Telemarketing Sales Rule (“TSR”)

Federal RegisterAug 29, 2008

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FEDERAL TRADE COMMISSION

16 CFR Part 310

RIN: 3084-AA98

Telemarketing Sales Rule (“TSR”)

AGENCY:

Federal Trade Commission

ACTION:

Final Rule Amendments

SUMMARY:

The Commission adopts two final amendments to the TSR. The first is an amendment making explicit a prohibition in the TSR on telemarketing calls that deliver prerecorded messages without a consumer's express written agreement to receive such calls. This amendment also requires that all prerecorded telemarketing calls provide specified opt-out mechanisms so that consumers can opt out of future calls. The amendment is necessary because the reasonable consumer would consider prerecorded telemarketing messages to be coercive or abusive of such consumer's right to privacy.

The second amendment modifies the method for measuring the maximum call abandonment rate prescribed by the TSR’s call abandonment safe harbor. The new method will permit sellers and telemarketers to calculate call abandonment rates for a live calling campaign over a thirty-day period, or any part thereof. This amendment is necessary because the current “per day” standard effectively precludes the use of predictive dialers with small calling lists.

DATES:

The amendments are effective October 1, 2008. Compliance with 16 CFR 310.4(b)(4)(i) is required beginning October 1, 2008. Compliance with 16 CFR 310.4(b)(1)(v) is required beginning December 1, 2008, except that compliance with 16 CFR 310.4(b)(1)(v)(A) is not required until September 1, 2009.

ADDRESSES:

Requests for copies of these amendments to the TSR and this Statement of Basis and Purpose (“SBP”) should be sent to: Public Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. The complete record of this proceeding is also available at that address. Relevant portions of the proceeding, including the final amendments to the TSR and SBP, are available at

www.ftc.gov.

FOR FURTHER INFORMATION CONTACT:

Craig Tregillus, (202) 326-2970, Division of Marketing Practices, Room 286, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION:

I. Overview and Background

A. Overview

This document states the basis and purpose for the Commission’s decision to adopt two proposed amendments to the TSR

that were published for public comment on October 4, 2006.

After careful review and consideration of the entire record of more than 14,000 comments amassed on the issues presented in this rulemaking proceeding, the Commission has decided to adopt, with several modifications suggested by the public comments, an amendment making explicit a prohibition on prerecorded telemarketing calls without a consumer’s express written agreement to receive such calls. The prerecorded call amendment will take effect in two stages. The requirement that prerecorded calls provide an automated interactive keypress or voice-activated opt-out mechanism will take effect on December 1, 2008, but the prohibition on placing calls that deliver prerecorded messages without the prior express written agreement of the recipient to receive such calls will not take effect until September 1, 2009.

16 CFR 310.

71 FR 58716 (Oct. 4, 2006).

In adopting the amendment explicitly prohibiting prerecorded calls delivered to consumers who have not agreed to receive them, the Commission has modified the proposed amendment in several respects as suggested by the public comments. The most significant revisions will: (1) Require sellers and telemarketers to provide a keypress or voice-activated opt-out mechanism promptly at the outset of any prerecorded message call that could be answered by a consumer as of December 1, 2008; (2) Make the amendment applicable to prerecorded messages left on answering machines and voicemail services, requiring that any prerecorded message call that could be answered by such a device promptly disclose at the outset a toll-free number that a consumer may use to assert a request not to receive such calls; and (3) Permit sellers to obtain the consumer’s signed, written agreement to receive calls delivering prerecorded messages in any manner permitted by the Electronic Signatures In Global and National Commerce Act (“E-SIGN Act” or “E-SIGN”).

Pub. L. No. 106-229, 114 Stat. 464 (2000) (

codified at

15 USC 7001

et seq.

Beginning on December 1, 2008, sellers and telemarketers will be required to comply with the new requirement to include an automated interactive opt-out mechanism pursuant to Section 310.4(b)(1)(v)(B). This requirement applies to calls delivering prerecorded messages, whether answered by the recipient in person, or answered by an answering machine or voicemail service.

In addition, as of December 1, 2008, the Commission will terminate its previously announced policy of forbearing from bringing enforcement actions against sellers and telemarketers who, in accordance with a safe harbor that was proposed in November 2004, make calls that deliver prerecorded messages to consumers with whom the seller has an established business relationship (“EBR”). Nevertheless, the Commission has determined that sellers and telemarketers may continue to place calls that deliver prerecorded messages to consumers with whom they have an EBR, provided they do so in compliance with the new requirement in § 310.4(b)(1)(v)(B), that prerecorded message calls include an automated interactive keypress or voice-activated opt-out mechanism. As of September 1, 2009, calls that deliver prerecorded messages will no longer be permitted to be placed based solely on the existence of an EBR, and calls that deliver prerecorded messages will be permitted to be placed only to consumers who have given their prior express written agreement to receive such calls.

The Commission also has decided to adopt two exemptions from the requirements of the prerecorded call amendment that commenters strongly advocated. First, all healthcare-related calls subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)

will be exempt from all of the requirements of the amendment. Second, charitable fundraising calls made by for-profit telemarketers to members of, or previous donors to, a non-profit charitable organization on whose behalf the calls are placed will be exempt from the requirement to obtain prior consent, but will be required to provide an automated keypress or voice-activated opt-out mechanism and prohibited from calling consumers who use the mechanism to opt out.

Pub. L. No. 104-191, 110 Stat. 1936 (1996) (

codified, as amended,

at 42 USC 1320

et seq.

In addition, the Commission is adopting, without modification, an amendment proposed in response to a petition from the Direct Marketing Association (“DMA”) to change the method for measuring the maximum call abandonment rate prescribed by the TSR’s call abandonment safe harbor. The new method will permit sellers and

telemarketers to calculate call abandonment rates for a calling campaign over a thirty-day period, or any part thereof. This amendment will take effect on October 1, 2008.

B. Background

The issues under consideration in this proceeding arise under the “call abandonment” provisions of the TSR. These issues were first presented by two industry petitions. The first was a request from Voice-Mail Broadcasting Corporation (“VMBC”)

for modification of the amended TSR’s “call abandonment” provisions to allow telemarketing calls that deliver prerecorded messages to consumers with whom the seller has an EBR if they allow consumers to opt out and meet certain other requirements.

The second, also involving the TSR’s call abandonment provisions, was a petition from the DMA for modification of the method for calculating the maximum call abandonment rate permitted under the TSR.

Starz Encore Group, The Spoken Hub, Copilevitz & Canter, and SoundBite Communications also submitted similar requests for a prerecorded call safe harbor.

See

note 49,

infra.

On November 17, 2004, the Commission published a Notice of Proposed Rulemaking (“NPRM”) to amend the TSR to create the safe harbor requested by VMBC, and sought public comment on that proposal and the DMA petition.

The notice also announced that the Commission would forebear from bringing enforcement actions against sellers and telemarketers using EBR-based prerecorded telemarketing messages that comply with the proposed safe harbor during the pendency of the rulemaking proceeding.

69 FR 67287 (Nov. 17, 2004).

Section 310.4(b)(1)(iv) of the TSR prohibits telemarketers from abandoning calls. An outbound telemarketing call is “abandoned” if the telemarketer does not connect the call to a sales representative within two seconds of the completed greeting of the person who answers. Call abandonment is an unavoidable consequence of the use of “predictive dialers”—telemarketing equipment that increases the productivity of telemarketers by placing multiple calls for each available sales representative. Predictive dialers maximize the amount of time representatives spend speaking with consumers and minimize the time they spend waiting to speak with a prospective customer. An inevitable side effect of this functionality, however, is that the dialer will sometimes reach more consumers than can be connected to available sales representatives. In these situations, the dialer either disconnects the call (resulting in a “hang-up” call) or keeps the consumer connected with no one on the other end of the line in case a sales representative becomes available (resulting in “dead air”). The call abandonment prohibition, added to the TSR pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”),

is designed to remedy these abusive practices.

15 USC 6101

et seq.

This and other amendments to the original TSR resulting from a rule review mandated by the Telemarketing Act, 15 USC 6108, took effect on March 31, 2003. TSR Statement of Basis and Purpose (“TSR SBP”), 68 FR 4580 (Jan. 29, 2003).

TSR SBP, 68 FR at 4641—45. The Telemarketing Act directed the Commission to prescribe rules prohibiting deceptive and abusive telemarketing acts or practices, including “a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of such consumer’s right to privacy.” 15 USC 6102(a)(3)(A).

Notwithstanding the prohibition on call abandonment, § 310.4(b)(4) of the TSR contains a safe harbor designed to preserve telemarketers’ ability to use predictive dialers, subject to four conditions. The safe harbor is available if the telemarketer or seller: (1) Abandons no more than three percent of all calls answered by a person (as opposed to an answering machine); (2) Allows the telephone to ring for fifteen seconds or four rings; (3) Plays a prerecorded message stating the name and telephone number of the seller on whose behalf the call was placed whenever a sales representative is unavailable within two seconds of the completed greeting of the person answering the call; and (4) Maintains records documenting compliance.

Because consumers who receive a prerecorded message would never be connected to a sales representative, a telemarketing campaign that consists solely of prerecorded messages would violate § 310.4(b)(1)(iv) and would not meet the safe harbor requirements in § 310.4(b)(4).

16 CFR 310.4(b)(4)(i)—(iv).

In a

Federal Register

notice published on October 4, 2006, the Commission reviewed and analyzed the nearly 13,600 comments submitted in response to the NPRM. Based on that review, the Commission: (1) Denied the VMBC request for creation of a safe harbor for prerecorded telemarketing calls; (2) Proposed an amendment to the TSR to make explicit the prohibition on prerecorded telemarketing calls that is implicit in the TSR’s call abandonment provisions; and (3) Proposed an additional amendment modifying the method for measuring the maximum allowable call abandonment rate prescribed by the TSR’s call abandonment safe harbor. The notice set forth the text of the proposed amendments and posed a series of questions on which the Commission sought public comment during a 30-day comment period, which the Commission subsequently extended an additional 40 days in response to a DMA petition seeking additional time, until December 18, 2006.

More than 600 additional comments were submitted during the comment period.

71 FR 65762 (Nov. 9, 2006).

The list of comments, including links to each comment submitted, is available at: (

http://www.ftc.gov/os/comments/tsrrevisedcallabandon/index.htm.

) Although the list indicates that 630 additional comments were submitted, a few are duplicate submissions.

E.g.

, Chodelski, No. 196 and Chodelle, No. 197; Call Command, Inc., Nos. 608, 610; PolyMedica Corp., Nos. 604, 609.

In view of the denial of the proposed amendment to create a safe harbor for EBR-based prerecorded telemarketing calls, the notice also announced that the Commission would terminate its policy of forbearing from bringing enforcement actions against sellers and telemarketers using prerecorded telemarketing calls (“forbearance policy”) effective January 2, 2007. In response to four petitions seeking an extension of the forbearance policy, however, the Commission announced in a

Federal Register

notice published on December 27, 2006, that in order to preserve the

status quo

, it would extend its forbearance policy at least until the conclusion of the rulemaking proceeding.

71 FR 77634 (Dec. 27, 2006). Two of the petitions came from healthcare-related businesses that use prerecorded calls as permitted by regulations issued by the Department of Health and Human Services (“HHS”) pursuant to HIPAA.

II. The Proposed Amendment Regarding Calls That Deliver a Prerecorded Message

The Commission has decided to adopt the proposed amendment with modifications suggested by commenters. As proposed, the final amendment will permit prerecorded message calls by or on behalf of a seller only to a consumer who has signed an express written agreement authorizing the seller to place such calls to his or her designated telephone number. However, the amendments will permit a seller to obtain agreements from consumers by any electronic means authorized by the E-SIGN Act. Moreover, the amendment will apply not only to calls answered by a person as proposed, but also to prerecorded messages left on an answering machine or voicemail system.

The final amendment will require that any permitted call delivering a prerecorded message must: (1) Allow the consumer’s telephone to ring for at least 15 seconds or 4 rings before an unanswered call is disconnected; (2) Begin the prerecorded message within 2 seconds of the completed greeting of the person called; (3) Disclose promptly at the outset of the call the means by which the person called may assert a Do Not Call request at any time during the message; (4) If the call could be answered in person, promptly make an automated interactive voice and/or keypress-activated opt-out mechanism available at all times during the message that automatically adds the telephone number called to the seller’s entity-specific Do Not Call list and that thereafter immediately terminates the call; (5) If the call could be answered by an answering machine or voicemail service, promptly provide a toll-free telephone number that also allows the person called to connect directly to an automated voice and/or keypress-activated opt-out mechanism that is accessible at any time after receipt of the message; and (6) Comply with all other requirements of the TSR and applicable federal and state laws.

In order to reduce initial compliance costs and burdens, the Commission will defer the effective date of the requirement that prerecorded calls provide an automated interactive opt-out mechanism for three months, and the express written agreement requirement for twelve months, to ensure that the industry will have adequate time to prepare to comply. This will permit sellers and telemarketers to continue placing prerecorded calls to consumers with whom the seller has an EBR until the written agreement requirement takes effect.

In addition, healthcare-related calls subject to HIPAA will be exempt from the amendment, and calls placed by for-profit telemarketers on behalf of non-profit entities will be exempt from the written agreement requirement of the amendment but subject to the opt-out requirements.

The Commission’s decision to adopt the proposed amendment is based on a careful review, consideration, and analysis of the entire record,

including the alternatives proposed by the public comments and the supporting evidence submitted, as well as the Commission’s law enforcement experience.

The record includes not only the comments submitted in response to the Commission’s request for public comment issued on October 4, 2006, 71 FR at 58716, 58732-33, but also the comments submitted in response to the Commission’s prior proposal to create a safe harbor for prerecorded calls, which raised essentially the same issues. 69 FR 67287 (Nov. 17, 2004).

E.g., FTC v. Voice-Mail Broad. Corp.

, No. 2:08-cv-00521 (C.D. Cal. Feb. 8, 2008) ($3 million civil penalty, with all but $180,000 suspended due to inability to pay, for abandoning over 46 million calls, 11 million of which were directed to numbers on the Do Not Call Registry, and providing no opt-out option to consumers who answered);

United States v. Star Satellite, Inc.

, No. 2:08-00797 (D. Nev. June 19, 2008) ($4 million civil penalty, with all but $75,000 suspended due to inability to pay, for 80 million abandoned calls from prerecorded message blasting);

United States v. Guardian Commc’n., Inc.

, No. 4:07-04070 (C.D. Ill. Nov. 15, 2007) ($7.8 million civil penalty, with all but $150,000 suspended due to inability to pay, for automated prerecorded message blasting to up to 20 million numbers a day, many of which were placed to numbers on the Registry without an EBR, for abandoning calls answered by a person, and for failure to transmit Caller ID information);

United States v. Craftmatic Indus., Inc.

, No. 07-4652 (E.D. Pa. Nov. 8, 2007) ($4.4 million civil penalty for hundreds of thousands of calls to numbers on the Registry, for abandoning millions of calls by failing to connect to a live operator, and for repeat calls to consumers who asked to be placed on the entity-specific Do Not Call list);

United States v. Broad. Team, Inc.

