Proposed Rule2022-10922
Telemarketing Sales Rule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 3, 2022
Issuing agencies
Federal Trade Commission
Abstract
As part of the Federal Trade Commission's ("FTC" or "Commission") regulatory review of the Telemarketing Sales Rule ("TSR" or "Rule"), the Commission issues this advance notice of proposed rulemaking ("ANPR") to seek public comment on whether the Rule should continue to exempt telemarketing calls to businesses, whether the Rule should require a notice and cancelation mechanism with negative option sales, and whether to extend the Rule to apply to telemarketing calls that consumers initiate to a telemarketer (i.e., "inbound telemarketing calls") regarding computer technical support services.
Full Text
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[Federal Register Volume 87, Number 107 (Friday, June 3, 2022)]
[Proposed Rules]
[Pages 33662-33677]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10922]
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FEDERAL TRADE COMMISSION
16 CFR Part 310
RIN 3084-AB19
Telemarketing Sales Rule
AGENCY: Federal Trade Commission.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: As part of the Federal Trade Commission's (``FTC'' or
``Commission'') regulatory review of the Telemarketing Sales Rule
(``TSR'' or ``Rule''), the Commission issues this advance notice of
proposed rulemaking (``ANPR'') to seek public comment on whether the
Rule should continue to exempt telemarketing calls to businesses,
whether the Rule should require a notice and cancelation mechanism with
negative option sales, and whether to extend the Rule to apply to
telemarketing calls that consumers initiate to a telemarketer (i.e.,
``inbound telemarketing calls'') regarding computer technical support
services.
DATES: Comments must be received on or before August 2, 2022.
ADDRESSES: Interested parties may file a comment online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Telemarketing Sales
Rule ANPR, R411001'' on your comment, and file your comment through
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. If you prefer to file your comment on
paper, mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex B), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Benjamin R. Davidson, (202) 326-3055,
<a href="/cdn-cgi/l/email-protection#ee8c8a8f98878a9d8180ae889a8dc0898198"><span class="__cf_email__" data-cfemail="f1939590879895829e9fb1978592df969e87">[email protected]</span></a>, or Patricia Hsue, (202) 326-3132, <a href="/cdn-cgi/l/email-protection#7909110a0c1c391f0d1a571e160f"><span class="__cf_email__" data-cfemail="2e5e465d5b4b6e485a4d00494158">[email protected]</span></a>,
Division of Marketing Practices, Bureau of Consumer Protection, Federal
Trade Commission, 600 Pennsylvania Avenue NW, Mail Stop CC-8528,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission reviews its rules and guides periodically to seek
information about their costs and benefits and their regulatory and
economic impact. The information obtained assists the Commission in
identifying rules and guides it should modify or rescind. Where
appropriate, the Commission combines such periodic general reviews with
reviews seeking information on specific questions about an industry.
On August 11, 2014, the Commission initiated a regulatory review by
publishing a notice in the Federal Register requesting public comment
on the TSR (``Regulatory Review'').\1\ It sought comment on questions
including whether the Rule continues to be necessary and serve a useful
purpose, whether and how the Rule's compliance burdens and costs can be
decreased and its benefits increased, and the impact of changes in the
marketplace and new technologies on the Rule. It also requested comment
on three specific issues; namely, whether the Rule should: (1) Prohibit
the sharing of preacquired account information for any purpose; (2)
enhance protections for negative option and free offers, and apply them
to inbound calls induced by general media advertising; and (3) require
sellers and telemarketers to maintain records of the numbers they dial
in their telemarketing campaigns.
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\1\ 79 FR 46732.
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Having reviewed the record, the Commission is issuing a Notice of
Proposed Rulemaking (``NPRM'') seeking comments on the Commission's
proposal to amend the TSR's recordkeeping provisions and to prohibit
deception in business-to-business telemarketing calls.\2\ The
Commission is also issuing this ANPR seeking comment on whether to
repeal all exemptions regarding telemarketing calls to businesses and
inbound telemarketing of computer technical support services, and
whether the TSR should provide consumers additional protections for
negative option products or services.
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\2\ The Commission addresses the comments on recordkeeping
submitted in response to the Regulatory Review in its proposed NPRM
being published in conjunction with this ANPR.
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II. Background
A. Statutory Basis for the TSR
Enacted in 1994, the Telemarketing and Consumer Fraud and Abuse
Prevention Act (``Telemarketing Act'' or ``Act'') targeted deceptive
and abusive practices in telemarketing. It directed the Commission to
adopt a rule with anti-fraud and privacy protections for consumers
receiving telephone solicitations to purchase goods or services, and
authorized the Commission and state attorneys general or other
appropriate state officials, as well as private persons who meet
certain jurisdictional requirements, to bring civil actions against
violators in Federal district court.\3\
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\3\ 15 U.S.C. 6101-6108. Subsequently, the USA PATRIOT Act,
Public Law 107-56, 115 Stat. 272 (Oct. 26, 2001), expanded the
Telemarketing Act's definition of ``telemarketing'' to encompass
calls soliciting charitable contributions, donations, or gifts of
money or any other things of value.
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In determining whether certain practices that do not fall
distinctly within the parameters of the Telemarketing Act's emphasis on
protecting consumer privacy are ``abusive,'' the Commission has applied
the unfairness analysis set forth in Section 5(n) of the FTC Act.\4\ An
act or practice is unfair under Section 5 of the Federal Trade
Commission Act (``FTC Act'') if it causes or is likely to cause
substantial injury to consumers, if any countervailing benefits to
consumers or competition do not outweigh the consumer harm, and if that
harm is not reasonably avoidable by consumers.\5\
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\4\ Statement of Basis and Purpose and Final Rule Amendments
(``2010 TSR Amendments''), 75 FR 48458, 48469 (Aug. 10, 2010)
(discussing the Commission's use of the unfairness standard in
determining whether a practice is ``abusive''); see also 15 U.S.C.
45(n) (codifying the Commission's unfairness analysis, set forth in
a letter from the FTC to Hon. Wendell Ford and Hon. John Danforth,
Committee on Commerce, Science and Transportation, United States
Senate, Commission Statement of Policy on the Scope of Consumer
Unfairness Jurisdiction, reprinted in In re Int'l Harvester Co., 104
F.T.C. 949, *95-101 (1984)) (``Unfairness Policy Statement'').
\5\ 15 U.S.C. 45(n).
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B. TSR History and Key Provisions
Pursuant to the Telemarketing Act's directive, the FTC promulgated
the TSR on August 23, 1995.\6\ The Commission subsequently amended the
Rule on four occasions: (1) In 2003 to add the National Do-Not Call
Registry and other requirements; \7\ (2) in 2008 to prohibit
[[Page 33663]]
unwanted sales robocalls; \8\ (3) in 2010 to ban the telemarketing of
debt relief services requiring an advance fee; \9\ and (4) in 2015 to
ban the use in telemarketing of certain payment mechanisms widely used
in fraudulent transactions.\10\
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\6\ Statement of Basis and Purpose and Final Rule (``Original
TSR''), 60 FR 43842 (Aug. 23, 1995). The effective date of the
original Rule was December 31, 1995.
\7\ See Statement of Basis and Purpose and Final Amended Rule
(``2003 TSR Amendments''), 68 FR 4580 (Jan. 29, 2003) (adding Do Not
Call Registry and other provisions).
\8\ See Statement of Basis and Purpose and Final Rule Amendments
(``2008 TSR Amendments''), 73 FR 51164 (Aug. 29, 2008) (addressing
the use of robocalls).
\9\ See 2010 TSR Amendments (adding debt relief provisions). The
Commission subsequently published correcting amendments to the text
of section 310.4 the TSR. Telemarketing Sales Rule; Correcting
Amendments, 76 FR 58716 (Sept. 22, 2011).
\10\ See Statement of Basis and Purpose and Final Rule
Amendments (``2015 TSR Amendments''), 80 FR 77520 (Dec. 14, 2015)
(prohibiting the use of remotely created checks and payment orders,
cash-to-cash money transfers, and cash reload mechanisms).
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The TSR applies to virtually all ``telemarketing,'' defined in
accordance with the Telemarketing Act to mean ``a plan, program, or
campaign which is conducted to induce the purchase of goods or services
or a charitable contribution, by use of one or more telephones and
which involves more than one interstate telephone call.'' \11\
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\11\ 16 CFR 310.2(gg) (using the same definition as the
Telemarketing Act, 15 U.S.C. 6106(4)). The TSR, like the
Telemarketing Act, also excludes catalog sales solicitations. Id.
The Act also explicitly states that the jurisdiction of the
Commission in enforcing the Rule is coextensive with its
jurisdiction under Section 5 of the FTC Act. 15 U.S.C. 6105(b).
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The Rule wholly or partially exempts several types of calls from
its coverage. For example, it generally exempts telemarketing calls to
businesses.\12\ It also generally exempts inbound calls placed by
consumers in response to direct mail or general media advertising.\13\
However, there are certain ``carve-outs'' from some of the TSR's
exemptions that bring certain conduct back within the ambit of the
rule, such as the carve-out for calls initiated by a consumer in
response to a general media advertisement relating to investment
opportunities.\14\
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\12\ 16 CFR 310.6(b)(7); See also 2015 TSR Amendments, 80 FR at
77555 (clarifying that the ``business-to-business'' exemption under
310.6(b)(7) applies only to telemarketing calls that are
``soliciting the purchase of goods or services or a charitable
contribution [from a] business itself, rather than personal
purchases or contributions by employees of the business'').
\13\ 16 CFR 310.6(b)(5)-(6). Moreover, the Rule exempts from the
National Do Not Call Registry provisions calls placed by for-profit
telemarketers to solicit charitable contributions; such calls are
not exempt, however, from the ``entity-specific'' do not call
provisions or the TSR's other requirements. 16 CFR 310.6(a).
\14\ See, e.g., 16 CFR 310.6(b)(5)-(6) (provisions related to
general advertisements and direct mail solicitations); 16 CFR
310.2(s) (definition of ``investment opportunity''). The TSR's
definition of ``investment opportunity'' includes anything sold in
part based on a representation of future income. In addition to
traditional passive investments, the definition can also encompass
work-from-home opportunities, real estate seminars, multi-level-
marketing programs, and programs that purport to educate consumers
about the stock market.
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The TSR is designed to protect consumers in a number of different
ways. First, the TSR includes provisions governing communications
between telemarketers and consumers, requiring certain disclosures and
prohibiting material misrepresentations.\15\ Second, the TSR requires
telemarketers to obtain consumers' ``express informed consent'' to be
charged on a particular account before billing or collecting payment
and, through a specified process, to obtain consumers' ``express
verifiable authorization'' to be billed through any payment system
other than a credit or debit card.\16\ Third, the TSR prohibits as an
abusive practice requesting or receiving any fee or consideration in
advance of obtaining any credit repair services; \17\ recovery
services; \18\ offers of a loan or other extension of credit, the
granting of which is represented as ``guaranteed'' or having a high
likelihood of success; \19\ and debt relief services.\20\ Fourth, the
TSR prohibits credit card laundering \21\ and assisting and
facilitating sellers or telemarketers engaged in violations of the
TSR.\22\ Fifth, the TSR, with narrow exceptions, prohibits
telemarketers from calling consumers whose numbers are on the National
Do Not Call Registry or who have specifically requested not to receive
calls from a particular entity.\23\ Finally, the TSR requires that
telemarketers transmit to consumers' telephones accurate Caller ID
information \24\ and places restrictions on calls made by predictive
dialers \25\ and those delivering prerecorded messages.\26\
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\15\ The TSR requires that telemarketers soliciting sales of
goods or services promptly disclose several key pieces of
information in an outbound telephone call or an internal or external
upsell: (1) The identity of the seller; (2) the fact that the
purpose of the call is to sell goods or services; (3) the nature of
the goods or services being offered; and (4) in the case of prize
promotions, that no purchase or payment is necessary to win. 16 CFR
310.4(d); see also 16 CFR 310.2(ee) (defining ``upselling'').
