Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016 #33

Submission Number:
33
Organization:
Promotion Marketing Association
Initiative Name:
Pay-Per-Call Rule Review: Response to Notice of Proposed Rulemaking: 16 C.F.R. Part 308, FTC File No. R611016
Matter Number:

R611016

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

Pay-Per-Call Rule
16 C.F.R. Part 308
And Request for Comment


FTC File No. R611016

COMMENTS OF THE
PROMOTION MARKETING ASSOCIATION, INC.

Ronald S. Goldbrenner, Esq.
General Counsel

Linda A.Goldstein, Esq.
Chairman Emeritus

PROMOTION MARKETING ASSOCIATION, INC.
257 Park Avenue South
New York, N.Y. 10010-7304
(212) 420-1100

 

Edwin N. Lavergne
Jay S. Newman
Shook, Hardy and Bacon, LLP
600 14th Street, N.W., Suite 800
Washington, D.C. 20005-2004
(202) 783-8400
Its Attorneys

March 10, 1999

TABLE OF CONTENTS

I. INTRODUCTION

II. SUMMARY

III. ONLINE ADVERTISING OF 900 NUMBERS

IV. TELEPHONE-BILLED PURCHASES

V. BILLING INCREMENTS .

VI. INDUSTRY DATABASE.

VII. FREE TIME.

VIII. PRESUBSCRIPTION AGREEMENTS AND PINS

IX. CONCLUSION.

The Promotion Marketing Association, Inc. ("PMA"), through its attorneys, hereby submits these comments in response to the Notice of Proposed Rulemaking ("NPRM") addressing the Commission's Trade Regulation Rule ("900 Number Rule") issued pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"), 16 C.F.R. § 308. See 63 Fed. Reg. 58524 (released October 30, 1998). Through a separate notice delivered to the Commission today, the PMA is requesting an opportunity to participate in the related public workshop to be held on May 20-21, 1999.

I. INTRODUCTION

The PMA (formerly known as the Promotion Marketing Association of America, Inc.) has been the leading non-profit association representing the promotion industry since 1911. Its membership consists of more than 700 companies representing diverse aspects of the industry, including Fortune 500 consumer goods and services companies, advertising and promotion agencies, and university faculty who educate about promotional activities as part of a business curriculum. The primary objectives of the PMA are to educate its members on the laws that govern promotions and to act 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.

For many years, 900 telephone numbers have been used as a marketing tool by many legitimate marketers of consumer products and services. Indeed, many marketers use 900 number services in conjunction with other media tools as part of their overall marketing strategy. Thus, the PMA has a significant interest in ensuring that the 900 number industry remains free of abuses without subjecting marketers to additional burdensome regulation which might render the use of pay-per-call services unattractive to legitimate sectors of the marketing industry.

The PMA has played a significant role in the development of the 900 Number Rule. In 1993, the PMA submitted comments and participated in the FTC's workshop regarding the original 900 Number Rule. In 1997, the PMA submitted comments in response to the FTC's 900 Number Rule review which is the precursor to the NPRM. In each case, the PMA provided the Commission with a unique industry perspective on the impact of the proposed rules on legitimate segments of the marketing industry. The PMA looks forward to offering the Commission the same input and perspective in connection with this proceeding.

II. SUMMARY

The PMA supports the Commission's efforts to curb the unfair and deceptive practices engaged in by some pay-per-call businesses. However, the PMA is concerned that some of the Commission's proposals, if implemented, would impose unnecessary costs on marketing and promotion businesses with no corresponding benefit to consumers. The PMA urges the FTC to keep 900 number services affordable for marketing and promotion companies and to avoid adopting regulations which unnecessarily inhibit the use and growth of 900 number services. Set forth below is a summary of the PMA's concerns with the NPRM.

Online Advertising of 900 Numbers. At this time, the PMA opposes the Commission's proposal to adopt Internet and online advertising standards for 900 number services. While the PMA supports the FTC's efforts to ensure that Internet and online advertisements clearly and conspicuously disclose the material terms and conditions of using a 900 number service, the PMA believes that the standards for these advertisements should be governed by the outcome of the FTC's pending electronic advertising inquiry, and not the present proceeding.

Telephone-Billed Purchases. The PMA asks the Commission to make clear the circumstances in which a taped authorization satisfies the FTC's proposed "express authorization" requirement applicable to telephone-billed purchases. The PMA proposes specific text to clarify this requirement.

Billing Increments. The PMA opposes the Commission's proposed change to Section 308.10(b) which would prohibit pay-per-call service providers from billing in one minute increments. Among other things, the proposed rule change would impose unnecessary costs on service providers, and ultimately on consumers. The PMA urges the Commission to withdraw this proposal.