, No. 6:05-1920 (M.D. Fla. Feb. 2, 2007) ($2.8 million civil penalty, with $1.8 million suspended due to inability to pay, for over 64 million abandoned calls, and 1 million calls to numbers on the Registry);

United States v. Global Mort. Funding, Inc.

, No. 07-1275 (C.D. Cal. filed Oct. 30, 2007) (complaint alleging hundreds of thousands of calls to numbers on the Registry without an EBR, failing to transmit required Caller ID information, and abandoning calls by failing to connect to a sales agent);

United States v. FMFG, Inc.

, No. 3:05-00711 (D. Nev. May 23, 2007) ($900,000 civil penalty for abandoned calls and calls to numbers on the Registry);

United States v. Conversion Mktn’g., Inc.

, No. 8:06-00256 (C.D. Cal. Mar. 10, 2006) ($580,000 civil penalty for abandoned calls and calls to numbers on the Registry);

United States v. DIRECTV, Inc.

, No. 05-1211 (C.D. Cal. Dec. 14, 2005) ($5.3 million civil penalty for abandoned calls and calls to numbers on the Registry);

United States v. Braglia Mktg. Group

, No. 04-1209 (D. Nev. Mar. 1, 2005)/

United States v. Flagship Resort Dev. Corp.

, No. 1:2005-981 (D.N.J. Feb. 22, 2005) ($1.26 million civil penalty for calls to hundreds of thousands of consumers without an EBR, and abandoned calls).

See also

71 FR at 58724 n.90.

A. Comments Supporting the Proposed Amendment

More than 13,000 consumer comments previously submitted in this proceeding opposed the creation of a safe harbor for prerecorded telemarketing calls.

In response to the current proposal to prohibit such calls except those where a consumer has given his or her express written agreement to receive such calls, the Commission received comments from 9 consumer organizations, a state attorney general, and some 220 consumers endorsing the proposed amendment.

Four clear themes emerge from these comments: (1) Sellers’ self interest in retaining established customers is not enough to prevent abuse through excessive pre-recorded message telemarketing; (2) Prerecorded message calls are coercive and abusive invasions of consumer privacy; (3) Prerecorded messages impose costs and burdens on consumers; and (4) Opt-out approaches may not adequately protect consumers.

These comments can be found at (

http://www.ftc.gov/os/comments/tsrcallabandon.

)

See

71 FR at 58718 n.23.

Attorney General of the State of Connecticut (“CTAG”), No. 585, at 2; Privacy Rights Clearinghouse (“PRC”), No. 552, at 3; AARP, No. 593, at 3; National Consumers League (“NCL”), No. 529, at 1. NCL states that its comment is filed on its own behalf and on that of the following consumer advocacy groups: Consumer Action, Consumer Federal of America, the Electronic Privacy Information Center, Junkbusters, Private Citizen, Inc., and the Privacy Rights Clearinghouse. NCL at 1. An additional 101 consumer comments appear to support the proposed amendment, but do not specifically refer to “prerecorded” calls.

1. Companies’ Reputational Interest Alone Does Not Prevent Abuses From Excessive Prerecorded Message Telemarketing

Citing their personal experience, a number of the consumers who support the proposed amendment place little faith in industry assurances “that they will self regulate and not abuse their customers.”

One commenter reports receiving “one particular pre-recorded satellite TV message EVERY day, and usually several,” from a well-established provider.

A second reports receiving prerecorded calls “every 10 days or so . . . for many months” from a major credit card service business.

A third is “deluged with pre-recorded calls, urging me to subscribe to cable, satellite, mortgage terms, credit card offers and other services.”

Barker, No. 633, at 2;

see

Lardner no. 168 (“I am on both the national and state Do Not Call lists and STILL get these obnoxious robo calls all the time.”); Gradwohl, No. 227 (“The pre-recorded, computer generated methods being used by telemarketers presently, has had the effect of making the [Do Not Call] list meaningless”).

Perrone, No. 555 (emphasis in original).

Corgard, No. 596.

Williams, No. 376;

cf.

Miller, No. 528 (“We are elderly, handicapped, solvent and rational. We don’t need storm windows, [satellite TV], refinancing, lower interest rates, ‘free’ trips to golf resorts—or hangup calls invading our privacy 24-7”).

See also

, Wall, No. 377 (receives the same prerecorded message from a large loan company that “repeats, repeats and repeats, month after month . . . that states I am approved for a loan that I don’t want and have never sought”); Matthews, No. 152 (“regularly” receives a call asking for a renewal of a major newspaper he ordered for one month two years ago); Davies, No. 242 (gets “3-4 calls per week” from a Visa card issuer that has submitted a comment in this proceeding).

In light of this type of experience on the part of individual consumers, consumer advocates do “not accept the argument that companies will not abuse the EBRs that they have with consumers,” contending that there is “no guarantee of self-restraint and every

reason to believe that the economic incentives for using prerecorded sales calls will lead to an increase from the current level of sales calls” because “[n]ew entrants in the marketplace will be motivated to use this technology to reach as many consumers as possible and established companies will use it to try to retain their market share.”

They point out that the savings in labor costs that can be realized by substituting prerecorded calls for sales agent calls are not simply theoretical. They argue that the potential for these real savings suggests prerecorded calls likely will increase if they are permitted. As NCL put it, “if [prerecorded message telemarketing] wasn’t so attractive, the telemarketing industry would not be pressing so vigorously for its use to be sanctioned.”

Another advocate concludes that “[c]onsumer comments, when combined with the Commission’s record of enforcement actions, confirm that the telemarketing industry is not one that can effectively police itself.”

Two consumer groups therefore urge the Commission to go further than the proposed amendment does and completely ban all prerecorded calls.

NCL at 5-6.

NCL at 2;

cf.

AARP at 4 (asserting that “permitting prerecorded calls with prior written consent will increase the volume of telemarketing calls”).

PRC at 2.

Id.

at 3; AARP at 4-5.

2. Prerecorded Calls Are Coercive and Abusive Privacy Invasions

Consumers are adamant that prerecorded calls are abusive of their privacy. A typical expression of this view is that, “I consider myself to be a ‘reasonable’ consumer and I do consider prerecorded telemarketing sales calls abusive to my privacy rights.”

A number of comments object that prerecorded calls are uninvited and unwanted abusive invasions into the private sanctuary of consumers’ homes.

Wong, No. 236;

See also

, Wibbens, No. 157 (“Allowing pre-recorded telemarketing calls that require the consumer to follow certain prompts in order to indicate the ‘Do Not Call’ status may increase the frequency of people being victimized by marketing schemes”).

Consumer groups assert that consumers find EBR-based prerecorded messages “coercive or abusive” of their privacy because “[f]or years and at every opportunity, consumers have weighed in against all manner of unwanted telemarketing calls, whether from ‘live’ callers, prerecorded messages or [abandoned call] hang-ups.”

They emphasize that the record contains overwhelming evidence of consumer aversion to prerecorded message calls, citing the more than 13,000 consumer comments previously received,

and the number of telephones listed in the National Do Not Call Registry (now more than 150 million) as evidence of continuing public outrage over unwanted calls and consumers’ desire to preserve their privacy.

PRC at 2;

see

NCL at 2; AARP at 4.

PRC at 2; NCL at 2.

PRC at 2; NCL at 1; AARP at 2. AARP notes that 62 percent of the respondents in a 2005 survey it conducted of consumers with telephone numbers listed on the Registry said they received more telemarketing calls than they would like, whereas only 2 percent received fewer than they would like. AARP at 3, 4. AARP also reports that when asked to respond to the question, “[o]verall, which phrase best describes telemarketing,” a total of “84 percent [of the respondents] said it was either “‘irritating’ (62%) or ‘invades my privacy’ (32%)” whereas “less than 1% of the respondents (0.4%) responded that telemarketing ‘is a great way to hear about new products and services.’” AARP at 5-6.

Two of the consumer group comments also stress that the value to consumers of prerecorded sales calls is “minimal” or “negligible” compared to the harm such calls inflict on their privacy.

While acknowledging that some consumers “might find it easier to hang up on recorded sales calls than live ones,” NCL points out that “they would still have to answer when their phones ring, and it is likely that they would be running to answer their phones much more frequently.”

NCL at 5; AARP at 5. Neither of the other two consumer advocates suggests that prerecorded calls provide more than a minimal consumer benefit. CTAG at 2; NCL at 5.

NCL at 5 (adding that “the surge of prerecorded political messages that many of us endured during the recent election cycle is only a preview of the deluge that is likely to be unleashed if prerecorded sales calls are allowed”). Although political calls are not placed for the purpose of inducing purchases of goods or services, and therefore are not “telemarketing” within the meaning of the TSR, 16 CFR 310.2(cc), or the Telemarketing Act, 15 USC 6106(4), some 30 consumer comments complained about prerecorded political calls received during the 2006 election.

E.g.

, Baldwin, No. 434; Hetsko, No. 326; Pless, No. 139.

3. Prerecorded Messages Impose Costs and Burdens on Consumers

Comments that support the proposed amendment cite both direct and indirect costs consumers incur from the receipt of prerecorded messages—wholly apart from their loss of privacy and consumers’ subsidization of such calls through payments for their telephone service. NCL notes that with “the ubiquitous use of cell phones” the cost to consumers of listening to unwanted prerecorded sales messages on their cell phones “would put consumers at an economic disadvantage” when they access their voicemail or answering machines remotely or forward landline

calls to their cell phones.

One consumer says that she often forwards calls when away from home to her cellular telephone, and ends up “paying airtime for unwanted calls” when she receives a prerecorded message.

Another notes that while traveling on business, he depends on his home message machine to record important calls, but that “[o]n any given trip, 10% of the space is taken up by those useless [prerecorded] calls.”

NCL at 4. Although FCC regulations promulgated under the TCPA prohibit both live and prerecorded calls made to cell phones, pagers, and fax machines, where the called party will be charged for the call, 47 CFR 64.1200(a)(1)(iii), (a)(3), NCL limits its argument to situations where consumers incur costs from forwarding landline calls to a cell phone or from calling long distance while traveling to listen to messages on their home voicemail or answering machine.

Farrow, No. 365; NCL at 4;

cf.

Hooper, No. 331; Khitsun, No. 546; Munoz, No. 612.

Scott, No. 362. This commenter does not indicate whether he incurs long-distance charges to retrieve the prerecorded messages from his answering machine.

A number of consumers object to prerecorded and other telemarketing calls taking a “free ride” on the telephone service they pay for, and interfering with its intended use. They contend that they pay for a telephone to provide a “communication device for my family, friends and work,”

and object to the hijacking of their telephone service to transmit unsolicited advertisements, particularly when they receive no compensation in return.

Several comments also suggest that prerecorded calls may be frustrating the original purpose of telephone service, and diminishing its value to consumers.

Pohl, No. 389;

see

House, No. 424 (“I have a phone so I can keep in touch with friends and family. . . . I do not want to pay for phone service so companies can use it for their convenience in their marketing efforts”); Casabona, No. 559; Mathes, No. 449; Scott, No. 362.

Walker, No. 52 (“I think folks that agree to receive telemarketing calls should be compensated for their time. That would be similar to Pay-Per-Click advertising.”); Barnes, No. 560;

see

Khitsun, No. 546 (“Who would like to buy a product from someone who calls them at their own expense?”).

Snell, No. 210 (noting that merchants will be unable to contact him by telephone with important information, such as safety recalls, because prerecorded calls have “forced me to either not give out my phone number or to provide a false number” when making purchases); Lepeska, No. 412 (relating that her 86-year-old mother frequently does not answer her prepaid calling card calls, which identify her as an “unknown caller,” because her mother “thinks it might be a sales call”);

cf.

Robertson, No. 264 (“I have family who use prepaid calling cards and so must answer calls from numbers I do not recognize, as they may be family”).

Finally, several comments cite potential indirect safety costs. A police detective asserts that the fact that prerecorded calls do not disconnect “creates a serious problem should you need immediate access to your phone for a 9-1-1 call.”

Similarly, a consumer reports that after he hangs up on a prerecorded message from a company that calls at least once a month, “the recording sometimes continues, and occasionally calls me right back to finish the message.”

Palicki, No. 260 (“Your husband goes down with a heart attack and you can’t get the recording to disconnect. These are actual issues”);

see

Casabona, No. 559 (Prerecorded calls “frequently result in one being unable to clear the line until the recording is over (you can hang up and pick up and the recording is still there)”). Two of the comments from consumer advocates also express concern that prerecorded messages may prevent access to a telephone line in an emergency. CTAG at 2; NCL at 5. The Commission has acknowledged that this “creates legitimate cause for concern.” 71 FR at 58723.

Haddox, No. 549.

4. Opt-out Approaches May Not Adequately Protect Consumers

In anticipation of industry arguments that prerecorded calls with automated keypress opt-out mechanisms should be allowed, AARP, NCL, and individual consumers highlight the problems of opting out from prerecorded sales calls. AARP emphasizes that under the proposed amendment, seniors and others will be harmed if they “initially determine [prerecorded sales] calls would be of interest” and agree to receive them, because “if a consumer subsequently decides to change their ‘opt-in’ with the seller it will be confusing, and possibly difficult . . . [to retract it] without a live person to speak with.”

AARP also notes that it will be more difficult for consumers to “just hang up” when they receive prerecorded sales calls, because they first will need to determine whether the call is one they have agreed to receive.

AARP at 4. AARP is correct in implying that, as proposed, the amendment did not provide expressly that an agreement to receive prerecorded messages, once given, would remain subject to the company-specific opt-out requirements of the TSR, and also did not require an effective keypress opt-out mechanism for consumers who agree to receive such messages but subsequently change their mind.

AARP at 5.

NCL argues that interactive opt-out technologies provide no guarantee that consumers will be able to halt repeated prerecorded calls that are abusive. NCL emphasizes that “if the opt-out is automatic,” consumers will be unable to “ask questions about why they have received the call” or to obtain information “that would help them determine whether the call may have violated their rights” so that they can report the violation for law enforcement action.

NCL at 4;

cf.

Thomas, No. 386 (reporting that after receiving over 20 prerecorded solicitations in 30 days, she had to pay her telephone company “over $1.50 per trace” in order to identify the offending telemarketer). NCL also notes that keypress technology “would obviously not work for people who still have rotary dials, and that “if the opt-out request requires talking to a live company representative,” there is “no assurance that one will be readily available.” NCL at 4.

Several comments from individual consumers assert that the opt-out options in the prerecorded messages they have experienced are burdensome and ineffective.

Consumers report problems with both live and automated opt-out mechanisms.

Some cite individual company policies that have prevented them from adding their number to a Do Not Call list, or that they find objectionable.

One comment observes that the “deluge” of prerecorded calls renders interactive opt-out options ineffective because it makes “consumers impatient, and they hang up before they can hear how to get on the ‘do not call’ list, even if instructions on how to do so are left at the beginning of the message.”

