FTC Toughens Telemarketing Rules

Newspapers, magazines and cable operators will be among the many companies whose business will soon be impacted by sweeping new regulations regarding telemarketing.

The Federal Trade Commission is establishing tough new guidelines for interstate telemarketers that will also make it easier for the public to remove their names from call lists. Although the regulations could have been even more restrictive, marketers are anything but pleased, and a legal challenge is already brewing.

Under rules released Wednesday by the Federal Trade Commission, companies would be allowed to place calls to their existing customers. That was a critical argument for magazines and newspapers, which often use telemarketers to sell subscription renewals or to convert Sunday subscribers to seven days. Under the FTC’s rules, that would be allowed, as would attempts to contact people whose subscription had lapsed.

“The will be allowed to do that 18 months from the last paper they receive,” said FTC chairman Timothy Muris during a Washington, DC press conference. That exemption holds true to other businesses as well. If a consumer has bought, leased or rented something from the seller within 18 months, the FTC deems it an “existing business relationship,” and the do-not-call list does not apply.

Under the new rules, any consumer that calls the toll free government hotline would remain on the do-not-call list for five years. Telemarketing companies would be required to check that registry and update their call lists every three months. Charities are also exempt, unless they use for-profit companies to place their calls. Telemarketers would also be required to identify themselves on caller ID boxes.

The use of predictive dialers has also fallen under the new regulations. The dialers, which dial a number when it believes a telemarketer is about to finish another call, often leave consumers with a dead phone line since the operator isn’t always ready as quickly as the computer thinks they will be. Under the FTC rules, telemarketers cannot have any more than 3% of their calls “abandoned” and they must play an identifying recording after two seconds if no telemarketer comes onto the line. The Newspaper Association of America had argued that number should be closer to 5%.

Muris said “at least a dozen” FTC employees will be assigned to the task of policing telemarketers, which could be fined as much as $11,000 per violation.

NAA president/CEO John Sturm said they are disappointed in the FTC’s decision not to include a blanket exemption for newspapers. “We are relieved that the Commission at least has allowed an exemption for established business relationships, which will allow us to continue outreach to our subscribers.” With 88% of newspapers using telemarketing, Sturm said the industry should look for new options.

The FTC registry will cost $16 million a year to operate, and Muris said the agency would pay that cost by fees levied on telemarketers. The FTC still needs approval from Capitol Hill to collect those fees, he said, adding, “We can’t afford to do this without congressional approval.” An official with the FTC predicted its do-not-call registry would be in operation by mid-2003.

It appears the FTC’s regulations may also need approval of the courts, as legal challenges are already under discussion among direct marketers and the Direct Marketing Association calls the proposal unlawful. “We will thoroughly review the final ruling by the FTC with the intention to pursue all legal and equitable courses of action," said DMA president/CEO H. Robert Wientzen. He believes the FTC’s proposed do-not-call list violates marketers’ constitutionally protected commercial free speech. “The FTC simply does not have jurisdiction to broadly implement the proposed list and is not authorized to spend federal funds in this manner.”

The Magazine Publishers of America is also considering legal action, said MPA president/CEO Nina Link. “We had hoped they would balance the needs of both consumers and industry, but it seems they have put far more burden on industry.”

DMA says the Telephone Preference Service, a privately-operated do-not-call service available free to consumers is 81% effective at decreasing unwanted solicitations, said Wientzen, adding that caller ID further reduces the need for government regulation. Consumer groups hail the rules, saying they will help protect consumers.

Meanwhile, the Federal Communications Commission is considering its own registry, which would cover the intrastate telemarketing calls not covered by FTC rules. Muris said he met with FCC chairman Michael Powell on Monday, to coordinate a single do-not-call registry.

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