Telemarketers also must disclose in any telephone sales call the
cost of the goods or services and certain other material
information. 16 CFR 310.3(a)(1). In addition, the TSR prohibits
misrepresentations about, among other things, the cost and quantity
of the offered goods or services. 16 CFR 310.3(a)(2). It also
prohibits making false or misleading statements to induce any person
to pay for goods or services or to induce charitable contributions.
16 CFR 310.3(a)(4).
\16\ 16 CFR 310.4(a)(7); 16 CFR 310.3(a)(3).
\17\ 16 CFR 310.4(a)(2).
\18\ 16 CFR 310.4(a)(3). As the Commission has previously
explained, ``[in] recovery room scams . . . a deceptive telemarketer
calls a consumer who has lost money, or who has failed to win a
promised prize, in a previous fraud. The recovery room telemarketer
falsely promises to recover the lost money, or obtain the promised
prize, in exchange for a fee paid in advance. After the fee is paid,
the promised services are never provided. In fact, the consumer may
never hear from the telemarketer again.'' Original TSR, 60 FR at
43854.
\19\ 16 CFR 310.4(a)(4); see 2003 TSR Amendments, 68 FR at 4614
(finding that these three services were ``fundamentally bogus'').
\20\ 16 CFR 310.4(a)(5).
\21\ 16 CFR 310.3(c).
\22\ 16 CFR 310.3(b).
\23\ 16 CFR 310.4(b)(1)(iii).
\24\ 16 CFR 310.4(a)(8).
\25\ 16 CFR 310.4(b)(1)(iv); 16 CFR 310.4(b)(4) (call
abandonment safe harbor).
\26\ 16 CFR 310.4(b)(1)(v).
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C. Legal Standard for Retaining, Amending, or Repealing the TSR
There is a presumption that an existing rule should be
retained.\27\ A decision to retain any portion of a current rule may be
based upon evidence gathered during the original rulemaking and the
Commission's subsequent enforcement experience, as well as evidence
adduced during a new rulemaking.\28\ Moreover, the Telemarketing Act's
rulemaking authorization applies not only to an initial rulemaking, but
also to the amendment or repeal of a telemarketing rule.\29\
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\27\ See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 41-42 (1983).
\28\ Amended Funeral Rule Statement of Basis and Purpose, 59 FR
1592, 1596 (Jan. 11, 1994).
\29\ Federal Trade Commission Organization, Procedures and Rules
of Practice, 16 CFR 1.25. See 15 U.S.C. 553(e); see also 2003 TSR
Amendments, 68 FR at 4583.
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Because of the ``potentially pervasive and deep effect'' of FTC
rules,\30\ the Commission carefully scrutinizes the regulatory review
record to determine whether the record is reliable and provides
sufficient support for undertaking an industry-wide rulemaking or
amendment proceeding. In particular, the Commission routinely evaluates
a number of factors, including the relative costs and benefits of the
Rule, industry compliance, the effect on competition and consumer
choice, its enforcement experience, and the adequacy of case-by-case
law enforcement under the FTC Act to address existing problems that
fall outside the Rule's scope.\31\ In addition, as a responsible
steward of the public funds allocated to it by Congress, the Commission
considers whether a rulemaking or amendment proceeding would serve the
public interest, recognizing the rulemaking process requires a
substantial, long-term investment of the Commission's finite resources
that could otherwise be
[[Page 33664]]
devoted to enforcement actions against rule violators.
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\30\ American Optometric Ass'n v. FTC, 626 F.2d 896, 905 (D.C.
Cir. 1980).
\31\ See, e.g., 2003 TSR Amendments and 2008 TSR Amendments.
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D. Summary of the Regulatory Review Record
The regulatory review record contains 114 unique responsive
comments.\32\ They include: two comments from other law enforcement
agencies; \33\ one comment from a telemarketer; \34\ one from an
industry services provider; \35\ one from a credit card association;
\36\ and ten comments from industry trade associations representing
companies that provide telemarketing services, employ telemarketers, or
make their own telemarketing calls to consumers.\37\ There are three
comments on behalf of 13 consumer advocacy groups,\38\ one from an
academic,\39\ two submissions attaching essentially identical comments
from 2,064 Illinois residents,\40\ and 92 unique comments from
individual consumers.\41\
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\32\ We cite public comments here by the name of the commenting
organization or individual and the comment number. Although the
comment record lists 118 submissions, one is a duplicate, American
Resort Development Association, Nos. 00100, 00101; one is listed
twice, Abrams, No. 00038; one contains a final attachment to a prior
submission, Citizens Utility Board, No. 00037 (supplementing No.
00036); and one is simply a comment period extension request, PACE,
No. 00039, that was granted by the Commission. 79 FR 61267 (Oct. 10,
2014).
\33\ National Assn. of Attorneys General (``NAAG''), No. 00117
(on behalf of the attorneys general from 37 states and one
territory); U.S. Department of Justice (``DOJ''), No. 00111.
\34\ InfoCision Management Corp., No. 00108.
\35\ NobelBiz, Inc., No. 00104.
\36\ Visa, Inc., No. 00109.
\37\ American Bankers Insurance Association (``ABIA''), No.
00106; American Resort Development Association (``ARDA''), No.
00100; Brand Activation Association (``BAA''), No. 00115; Consumer
Credit Industry Association (``CCIA''), No 00098; Direct Marketing
Association (``DMA''), No. 00103; Electronic Retailing Association
(``ERA''), No. 00095; MPA-The Association of Magazine Media
(``MPA''), No. 00116; National Automobile Dealers Association
(``NADA''), No. 00112; Newspaper Association of America (``NAA''),
No. 00099; and the Professional Association for Customer Engagement
(``PACE''), No. 00107.
\38\ AARP, No. 00097; Center for Responsible Lending (``CRL''),
No. 00093; and National Consumer Law Center on behalf of itself and
the Consumer Federation of America, Americans for Financial Reform,
Consumers Union, Consumer Action, Consumer Federation of California,
The Maryland Consumer Rights Coalition, National Association of
Consumer Advocates, U.S. PIRG, Virginia Citizens Consumer Council,
and Consumer Assistance Council, Inc. of Cape Cod and the Islands
(collectively, ``NCLC''), No. 00110.
\39\ The Pennsylvania State University, No. 00114.
\40\ Citizens Utility Board, Nos. 000356 and 00037.
\41\ Aside from the Citizens Utility Board comments, the record
contains 93 consumer comments, but there are duplicate entries for
Abrams, No. 00038. Several consumer comments sought relief from
collection agency calls that the TSR does not cover. See, e.g.,
Gray, No. 00007; Castallo, No. 00128; Wysong, No.00015; Branner, No.
00121; Lehman, No. 00120; and Valdes, No.00014. Several advocate
extending the TSR's do-not-call provisions to cover political,
charity, or survey calls. See, e.g., Wright, No. 00002; Anonymous,
No. 00089; Rosenow, No. 00067; Goodman, No. 00032; and Lehnen, No.
00030.
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III. Regulatory Review: Continuing Need for the TSR
All commenters generally agree on the continuing need for the TSR
but differ in their opinions as to whether amendments are necessary.
Consumers and their advocates largely argue for amendments they believe
will enhance consumer protection including by closing ``loopholes'' in
the TSR, and for more enforcement. Industry representatives, on the
other hand, largely advocate against any amendments, arguing the
current regulatory requirements, coupled with the existence of self-
policing industry organizations, provide consumers sufficient
protections.
A. Consumer Perspective
Consumers and their advocates all support the continuing need for
the TSR. The 2,064 largely identical comments from Illinois consumers
ask the Commission to ``keep and strengthen'' the TSR's consumer
protections that have ``battled telemarketing fraud and deception for
nearly two decades,'' \42\ and four other individual consumers
expressly agree the TSR is still needed and should be retained.\43\
AARP asserts it ``strongly agrees that there is a continuing need for
the [TSR],\44\ and the National Consumer Law Center (``NCLC'') and
other consumer groups state the TSR ``provides important protections
for consumers and clear rules of the road for the telemarketing
industry.'' \45\
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\42\ Citizens Utility Board, Nos. 00036 and 00037; see Rusch,
00046.
\43\ Ashley L., No. 00052 (TSR is ``still greatly needed, in its
entirety''); Leef, No. 00085 (``Please improve--or at least maintain
the status quo''); Wright, No. 00002 (``The Do Not Call registry is
a valuable resource for consumers and should be continued''); West
Italian, No. 00113 at 1 (``We need the TSR, and its enforcement,
more than ever'').
\44\ AARP, No. 00097, at 2.
\45\ NCLC, No. 00110, at 1.
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Comments from two other consumer advocates,\46\ an academic engaged
in relevant behavioral research,\47\ and two state and Federal law
enforcement agencies \48\ state while the TSR is still needed, it is
also in need of improvements. In particular, consumers and their
advocates argue for additional protections. These include heightened
restrictions on the ``data pass'' of preacquired account information
from an initial seller to a third party seller \49\ comparable to those
of the Restore Online Shoppers' Confidence Act (``ROSCA'') for online
transactions,\50\ extending the TSR's requirements to inbound
calls,\51\ and requiring sellers and telemarketers to create and
maintain their own records of the numbers dialed in telemarketing
campaigns to facilitate enforcement by Federal and state agencies and
private lawsuits by injured consumers.\52\
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\46\ CRL, No. 00093, at 1; American Association for Justice, No.
00102, at 1.
\47\ Grossklags, No. 00114.
\48\ NAAG, No. 00117, at 1-2; DOJ, No. 00111, at 1.
\49\ Citizens Utility Board, Nos. 00036 and 00037.
\50\ 15 U.S.C. 8401. ROSCA requires a third-party merchant that
offers add-on products or services after a sale by the initial
seller to obtain billing information directly from the consumer,
rather than from the initial seller, so the purchaser will
understand that there is or will be a charge for any add-on
purchase. See also AARP, No. 00097, at 3.
\51\ Citizens Utility Board, Nos. 00036 and 00037.
\52\ West Italian, No. 00113 at 1; AARP, No. 00097, at 5.
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More than half of the unique individual consumer comments make a
case that more enforcement is needed. They include requests for
enforcement against particular violators,\53\ reports about specific
violations of the TSR,\54\ complaints about continuing unwanted
calls,\55\ demands for more general enforcement of the TSR's Do Not
Call provisions,\56\ appeals for more severe penalties to deter
violations or a ban on all telemarketing,\57\ and concern that
violators are calling with impunity due to inadequate enforcement.\58\
The 2,064 Illinois consumer comments request amendments that: (1)
Require telemarketers to provide recordings of their calls, (2) ban
third-party use of pre-acquired account information, and (3) request
stronger consumer protection against inbound telemarketing calls placed
in response to advertisements.\59\ AARP also notes the number of
telemarketing complaints filed with the FTC and Federal Communications
Commission (``FCC'') has risen
[[Page 33665]]
significantly, and ``a rise in complaints means more need for
enforcement.'' \60\
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\53\ Moody, No. 00094; Smith, No. 00091; Austin, No. 00050;
Pecoraro, No. 00126; Hall, No. 00012; Peterson, No. 00004; Macias,
No. 00123; and Ramseur, No. 00118.