Pursuant to a non-enforcement policy announced by the Commission when it proposed the safe harbor requested by VMBC in its petition, sellers and telemarketers placing calls in compliance with the proposed safe harbor to deliver prerecorded messages to consumers with whom the seller has an EBR have not risked enforcement action. 69 FR at 67290; 71 FR at 77635 (extending the policy in response to several industry requests). Under that policy, prerecorded calls have been permitted if, among other things, a keypress opt-out mechanism or other means is provided at the outset of the call for consumers to add their telephone number to the seller’s company-specific Do Not Call list.

Lardner, No. 168 (“It is not enough to have an opt-out feature (which many robo callers do not offer)” because “[w]hen I try to speak to a human to get me off the calling list, the person just hangs up on me”); Corgard, No. 596 (a prerecorded call “will give you the option of being deleted from their list by pressing a certain number,” but “[t]his never works” because “the recording said it is an incorrect prompt,” and “[i]f you press the key to talk to a representative, before you can finish explaining that you are on the federal list, they simply hang up on you”); Anonymous, No. 222 (“I also keep getting pre-recorded calls where the phone number given in the messages is not the same as the Caller ID phone number. When I call the Caller ID phone # to complain, I never reach a person. When I call the phone # from the pre-recorded message, I get a sales person who ‘can’t’ put me on the company’s internal Do not Call/Mail, etc lists”); Abramson, No. 122, at 2.

Cook, No. 320 (“I consistently receive . . . prerecorded messages that are for another person . . . every day” and they “do not allow me to opt out of the calling list because they are calling the wrong person”);

see

Johnson, No. 532; Thomas, No. 386 (“Even if you do choose to opt out, it takes weeks for it to go into effect, when it should be immediate”); Bankston, No. 382 (“[W]ith ID theft out there I should not have to identify who I am to be removed from their call list”);

but see

Rosato, No. 156 (arguing that “authentication” of the opt-out requestor is necessary to prevent others in his household from “inadvertently” opting him out).

Byrne, No. 158 (“deluge” of prerecorded calls makes consumers so “impatient” that they hang up before hearing opt-out options, even if they are provided at the outset of a message).

B. Comments Opposing the Proposed Amendment

Comments from 73 telemarketers, businesses that use prerecorded calls, their trade associations and technology providers overwhelmingly opposed the proposed amendment, as did 187 of the consumer comments.

These comments primarily follow three lines of argument: (1) They question the reliability of the thousands of comments received earlier in this proceeding as indicative of consumer aversion to telemarketing calls that deliver a prerecorded message; (2) They point to surveys that purportedly show that some portion of the consuming public welcomes telemarketing calls that deliver prerecorded messages; and (3) They rely on data concerning consumer responses when opt-outs are provided in prerecorded message telemarketing calls.

Combined with the 77 consumer comments arguably supporting a safe harbor for prerecorded calls received in the prior proceeding, 71 FR at 58721 & n.57, these comments represent less than 2 percent of the 14,000 consumer comments in the record.

1. Previous Comments Inaccurately Reflect Consumer Attitudes

One industry comment argues that “a substantial number” of the 13,000 consumer comments opposing a prerecorded call safe harbor should be disregarded because they express dissatisfaction over “the fact that some telemarketing calls continue to be permitted at all” or over the breadth of the EBR definition.

Other industry comments argue that complaints about calls from companies with which the consumer has no EBR, company-specific Do Not Call mechanisms that do not work, and non-compliance with the Commission enforcement forbearance policy should be addressed by aggressive enforcement, not tighter rules that might limit legitimate EBR-based prerecorded telemarketing messages.

Consumer Bankers Association (“CBA”), No. 587, at 2. Another contends that “[n]one of the comments objects

per se

all

calls from businesses with which the consumer has an existing business relationship,” and concludes that the record does not support the elimination of EBR-based prerecorded calls, but would support a narrowing of the EBR definition for such calls. Voxeo Corp. (“Voxeo”), No. 621, at 8,10 (emphasis in original). In a similar vein, some industry comments urge that consumer comments that “focus on calls already prohibited” by the TSR should be disregarded. DMA, No. 589, at 5; IAC/Interactive Corp. and HSN LLC (“IAC”), No. 600, at 4; Call Command, Inc. (“Call Command”), Nos. 608, 610 at 4. Other industry comments assert that the 13,000 consumer comments opposing a safe harbor for telemarketing calls delivering prerecorded messages to established customers should be discounted because they “do not fully or accurately describe the marketplace.” DMA at 5; VMBC, No. 583, at 1-2 (record not a “fair representation” of all consumers).

Soundbite Communications, Inc. (“Soundbite”), No. 575, at 16-17; DMA at 5; IAC at 4; Valley Technology Consultants (Monion) (“Valley”), No. 39, at 1; Interactive Agent Association (“IAA”), No. 568, at 11; MP Marketing Services, Inc. (“MP”), No. 562 at 2; SmartReply, Inc. (“SmartReply”), No. 105, at 5-6; MinutePoll, LLC (“MinutePoll”), No. 540, at 7; Xpedite Systems, LLC (“Xpedite”), No. 595, at 4.

Yet other industry comments contend that the Commission should disregard consumer comments that indiscriminately lump EBR-based telemarketing calls delivering a prerecorded message together in the same hated category as “cold call” message blasting.

Some of these comments see an indication of some level of consumer support for an EBR exemption because a handful of earlier consumer comments do distinguish between voice blasting and EBR-based prerecorded message calls, and do not object to the latter.

Soundbite at 4-5; IAA at 2, 4; IAC at 4;

cf.

CBA at 2 (urging disregard of prior consumer comments “not directed at the proposal to create an EBR-based safe harbor for prerecorded telemarketing calls”).

See also

, Chrysalis Software, Inc. (Ramsay), No. 79 (“[T]he focus of [FTC] attention should be calls generated from companies unknown to the callee, such as those that have purchased a phone directory”); Zucker at 1 (Proposed amendment intended to stop “voice blasting” by “phone spammers” goes too far in covering EBR-based prerecorded calls).

IAA at 4 n.4.

See, e.g.

, Castellon, No. 471; Castro-Arellano, No. 472; Manley, No. 112.

A few industry comments assert that consumers who previously opposed prerecorded telemarketing were responding largely to their experience with “indiscriminate ‘blast’ telemarketing” calls that lacked the type of interactive opt-out mechanisms available now.

According to one of these comments, “to the extent [it] may have been the case in 2004” that consumers felt “powerless to make themselves heard” by a prerecorded message, “it is not the case today.”

Soundbite at 5, 10-11.

See also

VMBC at 1; DMA at 5; IAC at 3 (noting that it still may be true that “consumers generally have had only limited experience with prerecorded messages that provide a simple opt-out mechanism”).

Soundbite at 6.

2. The Proposed Amendment Would Burden Sellers and Consumers

Several comments protest that requiring an agreement in writing to receive calls delivering prerecorded messages would be confusing to consumers who are used to receiving these messages.

According to these commenters, the requirement would be a major inconvenience for consumers.

Others argue that the express written agreement requirement would not be in the best interests of consumers who may not realize the importance of making the extra effort to opt in to receive important messages in the distant future,

consumers who change phone numbers,

and consumers who must make a “double opt-in” when they call for information to authorize a follow-up return call with the information requested.

IAA at 6;

cf.

Xpedite at 5 (asserting that because of differences between the FCC rule permitting prerecorded calls to EBR customers and the proposed amendment, consumers will have “no clear picture of when and for whom an EBR permits a prerecorded telemarketing call, and when and for whom it does not”); DMA at 6.

VMBC at 2; Capelouto Termite & Pest Control, Inc. (“Capelouto”), No. 131, at 1; National Newspaper Association (“NNA”), No. 578, at 4 (providing consent more burdensome than receipt of a prerecorded reminder message about an expired subscription); SmartReply at 17; IAC at 9 & n.15; IAA at 5 n.5;

see

DMA at 5. Consumers who oppose the proposed amendment also criticize the requirement of an express written agreement as burdensome,

e.g.

, Kelly, No. 457; Maruca, No. 602; Schmitz, No. 520; a “pain,”

e.g.

, Carnes, No. 451; Rososer, No. 426, or “a waste of time.”

E.g.

, Lemkin, No. 31;

see

Martin, No. 437 (“big burden on my time”).

CenterPost Communications (“CenterPost”), No. 591, at 1.

Soundbite at 9; SmartReply at 18. This problem may be minimized by FCC regulations requiring Local Number Portability and Wireless Number Portability.

MP at 2; Career Education Corp. (“Career”), No. 580, at 3. Other comments, apparently not considering the flexibility ensured by E-SIGN, incorrectly argued that this requirement would be “impractical” or would not work when consumers call for information. DMA at 5; MinutePoll at 1, 9; Soundbite at 9; IAC at 9; MP at 2; Bernhardt at 1.

Other industry comments cite the burden and cost of contacting each person in existing EBR customer databases to obtain their agreement to receive prerecorded calls.

Several comments also emphasize the continuing costs of obtaining consent from new customers after the proposed

amendment takes effect,

and other costs they believe will be significant.

These comments also assume that the required written agreement must be obtained on paper. IAC at 9-10 (a direct mail piece to obtain a written agreement from HSN’s “millions” of EBR customers on a postage paid postcard would cost $.75 to $1.75 per customer and “will be a lengthy, resource-intensive endeavor”).

See also

SmartReply at 17-19 (estimating a cost of $9,350,000 for a “Top 100 Retailer” in the “Fortune 500“ with a database of 15 million customers to obtain such agreements via direct mail, a cost of $360,000 to $600,000 to revise and reprint 3-5 million credit card and loyalty applications, with “at best” a reduction in EBR customer databases of “90% or more”); DMA at 5. Individual commenters opposed to the proposed amendment cite the burden on business of complying.

E.g.

, Cook, No. 631; Hunley, No. 644; Simmons, No. 507.

IAC at 9 n.17 (contending that “even if companies design systems to seek and obtain consent in a compliant manner when consumers place orders by telephone, such systems also involve significant costs,” and that “[i]n addition to design, recordation and retention costs, each customer contact would take more time,” necessitating the “need to employ additional personnel or risk dropped calls”); Career at 3 (costs would increase by $3.58 million a year); SmartReply at 41 (on-going costs would not be

de minimis

because National Retail Federation research shows that “retail companies face a customer attrition rate of between 33% and 50% per year”).

See also

IAA at 5-6); NNA at 4; Call Command at 5; MinutePoll at 9;

cf.

Nolte, No. 429 (objecting that the cost of obtaining consent would be “a waste of time and money that could go to passing on additional savings to me”). Two individual comments also doubt that it would be practical for businesses to keep the required written agreements on file. Bender, No. 62; Haas, No. 76.

SmartReply at 20-21(loss of revenue from need to use less efficient marketing alternatives than current $10.00 gross return for every dollar of prerecorded message marketing, loss of brand value and customer “goodwill” that would devalue stock prices of publicly traded retailers); MinutePoll at 9 (cost of retrieving paper records now ordinarily destroyed after entry of information in EBR database would be especially burdensome and expensive); National Newspaper Association (“NAA”), No. 578, at 10-11 (noting that 20 percent of the newspaper industry has its own prerecorded call equipment that would be of limited use given difficulty of obtaining consumer consent).

The industry comments stress that prerecorded message telemarketing costs significantly less, and is more effective than the only alternatives that are available—direct mail,

live calls,

and email.

Three comments insist that there simply “is no other cost-effective communication method” available for businesses for which the timeliness of delivery of high-volume messages to customers is critical.

Other comments assert that prerecorded messages are the only affordable option for businesses to communicate with their customers.

SmartReply at 17 (Interactive message calls “run about 20% of the cost of the next best medium—direct mail”); Call Command at 3-4 (Direct mail costs are “ten times higher”); Career at 1 (Prerecorded call response rates are “

more than twice

as high as for communications by mail”) (emphasis in original); IAC at 5; Compton (“Vontoo CEO”), No. 47, at 1; MinutePoll at 10.

See also

SmartReply, Inc., “Measuring and Deducing Consumer Acceptance of Live Pre-recorded Calls with Prompt Opt-Out Mechanisms Across Ten Companies over Eight Months” (“SmartReply Study”), No. 106, at 11 (stating that a comparison of 82 client campaigns shows similar response rates for direct mail and prerecorded calls, but customers responding to the calls out-spent those responding to direct mail “by 175%”).

IAA at 1 n.2 (a prerecorded call “costs about $0.25,” whereas industry surveys show that the cost of a live call to a consumer “is from $3.75 to $5.30”); MinutePoll at 8, 10 (would have to charge clients “ten times our current rates per lead” for live calls); IAC at 5.

Career at 1 (prerecorded call response rates are “

ten times higher

than for communications by email”) (emphasis in original); MinutePoll at 8; IAC at 5 (email messages are “less effective than telephone messages” because many consumers “check their voicemail but not their home email daily”); IAA at 5-6 (email messages may not “get past spam filters”); Vontoo CEO at 1 (retirees “often do not have email”).

IAC at 2 and 5: SmartReply at 39; Messagebroadcast.com (“Message”), No. 599, at 6.

NNA at 4 (small community newspapers);

cf.

Career at 3 (“no choice” but to use live operators at a much higher cost); MinutePoll at 7 (proposed amendment “will result in a substantial increase in live operator calls”);

see, e.g.

, Metcalf, No. 482 (“more live calls will make a lot of consumers a lot more miserable”).

Several comments point out that the higher cost of using such alternative marketing methods will be passed on to consumers if, as they fear, businesses are unable to obtain the consent of a significant number of their customers to receive prerecorded messages.

One comment doubts that obtaining enough consents is likely, and accordingly asserts that the “practical effect” of the proposed amendment would be that “telemarketers could not communicate with [their] customers through prerecorded messages.”

Moreover, a number of industry comments argue that the proposed amendment will disproportionately harm small business telemarketers,

and the small businesses that are their clients.

Some small telemarketers assert that the proposed amendment “would reduce our revenue by 85%,” and that continuation in business “would require the termination of most of our existing employees” and an effort to “outsource the vast majority of our labor force to call centers in foreign countries.”

IAA at 2; MinutePoll at 8; SmartReply at 17; Vontoo, LLC (“Vontoo”) at 3. Several consumers opposed to the amendment also worry that businesses will not be able to obtain enough written agreements from consumers to continue providing messages they value. Shaw, No. 650;

see

Long, No. 629; Christianson, No. 27.

IAA at 1;

cf.

IAC at 5 n.9 (cost likely to be so great that not all sellers may be able to afford it, thus depriving consumers of messages they want); IAA at 10 (“[e]conomics dictates that prerecorded messages are less likely to be available to consumers”); Message at 6;

cf.

NNA at 3 (community newspapers “struggle to create sufficient work for call centers to cover basic overhead costs” which is why “voice messaging options have become more popular” because “the revenue driven by them also can pay for heightened customer service”). Consumers opposing the amendment also express concern about the continued availability of information and offers they value.

E.g.

, Ashroff, No. 627; Noack, No. 642; Szczepanik, No. 646.