Industry Database. Many consumers are abusing the existing 900 Number Rule by making repeated calls to pay-per-call services with no intention of paying for such calls. This, in turn, results in high chargebacks which makes 900 number services less attractive as a marketing tool. To address this problem, the Commission should clarify that industry efforts to establish a database to combat escalating chargebacks would not violate the 900 Number Rule.

Free Time. The PMA continues to oppose the FTC's proposal that, if any portion of a pay-per-call service is offered for free, the vendor must (1) provide a clearly discernable signal indicating the end of the free time and (2) inform the caller that the caller must terminate the call within the three seconds of the signal to avoid the charge. The PMA is concerned that the Commission's position is inconsistent with widely accepted marketing practices in the non-900 number context which, in turn, will inhibit the use of 900 number services as a marketing tool.

Presubscription Agreements and PINs. The PMA believes that consumers should not incur liability for purchases of audiotext services until after they have received the appropriate disclosures. However, the PMA believes that (1) the Commission's proposals involving presubscription agreements and personal identification numbers ("PINs") are too burdensome for consumers and service providers; (2) the service provider liability for unauthorized use of PINs should be narrowed; and (3) the Commission should clarify that PINs need only be unique to the service provider. The PMA asks the Commission to modify its proposals consistent with the PMA's recommendations.

III. ONLINE ADVERTISING OF 900 NUMBERS

The Commission proposes to require that in any advertising medium not specifically addressed by the 900 Number Rule (e.g., the Internet), all advertising disclosures must be clear and conspicuous and not avoidable by consumers acting reasonably. See Proposed Section 308.3(g). This proposal would, among other things, require that sweepstakes disclosures for pay-per-call sweepstakes be given before the consumer could receive the telephone number of the pay-per-call service. While the PMA supports the FTC's efforts to ensure that Internet and online advertisements clearly and conspicuously disclose the material terms and conditions of using a 900 number service, the PMA continues to believe that the FTC should not attempt to regulate online and Internet advertising within the context of this proceeding. Rather, regulation of Internet and online advertising should be governed by the outcome of the FTC's pending electronic advertising inquiry. See 63 FR 24996 (May 6, 1998).

The PMA submitted comments in the electronic advertising proceeding expressing concern about the Commission's general interpretation of "unavoidability." Specifically, the PMA urged the Commission not to interpret "unavoidability" more broadly than requiring that a consumer be given the opportunity to view the required disclosures before taking on any financial commitment. The PMA also opposed any definition of the term "unavoidability" that inhibits the ability of advertisers or marketers to utilize hypertext links and other similar online techniques to provide these disclosures. Given that any decision in this proceeding on the issue of unavoidability must be consistent with the Commission's decision in the broader electronic advertising inquiry, it seems only logical for the Commission to address this issue outside of this proceeding.

IV. TELEPHONE-BILLED PURCHASES

The commission should make clear the circumstances in which a taped authorization satisfies the FTC's proposed "express authorization" requirement applicable to telephone-billed purchases. The proposal would require service providers to possess "express authorization" by the billed consumer before billing for the calls. See Proposed Section 308.17, 63 Fed. Reg. at 58564. The proposal is unclear as to how businesses would get this "express authorization" absent a signed contract and what constitutes dispositive evidence of express authorization. To remedy this deficiency, the PMA proposes adding the following language in a footnote to the proposal:

Service providers shall be entitled to a presumption that they have obtained express authorization of the person to be billed for the purchase by obtaining a tape-recorded (or digital recorded) verification of the consumer being informed of the material terms and conditions of the agreement and agreeing to make the purchase on those terms and conditions, and by confirming that they are qualified to authorize billing to the telephone number to which the purchase will be billed.

Thus, where service providers obtain tape-recorded verification proving that consumers received and agreed to all material terms and conditions of the purchase, and where the consumer further confirms that he or she is qualified to authorize billing to the telephone number to be billed, this tape recording should be dispositive proof of "express authorization," as required by proposed Section 308.17

V. BILLING INCREMENTS

The Commission has concluded that because billing for 900 number transport in fractions of a minute is now possible, service providers cannot continue to use reasonable business discretion in deciding whether to continue billing in one minute increments. See 63 Fed. Reg. at 58546. The PMA strongly disagrees with the Commission's conclusion. Moreover, the PMA wholeheartedly supports the arguments raised by the Billing Reform Task Force ("BRTF") in its comments in this proceeding that the Commission's proposal ignores the plain language of TDDRA, contradicts the statute's legislative history, and would impose unnecessary obligations on service providers. The PMA is extremely concerned that the imposition of this unnecessary and intrusive requirement will further inhibit legitimate marketers from using 900 number services as part of their marketing campaigns.