\54\ Buchko, No. 00122; Harr, No. 00020; Branner, No. 00121;
Alabi, No. 00006; Mercurio, No. 00127; Texas Child, No. 00018;
Hines, 00124; Greenwood, No. 00125 Taylor, No. 00022; and Hays, No.
00049.
\55\ Swirsky, No. 00025; Duffield, No. 00021; and Harr, No.
00020.
\56\ Johannsen, No. 00078; Hardy, No. 00071; Boles, No. 00056;
Olson, No. 00027; Taylor, No. 00022; Burton, No. 00005; Kavanaugh,
No. 00041; Love, No. 00068; Bradshaw, No. 00065; Gallagher, No.
00051; Waterbury, No. 00044; Dougherty, No. 00043; Schugardt, No.
00031; McGlinchey, No. 00042; Lennon, No. 00028; Cockerill, No.
00082; West Italian, No. 00113 at 2; Rynearson-Moody, 00029; and
Whi, No. 00017.
\57\ Thompson, No. 00010; Abrams, No. 00038; and Bethea, No.
00016; and Keung, No. 00023.
\58\ Miller, No. 00057; Marcus, No. 00026; Rothenbach, No.
00024; Gindin, No. 00009; Luttrell, 00077; and Karsbaek, No. 00074.
\59\ Citizens Utility Board, Nos. 00036 and 00037.
\60\ AARP, No. 00097, at 5. See also NCLC at 11-12 (applauding
FTC enforcement action targeting robocall facilitators).
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B. Industry Perspective
Industry comments support the continuing need for the TSR and
generally oppose any amendments. As one trade organization observes,
``the FTC's enforcement actions under the Rule have provided industry
with adequate and predictable notice as to what practices the agency
views as acceptable and unacceptable.'' \61\ Another notes ``[i]n its
current form, the TSR has functioned well and continues to serve its
purpose of protecting the customers we serve as well as the operations
of legitimate businesses.'' \62\ The Professional Association for
Customer Engagement (``PACE'') states ``[t]he Rule has had an overall
positive impact on consumers . . . and there is a continuing need for
the majority of its protections.'' \63\
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\61\ BAA, No. 00115, at 2.
\62\ MPA, No. 00116, at 1.
\63\ PACE, No. 00107, at 2; see also CASRO, No. 00105
(``strongly believes there is a continuing need'' for the TSR and
lauding it for preventing harm to consumers and the legitimate
research industry).
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PACE, however, also asserts that while it ``supports strong
enforcement against companies that intentionally violate the Rule's DNC
provisions,'' ``no additional substantive changes are necessary at this
time.'' \64\ The Electronic Retailing Association (``ERA'') agrees ``no
revisions to the TSR are warranted.'' \65\
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\64\ PACE, No. 00107, at 2.
\65\ ERA, 00095, at 2 (the TSR provides ``the FTC with the tools
it needs to prosecute offensive telemarketing behavior''). See also
BAA, 00115, at 2 (the TSR provides a ``robust and effective
regulatory tool with which to investigate and prosecute offensive
telemarketing activities'').
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Most of the industry comments maintain ``the current framework of
laws, regulations, and industry self-regulation adequately covers
telemarketing.'' \66\ The Direct Marketing Association (``DMA'')
stresses ``[a]ny changes to the Rule would have adverse impacts on the
industry and consumers alike,'' \67\ and the Consumer Credit Industry
Association (``CCIA'') states ``[d]ue to the multiple layers of
[Federal and state] regulation and legislation, the industry is in a
precarious position in attempting to comply.'' \68\ PACE similarly asks
that the Commission ``consider the impact other laws and regulations
have had on businesses before adopting any additional regulations of
its own or expanding the reach of current regulations.'' \69\
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\66\ DMA, No. 00103, at 2; see also, e.g, BAA, No. 00115, at 2;
PACE, No. 00107, at 2; ERA, No. 00095, at 2 (likewise supporting the
TSR but opposing any changes).
\67\ DMA, No 00103 at 2.
\68\ CCIA, No. 00098, at 4.
\69\ PACE, No. 00107, at 2.
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Several industry trade associations emphasize the voluntary
compliance steps they have taken by establishing Self-Regulatory
Organizations (``SROs'') to enhance consumer protection. DMA's
Guidelines for Ethical Business Practice (``DMA Guidelines'') \70\ and
the PACE SRO \71\ were created to ensure compliance not only with the
TSR, but also all state telemarketing laws and regulations. DMA asserts
its Guidelines include a ``robust accountability program'' that is
``enforced by DMA's Ethics Committee that ``processes tens of thousands
of complaints annually, and takes action against members and non-
members alike,'' including disclosure of ``cases where companies failed
to conform their practices to industry requirements.'' \72\ The PACE-
SRO accredits contact centers that ``undergo an initial and recurring
onside compliance assessment, and are subject to quarterly data audits
of their outbound calling records, and those that do not comply fail to
obtain accreditation or have their accreditation revoked.'' \73\
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\70\ DMA, No. 00103, at 3-4.
\71\ PACE, No. 00107, at 3-4 (discussing PACE-SRO, available at
<a href="http://www.pacesroconnect.org">http://www.pacesroconnect.org</a>) (last visited Jan. 31, 2022).
\72\ DMA No. 00103, at 3-4; cf. ERA, No. 00095, at 6.
\73\ PACE, No. 00107, at 3-4.
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Both DMA and PACE emphasize that their SRO programs require
compliance not only with telemarketing regulations, but also with
industry ``best practices,'' and that they can amend SRO requirements
to address new technology and other issues more quickly than government
can amend regulations.\74\ The associations ask the FTC to encourage
and support their SRO efforts as a ``strong tool that can assist in
preventing the need for increased regulations.'' \75\
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\74\ DMA, No. 00103, at 3; cf. PACE, No. 00107, at 3 (SROs
``provide greater flexibility for constantly changing business
environments and technologies'').
\75\ ERA, No. 00095, at 7; cf. PACE, No. 00107, at 3 (arguing
``effective SROs are a strong tool that can assist in preventing the
need for increased regulations''); DMA, No. 00103, at 3 (``Self-
Regulation is the Appropriate Approach'').
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The public comments on the record from industry and consumer
stakeholders, as well as the Commission's own law enforcement
experience, persuade the Commission that the TSR continues to serve an
important and useful public purpose. The Commission invites comment on
the specific issues discussed below.
IV. Regulatory Review: Comments on Specific Issues
Commenters also provided responses to the specific issues
identified in the Regulatory Review. The majority of the comments
focused on whether the Rule should: (1) Prohibit or regulate the use or
retention of preacquired account information; (2) enhance protections
for negative option and free offers, and apply them to inbound calls
induced by general media advertising; and (3) require sellers and
telemarketers to maintain records of the numbers they dial in their
telemarketing campaigns.
A. Should the TSR Ban the Data Pass of Preacquired Account Information?
The TSR prohibits the disclosure or receipt, for consideration, of
unencrypted consumer account numbers for use in telemarketing, except
to process a payment.\76\ It also prohibits telemarketers and sellers
from causing a consumer to be charged, directly or indirectly, without
the consumer's express informed consent (i.e. ``unauthorized billing'')
for all transactions, including those using preacquired account
information.\77\ It does not, however, generally bar the transfer or
``data pass'' of preacquired consumer account information from one
seller or telemarketer to a third party seller or telemarketer, unless
doing so results in unauthorized billing.\78\ In 2010, Congress enacted
ROSCA,\79\ requiring a post-transaction third-party seller to obtain a
consumer's ``express informed consent'' to be charged,\80\ and
prohibiting an ``initial merchant'' from disclosing the billing
information of a consumer for use in an internet sale.\81\
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\76\ 16 CFR 310.4(a)(6).
\77\ 16 CFR 310.4(a)(7). The Commission reiterates that Section
310.4(a)(7) is not limited to transactions involving preacquired
account information, but applies to all transactions. See 2003 TSR
Amendments, 68 FR at 4620 (stating the unauthorized billing
provision applies to all transactions and not just transactions
involving preacquired account information).
\78\ 16 CFR 310.4(a)(7); see also 2003 TSR Amendments, 68 FR at
4620 (The Commission considered a general data pass ban on the use
of preacquired account information but instead focused on the harm
resulting from the use of preacquired account information and
included a broader prohibition generally banning unauthorized
billing under Part 310.4(a)(7).).
\79\ 15 U.S.C. 8401.
\80\ 15 U.S.C. 8402(a)(2).
\81\ 15 U.S.C. 8402(b).
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The operating rules of three of the major credit card associations
are consistent with ROSCA in prohibiting any ``disclosure, exchange, or
use'' by and among their merchants of
[[Page 33666]]
preacquired account information for their branded credit, debit and
prepaid cards, except to process payments.\82\ Thus, the card
association rules now require each merchant to obtain a consumer's full
account number directly from the consumer at the time of her first
purchase from the merchant. In light of ROSCA's passage and the
subsequent operating rule changes of the credit card industry, the
Regulatory Review sought comment on whether the TSR should be amended
to generally ban the data pass of preacquired account information.
---------------------------------------------------------------------------
\82\ 79 FR at 46734-35 & n. 34; VISA, No. 00109, at 2.
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AARP's comment expresses the view ``allowing telemarketers to share
information with third parties without consent creates a large loophole
that will allow data collectors and lead generators to . . . harm
consumers by signing them up for products and services they never
intended to purchase or hassling them with unwanted telephone calls.''
\83\ The National Association of Attorneys General (``NAAG'') concurs,
arguing the ``very nature of telemarketing makes the use of preacquired
account information difficult to identify'' and consumers should have
the same protection against unauthorized charges arising from the
exchange of preacquired account information in telemarketing sales as
ROSCA provides in internet sales, because the same consumer confusion
that spurred ROSCA's passage exists in the telemarketing context.\84\
NCLC also supports a ban, and asserts data pass is not necessary to
conduct legitimate business, arguing that such transfers meet the
unfairness test the Commission employs to ban abusive telemarketing
practices.\85\ VISA likewise urges the Commission to consider
``[h]armonizing the TSR with ROSCA'' to ensure data pass in
telemarketing is not just prevented by the credit card associations and
cannot ``migrate to other forms of payment to the detriment of
consumers.'' \86\
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\83\ AARP, No. 00097, at 3; see also Rusch, No. 00046; Beverly
Anne, No. 00066; Tripp, No. 00063; and West Italian, No. 00113, at
2.
\84\ NAAG, No. 00117, at 4; AARP, No. 00097, at 3, 5.
\85\ NCLC, No. 00110, at 4-5 (citing the harm from data pass
that consumers cannot avoid and the lack of benefits to consumers or
competition).
\86\ VISA, No. 00109, at 4.
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Industry advocates do not recommend adding a data pass ban to the
TSR. The Association of Magazine Media (``MPA'') asserts that in the
wake of ROSCA and the credit card rules, ``usage of the data pass
process has declined steadily,'' and suggests that ``concerns regarding
deceptive or unfair transfers of preacquired account information are no
longer necessary.'' \87\ DMA notes its Guidelines ``instruct DMA
members not to transfer or exchange credit card numbers when a consumer
has a reasonable expectation that the information will be kept
confidential.'' \88\ Another possible explanation is that Federal laws
bar financial institutions from disclosing account numbers to non-
affiliates for marketing purposes, including telemarketing.\89\
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\87\ MPA, No. 00116, at 2.
