FEDERAL TRADE COMMISSION
Washington, D.C. 20580
900-Number Rule Review - Comment
FTC File No. R611016
COMMENTS OF THE DIRECT MARKETING ASSOCIATION
I. INTRODUCTION AND SUMMARY
The Direct Marketing Association, Inc., ("DMA") supports the Commission's continued efforts to combat fraud and deceptive practices in connection with pay-per-call telephone services, but has a specific concern about any proposal to expand the definition of "pay-per-call" services. The DMA is the leading trade organization representing direct marketers, comprised of a broad coalition of over 3,500 domestic and international corporations and businesses. Our members collectively utilize virtually every form of direct marketing technique, including solicitations sent to consumers through the mail, inbound and outbound telephone marketing, and revolutionary new computer technologies.
Preservation of the integrity of telephone service as a direct marketing vehicle is absolutely vital to the success of DMA members' businesses. The DMA, therefore, agrees with the goals underlying the Federal Trade Commission's (FTC) Request for Comment, and the Federal Communications Commission's (FCC) proposed rule modifications, both of which are generally designed to eliminate consumer confusion between toll-free calls and those for which there is a per-call or per-time interval charge. And, the DMA has actively participated in the pay-per-call rulemakings conducted by the FTC and the FCC.
Both agencies, however, should explicitly clarify that neither the current rules, nor any modifications, will apply to calls that are free to consumers. The pay-per-call rules must remain flexible enough to allow for arrangements between information providers (IPs) and common carriers that benefit all parties, including consumers -- truly free services that are valued by consumers and that do not create the possibility of confusion or fraud.
II. THE PAY-PER-CALL RULES MUST PERMIT LEGITIMATE BUSINESS ARRANGEMENTS BETWEEN INFORMATION PROVIDERS AND CARRIERS
In the Telecommunications Act of 1996, Congress removed the "tariffed services" exemption from the pay-per-call regulations(1)/ to prevent IPs from evading those rules simply by filing tariffs that purport to govern their provision of information services. The FTC's Request for Comment, and the FCC's proposed new rules, however, indicate that both agencies remain concerned that some unscrupulous IPs may, for example, continue to receive commissions or "kick-backs" from carriers on calls for which the carrier imposes a high tariffed rate, with the result that consumers are charged for information which has been misleadingly characterized as "free." To address this possibility, the FCC tentatively concluded that "any form of remuneration" from a carrier to an IP, or "any reciprocal arrangement" between them, would constitute per se evidence that the amount charged for the call exceeds the "charge for transmission of the call" and, therefore, subject the service to the FCC's pay-per-call rules.
It is these arrangements, in which there is a "hidden charge," or in which consumers are led to believe that the information they will receive is "free" when that is not the case, that diminish the integrity and value of telephone service as a direct marketing tool. Thus, the agencies' concerns may be well founded. The FCC's proposed solution is not. And neither agency should try to alleviate its concerns by interfering with the provision of non-deceptive, free information- service calls that benefit consumers and businesses alike.
First, the FTC must make it unmistakably clear that services for which the consumer does not pay for either the call or the information are not subject to the rule. That is, where toll-free numbers are used for their traditional purpose of providing free information or for order-taking, the pay-per-call rules are categorically inapplicable. When there is no charge for the call or for the information imparted to the consumer as a result of the call, the fact that there may be "remuneration" from the carrier to the IP, or some form of "reciprocal arrangement" between them, is utterly irrelevant. The FTC must make absolutely certain that its rule does not become a vehicle for bringing traditional toll-free services within the ambit of the pay-per-call regulations.
Second, even in cases in which consumers do pay a charge for transmission of the call, this should be permitted where the compensation, or even a compensation or reciprocal arrangement between an IP and a carrier, are wholly unrelated to the provision of an information service. For example, an IP might use the number (202) 123-4567 to provide stock quotations or to provide information about products or services it sells. Calls to such a service may result in a toll charge to callers. At the same time, the IP may also utilize an 800 number, for unrelated purposes, and for which it receives a carrier discount based on call volume. Similarly, IPs may enjoy reduced rates for carrier services pursuant to barter arrangements, in exchange for advertising, endorsements, or other valuable IP services. In no event should these arrangements effectively force the IP to convert its information line to a 900-number line. These mutually beneficial agreements, based on the parties' sound judgment about their respective business needs and resources, have nothing at all to do with the IPs' provision of information services and do not cause confusion or harm to consumers.
Despite Congress's decision to remove the tariffed service exception, the FTC must not adopt standards that would render services for which the consumer pays no more than the normal toll charge subject to the pay-per-call rules. This would plainly conflict with the express statutory definition of a pay-per-call service.(2)
Beyond this, as even the FCC recognized, there are some truly free information services that callers access by making traditional toll call. As long as a call to this type of information service does not result in a charge over and above the normal toll fee, there is utterly no possibility of consumer confusion and no justification for subjecting these calls to the pay-per-call rules. Consumers surely understand that calls made to area codes other than those that are denominated as toll-free will result in a relatively moderate per-minute charge on their phone bills, even when the information that they obtain as a result of the call is "truly free." As long as the charge for the call does not exceed reasonable consumer expectations, there is no reason to subject these free information services to regulation. Indeed, imposing pay-per-call rules on these types of perfectly legitimate and valuable services will add to consumer confusion, thus impairing the value of telephone service as a direct marketing technique. These results are not what Congress intended when it removed the tariffed service exemption. Moreover, while we realize that certain proposals might simplify and expedite enforcement, these considerations do not support the imposition of pay-per-call regulations on practices which are not harmful to consumers and do not threaten the integrity of telephone service as an information marketing medium.
While attempting to prevent fraudulent practices is a laudable objective, the FTC must not lose sight of its responsibility to foster competition, business enterprise, and widespread and efficient use of existing and emerging technologies. Any modifications to the FTC's rule must, therefore, take into account how useful and necessary these services and arrangements are for carriers, businesses, and consumers. The DMA is inclined to believe that the question of potential abuses resulting from elimination of the tariffed services exemption should be dealt with on a case by case basis until such time as the precise nature of abuses, if any, becomes known and a remedy can appropriately be fashioned. At the very least, the DMA urges that any restriction on arrangements between carriers and IPs be strictly limited to cases in which (i) the remuneration or reciprocal relationship between the carrier and IP is related directly and exclusively tied to the information service, and (ii) the consumer is required to pay a charge for the transmission of the call that is greater than the charge imposed by the carrier for calls that do not involve a payment of remuneration or other arrangement with the IP.
THE DIRECT MARKETING ASSOCIATION, INC.
Ian D. Volner
Heather L. McDowell
Venable, Baetjer, Howard & Civiletti, L.L.P.
1201 New York Avenue, N.W., Suite 1000
Washington, D.C. 20005
(202) 962- 4800
Counsel to the Direct Marketing Association, Inc.
May 12, 1997
1. Pub. L. No. 104 - 104, 110 Stat. 56 (1996), codified at 47 U.S.C. § 228(i)(2).
2. 47 U.S.C. §228(i)(1)(B).