MinutePoll at 8 (amendment “would have a severe, disproportionate effect” on small telemarketers that lack “resources from other lines of business to offset the loss of revenue” and “sufficient scale to operate a large cost-effective live call center,” with “likely effect” of “industry consolidation”); Vontoo at 2 (“disproportionately severe” impact on small businesses”); SmartReply at 24 (businesses that provide prerecorded message services “are generally small businesses [with] less than $10 million in revenue”).

MinutePoll at 1 (“proposed rule would drive up marketing costs for small businesses”); SmartReply at 24;

but cf.

MP at 2 (amendment “would force our clients to go to other vendors who already offer direct mail and live telemarketing”).

MinutePoll at 8; TCIM Services, Inc. (“TCIM”), No. 15, at 1-2; Valley at 1. Many of the consumers who oppose the proposed amendment express concern that “thousands” of American jobs will be lost to foreign call centers.

E.g.

, Catalan, No. 480; Vivanco, No. 501.

Finally, some comments that oppose the proposed amendment argue that by lumping sophisticated interactive message systems that may include advanced voice recognition together with non-interactive systems, the proposed amendment would “stifle the advancement of potentially beneficial media.”

Accordingly, many favor application of the written agreement requirement only to non-interactive prerecorded calls.

E.g.

, Maxwell, No. 20; Auburn, No. 129; Runyan, No. 61; Wetzel, No. 95.

E.g.

, Direct Mail Express, Inc., No. 138; Zucker, No. 164, at 1; Duke, No. 54; Lane, No. 53.

3. Survey Evidence of Consumers’ Attitudes Toward Telemarketing Calls that Deliver Prerecorded Messages

Industry commenters submitted three online consumer preference surveys as indicative of consumer support for telemarketing calls that deliver a prerecorded message with a prompt opt-out.

The Commission notes, however, that none of these surveys allowed respondents to state a preference for receiving prerecorded calls only from sellers to whom they had given their prior written agreement to accept such calls pursuant to the proposed amendment. Thus, these survey results cannot purport to reflect consumer attitudes toward the proposed amendment, and are not probative of the extent to which consumers might prefer consent-based prerecorded calls over prerecorded calls with a prompt opt-out mechanism.

Minutepoll submitted a survey of 388 consumers and advanced it as evidence that there is a “significant minority” of consumers who prefer prerecorded calls to live calls. Most of these survey respondents—82 percent—said they had placed their phone numbers on the National Do Not Call Registry. When asked in the abstract, 70.1 percent stated that they would prefer “live operator” calls, whereas 29.9 percent said they would prefer a prerecorded message.

When given the choice of a prerecorded call with a “quick option to get on the calling company’s ‘Do not Call list,’” or a live operator call that “would not be required to do this,” 68.3 percent said they would prefer the prerecorded message and only 31.7 percent said they would prefer the live call.

responses to open-ended questions, however, 54 percent of those who said they preferred prerecorded messages generally or on some occasions indicated that a reason for this preference was simply because they would be “[a]ble to hang up.”

MinutePoll, Exh. A, at 1. The MinutePoll survey reports a margin of error of 5 percent.

MinutePoll, Exh. A, at 2. While taking care to articulate that the TSR does not require sales agents to disclose affirmatively that consumers can ask to be placed on the seller’s do not call list, this survey omits any reference to the TSR requirement that sales agents honor a consumer’s assertion of a do

not call request. It is a violation of the TSR to deny or interfere “in any way, directly or indirectly, with a person’s right to be placed on any registry of names and/or telephone numbers of persons who do not wish to receive outbound telephone calls established to comply with §310.4(b)(1)(iii),” 16 CFR 310.4(b)(1)(ii), or to initiate “any outbound telephone call to a person when that person previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered.” 16 CFR 310.4(b)(1)(iii)(A).

MinutePoll, Exh. A, at 1-2. Similarly, of the 68.3 percent who preferred prerecorded messages with a quick “DNC opt-out,” 33 percent indicated they made that choice to “[g]et them to stop calling/get off the list” and 16 percent did so to be able to “hang up easier/without guilt.”

Id.

A second online survey of 5,328 consumers conducted by Forrester Research for VMBC purports to show that consumers prefer prerecorded over live calls “on average at a rate of two to one, across different age, income, geographic, and technological groups.”

The survey reports that when given a choice between a recorded message that “electronically provides me with the opportunity to either be removed from future calls, be transferred to a live representative, or end the call” or “[a] call from a live telephone representative who begins talking without providing [those options],” from 57 percent to 71 percent of the Internet users surveyed, depending on “age, income, geographic and technographic groups,” stated that they would prefer the recorded message, with an average of 63 percent across all groups.

VMBC at 1,

citing

Forrester Research’s Consumer Technographics, NACTAS Q3 2006 Omnibus Online Survey (“VMBC Survey”), No. 584. The survey reports a margin of error of ± 1.3 percent. VMBC Survey at 1.

VMBC Survey at 1.

The findings of a third online survey of some 470 Internet users, 78 percent of whom had received an “automated” call within the past 12 months,

raise unanswered questions about the consumer preferences elicited in the MinutePoll and VMBC surveys. This survey, conducted for Silverlink by the Zoomerang Online Survey Service, was submitted to show that consumers are willing to receive prerecorded healthcare-related calls.

The survey shows, however, that consumers may be far less willing to receive commercial prerecorded telemarketing calls than the other two surveys might appear to suggest. The Silverlink Survey reports that 91 percent of the participants said they would be unwilling to listen to a prerecorded telemarketing call from their financial services company offering a new credit card at a discounted rate, that 87 percent would be unwilling to listen to a prerecorded telemarketing call from their travel agent offering a discounted vacation package, and that 41 percent would even be unwilling to listen to a health-related prerecorded telemarketing call.

Survey respondents were told that an “automated” call means “a call made to your home in which you

interact

with a recorded voice rather than a live caller.” Silverlink Communications, Inc. (Rubin) (“Silverlink Survey”), No. 217, Attach. A, at 2 (emphasis added). The Silverlink Survey reports a margin of error of “just above 4%.” Silverlink (Rubin), Attach. B, at 1.

The survey indicates that 45 percent of those surveyed “would like” or “would not mind” having their health plan or pharmacy deliver automated message reminders of routine screenings or tests recommended by their doctor, immunization reminders for themselves or their children, or prescription refill reminders. Silverlink Survey at 4.

Silverlink Survey at 7. Thirty-six percent of survey respondents indicated they would find a prescription refill reminder helpful, compared to 45 percent who would not; 42 percent indicated they would find an automated reminder of doctor-recommended routine screenings or tests helpful, compared to 36 percent who would not; and 30 percent would find an automated immunization reminder helpful, compared to 51 percent who would not. Silverlink Survey, Attach. A, at 2.

4. Indirect Evidence Regarding Consumers’ Attitudes Toward Telemarketing Calls that Deliver Prerecorded Messages

A number of industry comments cite indirect evidence of consumer acceptance of prerecorded message calls that incorporate an interactive opt-out mechanism. Summing up this line of argument, DMA asserts that “over the past two years, companies that use the prompt opt-out as mandated by the safe harbor have found that the opt-out rate is fairly low,” and that this shows “that consumers often welcome prerecorded messages from entities with which they have [an EBR].”

While several comments from telemarketers claim opt-out rate percentages that may appear to support this contention,

only two—Global

and SmartReply

—provide the information necessary to evaluate the claims. However, their results—less than 2 percent for Global and 0.4 percent for SmartReply—are based on

campaigns for unique clients. Moreover, to the extent that Global provides data on the number of consumers who “opted out” simply by hanging up the telephone, the results indicate that a significant percentage of consumers may not welcome such calls.

Thus, the low opt-out rates reported do not tell the whole story and do not necessarily reflect typical consumer acceptance of prerecorded calls with a prompt opt-out mechanism, or provide a reliable measure of consumer acceptance of such calls.

DMA at 4; NNA at 3 (newspapers’ company-specific do not call lists are “typically small and in some cases nonexistent”); IAA at 10 (“low opt-out rates experienced by members’ clients” are “consistent with” low opt-out rates reported in original VMBC petition); Soundbite at 6 n. 13 (“usually in the low single digits”); Protocol Integrated Direct Marketing, No. 535, at 1(citing unspecified “low opt-out rates”). Some comments also contend that anecdotal evidence of few complaints shows consumer acceptance of prerecorded messages. NNA at 3 (no complaints to community newspapers); Snoozester, Inc., No. 49, at 1 (only 4 complaints out of “hundreds of thousands of calls my company has made”); Capeluto Termite & Pest Control, Inc. (“Capeluto”), No. 131, at 1 (2 complaints out of 50,000 calls).

Most of these comments fail to provide any underlying data necessary to evaluate the claims. Two indicate that the stated opt-out rates combined data from calls where the opt-out mechanism was a keypress option and calls where they provided a toll-free number requiring a return call that consumers may be less inclined to take the time to make. MP at 1-2 (9-11 percent opt-out rate with interactive messages “for

most

of our programs”) (emphasis added); CenterPost at 2 (0.7 percent opt-out rate for prescription refill and insurance policy renewal calls where “75 percent of all calls” had “in-call opt-out included”). Others do not state whether the percentage was calculated based only on the number of opt-outs when the prerecorded message was actually answered by a consumer (as opposed to the number of opt-outs for all calls placed, which may include messages left on answering machines, calls that go unanswered by a person or machine, and busy signals). MinutePoll at 4 (8-10 percent opt-out rate with up-front keypress opt-out, but no indication if based only on live answers); VMBC at 2 (3.1 percent opt-out rate with “easy” up-front opt-out);

cf.

Xpedite at 4 n.11 (1 percent opt-out rate for calls providing opt-out telephone number); Countrywide Home Loans, Inc. (“Countrywide”), No. 592, at 2 (“less than 1%” opt-out rate for messages left only on voicemail and answering machines). Two comments provide none of this information, Call Command at 2 (1.14 percent opt-out rate with no indication of type of opt-out or how computed); Vontoo at 2 (50 of 12,000 “persons called” (0.4 percent) in a single campaign opted out), and two others indicate they did not provide the opt-out option until the end of the call, when it may have been less likely to be used (

e.g.

, if the consumer had already hung-up); Message at 1 (0.38 percent opt-out rate where calls provided a keypress option at the end of the message); Draper’s and Damon’s (“Draper’s”), No. 108, at 1 (less than 1.36 percent opt-out rate where a keypress option was provided at the end of the message).

Global Connect Strategic Broadcasting (“Global”), No. 620, at 5, 19-20 (less than 2 percent opt-out rates with keypress opt-out for messages offering casino/hotel discount promotions answered by a live person).

SmartReply Study at 3 (0.4 percent opt-out rate for messages offering discount promotions from 10 of top 15 “Fortune 500” retailer clients). SmartReply asserts that the low opt-out rate reported shows “that some [prerecorded] calls are more relevant [to consumers] than others,” and that the existing EBR requirements “sufficiently guarantee that most of these calls will be relevant enough that a significant majority of consumers will listen to the call month after month, even when given an easy, free and immediate mechanism to opt out of future calls.”

. Although the data shows that 148,516 of the 4,894,950 customers who answered the first call (3 percent) also answered and listened to some or all of each of the seven subsequent monthly messages, consumers who failed to pick up and answer any one of the calls were excluded from further study, even if they subsequently answered a call. SmartReply also contends that consumers must find the monthly calls “relevant and non-intrusive,” because the data indicates that 90 percent of the customers who answered all eight calls listened to the prompt opt-out option, and on average, 67 percent continued to listen to three quarters or more of the message.

at 6-7. SmartReply further compares opt-out rates for prerecorded calls that were answered with those for messages left on answering machines with a toll-free opt-out number, and concludes that customers are “300% more likely” to make use of the interactive opt-out mechanism than the toll-free number.

. at 10-11.

Global at 19 (showing hang-up rates before the opt-out message of from 23-68 percent, with a mean of 46 percent and a median of 48 percent, in 13 separate sets of calls).

A few comments also assert that affirmative actions taken by consumers in response to interactive opt-out prerecorded messages manifest consumer satisfaction with such calls.

One comment claims that “66-82% of customers renew a policy or prescription . . . ; 33-48% of customers select additional products or services along with the renewal; and 5-13% of customers renew policies prior to lapse.”

Another notes that a major entertainment retailer that “realized a 6% response to their direct mail offer” obtained an “11.5% response when it supplemented the direct mail offer with a prerecorded message campaign.

Similarly, a third asserts that a study of 82 client campaigns showed that consumer spending in response to prerecorded messages was 175 percent greater than spending in response to a direct mail campaign.

E.g.

, Message at 2-3 (citing increased customer response rates in client campaigns). None of these comments provided underlying data that would permit an independent assessment of the claims.

CenterPost at 1. This comment is unclear as to whether the percentages provided refer only to prerecorded message calls that are answered. CenterPost also reports that in two voluntary health-related surveys it conducted that invited consumers to answer a single question assessing their satisfaction with an interactive prerecorded message offering prescription refill reminders and information, 89.4 percent indicated they found the “notification” to be “useful” in one survey and 94 percent were “extremely” or “highly” satisfied in the other.

Id.

at 1-2. Because these two surveys apparently were conducted after the refill offer was made, the satisfaction percentages necessarily excluded consumers who may have chosen to hang up on the call or opt out from future calls.

VMBC at 2.

SmartReply Study at 11-12.

A number of comments contend that this evidence of the existence of a “subset” of consumers who may want and “expect to receive” at least some prerecorded telemarketing messages rebuts any possible contention that prerecorded telemarketing messages are “coercive or abusive,”

and undercuts support for the proposed amendment.

See

Smith, No. 544 (does not find prerecorded messages coercive or abusive). Other consumers who oppose the proposed amendment say prerecorded messages are “not a problem,”

e.g.,

Arce, No. 469; Marquez, No. 507; Yanes, No. 485; are “less intrusive and coercive,”” or simply “less invasive” than live calls,

e.g.,

Azcurra, No. 467; Hernandez, No. 475; Torres, No. 496; because they find it easier to hang up on a recording,

e.g.,

Boricean, No. 470; Kheriaty, No. 44; Shimko, No. 127; they prefer not having to deal with “pushy telemarketers,”

e.g.,

Castellon, No. 471; Morales, No. 505; Villasenor, No. 500; and find prerecorded messages easier to understand than a script read by a disinterested telemarketer,

e.g.,

Christianson, No. 27; Lemkin, No. 31; Wiggen, No. 28, or an offshore telemarketer with a foreign accent. Auburn, No. 129; Zucker, No. 164, at 1.

MinutePoll at 6; SmartReply at 25-26;

cf.

Message at 6 (asserting the prerecorded messages that comply with the law are not coercive or abusive); Superior Communications and Consulting (“Superior”), No. 632, at 2 (arguing that an EBR-based prerecorded message that “results in a sale of goods or services” is not “unwanted or abusive”). Two comments also protest that “there has been no study proving that prerecorded calls are inherently abusive.” Vontoo at 2; Message at 6.