\88\ DMA, No. 00103, at 6.
\89\ ABIA, No. 00106, at 2; see also 15 U.S.C. 6802(d); 12 CFR
1016; 15 CFR 313.12.
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DMA and PACE argue against the need for a data pass prohibition for
a different reason; namely, the TSR already requires a business to
obtain a consumer's ``express informed consent'' before it can charge
her account for a purchase, even if it already has her billing
information.\90\ Moreover, for payments not made by a debit or credit
card, the TSR requires ``express verifiable authorization'' of the
charge by a written authorization signed by the consumer, an audio
recording of an oral authorization, or written confirmation of the
transaction by mail.\91\ DMA and MPA also assert the evidence
underpinning enactment of ROSCA cannot support a TSR data pass ban,
because online sales are fundamentally different from telemarketing
sales.\92\
---------------------------------------------------------------------------
\90\ DMA, No. 00103, at 6; PACE, No. 00107, at 4; see 16 CFR
310.4(a)(7). PACE also expresses concern that a data pass ban would
prevent sellers from using third-party telemarketers, who must be
able to transmit billing information back to the seller.
\91\ 16 CFR 310.3(a)(3).
\92\ DMA, No. 00103, at 5; MPA, No. 00116, at 2; but see NAAG
No. 00117, at 5 (``the same consumer confusion which spurred ROSCA's
passage also exists in the telemarketing arena'').
---------------------------------------------------------------------------
At this time, it is unclear a TSR amendment restricting the data
pass of preacquired account information is necessary to prevent
unauthorized billing. The TSR currently prohibits data pass that causes
unauthorized billing.\93\ It also requires sellers and telemarketers to
obtain a consumer's ``express informed consent'' to be charged for a
good, service, or charitable contribution for any form of payment \94\
and ``express verifiable authorization'' for payments other than credit
or debit cards.\95\ Further, card association rules and other Federal
laws, including the 2015 TSR payment method prohibitions,\96\ provide
additional protections against unauthorized billing.
---------------------------------------------------------------------------
\93\ 16 CFR 310.4(a)(7).
\94\ Id.
\95\ 16 CFR 310.3(a)(3).
\96\ On December 14, 2015, one year after the regulatory review
comment period closed, the Commission issued antifraud amendments to
the TSR. 2015 TSR Amendments, 80 FR at 77520. The amendments
prohibited the use of remotely created checks, remotely created
payment orders, cash-to-cash money transfers and cash reload
mechanisms in telemarketing. 16 CFR 310.4(a)(9) & (10). Each of the
prohibited payment mechanisms had been widely used by fraudulent
sellers and telemarketers and three commenters urged the Commission
to adopt these amendments during the regulatory review comment
period. AARP, No. 00097, at 3; NCLC, No. 00110, at 15; NAAG, No.
00117, at 12-13. During its rulemaking, the Commission concluded
that the TSR's ``express verifiable authorization'' requirement for
payments other than credit or debit cards was not sufficient to
prevent consumer harm because unscrupulous telemarketers that use
these payment methods typically ignore the TSR's restrictions. 2015
TSR Amendments, 80 FR at 77543. Given the pervasiveness of fraud
resulting from these payment mechanisms and the minimal legitimate
uses for them, the Commission decided to ban these payment
mechanisms as a bright line rule that benefits competition and
consumers. Id. at 77537.
---------------------------------------------------------------------------
The Commission, however, does recognize it may be difficult to
identify when preacquired account information has resulted in
unauthorized billing in the context of telemarketing, in part because
it is not always clear whether consumers have provided ``express
informed consent'' or ``express verifiable authorization''
(collectively, ``consent'') for a particular transaction.\97\ To
address this challenge, among others, the Commission is issuing an NPRM
that would require telemarketers and sellers to retain complete records
of consumer consent, including documentation on the purpose for which
consent is sought, in the same manner and format that the request for
consent is presented to consumers.\98\ The Commission believes the
proposed recordkeeping requirements will help clarify the extent to
which the use of preacquired account information may result in
unauthorized billing, and whether additional protections against the
data pass of preacquired account information are necessary. Thus, the
Commission is seeking comment on these issues in the NPRM.
---------------------------------------------------------------------------
\97\ See, e.g., NAAG, No. 00117, at 4-5. See also FTC v.
Vacation Property Services, No. 8:110cv099585, 2012 WL 1854231, at
*3 (M.D. Fla. May 21, 2012) (rejecting defendant's arguments that it
had obtained consumers' express consent through a separate
verification call); FTC v. Publishers Business Services, Inc., 821
F. Supp. 2d 1205, 1224 (D. Nev. 2010) (same).
\98\ See NPRM Section III.B.4.
---------------------------------------------------------------------------
B. Should the TSR Require Consumer Consent for the Retention of Account
Information?
When a consumer gives a seller or telemarketer her account
information to pay for a purchase, that information will be covered by
the TSR's definition of
[[Page 33667]]
``preacquired account information'' if the seller retains and uses the
information for subsequent purchases in the same or a subsequent
telemarketing call.\99\ The Regulatory Review asked whether sellers and
telemarketers should be required to obtain consumer consent to retain
preacquired account information to prevent unauthorized billing.
---------------------------------------------------------------------------
\99\ 16 CFR 310.2(z).
---------------------------------------------------------------------------
Consumer advocates acknowledge consumers would not be surprised
that a seller to whom they have given their account information has
retained it, since sellers may need it for purposes such as canceling
the transaction and crediting the consumer's account.\100\ PACE and DMA
also argue that from an industry perspective, sellers need to keep
account information obtained directly from a consumer not only for
cancellation purposes, but also to facilitate and expedite returns,
exchanges, refunds, and order modifications.\101\
---------------------------------------------------------------------------
\100\ NCLC, No. 00110, at 6.
\101\ PACE, No. 00107, at 4; DMA, No. 00103, at 7. MPA notes
that its members generally do not retain account information except
in the case of automatic renewal transactions in which case the
information is retained as ``a service of convenience.'' No. 00116
at 2.
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NCLC urges the Commission to amend the TSR to add four safeguards
to protect consumers if sellers retain their billing information.\102\
Specifically, NCLC requests the following protections in transactions
involving preacquired account information: (1) Sellers should obtain a
consumers' ``express verifiable consent'' to retain their billing
information; (2) sellers should confirm the last four digits of the
consumers' account number, and if the account has an expiration date,
to confirm the expiration date; (3) sellers should allow consumers the
right to revoke their consent to retain their account information at
any time; and (4) sellers should allow consumers to use a different
account than the one previously provided to complete a transaction.
---------------------------------------------------------------------------
\102\ NCLC, No. 00110, at 7.
---------------------------------------------------------------------------
Industry advocates argue against amending the TSR to add safeguards
for transactions involving preacquired account information. They point
out that the ``retention [of preacquired account information] is
different from charging a consumer's account,'' \103\ and consumers
have sufficient protection because the TSR already requires sellers to
obtain a consumer's authorization to charge her account even if they
have the information on file.\104\ DMA also emphasizes that sellers and
telemarketers must obtain a consumer's ``express informed consent''
before charging an account, and must ``identify the account to be
charged with `sufficient specificity for the customer or donor to
understand what account will be charged.' '' \105\
---------------------------------------------------------------------------
\103\ DMA, No. 00103, at 6.
\104\ PACE, No. 00107, at 4.
\105\ DMA, No. 00103, at 3 (quoting 16 CFR 310.4(a)(7)(ii)(A)
(requiring, in any transaction involving preacquired account
information, that sellers and telemarketers obtain a consumer's
``express agreement'' to be charged using an account identified with
sufficient specificity for the consumer to understand what account
will be charged as evidence of her ``express informed consent'')).
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While NCLC's proposals may have merit, neither the Commission's law
enforcement experience nor the regulatory review provide sufficient
evidence to warrant further Commission action at this time.
C. Should the TSR provide additional protections for negative option
offers, including Free-to-Pay Conversion transactions?
For telemarketing transactions involving preacquired account
information, such as negative option offers, the TSR requires sellers
and telemarketers to: (1) Identify the account to be charged with
sufficient specificity so that a consumer understands what account will
be charged; and (2) confirm the consumer's ``express agreement'' to
charge that account to complete the transaction. \106\ For transactions
involving both preacquired account information and a ``free-to-pay
conversion \107\ feature, such as free-trial offers, the TSR provides
additional protections by requiring sellers and telemarketers to record
the entire telemarketing call, obtain the last four digits of the
account number to be used, and confirm the consumer's ``express
agreement'' to charge that account to complete the transaction.\108\
For payment mechanisms other than credit or debit cards, the
telemarketer or seller must also obtain ``express verifiable
authorization,'' which for oral authorizations includes the number of
times a consumer will be charged and the dates of those charges.\109\
The Regulatory Review sought comment on whether changes in the
marketplace require additional protections for negative option offers,
including ``free-to-pay conversion'' transactions.\110\
---------------------------------------------------------------------------
\106\ 16 CFR 310.4(a)(7)(ii).
\107\ 16 CFR 310.2(r) (defining ``free-to-pay conversion'' as an
offer in which the consumer will receive a product or service for
free for an initial period and will incur an obligation to pay for
it if she does not take affirmative action to cancel before the end
of that trial period).
\108\ 16 CFR 310.4(a)(7)(i).
\109\ 16 CFR 310.3(a)(3)(ii); see also 2015 TSR Amendments.
\110\ 79 FR at 46735.
---------------------------------------------------------------------------
Consumer advocates argue the existing protections are inadequate
and offer a myriad of recommendations for enhanced protections. NAAG
argues additional protections are necessary because all negative option
offers generate ``confusion, misunderstanding, and outright deception''
because some consumers do not understand that sellers will interpret
their silence and inaction as authorization to charge recurring
payments.\111\ NAAG suggests an amendment to the TSR requiring a
statement of the negative option terms in the initial telemarketing
transaction that is separate from the other terms of the offer, and a
separate audible acceptance of the negative option terms.\112\ NAAG
also suggests the TSR should require telemarketers to send a
``confirmation to the consumer, whether by mail or otherwise'' whenever
a consumer is enrolled in a negative option feature.\113\ NCLC suggests
that for all negative option offers using preacquired account
information, the TSR should require sellers and telemarketers to obtain
full account numbers directly from the consumer every time they charge
the consumer so consumers will understand their account will be
charged.\114\
---------------------------------------------------------------------------
\111\ NAAG, No. 00117, at 3, 6.
\112\ Id.
\113\ Id.
\114\ NCLC, No. 00110, at 7.
---------------------------------------------------------------------------
For ``free-to-pay conversion'' offers in particular, NCLC urges the
Commission to adopt an amendment barring sellers from obtaining account
information until the end of the trial period, or at least an amendment
requiring sellers to give consumers timely phone or email reminders
about how to avoid a charge a few days before they will charge the
consumer's account.\115\ AARP's comment concurs and proposes requiring
sellers to send a reminder notice and obtain confirmation of a
consumer's continued desire to complete the purchase not only for
``free-to-pay conversion'' offers, but for all negative option
offers.\116\
---------------------------------------------------------------------------
\115\ Id. at 9-10. NCLC also advocates requiring that an
automated toll-free telephone number be made available to accept
cancellations without speaking to a representative 24 hours a day,
and forbidding requirements for a written notice of cancellation,
along with other conditions that make it unduly burdensome to
cancel.
