducting pay per call programs, one unanticipated result of the 900 Number Rule which continue to threaten the viability of the industry has been the widespread incidence of consumers refusing to pay for legitimate 900 number charges. Such abuse has resulted in an extraordinary level of chargebacks to legitimate service providers.

The PMAA is aware of the results of the Task Force Study conducted by the Interactive Services Association which revealed that 900 number service providers lost nearly $180 million in billed but unpaid telephone charges representing approximately 18% of total end user billings.

The PMAA believes that it is important that this problem be addressed and that the chargeback level be reduced if legitimate marketers are to have continued confidence in the medium. If the problem remains unresolved, many legitimate marketers will simply choose to utilize other vehicles for their marketing programs. This will naturally impair the development of legitimate pay per call applications.

The PMAA believes that the billing portions of the existing Rule should be modified to combat this abuse. The PMAA fully supports the recommendations set forth by the ISA in its comments concerning Billing and Collection Reform. In particular, the PMAA supports the recommendation of the ISA that Section 308.7(n) be amended to require that billing notices adequately inform consumers about their responsibility to pay or the consequences of failing to pay 900 number charges. The PMAA further supports the specific language proposed by the ISA for Section 308.7(n).

To the extent that the ISA believes that the chargeback problems can be reduced by initiating a review of LEC Billing and Collection practices, the PMAA would likewise support this recommendation. Some PMAA members have reported experiencing the very problem alluded to by the ISA in its comments, specifically the willingness and readiness of LECs to grant billing adjustments without conducting any investigation. The PMAA believes that all of these measures are necessary to restore industry confidence in the viability of this medium and thereby foster the continued growth of legitimate pay per call applications.

SCOPE OF DEFINITION OF PAY PER CALL SERVICES

A.The Commission Should Not Impose Regulations on Internet Services Offered Over the Internet or Through On Line Services

The Commission has asked for comment on whether audiotext services being offered over the Internet or on line services should be subject to the 900 Number Rule. For the same policy reasons discussed above, the PMAA does not believe that any regulation of on line or Internet services should be done within the context of this rulemaking proceeding.

While the PMAA appreciates the Commission's concerns about possible abuses associated with on line audiotext services, particularly potential abuse associated with "international modem " service, the PMAA continues to believe that issues relating to on line and Internet applications should be addressed in a separate proceeding in which all of the unique technological and other aspects of this medium can be considered and in which those with the special expertise in this area can participate. The differences in technology and consumer usage of the telephone and the computer are simply too great to justify simply applying the pay per call rules in a wholesale fashion to an entirely different medium. Moreover, to the extent that any regulations governing on line and Internet service are adopted they will have global implications. The PMAA would thus urge the Commission to refrain from hastily imposing regulation at this time in the absence of all of the necessary data and input upon which such regulation, if any, should be based. Since a large segment of PMAA members operate Web sites, the PMAA would be happy to work with the Commission in the future in developing appropriate guidelines

DEFINITIONS/800 PRESUBSCRIPTION AGREEMENTS

The FTC has asked whether its definition of a "presubscription agreement" should be modified to harmonize with changes the FCC has made pursuant to the 1996 Act.{2} The PMAA believes that the FCC rules governing 800 numbers should be revised to comport with the FCC's rules which state that callers cannot be charged for information conveyed during a call to an 800 or other telephone number advertised or widely understood to be toll-free unless: (i) the calling party has a "written agreement"; or (ii) the calling party is charged by means of a credit, debit, charge or calling card and certain disclosures are made during a preamble message. The new FCC rules also provide that written agreements must include a unique personal identification number to obtain access to the information service.

The existing FTC rules are inconsistent with the newly adopted FCC requirements. For example, the FTC does not require a written agreement, but does require the caller's "affirmative consent" to establish a valid presubscription agreement.{3} Although Congress only required the FCC to modify its rules governing 800 number services, nothing in the 1996 Act precludes the FTC from harmonizing its 800 number rules with those of the FCC. Indeed it makes little sense for the two agencies to have inconsistent rules governing the same service.

CONCLUSION

The comments expressed above reflect the concerns and experiences of PMAA's membership and leadership. Although the PMAA has attempted to present its comments in the most comprehensive manner possible, the undersigned would be pleased to respond to any questions the FTC staff may have regarding the forgoing during the June Conference-Workshop, as well as any additional information the PMAA can offer.

Respectfully Submitted,

Ronald S. Goldbrenner, Esq.
General Counsel
PROMOTION MARKETING
ASSOCIATION OF AMERICA, INC.
257 Park Avenue South
New York, N.Y. 10010-7304
212/ 420-1100
Linda A. Goldstein, Esq.
Marc S. Roth, Esq.
HALL DICKLER KENT FRIEDMAN AND WOOD
909 Third Ave.
New York, N.Y. 10022
212/339/5465

Dated: May 12, 1997

{1} Arkansas, California, Colorado, Florida, Georgia, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

{2} Question 12(d).

{3} FTC Report at 17.