5. Alternatives to the Proposed Amendment

Some of the industry comments continue to urge the Commission to conform the TSR to FCC regulations that permit calls delivering prerecorded messages if a seller has an EBR with the called consumer. A few recommend reconsideration and adoption of the safe harbor for prerecorded message calls that the Commission had originally proposed in response to the VMBC request. Most, however, advocate one or more refinements of the original VMBC safe harbor proposal in an effort to reduce the likelihood that prerecorded calls would be “coercive or abusive.”

a. Comments Arguing that the EBR Exemption Should be the Only Limit on Placing Calls that Deliver Prerecorded Messages, and that the Original Safe Harbor Proposal Should be Adopted

Some industry comments continue to insist that the TSR’s existing EBR exemption from the prohibition against calls to numbers listed on the National Do Not Call Registry should apply equally to live calls and prerecorded calls.

100

They argue that the EBR exemption properly effectuates the purpose of the TSR and the Telemarketing Act by protecting consumers from unwanted cold calls and is critical to businesses.

101

They also reiterate previous assertions that the exemption should apply to prerecorded calls to minimize inconsistency between the TSR and parallel FCC regulations.

102

These contentions, however, were considered and rejected by the Commission when it considered adopting a prerecorded call safe harbor, and there is nothing new in the more recent comments that would warrant reconsideration of the Commission’s previous conclusions.

100

DMA at 1, 3 (the same public policies apply equally to live and prerecorded calls); Xpedite at 4.

101

DMA at 4; IAA at 3-4,

citing

House Report No. 103-20, 1994 U.S. Code Cong. & Admin. News, at 1626. Two cite a December 2005 Harris poll conducted for the FTC in which 92 percent of adults with numbers on the Registry reported receiving fewer telemarketing calls as evidence that the EBR exemption “strikes the appropriate balance” between protecting consumers from unwanted calls and allowing businesses to use a variety of methods including prerecorded messages to transmit marketing offers to their customers. Verizon, No. 588, at 1; Superior at 2.

102

DMA at 6; Verizon at 6-7; Bank of America (“BoA”), No. 572, at 3; National Association of Realtors (“NAR”), No. 101, at 1; TCIM at 1; Commerce Energy Group, Inc., No. 598, at 1. Two comments object that “there normally is no question of ‘call abandonment’ regarding prerecorded message calls,” and therefore that “[

]

prerecorded message calls should be exempted from the call abandonment requirement, or found compliant if the message starts within two seconds.” Verizon, Attach. A, at 4-5 (basing the objection on the lack of “hang-ups” and “dead air” with prerecorded messages, but conceding that there may be a “separate policy reason” for restricting such messages); Beautyrock, Inc. (Body) (“Beautyrock”), No. 12, at 1.

A few industry comments ask the Commission to revisit creation of the EBR-based safe harbor for prerecorded messages it previously proposed in response to the VMBC request.

103

One reiterates the view previously advanced by many in the industry that the safe harbor proposal would protect consumers and “was supported by the record and constituted a useful step in the direction of harmonizing the Commission’s regulations with those of the FCC.”

104

103

CBA at 1; Message at 5;

cf.

NAR at 1-2 (suggesting that the FTC require, as in the safe harbor proposal, a “toll-free number or other means to opt out”).

104

CBA at 8-9. The Commission disagrees that it is obliged to conform its Do Not Call requirements to the parallel requirements of the FCC.

See

71 FR at 58719-20, 58724-25.

Several comments question some of the concerns the Commission expressed in rejecting its original safe harbor proposal. One contends that the evidence in the record that prerecorded messages could pose a health and safety threat is “anecdotal,” and that “any concerns about isolated instances of prerecorded calls tying up a phone line so that emergency calls cannot get through would be completely avoided” by provision of an automated interactive opt-out mechanism.

105

A few industry comments also opined that the Commission is unduly concerned about

the likelihood that a safe harbor for low-cost prerecorded messages could “substantially increase the volume of telemarketing calls,” and that any such concern is “speculative.”

106

Others criticize the NPRM for giving “inadequate consideration” to sellers’ “strong incentives to avoid alienating existing customers with excessive reliance on prerecorded messages.”

107

At least one comment argues that the low cost of Voice over Internet Protocol (“VoIP”) calling “will not engender a significant increase in call volume over today’s levels” because “long distance rates for high-volume users are already extremely low.”

108

105

MinutePoll at 7. The comment also argues that “the record does not indicate that prerecorded calls last any longer or occur any more frequently than live operator calls,” and thus pose no greater threat to health or safety.

Id.

106

CBA at 3; DMA at 5-6 (acknowledging that “it is theoretically possible that there will be a large number of prerecorded messages” because of their lower cost than live calls, but contending, based on discussions with its members, that live calls will continue to exceed prerecorded messages, which are most “useful in specific, targeted applications”).

107

CBA at 3 (citing the low opt-out rate reported in VMBC’s petition as evidence of this self-restraint, and arguing that start-ups and other companies in highly competitive lines of business share the same incentives);

see

IAA at 6 (prerecorded messages are most likely to be sent by established firms, with the strongest incentives for self-restraint, rather than start-ups or fly-by-nights). Two comments assert that “more than 80% of consumers are on the national do not call list,” and this fact deters abuse. MinutePoll at 6; IAC at 3. Another says market research shows that retailers face customer attrition rates of between 33 percent and 50 percent each year, and contends they devote their resources to “targeted marketing that quickly abandons non-productive customers,” rather than to efforts to minimize this attrition by means of low-cost prerecorded calls. SmartReply at 41-42.

108

MinutePoll at 7 (arguing that equipment and facilities charges, “not transmission expenses” are a significant cost factor, but providing no evidence to support that contention);

cf.

Zucker at 1 (arguing that the cost of VoIP “is not any different” from the current cost of long distance service for high-volume users since the largest VoIP providers are all telephone companies “for whom VoIP is replacing their regular [long distance] offering”).

Nevertheless, two industry comments oppose any reconsideration of the original safe harbor proposal. One contends that the FTC was right to reject the proposal as “too unreliable or too burdensome for the consumer,” criticizing its contemplated reliance on live operators to implement company-specific opt-outs in particular.

109

One industry comment goes even further, contending that mainstream interactive message technologies

are

“coercive and abusive,” “[a]s supported by the factual record compiled by the Commission,” explaining:

109

Voxeo at 5;

cf.

Global at 6 (also implicitly criticizing the lack of an automated opt-out requirement).

‘[P]rerecorded message’ telemarketing, as it currently exists, consists largely of one-way audio broadcasts designed to convey information to consumers. Such messages are nothing other than outbound streaming audio files which convert the telephone (traditionally an instrument of two-way communication) into a radio (an instrument for listening). These campaigns are widely regarded as a nuisance and a burden to consumers because consumers are powerless to interact with them.

110

Interactions Corp. (“Interactions”), No. 571, at 1 (adding that mainstream “interactive voice response (IVR) systems [that] rely on either touch-tone input (which severely limits the consumer’s ability to communicate or direct the interaction) or frustratingly ill-equipped voice recognition technologies (which require the consumer to talk using sound bites and keywords that can be recognized by the IVR and in the order and in the fashion dictated by the IVR)” are “generally considered more intrusive and more of an invasion of privacy” primarily “[b]ecause these forms of ‘prerecorded messages’ have no ability to listen to, understand or truly interact with consumers in a natural and conversational fashion”).

Considering this viewpoint and industry’s previous opposition to the original safe harbor proposal, the Commission concludes that the prior safe harbor proposal should not be resuscitated. This conclusion is bolstered by the many divergent industry suggestions for modifying the proposal, discussed immediately below, and, of course, the strong consumer opposition to the original proposal and support for the current proposal.

b. A Modified Safe Harbor Should be Considered

The great majority of the industry comments ask the Commission to revisit and refine its prior safe harbor proposal, rather than adopt the proposed amendment. They argue that a safe harbor for prerecorded telemarketing messages with an interactive opt-out is necessary for businesses to provide many important and convenient messages to consumers who wish to receive them.

111

Although, as the Commission has emphasized, the TSR does not cover purely “informational” messages,

112

the current round of industry comments provides numerous examples of messages that fall within the purview of the TSR because they combine information with a direct or indirect solicitation.

113

111

The industry recognizes that informational messages that include a sales offer are “telemarketing” messages, but argues that such messages provide consumers with “information they desire, in a format they prefer,” DMA at 4; IAA at 2; Message at 6;

cf.

Soundbite at 5 (consumers would be “frustrated” by an “incomplete” message that omitted the sales component to ensure that the message was strictly informational); SmartReply at 39 (purely informational messages would be “less relevant” and consumers would be less happy to get them). At least one argues that a safe harbor is also necessary to prevent a “chilling effect” on informational calls in view of industry “uncertainty as to the regulatory dividing line between informational and telemarketing calls.” Xpedite at 5;

see also

Global at 9 (an up-front keypress opt-out option would “alleviate any ambiguity between an informational message and a promotional message”); NAR at 1; Zucker at 1.

112

71 FR at 58719, 58725.

113

The comments cite such examples as expiration and renewal reminders (

e.g.,

DMA at 4 (magazine subscription); NNA at 2 (newspaper subscriptions); Soundbite at 4; Capelouto at 1; Tiesenga, No. 651 (snow removal service); Wussler, No. 97 (termite inspection); Kelly, No. 457 (bank CD renewal)); airline flight upgrade and rebooking offers (

e.g.,

DMA at 4; IAA at 8-9; Beatty, No. 22; Romoser, No. 426); overdue payment notices with incentives to pay promptly (

e.g.,

DMA at 4; Xpedite at 1; Romoser (overdue mortgage payment offer)); bounced check and overdraft alerts with overdraft protection offers (

e.g.,

Soundbite at 4; Christianson, No. 27); insurance lapse warnings with renewal offers (

e.g.,

CenterPost at 1; Craig, No. 110; Rosato, No. 156); invitations to special retail sales and events (

e.g.,

Draper’s at 1; SmartReply at 8; Long, No. 629; Tiesenga, No. 651); cell phone and wireless plan savings offers (

e.g.

, Soundbite at 4; Carnes, No. 451; Rankin, No. 136); reminders of prior-year purchases (

e.g

., SmartReply at 14 (flowers for birthdays or anniversaries)); ticket offers for musical events (

e.g.,

Shaw, No. 650; Tiesenga, No. 651); car service reminders and lease and warranty expiration offers (

e.g.,

Minkoff, No. 183, at 1; AutoLoop, LLC (Anderson, Steve), Nos. 63, 184, at 1; Cronin, No. 655; VanHaaren, No. 623); lower interest rate offers (

e.g.,

Countrywide at 2 (refinancing); Geyerhahn, No. 153 (refinancing); Knoll, No. 162 (credit card)); time-sensitive sales notifications (

e.g.,

Agranovsky, No. 19 (eBay end-of-bidding alerts); Gutierrez, No. 82 (stock market alerts)); and local promotions (

e.g.,

Simmons, No. 648 (pre-order offer for school photos); Szczepanik, No. 646 (sports league paraphernalia offers)).

In urging the Commission to allow telemarketing calls that deliver prerecorded messages and require that they include an interactive opt-out mechanism,

114

many industry comments propose one or more modifications of the original EBR-based safe harbor proposal to reduce the likelihood that prerecorded calls would be “coercive or abusive.” Several of the comments acknowledge that industry opposition in 2004—on the basis that the required technology to implement the keypress opt-out mechanism would be “costly, burdensome, and not widely available”—was a factor in the Commission’s withdrawal of the original safe harbor proposal.

115

Many accordingly take pains to point out that interactive keypress and voice-activated technologies have become “readily available” and “cost effective,”

116

and therefore contend that a mandatory interactive keypress opt-out requirement would now be “feasible.”

117

114

E.g.,

Bender, No. 62; Haas, No. 76; Kheriaty, No. 44.

115

71 FR at 58725.

E.g.,

Xpedite at 2-3; Voxeo at 6; DMA at 3.

116

E.g.,

IAC at 3; DMA at 3; Xpedite at 3; Global at 8; MinutePoll at 9.

117

DMA at 3; Xpedite at 3. At least one industry comment argues that interactive prerecorded calls allow consumers to assert company-specific opt-outs even more “quickly, effectively and efficiently” than live calls. Schwartz, No. 640, at 3 (citing the test proposed by the Commission for approval of a safe harbor for prerecorded calls in 71 FR at 58718, 58725).

Most of the industry commenters now are willing to support a safe harbor for prerecorded calls to EBR customers that includes an interactive opt-out mechanism utilizing Interactive Voice Response (“IVR”) technology.

118

As summarized below, the industry proposals include recommendations for: (1) refinements in the prompt keypress opt-out requirement; (2) disclosure of the nature of the EBR that permits the call; (3) limitations on the permissible frequency and duration of prerecorded calls; and (4) restrictions narrowing the scope of permissible EBRs for prerecorded calls.

118

Although many of the industry proposals refer to IVR technology,

e.g.

, IAC at 3, this term may be a misnomer, to the extent it suggests that such systems are uniformly capable of responding to a consumer’s voice commands. While some IVR systems may also have “Automated Speech Recognition” (“ASR”) capability that responds to a consumer’s spoken words—the direction in which the technology appears to be evolving,

e.g.,

Voxeo at 6; Interactions at 1—many comments appear to use the term to describe a system limited to accepting a consumer’s telephone keypad input to select a desired option.

i. Prompt Keypress Opt-Out Option

The industry proposals for modifying the original safe harbor begin by suggesting that prerecorded messages be required to provide an interactive keypress or voice-activated mechanism that would allow consumers to make a company-specific opt-out request after the message informed consumers of this option at the outset of the call.

119

They appear to take for granted what only one comment explicitly advocates, that the keypress option should be active throughout the prerecorded message.

120

119

E.g.

, DMA at 1; cccInteractive (Johnson, CJ), No. 159, at 1; Call Command at 4; NNA at 1-2, 6; IAA at 11; VMBC at 2; MP at 2; Xpedite at 2; Voxeo at 6; Zucker, No. 164, at 1. One comment suggests specifying that the opt-out disclosure be delivered within the first 20 seconds of the message. IAC at 7.

120

Soundbite at 13;

see

IAC at 7.

Some comments assert that the simplicity of such a mechanism will make prerecorded messages convenient and efficient for consumers and businesses.

121

Two comments further submit that the prompt availability of such a convenient company-specific opt-out mechanism would prevent prerecorded calls from being “coercive.”

122

One comment notes that such an option would at least alleviate concerns about consumers’ inability to interrupt a prerecorded message to ask to be placed on the company’s do not call list.

123

Another emphasizes that the requirement will create a powerful and “immediate incentive to companies not to abuse prerecorded telemarketing by flooding consumers with a large number of calls of questionable value” because once a consumer opts out, the company will be barred from placing

any

future calls, live or prerecorded, to the consumer.