\116\ AARP, No. 00097, at 4; cf. NAAG, No. 00117, at 11 (urging
that the TSR require a telemarketer to send a confirmation to the
consumer at the time of enrollment in a negative option that clearly
and conspicuously sets forth the terms of the negative option plan).
---------------------------------------------------------------------------
[[Page 33668]]
NAAG also advocates for stronger protections in the context of
free-to-pay conversion offers. Specifically, NAAG suggests that the
Commission extend Section 310.4(a)(7) to all such offers, even if no
preacquired account information is used, to ensure telemarketers obtain
a consumer's express informed consent before telemarketers are able to
bill or send invoices to consumers after the ``free trial'' is
over.\117\
---------------------------------------------------------------------------
\117\ NAAG, No. 00117, at 11.
---------------------------------------------------------------------------
Industry advocates object to all of these proposed changes. DMA
emphasizes both card association rules and SRO Guidelines require a
third-party seller with preacquired account information to obtain the
full account number directly from the consumer for ``free-to-pay
conversion'' offers.\118\
---------------------------------------------------------------------------
\118\ DMA, No. 00103, at 4, 6.
---------------------------------------------------------------------------
Industry also contends the TSR's current requirements appropriately
balance consumer convenience and protection. For example, MPA argues
free trials and automatic renewals benefit consumers, particularly in
situations where consumers are repeat customers and already have an
established business relationship with the seller. MPA and other
industry representatives state that requiring consumers to repeat their
full 16-digit card number for each additional negative option offer,
such as an automatic magazine subscription renewal, would frustrate
consumers and would negatively impact legitimate business.\119\
---------------------------------------------------------------------------
\119\ MPA, No. 00116, at 3; see also DMA, No. 00103 at 6-7;
ARDA, No. 00100, at 7. PACE, No. 00107, at 4.
---------------------------------------------------------------------------
DMA concurs, emphasizing the TSR and its SRO Guidelines require
sellers to disclose all material terms of the offer, ``identify the
account [to be charged] with specificity,'' and ``obtain affirmative
consent from the consumer to charge that account.'' \120\ DMA further
argues requiring sellers to obtain full account information from
existing customers simply increases the cost and time involved in the
transaction, thus frustrating consumers without providing any
additional protections.\121\ PACE adds the TSR's requirement that
sellers and telemarketers obtain a consumer's authorization to charge
her account gives the FTC ``ample authority to pursue entities charging
accounts without proper authorization.\122\
---------------------------------------------------------------------------
\120\ DMA, No. 00103, at 6-7.
\121\ Id. at 3.
\122\ PACE, No. 00107, at 4.
---------------------------------------------------------------------------
As discussed above, the Commission is proposing to amend the TSR's
recordkeeping provisions to explicitly require telemarketers and
sellers to retain complete and accurate records of consumers' ``express
informed consent'' to be charged for a particular transaction.\123\ In
the event a transaction includes a negative option, including ``free-
to-pay'' or ``fee-to-pay'' conversion offers, a complete record of
``express informed consent'' must include the purpose for which consent
is requested, the account that will be charged, the date a consumer
provided consent, and the consumer's consent to be charged using the
identified account for the relevant good or service. The proposed
recordkeeping requirements also require sellers and telemarketers to
retain records that demonstrate they have comported with Section
310.4(a)(7)'s requirements regarding the use of preacquired account
information. The Commission believes the new recordkeeping requirements
will provide additional protections to consumers by ensuring sellers
and telemarketers obtain actual ``express informed consent'' from
consumers to be charged for a transaction with a negative option
feature.\124\ The Commission also believes these requirements will be
more effective than requiring third-party telemarketers to obtain the
full account information from consumers as an indication of consent
because consumers providing full account information may not understand
that they are being sold a transaction with a negative option feature.
---------------------------------------------------------------------------
\123\ See supra VI.A.
\124\ See NPRM Section III.B.4. NAAG also reports that
telemarketers are circumventing the heightened ``express informed
consent'' requirements for ``free-to-pay'' conversion offers by
charging a ``nominal upfront fee.'' No. 00117, at 5. (``By offering
their products and services for an initial term at a nominal upfront
price . . . telemarketers relying on preacquired account information
circumvent the TSR's requirement of obtaining the last four (4)
digits of the consumer's account number and the equally important
requirement of maintaining an audio recording of the entire
transaction.''). The proposed recordkeeping requirements that
clarify the records necessary to prove that a consumer has consented
to a transaction should eliminate any incentive to circumvent the
express informed consent requirement.
---------------------------------------------------------------------------
The Commission is also interested in exploring the commenters'
suggestions that sellers or telemarketers provide consumers notice and
the opportunity to cancel negative option transactions whenever they
are billed.\125\ Requiring sellers or telemarketers to provide
consumers with reminders of negative option programs and simple
cancelation mechanisms may be an effective way of reducing consumer
harm without overburdening industry. However, the Commission is aware
of potential logistical hurdles to providing notification and
cancelation with telemarketing transactions. For example, do
telemarketers typically obtain consumers' email addresses, and if so,
would email be an effective method to send a notification? Should
telemarketers provide cancelation mechanisms by phone or would online
mechanisms be more convenient for consumers? As outlined below in
Section V, the Commission is seeking comment on whether the TSR should
require negative-option sellers to provide simple notice and
cancelation mechanisms, and how these mechanisms should be provided.
---------------------------------------------------------------------------
\125\ AARP suggests that companies ``send a reminder to the
consumer and receive confirmation the consumer still wants to
purchase the service or product.'' AARP, No. 00097, at 4. cf. NAAG,
No. 00117, at 11 (urging that the TSR require a telemarketer to send
a confirmation to the consumer at the time of enrollment in a
negative option that clearly and conspicuously sets forth the terms
of the negative option plan).
---------------------------------------------------------------------------
Beyond the changes the Commission is proposing to the recordkeeping
provisions, and the Commission's request for information about notice
and cancelation mechanisms, the Commission does not agree with the
additional rule proposals made by commenters. Commenters proposed the
rule: (1) Require sellers and telemarketers to obtain a full account
number from consumers every time they are charged; or (2) defer payment
authorization until the end of the trial period. The Commission does
not believe these proposals would provide protections against deceptive
negative option offers that outweigh the likely increased consumer
frustration due to longer, complicated transactions and additional
burdens on industry. And with respect to NAAG's suggestion that Section
310.4(a)(7) should be extended to all free-to-pay conversion
transactions regardless of whether preacquired account information is
involved, the Commission does not believe such an amendment is
necessary. Section 310.4(a)(7) already requires telemarketers or
sellers to obtain a consumer's express informed consent to be charged
for the good, service, or charitable contribution in all telemarketing
transactions, including those that do not involve the use of
preacquired account information. The Commission nonetheless reiterates
that Section 310.4(a)(7)'s requirement of obtaining a consumer's
express informed consent before billing a consumer applies to all
telemarketing transactions, including those in which the consumer is
billed for a good or service at a later date after the ``free trial''
is over.
[[Page 33669]]
D. Is there a need to apply outbound call protections to inbound calls?
The TSR generally exempts inbound calls responding to media
advertising, with some specific exceptions.\126\ The Regulatory Review
asked if there is a need to amend the exemption in view of the
proliferation of infomercials in the marketplace, including for
negative option offers.
---------------------------------------------------------------------------
\126\ 16 CFR 310.6(b)(5).
---------------------------------------------------------------------------
Consumers and their advocates regard the general media exemption as
a ``loophole'' in the TSR, advocating that the TSR should apply to all
telemarketing calls regardless of which party initiated the call.\127\
NAAG cites the Commission's 2013 Consumer Fraud Survey as support
because it reports that more than half of frauds are marketed through
means other than telemarketing.\128\ Consumer advocates specifically
suggest the TSR should apply equally to inbound and outbound
telemarketing for negative option offers. NCLC asserts the TSR
requirements for the use of preacquired account information in negative
option offers should apply to all inbound calls responding to general
media and direct mail ads because ``the potential risks are the same''
as offers in outbound telemarketing.\129\ NAAG agrees, and advocates an
amendment to extend the TSR's outbound call material terms disclosure
requirements for negative option offers, as well as the ban on
misrepresenting any aspect of such offers, to all inbound calls induced
by direct mail or general media ads.\130\
---------------------------------------------------------------------------
\127\ Kapecki, No. 00084; Rosenow, No. 00067; Beverly Anne, No.
00066; Tripp, No. 00063; and Steel, No. 00070.
\128\ NAAG, No. 00117, at 8 (stating that the 2013 survey
reported 59.3% of fraud incidents were the result of fraudulent
offers through general media advertising).
\129\ NCLC, No. 00110, at 7.
\130\ NAAG, No. 00117, at 10.
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Industry advocates uniformly oppose adding any limitations to
either the general media or direct mail exemptions. PACE and ERA agree
all material terms and conditions of negative option offers should be
disclosed prior to any sale, but argue against amending the TSR to
require the disclosures be made during an inbound call.\131\ DMA
explains that required oral disclosures during inbound calls would be
duplicative in many cases of disclosures in the marketing materials
that induced the call.\132\ BAA adds that unlike answering outbound
telemarketing calls, consumers placing inbound calls have the ``luxury,
time and discretion to decide whether to respond'' to general media or
direct mail ads, and can obtain ``the information they need to make an
informed purchasing decision'' in advance of or during the call.\133\
---------------------------------------------------------------------------
\131\ PACE, No. 00107, at 6; ERA, No. 00095, at 3.
\132\ DMA, No. 00103, at 7.
\133\ BAA, No. 00115, at 3.
---------------------------------------------------------------------------
MPA argues applying the TSR's disclosure requirements to inbound
telemarketing for newspaper subscriptions, particularly for existing
customers, would add time and expense for industry to comply without
providing additional consumer protections when the general media
advertisement includes all material terms of the offer.\134\ ERA
similarly argues against a disclosure requirement without evidence of
widespread abuse.\135\ ERA joins PACE in contending the Commission can
always rely on its authority under Section 5 of the FTC Act to bring
cases against sellers that fail to disclose material terms in their
advertising or during an inbound call.\136\
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\134\ MPA, No. 00116, at 4.
\135\ ERA, No. 00095, at 3. ERA disputes NAAG's contention that
the FTC's Third Consumer Fraud Survey provides evidence of pervasive
fraud in general media advertising. Compare ERA, No. 00095, at 5
with NAAG, No. 00117, at 8.
\136\ ERA, No. 00095, at 5. ERA and PACE made these comments
before the Supreme Court held that Section 13(b) of the FTC Act does
not authorize courts to award equitable monetary relief. See AMG
Capital Management, LLC v. FTC, 141 S.Ct. 1341 (2021).
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The general media and direct mail exemptions for inbound calls
contain additional limitations that narrow the scope of the exemptions.
For example, negative option sales in inbound telemarketing that are
upsells after an initial purchase are expressly excluded from both the
general media and direct mail exemptions.\137\ The TSR's outbound call
provisions therefore are equally applicable to inbound call upsells.
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\137\ 16 CFR 310.6(b)(5)(iii) and (b)(6)(iii).