The PMA concurs with the BRTF's view that the Commission mistakenly reads Section 5711(a)(2)(D), which dictates the time when charges must stop being assessed, as a limitation on the permissible billing unit that can be used to bill for pay-per-call services. As a result, the Commission misconstrues the legitimate practice of billing on a per minute basis with the deceptive practice of charging for extra complete minutes. Congress enacted Section 5711(a)(2)(D) to curb abuses by service providers that continued to assess charges minutes after the caller had hung up. See, e.g., S. Conf. Rep. No. 190, 102d Cong., at 19 (1991). One minute billing is an acceptable, non-deceptive practice in the telecommunications industry as evidenced by the fact that long-distance and pay-per-call services have been billed in one minute increments for years. One minute billing is also consistent with consumer expectations, which have been shaped by the prevalence of one minute billing in the telecommunications industry. Consumers are fully accustomed to being billed in one minute units from their experience with telecommunications and related services.

Mandating fractional billing is tantamount to telling companies how to package their products and how much they may charge for those products. The PMA is not aware of any other instance in which unit packaging is similarly mandated. The Commission should let market forces determine the unit of time in which pay-per-call services are billed. Consumers will be adequately protected as long as they understand the unit of time for which charges accrue, and can choose among providers in a competitive market.

VI. INDUSTRY DATABASE

The pay-per-call industry is plagued by high chargebacks for pay-per-call services. See, e.g., Comments of the Interactive Service Association ("ISA") in FTC File No. R611016, filed May 12, 1997, at 5. Some industry members have proposed the creation of an industry-wide database to block chronic abusers of pay-per-call services as a means to alleviate this problem. Unfortunately, the NPRM does not discuss this issue at all and industry members are unsure whether such a database can be lawfully created.

The PMA asks the Commission to confirm the lawfulness of establishing an industry database that will enable service providers to protect themselves against theft by blocking access to persons who repeatedly call, but refuse to pay for, telephone-billed purchases. The PMA supports the BRTF's request that the Commission amend Section 308.20(l) to clarify that the rule does not preclude service providers from utilizing information maintained in an industry database to block a consumer's access to pay-per-call services on the basis of information which shows that the consumer has repeatedly requested credits for legitimate charges.

VII. FREE TIME

The PMA previously asked the FTC to 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. See Comments of the PMA in FTC File No. R611016, filed May 12, 1997, at 5. With only limited discussion in the NPRM, the FTC proposes to require that if any portion of a telephone call to a pay-per-call service is free, the service provider must provide a clearly discernible signal or tone indicating the end of the free time, and must inform the caller that to avoid charges, the call must be terminated within three (3) seconds of such signal or tone. The PMA continues to oppose this proposal. The PMA is concerned that the Commission's position is inconsistent with widely accepted marketing practices in the non-900 number context which, in turn, will inhibit the use of 900 number services as a marketing tool. The PMA asks the Commission to reconsider this issue.

VIII. PRESUBSCRIPTION AGREEMENTS AND PINS

The PMA believes that consumers should not incur liability for purchases of audiotext services until after they have received appropriate disclosures. However, the PMA shares the concerns expressed by the Teleservices Industry Association (" TSIA") in its comments in this proceeding. Specifically, the PMA believes that (1) the Commission's proposals involving presubscription agreements and PINs are too burdensome for consumers and service providers; (2) the service provider liability for unauthorized use of PINs should be narrowed; and (3) the Commission should clarify that PINs need only be unique to the service provider. The PMA supports the recommendations of the Teleservices Industry Association on each of these issues and asks the Commission to reconsider its proposals accordingly.

IX. CONCLUSION

For the foregoing reasons, the PMA respectfully requests that the Commission revise its recommended changes to the 900 Number Rule to reflect the concerns raised in these comments.

Respectfully submitted,

PROMOTION MARKETING ASSOCIATION, INC.

By: ____________________________________
Edwin N. Lavergne
Jay S. Newman
Shook, Hardy and Bacon, LLP
600 14th Street, N.W., Suite 800
Washington, D.C. 20005-2004
(202) 783-8400

Its Attorneys

Ronald S. Goldbrenner, Esq.
General Counsel

Linda A. Goldstein, Esq.
Chairman Emeritus
PROMOTION MARKETING ASSOCIATION, Inc.
257 Park Avenue South
New York, NY 10010-7304
(212) 420-1100

Dated: March 10, 1999