124

121

DMA at 3; IAA at 2; Superior at 2. Three comments note that voice recognition systems exist that can provide equally convenient opt-out functionality for users of rotary dial telephones. Voxeo at 6 & n.6.; Soundbite at 6 & n.15; Schwartz, No. 640, at 4. It is not clear, however, that these advanced systems are widely in use.

See

IAC at 7 (suggesting that a toll-free number be provided for users of rotary phones);

cf.

Global at 3 (suggesting a toll-free number for messages left on answering machines).

122

Career at 2; MinutePoll at 1.

123

Soundbite at 8. One telemarketer mentions that its prompt opt-out disclosure includes both a keypress option and a toll-free number (for consumers who receive the prerecorded message on their answering machines) that connects to the same automated system used for the keypress opt-out. SmartReply at 5.

124

Soundbite at 13-14.

The comments differ, however, on the precise details of how a prompt keypress opt-out option should function.

125

Most recommend that a single keypress should trigger an automated opt-out, without the intervention of a live operator, so that a “consumer knows with certainty that they have made the request.”

126

However, one comment argues that businesses should have the option of using customer service representatives to take opt-out requests, rather than an automated system,

127

while another seeks the flexibility to require a second keypress to confirm an opt-out request.

128

Likewise, one comment suggests that an automated opt-out keypress should lead directly to immediate termination of the call after a recorded brief acknowledgment of the request,

129

without requiring navigation of any intervening submenus, while another recommends a limit of two layers of submenus.

130

Finally, many of the comments appear to suggest that an automated opt-out request should take effect immediately to prevent any future calls (although most are silent on this point), but one comment recommends that companies be given 30-days to process the request, to allow sellers time to scrub their lists after receiving new opt-outs from third-party telemarketers.

131

125

For example, one comment recommends that a uniform opt-out keypress be required, such as two presses on the “6“ key (which would spell “NO” on the keypad, so that the FTC could advise consumers to “Just Press ‘NO’”). Soundbite at 14. Other comments indicate, however, that different systems may be limited to the use of a single specific key for opt-out requests.

E.g.,

Global at 11(“7” key); MinutePoll at 4 (“9” key); IAC at 3 n.2 (“1” key).

126

DMA at 2; Soundbite at 13 (so consumers can be assured that opt-out is “easy and effective”); Voxeo at 7; Global at 3; Xpedite at 3.

127

IAC at 7 (noting that permissible hold times while waiting for an operator could be limited by the safe harbor).

128

MinutePoll at 8.

129

Soundbite at 13.

130

IAC at 7.

131

IAC at 3 nn.2-3. However, interactive technology apparently exists that allows telemarketers to automatically scrub call lists against recent additions to a seller’s company-specific do not call list.

See

Global at 12.

ii. Express Identification of the EBR

A number of the industry comments recommend adding a provision to a safe harbor for prerecorded message calls that would require an indication that the call is based on an EBR.

132

Two comments appear to contemplate only a brief indication that the consumer is a “customer” or “made an inquiry,”

133

one would go further and disclose “how the [consumer’s] phone number was obtained.”

134

Another comment suggests that, in lieu of a mandatory disclosure, this information could be conveyed via a required keypress option that would trigger an explanation of why the consumer is receiving the message.

135

132

DMA at 1, 3; MinutePoll at 2; MP at 1; SmartReply at 5.

133

DMA at 3; MinutePoll at 2 (“briefly identify the nature of the EBR”)

134

MP at 1.

135

SmartReply at 5.

iii. Call Frequency and Duration Limitations

Several comments indicate that limiting telemarketing to no more than one call a month is regarded, at least by some in the industry, as a “best practice.”

136

Two comments accordingly recommend adding this limitation to a prerecorded call safe harbor, arguing that such a restriction would ensure that prerecorded calls would not be “abusive.”

137

They contend that, in combination with a prompt keypress opt-out option designed to prevent prerecorded messages from being “coercive,” this additional restriction would prevent prerecorded calls from being either “coercive or abusive,” thereby obviating any need or justification for requiring a consumer’s express written agreement to receive prerecorded telemarketing calls.

136

SmartReply at 7;

see

IAC at 3; Career at 1; MinutePoll at 1.

137

MinutePoll at 1; Career at 1.

See

IAC at 6 (suggesting that the Commission could consider this or other limitations on the frequency of prerecorded calls).

Two comments also suggest that limits on the length of prerecorded messages may be regarded as a “best practice.” One indicates that as a “best practice, not only does it limit contact with its client’s customers to once a month, but also limits the average

message length to “about 37 seconds.”

138

Another proposes that the FTC consider such a limitation, and suggests that it be 45 seconds.

139

138

SmartReply at 7;

but cf.

SmartReply Study at 7 (survey results noting that SmartReply recommends a 17 second message);

but see

CenterPost at 2 (reporting an “average call length of over one minute”).

139

IAC at 7;

but see

Global at 19-20 (showing message lengths of from 33 to 93 seconds).

iv. EBR Limitations

Other industry comments propose one or more additional requirements that would restrict the scope of an EBR for prerecorded calls in answer to consumer objections about “calls from sellers that use a one-time, insignificant purchase, or even a mere inquiry, as a license to bombard the consumer with solicitations relating to all aspects of the seller’s business.”

140

Several suggest imposing restrictions on the source of the telephone numbers to which prerecorded calls may be placed.

141

Others advocate that the Commission consider limitations on the number of transactions between the seller and customer to confine the EBR to businesses with which consumers have regular dealings, or from which they would reasonably expect a follow-up to an inquiry or purchase.

142

Two comments also recommend that consideration be given to shortening the 18-month time period in the current EBR definition to 12 months for prerecorded calls.

143

Two other comments suggest that EBR-based prerecorded message calls might be limited to those that are made in response to prior purchases or existing contracts.

144

Finally, one additional comment asks the FTC to consider modifying the National Do Not Call Registry to permit consumers to opt out of all calls from businesses with which they have an EBR,

145

while another advocates a segregation of company-specific opt-out lists that would require consumers to opt out separately from prerecorded calls and live calls, so that businesses could continue to make live calls to EBR customers who only opt out of prerecorded calls.

146

140

Voxeo at 7-8.

141

VMBC at 2 (allowing prerecorded messages only to consumers who provide the seller with their contact information); Soundbite at 15-16 (allowing messages only where the seller obtains the consumer’s number directly from the consumer, and prohibiting calls where the consumer’s number is obtained from a directory, another company, or some other source); Chrysalis Software, Inc. (Ramsey, Greg), No. 79 (prohibiting use of purchased lists); Global at 9 (prohibiting calls to numbers collected in promotional or prize drawings, or obtained from affiliated companies); Valley at 1 (disallowing sale of customer lists to affiliate parties).

142

IAC at 6 (suggesting that the EBR be limited to allow calls only to consumers who have purchased, rented or leased goods or services on two or more occasions within an 18 month period); Voxeo at 4 (proposing that EBR calls only be permitted if the consumer has engaged in “a series of regular transactions” with the seller or if the calls “directly pertain” to a prior transaction).

143

SmartReply at 43 (noting that “[i]n general, our clients only call customers that have transacted in the prior 12 months” because messages “lose relevance” after that time, and that “some states require a 6 month EBR.”

Id.

at 11); IAC at 6;

but see

DMA at 3-4 (the same EBR parameters should exist for both live and prerecorded calls).

144

VMBC at 1 (“a previous purchase or service agreement”); IAA at 11 (“contract renewals” and “proposed changes to existing contracts to address post-contract events and/or changed circumstances”).

145

Call Command at 2 (suggesting that consumers who exercise this option could then consent to receive any EBR calls they wanted). Unfortunately, the significant cost of any such alteration to the Registry precludes that possibility.

146

The Heritage Co. (“Heritage”), No. 581, at 3.

C. Discussion and Analysis of the Safe Harbor Modification Proposals

The question the Commission must consider in determining whether to adopt a revised safe harbor with any of the modifications proposed by the industry comments is whether such a safe harbor would serve the public policy interests articulated in the Telemarketing Act. In making that assessment, the Commission continues to employ the same analytical framework used in considering the prior prerecorded call safe harbor proposal:

147

None of the comments in the current round questions the Commission’s analytical approach in evaluating the prior safe harbor proposal for prerecorded calls.

[T]he Commission’s analysis begins from the premise that a new safe harbor that treats prerecorded telemarketing calls to established customers differently from other prerecorded calls might be appropriate if: (1) The consumer aversion to prerecorded calls (which led to enactment of the TCPA ban on such calls) does not apply when such calls are made to established customers; (2) any harm to consumer privacy is outweighed by the value of prerecorded calls to established customers; or (3) there is something unique about the relationship between sellers and their established customers that gives sellers a sufficient incentive to self-regulate so that they would avoid prerecorded telemarketing campaigns that their customers would consider abusive.

148

71 FR at 58723.

1. Are Consumers Averse to EBR-Based Prerecorded Messages?

We begin, therefore, with the first question for analysis: whether consumer aversion to prerecorded calls does not apply when the calls are made to EBR customers. As the Commission previously stated, if consumers have little or no aversion to prerecorded calls to EBR customers, the fact that such calls avoid the twin harms of “hangups” and “dead air” would weigh heavily in favor of the adoption of a new safe harbor.

149

Id.

Some of the industry comments contend that the proposed amendment improperly treats prerecorded calls as “abandoned,” arguing that they are not “abandoned” because a message is delivered within two seconds of a live answer. Beautyrock at 1; Superior at 1; Verizon, Attach. A, at 5. However, these objections ignore the text of the prohibition, which defines a call as “abandoned” whenever “a person answers it and the telemarketer

does not connect the call to a sales representative

within two (2) seconds of the person’s completed greeting.” 16 CFR 310.4(b)(iv) (emphasis added).

Almost all of the few consumer comments in the record that favored the prior safe harbor proposal for prerecorded calls confined their support for such calls to informational messages,

150

while the industry in effect took the position that the need for such informational messages required blanket approval of prerecorded telemarketing messages to EBR customers without an interactive opt-out mechanism.

151

The Commission therefore took pains to point out that purely informational messages are not “telemarketing” messages covered by the TSR.

152

150

71 FR at 58720 & n.53.

151

See

71 FR at 58719 & n.29.

152

71 FR at 58725.

However, as previously noted, the comments opposing the proposed amendment now emphasize for the first time that the exclusion of purely informational reminder messages from TSR coverage still leaves many convenient prerecorded messages covered by the definition of “telemarketing,” because they are both informational and involve a direct or indirect solicitation.

153

Several industry comments argue that a safe harbor for prerecorded telemarketing messages with an interactive opt-out is necessary for businesses to provide these convenient messages to consumers who wish to receive them.

153

One consumer expresses concern that the industry may turn to the use of “informational” messages that include an option of “finding out more” about a sales offer. Hubbard, No. 115. Such calls would be covered by the TSR as “telemarketing” calls.

Industry commenters argue, moreover, that many of the consumer comments that oppose prerecorded calls should be discounted because they do not specifically state their opposition to prerecorded calls with the various interactive opt-out options that industry members now advocate. The industry would have the Commission parse out the more than 13,000 consumer comments, and ignore those which object to non-interactive prerecorded

message blasting, those which object to receiving any telemarketing calls at all (including prerecorded calls), those which object to the breadth of the EBR definition, and those which object to violations of the TSR.

The industry comments appear to recognize, however, that the majority of consumer comments that oppose prerecorded calls cannot be placed into any of these categories because they do not provide sufficient information to permit such a classification. The industry presumes, instead, that because prerecorded messages with interactive opt-outs were not widely used at the time of the prior comment period, the comments from consumers at that time could not have been addressing them. For that reason, the industry contends that the majority of consumer comments that cannot be categorized could not have been objecting to prerecorded messages with an interactive opt-out, and should be disregarded.

The industry’s critique of the consumer comments ignores the fact that a few prerecorded call telemarketers had been using interactive opt-out technology that consumers may have experienced before the Commission requested public comment on a prerecorded message safe harbor. Industry’s advocacy also overlooks the clear majority of the most recent consumer comments that specifically object to receiving prerecorded calls with an interactive opt-out mechanism. Further, industry neglects to account for a fact not previously placed on the record—that the purportedly quick and easy opt-out provided by an interactive mechanism at most may be accessible by no more than 15 to 20 percent of the consumers who receive prerecorded messages, because at least 80 to 85 percent of these messages end up on consumers’ answering machines, where consumers are powerless to avoid the greater burden of calling the seller in an effort to be placed on an entity-specific opt-out list.

154

See

note 246,

infra

, and accompanying text. Although one industry member states that consumers who receive prerecorded messages on their answering machines and call the toll-free number provided are connected to the same automated opt-out mechanism as those who answer a call, none of the other industry comments indicates that the opt-out mechanism for recipients of answering machine messages would be equally convenient.

See

note 123,

supra,

and accompanying text.

The Commission noted, when it denied the request for a safe harbor for prerecorded messages delivered to EBR customers, that the consumer comments in the record provided “compelling evidence that consumer aversion to prerecorded message telemarketing—regardless of whether an established business relationship exists—has not diminished since enactment of the TCPA, which, in no small measure, was prompted by consumer outrage about the use of prerecorded messages.”

155

The Commission would therefore be hard pressed to ignore the scope and force of that consumer opposition to prerecorded telemarketing messages now—as the industry analysis does—absent compelling evidence that consumers affirmatively support and accept such messages when they provide an interactive opt-out mechanism. The consumer surveys and opt-out rate data submitted by the industry fall short in providing such evidence.

155

71 FR at 58723.

The Minutepoll survey shows that when asked in the abstract, 70 percent of the respondents said that they prefer live telemarketing calls, and only 30 percent said they prefer prerecorded calls.

156

Both the Minutepoll and Forrester surveys purport to show, however, that consumers really prefer prerecorded calls to live calls. For example, Minutepoll reports that when given a choice between a prerecorded call with a “quick option to get on the calling company’s Do Not Call list” and a “live operator call that would not be required to do this,” 68 percent of the respondents said they preferred prerecorded calls and only 32 percent said they preferred live calls.

157

There is reason to doubt, however, that the surveys actually show that consumers affirmatively want to receive prerecorded sales calls. Of the 68 percent of consumers in the more in-depth MinutePoll survey who said they would prefer a prerecorded message with a “quick DNC opt-out,” 33 percent directly attributed that choice to their ability to stop future calls and 16 percent to their ability to hang up easier or without guilt. Thus, when forced to choose between an opt-out option with prerecorded calls and no such option with live calls, 33 percent of those who said they prefer prerecorded calls may have been misled by the survey to believe that accepting a prerecorded call was the only way to stop such calls and another 16 percent did not want to listen to the call at all.

158

Thus, neither the Minutepoll nor Forrester results convincingly demonstrate that consumers want prerecorded calls.

156

See

note 81,

supra

, and accompanying text. The Commission notes that, by asking whether consumers would rather receive prerecorded message calls or calls from a sales agent, both the MinutePoll and Forester surveys may have led survey respondents to presume that they were being asked to choose between an equal number of prerecorded calls and sales agent calls. The choices of those who said they would prefer prerecorded calls might have changed if they understood they could receive a greater number of pre-recorded calls than sales agent calls.