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Whether and to what extent there may be a problem with inbound
telemarketing calls offering a negative option is unclear from the
regulatory review record. It therefore is difficult to determine at
this time whether there is a need for an amendment that would apply the
negative option disclosure requirements and prohibitions or other
protections to such calls. The Commission is mindful, however, of the
rising trend of certain types of goods or services that are marketed
through general media or direct mail and induce inbound telemarketing
sales that often include a negative option feature. In particular, the
Commission's law enforcement experience indicates that scams offering
computer technical support services (or ``tech support'') have been a
rising trend that particularly impacts older adults and are marketed
through inbound telemarketing.\138\ Many of these tech support services
also include negative options. As a result, as outlined below in
Section V, the Commission is seeking comment on whether the TSR should
apply to inbound telemarketing of tech support services.\139\ The
Commission also seeks comment in Section V.E on the number of sellers
or telemarketers who deceptively sell products or services with
negative options, other than tech support services, solely through
inbound telemarketing.
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\138\ See FTC Data Spotlight, Older Adults Hardest Hit by Tech
Support Scams (``FTC Data Spotlight'') (Mar. 7, 2019) (tech support
scams particularly impact older adults), available at <a href="https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams">https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams</a> (last visited Jan. 31, 2022); FTC
Report to Congress, Protecting Older Consumers, 2019-2020 (``2020
Protecting Older Consumers Report'') at 6 (Oct. 18, 2020), available
at <a href="https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf">https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf</a> (last visited Jan.
31, 2022).
\139\ See infra Section V.A.
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E. Should the rule continue to exempt business-to-business
telemarketing?
Currently the TSR exempts telemarketing calls to ``any business to
induce the purchase of goods or services or a charitable contribution
by the business,'' (i.e., ``business-to-business exemption'' or ``B2B
exemption'').\140\ The Commission sought comment on how sales to a
``home-based business should be treated'' under the Rule.\141\ One
comment suggests ``home business[es] should be treated more like [ ]
consumer[s] . . . out of deference to the overall home environment. . .
. The same phone often handles both personal and business calls in a
home business or in a home occupied by an independent consultant or
freelancer.'' \142\
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\140\ 16 CFR 310.6(b)(7). This exemption, however, does not
apply to the telemarketing of nondurable office or cleaning
supplies. Id.
\141\ 79 FR at 46738.
\142\ West Italian, No. 00113, at 3.
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PACE, however, argues the current exemption ``properly strikes a
balance between consumer protection and overregulation and should be
left intact.'' \143\ PACE also asserts allowing the exemption to
continue ``represents sound public policy and equitableness because it
is impossible for callers to know whether the phone provider classifies
the number as a residential or business number.'' \144\
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\143\ PACE, No. 00107, at 6.
\144\ Id.
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Although the Commission did not receive many comments on this
[[Page 33670]]
question, the Commission's law enforcement experience with deceptive
business-to-business telemarketing along with changing market forces
influencing where consumers perform their jobs and the nature of those
jobs raise the question whether the TSR should continue to exempt such
calls. Thus, for the reasons outlined below in Section V, the
Commission is seeking additional comment on whether the TSR should
continue to exempt business-to-business telemarketing.\145\
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\145\ See infra Section V.B.
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F. Other Commenter Proposals
A number of comments have recommended a variety of other amendments
to the TSR. These comments fall into the following categories: (1)
Revision of prior determinations or interpretations the Commission is
not inclined to reconsider; \146\ (2) amendments the Commission does
not believe are necessary; \147\ (3) amendments outside of the agency's
jurisdiction; \148\ and (4) amendments that lack data to support the
suggested change.\149\ As such, the Commission is not inclined to
further consider or implement these requested amendments.
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\146\ Infocision, No. 00108, at 2 (amendment to exempt for-
profit telemarketers who offer goods or services on behalf of non-
profits (i.e., ticket sales on behalf of a ballet company)); NAA,
No. 00099, at 1-6 (amendment of the ``established business
relationship'' exception to allow live calls to introduce digital
offerings to former newspaper subscribers with numbers on the Do Not
Call Registry); ARDA, No. 00100, at 2-4 (e.g., amendments to the
prohibition to send robocalls and relaxing the restrictions on
abandoned calls to existing customers); NCLC, No. 00110, at 14
(amendment to change the assisting and facilitating knowledge
standard from ``knows or consciously avoids knowing'' to ``knows or
has reason to know''); NobelBiz, No. 00104, at 5 (amendment stating
that the transmission of an erroneous name or failure to transmit a
name pursuant to the TSR's caller ID provision is not a violation
unless there was intent to deceive the call recipient).
\147\ NAA, No. 00099, at 7-8 (amendment to require monthly
purging of disconnected and reassigned numbers on the Registry which
is unnecessary since the agency already performs such purging--see
FTC, Do-Not-Call Improvement Act of 2007, Report To Congress:
Regarding the Accuracy of the Do Not Call Registry (Oct. 2008),
available at <a href="https://www.ftc.gov/sites/default/files/documents/reports/do-not-call-improvement-act-2007-report-congress-regarding-accuracy-do-not-call-registry/p034305dncreport.pdf">https://www.ftc.gov/sites/default/files/documents/reports/do-not-call-improvement-act-2007-report-congress-regarding-accuracy-do-not-call-registry/p034305dncreport.pdf</a>); Air Rehab.
Corp., No. 00047 (amendment to exempt calls to arrange face-to-face
sales meetings which are already exempt under Section 310.6(b)(3));
Whi, No. 00017 (amendment to permit private lawsuits, which are
already permitted under the Telemarketing Act, 15 U.S.C. 6104, and
the Telephone Consumer Protection Act, 47 U.S.C. 227(b)(3)).
\148\ See, e.g., ARDA, No. 00100, at 2, 4-6 (amendments relating
to issues under the FCC's jurisdiction, including autodialers, cell
phones, and SMS texts).
\149\ See, e.g., CRL, No. 00093 at 4, 10 (acknowledging lack of
data); NCLC, No. 001100, at 18-19.
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V. Request for Comments
In determining the advisability of exempting certain calls from
complying with the TSR the Commission considers the following factors:
(1) Did Congress intend the TSR to cover such calls; (2) is the conduct
or business in question regulated extensively by Federal or state law;
(3) in the Commission's law enforcement experience, does the conduct or
business lend itself to the type of deceptive acts and practices that
the TSR is intended to address; and (4) would it be unduly burdensome
to require businesses to comply with the TSR compared to the likelihood
that sellers or telemarketers engaged in fraud will use the existing
exemption to circumvent the TSR's coverage.\150\
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\150\ Original TSR, 60 FR at 43859.
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To assist the Commission in evaluating these factors, the
Commission seeks comments on whether the TSR should: (1) Apply to
inbound telemarketing of tech support services; (2) apply to
telemarketing to businesses; and (3) require telemarketers to provide
consumers with notice that they are about to be billed for a negative
option product or service and provide consumers with a simple
cancellation mechanism. The Commission also seeks comments on the
benefits and estimated burdens these potential rule changes would
impose on sellers and telemarketers. In their replies, commenters
should provide any available evidence and data that supports their
position, such as empirical data on the harm to consumers caused by
deceptive inbound telemarketing of tech support services, deceptive
telemarketing to businesses, or the failure to provide consumers with
notice and simple cancellation mechanism in negative option
telemarketing. Commenters should also provide any empirical data on the
costs to sellers or telemarketers that would be caused by applying the
TSR's requirements on inbound telemarketing of tech support services,
telemarketing to businesses, or requiring notification and a simple
cancellation mechanism for negative option products or services. The
questions are designed to assist the public and should not be construed
as a limitation on the issues about which a public comment may be
submitted.
A. Inbound Telemarketing of Computer Technology Support Services
Consumer complaints about tech support scams have increased
dramatically over the last few years, ranging from approximately 40,000
complaints in 2017 to approximately 100,000 complaints in 2020.\151\ In
2018, consumers reported losing more than $55 million to these scams,
with an average individual loss of approximately $400, and an average
individual loss for consumers over the age of 60 of approximately
$500.\152\ Indeed, tech support scams disproportionately harm older
consumers, with consumers age 60 and over being six times more likely
to report a financial loss to tech support scams compared to younger
consumers.\153\ From 2015 to 2018, older adults filed more reports on
tech support scams than on any other fraud category.\154\
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\151\ See FTC Consumer Sentinel Network Databook 2020, at 86,
(Feb. 2021), available at <a href="https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2020/csn_annual_data_book_2020.pdf">https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2020/csn_annual_data_book_2020.pdf</a> (last visited Jan. 31, 2022); FTC
Consumer Sentinel Network Databook 2017, at 93, (list visited Jan.
31, 2022), available at <a href="https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2017/consumer_sentinel_data_book_2017.pdf">https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2017/consumer_sentinel_data_book_2017.pdf</a> (last visited Jan. 31, 2022).
\152\ See, FTC Data Spotlight, available at <a href="https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams">https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams</a> (last visited Jan. 31, 2022).
\153\ See 2020 Protecting Older Consumers Report, at 6,
available at <a href="https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf">https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf</a> (last
visited Jan. 31, 2022).
\154\ FTC Data Spotlight, available at <a href="https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams">https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-support-scams</a> (last visited Jan. 31, 2022); see also FTC Report to
Congress, Protecting Older Consumers, 2018-2019, at 5 (Oct. 18,
2019), available at <a href="https://www.ftc.gov/reports/protecting-older-consumers-2018-2019-report-federal-trade-commission">https://www.ftc.gov/reports/protecting-older-consumers-2018-2019-report-federal-trade-commission</a> (last visited
Jan. 31, 2022). In 2019, reports of online shopping frauds became
the top fraud complaint for older consumers, with tech support scams
dropping to second place. 2020 Protecting Older Consumers Report, at
7, available at <a href="https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf">https://www.ftc.gov/system/files/documents/reports/protecting-older-consumers-2019-2020-report-federal-trade-commission/p144400_protecting_older_adults_report_2020.pdf</a> (last
visited Jan. 31, 2022). Older consumers, however, are less likely to
report losing money to online shopping frauds, compared to younger
consumers. Id.
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The scam typically begins with an outbound telemarketing call, a
pop-up message on a consumer's computer, or an advertisement that
induces inbound telemarketing calls.\155\ The scammers typically
pretend to represent well-known companies such as Microsoft, McAfee, or
Symantec, and in their outbound calls, they inform consumers
[[Page 33671]]
that they have detected an issue on their computers.\156\
Alternatively, scammers use deceptive computer pop-up messages that
tell consumers to run a scan resulting in numerous ``error''
messages.\157\ Or, they place search engine advertisements displayed
when a consumer searches online for either the phone number of her
computer company or for information about an issue she is having with
her computer.\158\ The pop-up messages and search engine advertisements
typically direct consumers to call a phone number to fix the purported
problems. Once consumers connect with telemarketers, whether through
outbound telemarketing or inbound, the telemarketers convince consumers
there are a variety of problems with their computers and persuade
consumers to purchase subscription tech support services \159\ or
software they do not need.\160\
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\155\ See, e.g., Prepared Statement of the Federal Trade
Commission Before the United States Senate Special Committee on
Aging on Combatting Technical Support Scams (``Tech Support
Testimony''), at 3-5 (Oct. 21, 2015), available at <a href="https://www.ftc.gov/system/files/documents/public_statements/826561/151021techsupporttestimony.pdf">https://www.ftc.gov/system/files/documents/public_statements/826561/151021techsupporttestimony.pdf</a> (last visited Jan. 31, 2022).
\156\ Id.
\157\ See, e.g., Tech Support Testimony, at 3-5, available at
<a href="https://www.ftc.gov/system/files/documents/public_statements/826561/151021techsupport03JNtestimony.pdf">https://www.ftc.gov/system/files/documents/public_statements/826561/151021techsupport03JNtestimony.pdf</a> (last visited Jan. 31, 2022).