157

See

note 82,

supra,

and accompanying text;

cf.

note 85,

supra

, and accompanying text (Forrester data).

158

MinutePoll, Exh. A, at 2. Similarly, of the 30 percent of consumers who initially said they preferred prerecorded calls when asked “in the abstract,” more than half (54 percent) said the reason for this preference was that they could easily hang up on the prerecorded calls. This might indicate that at most 15 percent of the survey respondents may actually have wished to receive prerecorded calls.

Id.

The Silverlink Survey appears to confirm what the other two surveys suggest—that at best a comparatively small minority of consumers affirmatively appreciate receiving prerecorded telemarketing calls.

159

More importantly, the Silverlink Survey, which was submitted to show greater consumer acceptance of prerecorded healthcare messages than of other telemarketing messages, demonstrates that consumer acceptance of prerecorded messages varies dramatically depending on the subject matter of the message. By overwhelming margins, survey participants said they would be unwilling to listen to a prerecorded credit card offer at discounted rates (91 percent) or an offer of discounted vacation travel packages (87 percent), whereas only 41 percent said they would be unwilling to listen to a healthcare-related prerecorded telemarketing call.

160

159

It is noteworthy that 78 percent of the Silverlink Survey participants reported that they actually received an automated call within the preceding 12 months. Silverlink Survey, Attach. A at 2.

160

Silverlink Survey at 5 & n.14. The fact that as many as 41 percent of the survey participants said they would be unwilling to listen to healthcare-related messages indicates that the high satisfaction rates (89-94 percent) reported in the CenterPost surveys can best be attributed to the fact that only customers who responded to the prerecorded call were surveyed.

Thus, far from providing compelling evidence of consumer acceptance of prerecorded telemarketing messages with an interactive opt-out option, the industry surveys manifest widespread consumer disaffection with such calls. With these surveys as background, the other evidence proffered by the industry to show consumer approval of prerecorded messages—opt-out rates and consumer actions in response to prerecorded messages—is not only indirect, but singularly unpersuasive.

As previously noted, most of the industry claims about low opt-out rates fail to provide sufficient information for an assessment of the claims, either because they combined rates for calls that had an interactive opt-out with those that did not, based the rate on

calls that deferred the opt-out information until the end of the call, or failed to indicate whether the rate calculation was based only on calls that were actually answered.

161

The two that did provide sufficient information are exceptional cases, with one providing prerecorded calls offering casino discount promotions and the other notifying customers of special sales at “Fortune 500” retailers.

162

In contrast to the low rates cited in the industry comments, the Commission’s law enforcement investigations suggest that interactive opt-out rates for prerecorded telemarketing calls correctly calculated as a percentage of the calls actually answered may range from 10 to 20 percent. The likely reason for the apparently low opt-out rates reported by the industry is that the great majority of consumers probably hang up on prerecorded calls without waiting for information on how to opt out.

163

161

See

note 90,

supra

, and accompanying text.

162

See

note 91,

supra

. The brevity of the messages in the SmartReply study also may have contributed to the unusually low opt-out rates reported.

163

See

note 52,

supra

, and accompanying text.

The fundamental problem with opt-out rates and other indirect measures of consumer acceptance of prerecorded calls is that consumers who do not wish to be bothered by prerecorded telemarketing messages, if they do not simply answer and hang up, may let the message roll over to an answering machine where they can delete it later.

164

The SmartReply study reporting that consumers are 300 percent less likely to call a toll-free number to opt out in response to an answering machine message than to use an interactive opt-out mechanism suggests that consumers are quite averse to non-interactive opt-out mechanisms.

165

It appears more than likely that the percentage who bother to assert an entity-specific opt-out is a small percentage of those who dislike prerecorded telemarketing messages. Similarly, while there is some evidence in the record that consumers who answer prerecorded message calls and listen to them actually make purchases, particularly of healthcare products,

166

this may occur only in a relatively small percentage of the prerecorded calls that are made.

167

164

Only three percent of the customers in the SmartReply study answered the phone and listened to some or all of each of eight monthly calls.

See

note 92,

supra.

165

See

note 92,

supra.

166

See

note 95,

supra

, and accompanying text.

167

None of the industry comments provides data showing both the number of prerecorded calls made and the number of sales resulting from those calls.

After a careful review of the record in its entirety, it is the Commission’s considered opinion that the evidence shows that a substantial majority of consumers dislike telemarketing calls that deliver prerecorded messages, with or without an EBR or even an interactive opt-out mechanism, but that a comparatively small minority of consumers may, in fact, appreciate the convenience of EBR-based prerecorded calls when they provide an interactive opt-out mechanism, at least in some circumstances.

168

While a precise percentage cannot be determined from the information in the record, the record evidence suggests that at least 65 to 85 percent of consumers do not wish to receive prerecorded telemarketing calls.

169

In fact, these percentages would likely have been higher, perhaps significantly higher, if the MinutePoll survey had given participants the choice of receiving

prerecorded calls without their consent. Consequently, the first potential rationale for creating a new safe harbor for interactive prerecorded telemarketing calls is not supported by the record.

168

At least three consumers opposed to the proposed amendment say that prerecorded messages benefit them because the same offers might get lost or go unread in the volume of junk mail they receive. Knoll, No. 162; Kelly, No. 457; DeSimone, No. 161;

see

Harvey, No. 186;

cf.

Beebe, No. 62. Other consumers equate prerecorded messages with the junk mail and spam they receive and believe that the volume of prerecorded calls will grow overwhelming unless restrictions are placed on such calls.

See

Wallace, No. 375 (gets “way too much junk mail also”); Brady, No. 569 (already gets “more than enough. . . junk mail and internet spam”); Leach, No. 311 (gets “so much junk mail everyday, isn’t that enough?”).

169

See

notes 156-158

, supra,

and accompanying text. Although the 2005 AARP survey similarly indicated that 84 percent of sampled consumers with numbers on the Registry considered telemarketing calls “irritating” or invasive of “my privacy,”

see

note 35,

supra

, the Commission does not rely on that survey because it inquired about all “telemarketing” calls, not just prerecorded calls.

2. Is Harm to Privacy Outweighed by the Value of Prerecorded Calls?

The entire record in this proceeding is clear that an overwhelming number of consumers hate prerecorded calls, and consider them a gross invasion of their privacy at home. Although the record also now contains some limited evidence of consumer willingness to accept some telemarketing calls that deliver a prerecorded message and include an interactive opt-out mechanism, only a small minority of consumers say they want to receive such calls.

170

There is clear consumer support in the record for prerecorded informational messages that are not prohibited by the TSR—

i.e.

, messages that do not include a sales pitch or information about how to make a purchase. In contrast, there is scant consumer support for interactive prerecorded telemarketing messages that combine an informational component and a sales component, or provide only a sales pitch.

170

See

note 53,

supra

(2 percent of consumer comments oppose a written agreement requirement). If the previous consumer comments did not think to object specifically to calls from businesses with which the consumer has an EBR,

see

note 56,

supra

, and accompanying text, that oversight is hardly a reliable indication that the commenters would welcome EBR calls in some circumstances, as an industry comment asserts.

See

note 57,

supra

, and accompanying text.

The relatively few consumers who want to receive interactive prerecorded telemarketing messages primarily say they value such messages because they find them a “useful” convenience in their busy lives, or because they regard them as less invasive than live conversations with a telemarketer. The greater majority who object to prerecorded telemarketing messages in general, or to interactive messages in particular, consider them an intrusive and disruptive invasion of their privacy at home that amounts to harassment.

Any argument that the harm of an invasion of privacy is outweighed by the value of prerecorded telemarketing messages as a “useful” convenience, or their value as a means of avoiding the possible discomfort of conversing with a telemarketer, would be untenable unless the privacy invasion were relatively minor. For the great majority of consumers, however, the ringing of the telephone is anything but a minor invasion of the privacy of their homes, particularly when the call they answer converts a two-way instrument of communication into a one-way broadcast of a prerecorded advertisement, even if that broadcast has some interactive features.

The Commission is satisfied that there is nothing new in the record that would warrant a different conclusion on this issue than it reached before in denying the VMBC request for a safe harbor for prerecorded messages with an interactive opt-out mechanism. The fact that the record now includes evidence that some consumers would find interactive prerecorded messages useful does not outweigh the significant harm to the privacy interests of consumers, as attested by the great majority of consumer comments in the record and by the survey data submitted. This argues for choice in this matter—to allow those consumers who want such calls to consent to receive them, while protecting the large majority who deplore them from having to receive and opt out, one by one, from each seller’s

call list. Thus, the second potential rationale for adoption of a safe harbor for interactive prerecorded telemarketing calls is not supported by the record. That fact, as the Commission previously noted, “assumes particular importance in view of Supreme Court precedent that has long recognized the significant governmental interest in protecting residential privacy.”

171

71 FR at 58723.

The Commission emphasizes that this conclusion is by no means solely the result of the relative percentages of consumers who say they oppose or support prerecorded telemarketing messages, or who do or do not perceive that their privacy at home is harmed by receiving them. The conclusion is influenced in no small part by the considerable value Congress clearly attached to preserving the privacy of citizens in their homes when it enacted the Telemarketing Act, and specifically directed the Commission to “include in [the TSR] a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of such consumer’s right to privacy.”

172

15 USC 6102(a)(3)(A). This directive appears consistent with the previously expressed intent of Congress, as stated in the preamble to the TCPA, that “banning . . . automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call . . . is the only effective means of protecting telephone consumers from this nuisance and privacy invasion.” TCPA, Pub. L. No. 102—243, 105 Stat. 2394 (1991) at § 2(12).

3. Do Sellers Have a Strong Incentive to Avoid Abuses?

The third potential rationale for creation of a new safe harbor as indicated in the NPRM is that sellers might self-regulate the number of prerecorded messages they send in order to preserve the goodwill of established customers. The Commission determined that this consideration could not support such a safe harbor. Some industry comments submitted in response to the NPRM challenge this determination, but not persuasively. The Commission previously concluded that: (1) While well-established businesses with brand or name recognition may have incentives to exercise restraint, the same is not necessarily true for new entrants or small businesses in highly competitive markets; (2) A safe harbor for prerecorded calls would expose consumers to prerecorded calls from every seller from whom they had made a single purchase within the past 18 months; (3) Sellers would have less incentive to exercise self-restraint with respect to customers who make inquiries, because they would have no existing customers to lose, but only customers to gain; (4) The likelihood that industry-wide self-restraint would be effective requires consideration of the industry’s record of compliance; (5) Although overall compliance is quite good, not all covered entities are complying, and that fact presents a particular problem with respect to consumer concerns about the breadth of the industry’s interpretation of what constitutes an EBR; and (6) The significantly lower cost of prerecorded telemarketing calls, compared to live calls, will create economic incentives to increase the number of prerecorded telemarketing calls consumers receive in their homes.

173

71 FR at 58723-24.

Some in the industry assert that the Commission gave “inadequate consideration” to the argument that sellers have strong incentives to avoid alienating existing customers, 80 percent of whose telephone numbers may be listed on the Registry. These comments argue that because the availability of an interactive opt-out mechanism could easily lead to the loss of the right to contact many EBR customers by telephone, sellers would exercise caution in using prerecorded messages.

174

The Commission believes it did give appropriate weight to these considerations, however, when it explicitly acknowledged that sellers with brand or name recognition may have sufficient incentives to exercise restraint in placing prerecorded telemarketing calls to their customers.

175

174

See

note 107,

supra

, and accompanying text.

175

71 FR at 58723.

Some industry comments further criticize the Commission’s concern about whether new entrants and small businesses in highly competitive markets would have sufficient incentives to exercise the same self-restraint, contending that they share the same incentives and are less likely than established businesses to use prerecorded telemarketing calls.

176

This criticism ignores the powerful economic incentives for new entrants and small businesses to seek to grow their businesses. The Commission considers it noteworthy that none of the industry comments challenged its conclusion that sellers would have less incentive to exercise self-restraint with respect to consumers who make an inquiry that creates an EBR, and thus are potential customers, rather than existing customers.

177

176

See

note 107,

supra

177

71 FR at 58723-24.

Based on the entire record and its enforcement experience, three considerations lead the Commission to conclude that, if anything, it may have overestimated the incentives for industry self-restraint in the use of prerecorded telemarketing messages. First, any such self-restraint is called into question by the more than 100 consumer complaints a month that the Commission has been receiving about prerecorded telemarketing calls—the fifth highest number of all TSR violation complaints.

178

Second, the Commission’s recent law enforcement investigations and cases provide evidence that millions of prerecorded calls are being made to numbers on the Registry, and that many of these calls are abandoned if a consumer answers the telephone.

179

Third, two facts about which the Commission was not previously aware—an industry analysis showing that consumers are 300 percent less likely to opt out from an answering machine message that provides a toll-free number than from a prerecorded call that has an interactive opt-out mechanism,

180

and industry reports that between 80 and 85 percent of prerecorded messages end up on answering machines

181

—suggest that sellers may have little reason to be overly concerned about losing EBR customers from too frequent use of prerecorded telemarketing messages since most consumers do not bother to call back to opt out after retrieving such messages. This data also suggests that the relatively low opt-out rates reported in the industry comments may be more a function of the relatively small percentage of such calls answered by a

consumer rather than an answering machine. Thus, the supposed incentive for industry self-restraint created by the availability of an interactive opt-out mechanism is liable to be less effective than it previously appeared.

182

178

Consumers filed more than 1200 complaints about prerecorded calls with the Commission from January 1 through December 31, 2007.

179

E.g., FTC v. Voice-Mail Broad. Corp.

, No. 2:08-cv-00521 (C.D. Cal. Feb. 8, 2008) ($3 million civil penalty for failing to comply with the FTC’s enforcement forbearance policy in delivering prerecorded messages;

i.e.

, abandoning over 46 million calls, that provided no opt-out option to consumers who answered);

United States v. Guardian Commc’n., Inc.

, No. 4:07-04070 (C.D. Ill. Nov. 15, 2007) ($7.8 million civil penalty for automated prerecorded message blasting to up to 20 million numbers a day, many of which were placed to numbers on the Registry, and for abandoning calls answered by a person);

United States v. Craftmatic Indus., Inc

., No. 07-4652 (E.D. Pa. Nov. 8, 2007) ($4.4 million civil penalty for hundreds of thousands of calls to numbers on the Registry and for abandoning millions of calls); Global Mort. Funding, Inc., No. 07-1275 (C.D. Cal. filed Oct. 30, 2007) (complaint alleging hundreds of thousands of calls to numbers on the Registry, and abandoning many calls answered by a consumer).

See also

note 15,

supra

180

See

note 92,

supra

181

See

note 246,

infra

, and accompanying text.

182

The annual 33 to 50 percent customer attrition experienced by retailers, SmartReply at 41, would appear to provide a strong incentive to use prerecorded calls to make sales before the attrition occurs, whereas opt-out rates are so low as to provide little incentive for self restraint.