\158\ See, e.g., FTC v. Click4Support, LLC, et. al., No. 15-cv-
05777-SD, at 9-10 (E.D. Pa. Oct. 26, 2015), available at <a href="https://www.ftc.gov/system/files/documents/cases/151113click4supportcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/151113click4supportcmpt.pdf</a>
(last visited Jan. 31, 2022).
\159\ See, e.g., FTC v. Vylah Tec LLC, et. al., No. 17-cv-228-
FtM-99MRM (M.D. Fa. May 17, 2017), available at <a href="https://www.ftc.gov/system/files/documents/cases/162_3253_vylah_tec_llc_complant.pdf">https://www.ftc.gov/system/files/documents/cases/162_3253_vylah_tec_llc_complant.pdf</a>
(last visited Jan. 31, 2022).
\160\ Id.
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The Commission has brought a multitude of cases against sellers and
telemarketers perpetrating tech support frauds on consumers.\161\ In
many of those cases, telemarketers have induced inbound telemarketing
by placing advertisements via search engine ads, thus falling outside
of the TSR's purview unless the telemarketer also upsells the consumer
on a good or service.\162\ Given this rising threat and the harm it
causes to consumers, particularly those aged 60 and older, the
Commission believes the time is ripe to consider repealing the TSR
exemption for inbound telemarketing of tech support services.
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\161\ See, e.g., FTC v. RevenueWire, Inc., No. 1:20-cv-1032
(D.D.C. April 21, 2020) (the companies to which RevenueWire provided
payment processing services used pop-up dialog boxes that claimed to
have detected computer infections and directed consumers to call a
1-800 number) available at <a href="https://www.ftc.gov/system/files/documents/cases/revcomp3.pdf">https://www.ftc.gov/system/files/documents/cases/revcomp3.pdf</a> (last visited Jan. 31, 2022); FTC v.
Boost Software, Inc., No. 14-cv-81397 (S.D. Fla. Nov. 10, 2014)
(same as RevenueWire) available at <a href="https://www.ftc.gov/system/files/documents/cases/141119vastboostcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/141119vastboostcmpt.pdf</a> (last visited Jan. 31,
2022); FTC v. PCCare247, Inc., 12-cv-7189 (S.D.N.Y. Oct. 3, 2012)
(PCCare used paid advertisements that made it appear PCCare was
affiliated with established computer companies in order to trick
consumers to call PCCare's telemarketers) available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2012/10/121003pccarecmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2012/10/121003pccarecmpt.pdf</a> (last visited Jan. 31, 2022). See also, Press
Release, FTC and Federal, State and International Partners Announce
Major Crackdown on Tech Support Scams (May 12, 2017) (announcing 16
new cases as part of tech support sweep) available at <a href="https://www.ftc.gov/news-events/press-releases/2017/05/ftc-federal-state-international-partners-announce-major-crackdown">https://www.ftc.gov/news-events/press-releases/2017/05/ftc-federal-state-international-partners-announce-major-crackdown</a> (last visited Jan.
31, 2022) and ``Operation Tech Trap Law Enforcement Actions'' (May
2017) (listing cases brought as part of tech support sweep)
available at <a href="https://www.ftc.gov/system/files/attachments/press-releases/ftc-federal-state-international-partners-announce-major-crackdown-tech-support-scams/operation_tech_trap_chart_of_actions.pdf">https://www.ftc.gov/system/files/attachments/press-releases/ftc-federal-state-international-partners-announce-major-crackdown-tech-support-scams/operation_tech_trap_chart_of_actions.pdf</a> (last visited Jan. 31,
2022).
\162\ The TSR generally exempts inbound telemarketing calls
induced by general media advertisements. 16 CFR 310.6(b)(5) and (6).
As noted in Section IV.D, supra, the TSR's coverage extends to all
upsells, including those in inbound telemarketing. 16 CFR
310.6(b)(5)(iii) & (b)(6)(iii).
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In considering this proposal, in addition to the questions listed
below, the Commission seeks comment on whether: (1) It should add tech
support services to the list of goods or services for which the inbound
telemarketing exemptions do not apply; \163\ (2) it should repeal the
exemption only for general media advertisements (e.g., search engine
ads) that induce inbound telemarketing of tech support services but
retain the exemption for direct mail solicitation under Section
310.6(b)(6); or (3) it should repeal the exemption in its entirety but
carve out an exemption for sellers who manufacture the computer at
issue, and with whom the consumer has an existing business relationship
(i.e., if a consumer purchased a computer from Microsoft, the TSR would
not apply to any inbound telemarketing calls induced by or on behalf of
Microsoft to that consumer). The Commission also seeks comment on
whether tech support service scams impact other devices such as mobile
phones or tablets.
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\163\ See 16 CFR 310.6(b)(5) and (6).
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B. Questions for Inbound Telemarketing of Tech Support Services
1. Should the TSR apply to inbound telemarketing of tech support
services? If not, why not? If yes, why? What harm is caused by such
calls? What benefits do such calls confer? What existing Federal or
state laws apply to such calls, and are the existing laws sufficient or
insufficient to address the identified harm?
2. What kind of tech support services do sellers offer to
consumers? What kinds of products do the tech support services cover?
What is the nature of the services offered? Do the services require
consumers to sign up for a subscription plan? How many services require
a subscription plan?
3. How many sellers or telemarketers sell tech support services
through inbound telemarketing without using unfair or deceptive acts or
practices? How many sellers offer those services only through inbound
telemarketing and do not employ any outbound telemarketing? How do
consumers learn about these sellers? Do they advertise through general
media advertisements or direct mail solicitations? What kind of
advertisements? How would requiring such sellers to comply with the TSR
affect their business? How would it affect consumers?
4. How many inbound telemarketing calls for tech support services
do sellers or telemarketers receive on average per year, per month, or
per day? How many of those calls or what percentage of those calls
result in a sale?
5. Do sellers or telemarketers that sell tech support services
through inbound telemarketing sell those services to consumers,
businesses, or both? If sellers or telemarketers are engaged in inbound
telemarketing of tech support services to consumers, how many such
calls do sellers or telemarketers receive on average per year, per
month, or per day? How many of those calls or what percentage of those
calls result in a sale? If sellers or telemarketers are engaged in
inbound telemarketing of tech support services to businesses, how many
such calls do sellers or telemarketers receive on average per year, per
month, or per day? How many of those calls or what percentage of those
calls result in a sale?
6. How many inbound tech support telemarketing calls were induced
by general media advertising such as search engine advertisements? How
many of those calls or what percentage of calls induced by general
media resulted in a sale?
7. How many inbound tech support telemarketing calls were induced
by a direct mail solicitation? How many of those calls or what
percentage of calls induced by direct mail solicitations resulted in a
sale?
8. Do entities that manufacture and sell computers engage in
inbound telemarketing of tech support services to businesses or
consumers? If so, do such entities use unfair or deceptive acts or
practices to sell their tech support services? If such entities engage
in inbound telemarketing of tech support services to consumers, how
many calls do such entities receive from consumers on average per year,
per month, or per day? How many calls result in a sale? If such
entities engage in inbound telemarketing of tech support services to
businesses, how many calls do such entities receive from businesses on
[[Page 33672]]
average per year, per month, or per day? How many calls result in a
sale?
9. Should the TSR apply to inbound telemarketing of tech support
services induced by advertisements through any medium? If yes, why, and
what is the harm caused by such solicitations? If not, why not, and
should the TSR apply to inbound telemarketing of tech support services
induced by particular types of advertisements?
10. Should the TSR apply to inbound telemarketing of tech support
services induced by direct mail solicitation? If yes, why and what harm
is caused by such solicitations? If not, why not?
11. Should the TSR continue to exempt inbound telemarketing of tech
support services but apply the TSR's provisions regarding the use of
prerecorded messages, including those that use soundboard technology?
If yes, why and what is the harm caused by the use of prerecorded
messages in inbound telemarketing of tech support services? If not, why
not?
12. If the Commission repeals the exemptions for inbound
telemarketing of tech support services, should it create a carve out?
What kind of carve out and why? Should the Commission carve out an
exemption for entities who manufacture the computer at issue and have
an existing business relationship with the consumer? Why or why not?
13. How should the Commission define ``tech support services''?
Should the definition apply to any type of technology assistance,
including for any device (e.g., mobile phones and tablets)? If not, why
not? If yes, why and what is the harm caused in connection with those
technology assistance services? Have there been instances of fraud
occurring in connection with those technology assistance services? How
pervasive is this type of fraud?
14. If the Commission considers employing a broad definition of
tech support so that it either encompasses multiple types of services,
or any form of technology assistance, should the Commission consider
carve outs for a particular type of technology assistance? If yes, what
carve out should the Commission consider and why?
15. If the Commission repeals the exemptions for inbound
telemarketing of tech support services, what burden would be imposed on
industry? How do you quantify that burden? How can the Commission
repeal the exemption for inbound telemarketing of tech support services
but lessen that burden on industry?
B. Business-to-Business Telemarketing Calls
1. Regulatory History of Business-to-Business Telemarketing Exemption
The Commission has considered whether to narrow or clarify the
business-to-business (``B2B'') exemption on several occasions since its
promulgation in 1995.\164\ First, in 2003 the Commission considered
whether to include a carve out from the exemption for the sale of
internet or web services \165\ to prevent small businesses from being
defrauded as they navigated the then-new world of internet advertising.
The Commission defined internet or web services as services that enable
businesses to access the internet or the world wide web.\166\ The
Commission noted that reports of frauds from small businesses about
telemarketers promoting services that could help them increase their
internet presence had risen dramatically with the rapid adoption of
internet use from 1997 to 2002.\167\
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\164\ See Original TSR, 60 FR at 43861.
\165\ 2003 TSR Amendments, 68 FR at 4662. The Commission also
considered whether to carve out solicitations for charitable
contributions from the TSR's B2B exemption. On balance, the
Commission decided to rely on its Section 5 authority to address
fraudulent fundraising rather than impose additional regulatory
burdens on legitimate non-profit organizations that already operate
on very narrow margins. Id. at 4663.
\166\ The Commission proposed two definitions in its proposed
rulemaking--internet Services and Web Services. 2002 Notice of
Proposed Rulemaking, 67 FR at 4500. Internet Services meant any
service that allowed a business to access the internet, including
internet service providers, providers of software and telephone or
cable connections, as well as services that provide access to email,
file transfers, websites, and newsgroups. Id. Web services was
defined as ``designing, building, creating, publishing, maintaining,
providing, or hosting a website on the internet.'' Id. The
Commission intended for the term internet services to encompass any
and all services related to accessing the internet and the term web
services to encompass any and all services related to the world wide
web. Id.
\167\ Id. at 4531; see also Press Release, FTC Cracks Down on
Small Business Scams (June 17, 1999) (announcing sweep of cases
against fraudulent telemarketers who scammed small businesses by
offering a negative option website design and hosting service to
help small businesses create an internet presence), available at
<a href="https://www.ftc.gov/news-events/press-releases/1999/06/ftc-cracks-down-small-business-scams">https://www.ftc.gov/news-events/press-releases/1999/06/ftc-cracks-down-small-business-scams</a> (last visited Jan. 31, 2022).