A number of comments also object to the Commission’s consideration of the industry’s record of compliance with the TSR in assessing the likelihood that industry-wide self-restraint would be effective. They argue, in essence, that it is unfair to judge industry members who try to comply with the law by the actions of bad actors who are unlikely to comply with any TSR requirement unless brought to account by law enforcement action.

183

This argument would have greater force were it not for the fact that, as some in the industry have privately acknowledged, a few industry submissions show,

184

and the Commission’s law enforcement experience demonstrates,

185

it was not until late in 2006 that many finally began to comply with a key requirement of the enforcement forbearance policy for prerecorded calls announced by the Commission in November 2004, by telling consumers how to opt out at the outset of the call, rather than at the end of the message.

186

The Commission’s consideration of this issue has focused more narrowly, however, on the fact that the industry compliance record presents a particular problem with respect to consumer concerns about the breadth of the industry’s interpretation of what constitutes an EBR, as the consumer comments and the Commission’s enforcement experience have indicated.

187

183

See

Charles Duhigg,

Bilking the Elderly with a Corporate Assist

, N.Y. Times, May 20, 2007, at A-1 (reporting that, since the start of 2006, “federal agencies have filed lawsuits or injunctions against at least 68 telemarketing companies and individuals accused of stealing more than $622 million”).

184

Message at 2-3 (message scripts with opt-out at end of call); Draper’s and Damon’s (message script with opt-out at end of call).

185

FTC v. Voice-Mail Broad. Corp.

, No. 2:08-cv-00521 (C.D. Cal. Feb. 8, 2008) ($3 million civil penalty, with all but $180,000 suspended due to inability to pay, for law violations including failure to provide consumers who answered prerecorded calls with an opportunity, at the outset of the message, to opt out). This violation was somewhat surprising since it was VMBC that first advocated a safe harbor for prerecorded messages with an interactive opt-out opportunity at the outset of the message.

186

69 FR at 67290 (requiring,

inter alia

, a disclosure of the opt-out mechanism provided at the

outset

of a prerecorded call) (emphasis added). The argument would also be more compelling if the record did not include consumer complaints about prerecorded calls from well-established businesses with brand or name recognition.

See

notes 19-21,

supra,

and accompanying text.

187

71 FR at 58724 & n.91,

citing United States v. Columbia House Co.

, No. 05C—4064 (N.D. Ill. filed July 14, 2005) ($300,000 civil penalty settlement for alleged calls to tens of thousands of numbers on the Registry to consumers who last made a purchase from the defendant far outside the prior 18-month period during which the EBR exemption would have applied). The Commission has no reason to believe that narrowing the EBR definition would succeed in protecting consumer privacy, and would eliminate the problems addressed by the proposed amendment. Such an approach would have the undesirable effect of reducing the ability of businesses to communicate with their EBR customers with live calls.

Finally, the industry challenges consumer and Commission concerns that industry-wide self-restraint would be unlikely to prevent an increase in prerecorded telemarketing calls as “speculative” and “not supported by the record,” notwithstanding an industry comment acknowledging that such an increase is “theoretically possible.”

188

Even if it is true, as industry comments argue,

189

that VoIP is unlikely to reduce call transmission costs much below current long-distance rates for high volume users, industry cannot (and does not) dispute that prerecorded message telemarketing is significantly less expensive for sellers than live telemarketing conducted by sales agents. While any forecast of likely future events may be unavoidably “speculative” to some degree, it is only reasonable to expect that the prospect of labor cost savings would increasingly lead sellers to convert as much live telemarketing as possible to prerecorded calls.

188

See

note 106,

supra

, and accompanying text. The Commission is not persuaded that it should ignore the basic economic principles which led to its concern, and rely instead on vague industry assurances, based on anecdotal evidence, that prerecorded calls “are most useful in specific, targeted applications” to conclude that an increase in prerecorded calls would not occur if a safe harbor were created.

189

See

note 108,

supra

, and accompanying text.

Because the record does not provide persuasive support for any of the three potential justifications for according special treatment to interactive prerecorded telemarketing calls to EBR customers, there is no justification for creation of a safe harbor for such calls. Accordingly, the Commission has decided not to reconsider its previous denial of the VMBC request for a safe harbor.

D. The Proposed Amendment

As discussed earlier in this notice, the October 2006 NPRM proposed and sought public comment on an amendment to the TSR that would permit prerecorded telemarketing calls only to consumers who provided their express written agreement to receive them.

190

This proposal was based in large measure on the extensive record of strenuous consumer opposition to the VMBC request for a safe harbor for prerecorded calls. In proposing the amendment to make explicit the prohibition of calls delivering prerecorded telemarketing messages when answered by a consumer that is implicit in the TSR’s call abandonment prohibition,

191

the Commission emphasized that the Telemarketing Act directs the FTC “to include in [the TSR] a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of such consumer’s right to privacy.”

192

The Commission further concluded that “the present record supports a finding that a reasonable consumer would consider prerecorded telemarketing calls coercive or abusive of such consumer’s right to privacy,”

193

but specifically requested public comment on that issue.

194

190

71 FR at 58726-27.

191

16 CFR 310.4(b)(1)(iv) (prohibiting call abandonment, and defining call abandonment as a failure to connect a call to a sales representative within two seconds of the completed greeting of the person who answers).

192

71 FR at 58726.

193

194

71 FR at 58733.

1. Discussion and Analysis of the Proposed Amendment

Consumers find non-interactive prerecorded calls abusive because they are powerless to interact with a recording.

195

For this reason, most of the industry comments apparently accept that a reasonable consumer would consider non-interactive telemarketing message calls “coercive or abusive of such consumer’s right to privacy.”

195

71 FR at 58723.

The industry comments strongly contest, however, the Commission’s authority to prohibit the delivery of prerecorded telemarketing messages that provide an

interactive

opt-out mechanism without a consumer’s prior written agreement to receive them. They primarily argue that interactive messages are significantly different from non-interactive messages because consumers are not “powerless” to prevent privacy abuses from prerecorded message calls that provide an interactive opt-out mechanism. The industry comments therefore contend that it would be unreasonable for consumers to consider such messages abusive of their privacy.

The Commission does not find this argument persuasive. As the Commission noted when it amended the TSR to establish the Registry, “the company-specific approach is seriously inadequate to protect consumers’ privacy,” not only from calls from a single telemarketer, but especially when the volume of telemarketing calls from multiple sources is so great that “consumers find even an initial call from a telemarketer or seller to be abusive and invasive of privacy.”

196

Consequently, reasonable consumers may very well experience even telemarketing calls that deliver a prerecorded message but include an interactive entity-specific opt-out as coercive and abusive of their rights to be left alone in their own homes. Such a conclusion might be particularly justified if an overall increase in the number of such calls were anticipated because of their low cost; but it would not be unreasonable even if no such increase were anticipated, given the evidence in the record that interactive opt-out mechanisms do not always work,

197

and can be just as ineffective and burdensome for consumers as the entity-specific opt-out procedures criticized in the Commission’s decision to create the Registry.

198

196

68 FR at 4629-30.

197

See

Section II.A.4,

supra

198

68 FR at 4629.

Second, the industry argues that the record cannot support a finding that interactive prerecorded messages are “coercive or abusive” because the consumer comments submitted during the initial comment period in 2004 do not explicitly object to

interactive

messages. For the reasons previously discussed, the Commission finds this argument unpersuasive.

199

In this regard, the most telling evidence in the record is the industry survey results showing that a significant majority of consumers do not want to receive interactive prerecorded messages.

200

Thus, the Commission concludes that the preponderance of the evidence on the record as a whole supports adoption of the proposed amendment.

201

199

See

the discussion in Section II.B.1,

supra

200

The Commission notes that the fact that a clear majority of consumers do not want to receive interactive prerecorded telemarketing messages does not necessarily compel a finding that a reasonable consumer would consider such messages “coercive or abusive,” any more than the fact that a minority may want to receive such messages would compel the opposite conclusion. The standard is an objective one, which requires the Commission to determine, from the perspective of a “reasonable consumer,” whether such a consumer “would consider” prerecorded telemarketing messages to be “coercive or abusive.”

201

Two additional industry arguments are based on a misunderstanding of the applicable evidentiary standard. According to these arguments, no conclusion can be drawn that reasonable consumers could consider such calls coercive or abusive of their right to privacy absent a study proving that interactive prerecorded message calls are abusive, or because there is a “subset” of consumers who say they want to receive such messages.

See

notes 98-99,

supra

, and accompanying text.

Having reviewed the entire record, the Commission concludes that the reasonable consumer would consider interactive prerecorded telemarketing messages to be coercive or abusive of such consumer’s right to privacy. The mere ringing of the telephone to initiate such a call may be disruptive; the intrusion of such a call on a consumer’s right to privacy may be exacerbated immeasurably when there is no human being on the other end of the line. The Commission is inclined to agree that prerecorded telemarketing messages, whether interactive or non-interactive, convert the telephone from an instrument for two-way conversations into a one-way device for transmitting advertisements, as one industry comment notes. The Commission believes that the other narrowly focused industry arguments to the contrary disregard the intrusiveness and disruptiveness of calls delivering prerecorded messages, and seriously underestimate the very high value consumers place on their privacy at home.

In reaching this conclusion, the Commission remains mindful of industry concerns about the impact of this determination, and appreciates the potential consequences for law-abiding industry participants. For this reason—and out of consideration for the minority of consumers who may wish to receive prerecorded messages—the Commission declines to adopt the suggestion of two consumer groups that prerecorded telemarketing calls be banned completely.

202

Also for this reason, the Commission is adopting a number of provisions industry commenters have advocated to mitigate the burden of implementing the amendments the Commission is adopting, as discussed below.

202

AARP at 4; PRC at 5.

The Commission is also mindful of the legitimate interests of both sellers and consumers in communicating immediately following a sale. The Commission therefore wishes to emphasize that prerecorded messages communicating delivery or service dates or times, and similar information, are informational calls that fall outside the ambit of the TSR’s regulation of “telemarketing.” Thus, sellers may continue to use prerecorded messages for those purposes without restriction.

Finally, the Commission notes that it is aware that the technology used in making prerecorded messages interactive is rapidly evolving, and that affordable technological advances may eventually permit the widespread use of interactive messages that are essentially indistinguishable from conversing with a human being. Accordingly, nothing in this notice should be interpreted to foreclose the possibility of petitions seeking further amendment of the TSR or exemption from the provisions adopted here.

2. Commenters’ Suggestions for Revisions to the Proposal

The public comments on the proposed amendment urge several revisions that the Commission has taken into consideration in refining it. The comments variously advocate: (1) modification of the requirement for a signed, written agreement to give sellers greater flexibility in obtaining consumer consent to receive prerecorded message calls; (2) clarification of what disclosures sellers must make when obtaining a written agreement from a consumer; (3) reconsideration of whether the amendment should apply to messages left on answering machines; and (4) other technical revisions.

a. Suggested Modifications of the “Written Agreement” Requirement

Several industry comments request modification of the “written agreement” requirement of the proposed amendment to mitigate compliance burdens. Because “much commerce occurs over the Internet, by phone, and in other simple formats without writing and without a clear signature,”

203

several comments urge the Commission to modify the proposed amendment to give businesses greater flexibility in obtaining the required agreement from consumers to receive prerecorded message calls.

204

Specifically, several ask that the amendment be modified so that the agreement need not be in writing,

205

and so that an old-fashioned,

pen-to-paper signature not be required.

206

Another contends that the amendment should require no more than that the seller or telemarketer “document a consumer’s intent to be called.”

207

203

DMA at 8;

cf.

Voxeo at 9 (“[W]ith the widespread use of the Internet and other platforms for electronic or long-distance shopping,” many transactions never leave “the confines of cyberspace”).

204

DMA at 8; IAA at 11; IAC at 8; SmartReply at 23, 28 (seeking “liberalizing” of “the definition of express consent” so that it can be obtained “with minimal effort and minimal commitment”); Call Command at 5 (requesting “a less restrictive approach to obtaining a consumer’s express consent”).

205

E.g.,

DMA at 9; IAA at 11; NNA at 5 (permit “oral consent”); SmartReply at 28 (no “burdensome document or contract”); SMG Group, LLC (Grossman, Steven), No. 613 at 1 (“a more reasonable measure would be to require verbal or even electronic consent”).

206

E.g.,

DMA at 9; Schwartz at 5 (contending that the signature requirement is “too burdensome for businesses to implement and will prevent [use of] interactive telemarketing calls”);

see

IAA at 4-5, 8.

207

Call Command at 5.

Similarly, a number of comments request clarification that the E-SIGN Act applies not only to the signature requirement of the proposed amendment,

208

but also to the “written agreement” requirement.

209

Several comments assert that E-SIGN permits an on-line means via website or email of obtaining a consumer’s agreement;

210

a telephone keypress authorization;

211

a recording of oral agreement given during a call;

212

or an oral agreement given during a call with third-party verification.

213

Other comments without reference to E-SIGN urge the Commission to permit a check-box on a return postcard without a signature,

214

an unsigned application on which a consumer provides his or her telephone number,

215

or an in-store disclosure by a consumer of his or her telephone number in response to a sales agent’s request.

216

208

E.g.

, SmartReply at 33; Countrywide at 2;Vontoo at 2; Voxeo at 9.

209

Call Command at 6 (“With respect to consents obtained through e-mail and the Internet, it is assumed that the answer is straightforward—

i.e.

, such methods of consent are clearly considered written consents under the Federal E-SIGN Act”).

210

Id.

; Voxeo at 9; Call Command at 5-6; DMA at 9; Vontoo at 2; Third Party Verification, Inc. (“Verification”), No. 134, at 1; Draper’s at 1; Booking Angel (McEvoy, Dean), No. 121, at 1; Healthcare Technology Systems (Mundt), No. 103 at 1; Zucker at 2. A few consumers who oppose the amendment agree.

E.g.,

Eapen, No. 57; Kaushik, No. 48; Shimko, No. 502.

211

Countrywide at 2; Global at 11; Call Command at 5; SmartReply at 15;

See also

Strang, No. 189, at 4 (recommending that in lieu of

an express written agreement requirement, sellers be required to maintain documentation that provides “clear and convincing evidence” of a consumer’s consent to receive prerecorded calls, including “the name of the party giving permission, the telephone number that the advertiser may call, proof that the recipient was informed that prerecorded messages would be used, and the date that permission was given”).

224

DMA at 9.

See also

, Vontoo at 3 (also advocating a “clear and conspicuous” disclosure and adding that a “non-deceptive” disclosure should also be required).

225

Career at 5.

Consumers who address the issue agree that the proposed amendment should specify what must be disclosed to consumers before they give their express written agreement to receive prerecorded calls, but take a more expansive view of the disclosures that are needed. One consumer advocate asks that the Commission “propose specific rules to ensure the clarity and simplicity of a seller’s invitation to consumers” to provide their express written agreement, and publish the proposed rules for additional public comment.

226

The Commission disagrees that an additional notice and comment period is necessary for this purpose, given the thoughtful comments already provided on this issue.

226

AARP at 6.

Some consumers express concern that sellers’ requests f

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