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Consumer advocates and law enforcement agencies argued the TSR
should not exempt telemarketing of internet or web services to
businesses based on extensive law enforcement efforts to combat the
proliferation of fraudulent telemarketing of those services.\168\
Industry proponents argued the record did not support applying the TSR
to those services in such a sweeping fashion and overregulation would
result in harming small businesses because ``it would increase their
costs and hamper their use of Web-based advertising such as online
Yellow Pages.'' \169\ The Commission decided imposing regulations
without further evidence that its law enforcement tools were
insufficient might negatively impact small businesses by increasing
their cost and impeding their use of internet advertising.\170\ The
Commission stated it needed to ``move cautiously so as not to chill
innovation in the development of cost-efficient methods for small
businesses to join in the internet marketing revolution.'' \171\
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\168\ 2003 TSR Amendments, 68 FR at 4662.
\169\ Id. at 4663.
\170\ Id.
\171\ Id.
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The Commission revisited the B2B exemption in 2013 when it issued a
Notice of Proposed Rulemaking (``2013 NPRM'') seeking comment on
whether to amend the exemption to explicitly limit it to telemarketing
calls selling a good or service to that business or seeking a
charitable contribution from that business, rather than personal
purchases or charitable contributions of employees of the
business.\172\ The Commission noted in its 2013 NPRM that it had
allowed business telephone numbers to be listed on the FTC's Do Not
Call (``DNC'') Registry ``because, among other reasons, telemarketers
who seek to circumvent the Registry have solicited employees at their
place of business to buy goods or services such as dietary products,
auto warranties, and credit assistance.'' \173\ In implementing the
amendment in 2015, the Commission reiterated the amendment is ``simply
a clarification of the scope of the existing exemption, not a change in
its substance'' and the ``clarification should further deter
telemarketers from attempting to circumvent the Registry.'' \174\
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\172\ Notice of Proposed Rule Making (``2013 TSR NPRM''), 78 FR
41200, 41219 (July 9, 2013).
\173\ Id. at 41219.
\174\ Id.
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2. Law Enforcement Experience in Deceptive Business-to-Business
Telemarketing
Since the Commission last considered, and declined, to
substantively amend the B2B exemption to exclude services providing
access to the internet, the marketplace has substantially evolved. The
digital marketing landscape has become increasingly complex and rife
with opportunities for sellers or telemarketers to defraud small
businesses by selling them services to help them advertise their
businesses online. Indeed, the
[[Page 33673]]
expansion of the different ways to advertise online has been
accompanied by numerous types of deceptive telemarketing schemes aimed
at small businesses, including schemes that have purportedly sold
business directory listing services, the very same services industry
proponents claimed small businesses would not be able to access if the
Commission implemented its proposed amendments.\175\ The Commission has
brought many cases against fraudulent telemarketers selling services
that purportedly assist small businesses to advertise online, including
business directory listings,\176\ web hosting or design scams,\177\ and
search engine optimization (``SEO'') services.\178\ The Commission has
also seen deceptive telemarketing schemes that target businesses in
other areas not related to online advertising services.\179\ In fact,
the Commission has filed cases against other telemarketing frauds
targeting small businesses such as market-specific advertising
opportunities \180\ and government imposter scams.\181\ Given the
Commission's law enforcement experience in this area showing the
prevalence of fraud in digital marketing services targeting businesses,
and the maturation of this industry, the Commission believes it is time
to reconsider whether the TSR should continue to exempt B2B
telemarketing at all, or at a minimum, B2B telemarketing of digital
marketing services or imposter scams that harm businesses.\182\ The
Commission also believes there is sufficient evidence to apply the
TSR's prohibitions against making material misrepresentations or false
or misleading statements in B2B telemarketing and seeks comment on this
proposal in the NPRM.
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\175\ See supra note 169.
\176\ See, e.g., FTC v. Your Yellow Book Inc., No. 14-cv-786-D
(W.D. Ok. July 24, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140807youryellowbookcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140807youryellowbookcmpt.pdf</a> (last visited
Jan. 31, 2022); FTC v. <a href="http://OnlineYellowPagesToday.com">OnlineYellowPagesToday.com</a>, Inc., No. 14-cv-
0838 RAJ (W.D. Wa. June 9, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140717onlineyellowpagescmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140717onlineyellowpagescmpt.pdf</a> (last
visited Jan. 31, 2022); FTC v. Modern Tech. Inc., et. al., No. 13-
cv-8257 (Nov. 18, 2013) available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/131119yellowpagescmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/131119yellowpagescmpt.pdf</a> (last
visited Jan. 31, 2022); FTC v. 6555381 Canada Inc. d/b/a Reed
Publishing, No. 09-cv-3158 (N.D. Ill. May 27, 2009) available at
<a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602reedcmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602reedcmpt.pdf</a> (last visited Jan. 31, 2022); FTC v. 6654916
Canada Inc. d/b/a Nat'l. Yellow Pages Online, Inc., No. 09-cv-3159
(N.D. Ill. May 27, 2009), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602nypocmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602nypocmpt.pdf</a> (last
visited Jan. 31, 2022); FTC v. Integration Media, Inc., No. 09-cv-
3160 (N.D. Ill. May 27, 2009), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602goamcmpt.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2009/06/090602goamcmpt.pdf</a> (last
visited Jan. 31, 2022); FTC v. Datacom Mktg. Inc., et. al., No. 06-
cv-2574 (N.D. Ill. May 9, 2006), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2006/05/060509datacomcomplaint.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2006/05/060509datacomcomplaint.pdf</a> (last visited Jan. 31, 2022); FTC v.
Datatech Commc'ns, Inc., No. 03-cv-6249 (N.D. Il. Aug. 3, 2005)
(filing amended complaint), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2005/08/050825compdatatech.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2005/08/050825compdatatech.pdf</a> (last
visited Jan. 31, 2022); FTC v. Ambus Registry, Inc., No. 03-cv-1294
RBL (W.D. Wa. June 16, 2003), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/07/ambuscomp.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/07/ambuscomp.pdf</a> (last
visited Jan. 31, 2022).
\177\ See FTC v. Epixtar Corp., et. al., No. 03-cv-8511(DAB)
(S.D.N.Y. Nov. 3, 2003), available at <a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/11/031103comp0323124.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/11/031103comp0323124.pdf</a> (last
visited Jan. 31, 2022); FTC v. Mercury Marketing of Delaware, Inc.,
No. 00-cv-3281 (E.D. Pa. Aug. 12, 2003) (filing for an Order to Show
Cause Why Defendants Should Not be Held in Contempt), available at
<a href="https://www.ftc.gov/sites/default/files/documents/cases/2003/08/030812contempmercurymarketing.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2003/08/030812contempmercurymarketing.pdf</a> (last visited Jan. 31, 2022).
\178\ See, e.g., FTC v. Pointbreak Media, LLC, No. 18-cv-61017-
CMA (S.D. Fla. May 7, 2018), available at <a href="https://www.ftc.gov/system/files/documents/cases/matter_1723182_pointbreak_complaint.pdf">https://www.ftc.gov/system/files/documents/cases/matter_1723182_pointbreak_complaint.pdf</a>
(last visited Jan. 31, 2022); FTC v. 7051620 Canada, Inc. No. 14-cv-
22132 (S.D. Fla. June 9, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/140717nationalbusadcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/140717nationalbusadcmpt.pdf</a> (last
visited Jan. 31, 2022).
\179\ A 2018 survey conducted by the Better Business Bureau
revealed that the same scams that harm consumers, such as tech
support scams and imposter scams, also harm small businesses, and
that 57% of scams that impact small businesses are perpetrated
through telemarketing. Better Business Bureau, Scams and Your Small
Business Research Report, at 9-10 (June 2018), available at <a href="https://www.bbb.org/globalassets/local-bbbs/council-113/media/small-business-research/bbb_smallbizscamsreport-final-06-18.pdf">https://www.bbb.org/globalassets/local-bbbs/council-113/media/small-business-research/bbb_smallbizscamsreport-final-06-18.pdf</a> (last
visited Jan. 31, 2022).
\180\ See, e.g., FTC v. Production Media Co., No. 20-cv-00143-BR
(D. Or. Jan. 23, 2020), available at <a href="https://www.ftc.gov/system/files/documents/cases/production_media_complaint.pdf">https://www.ftc.gov/system/files/documents/cases/production_media_complaint.pdf</a> (last visited
Jan. 31, 2022).
\181\ See, e.g., FTC v. <a href="http://DOTAuthority.com">DOTAuthority.com</a>, No. 16-cv-62186 (S.D.
Fla. Sept. 13, 2016) available at <a href="https://www.ftc.gov/system/files/documents/cases/162017dotauthoriity-cmpt.pdf">https://www.ftc.gov/system/files/documents/cases/162017dotauthoriity-cmpt.pdf</a> (last visited Jan. 31,
2022); FTC v. D & S Mktg. Solutions LLC, No. 16-cv-01435-MSS-AAS
(M.D. Fla. June 6, 2016), available at <a href="https://www.ftc.gov/system/files/documents/cases/160621dsmarketingcmpt.pdf">https://www.ftc.gov/system/files/documents/cases/160621dsmarketingcmpt.pdf</a> (last visited Jan.
31, 2022).
\182\ See supra note 186; see also, FTC Blog, Protecting Small
Business from Imposters (Jan. 9 2020), available at <a href="https://www.consumer.ftc.gov/blog/2020/01/protecting-small-business-imposters">https://www.consumer.ftc.gov/blog/2020/01/protecting-small-business-imposters</a> (last visited Jan. 31, 2022).
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3. Market Changes in People's Work Experience
In addition to the Commission's law enforcement experience, the
Commission also notes that since it last considered making substantive
changes to the exemption in 2003, technological advancements, along
with current events, have drastically affected where people typically
perform their jobs as well as the types of jobs they perform.
Specifically, technological changes have provided people more workplace
flexibilities,\183\ resulting in greater numbers of people working from
home on either a part-time or full-time basis.\184\ But more
significantly, the COVID-19 pandemic has resulted in an unprecedented
number of people working from home since March 2020.\185\ Although it
is difficult to predict whether people will continue to work from home
in such large numbers in the future, industry analysts currently
believe businesses will provide greater work flexibilities to their
employees post-pandemic.\186\ The Commission's
[[Page 33674]]
DNC Registry is meant, in part, to protect consumers' privacy from an
abusive pattern of calls.\187\ With more people working from home, the
likelihood B2B telemarketing will impinge on the privacy of a
consumer's home is escalating. This raises the question whether the DNC
Registry will still be able to effectively protect consumers' privacy
if the TSR is not extended to cover B2B telemarketing.
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\183\ See Rachel M. Krantz-Kent, Monthly Labor Review: Where did
Workers Perform Their Jobs in the Early 21st Century?, U.S. Bureau
of Labor and Statistics (July 2019), available at <a href="https://www.bls.gov/opub/mlr/2019/article/where-did-workers-perform-their-jobs.htm">https://www.bls.gov/opub/mlr/2019/article/where-did-workers-perform-their-jobs.htm</a> (last visited Jan. 31, 2022) (noting that ``advances in
information and communication technology allow people to reach their
colleagues and clients by phone, email, or text from nearly
anywhere, at all hours of the day'' and that the ``development and
expansion of secure computer networks, cloud computing, and wireless
connections provide additional flexibility in where and when work
can be done'').
\184\ A 2017 survey estimated that approximately 43% of
Americans spend some time working from home, with increasing numbers
working remotely four to five days a week. Niraj Chokshi, Out of the
Office: More People Are Working Remotely, Survey Finds, N.Y. Times,
Feb. 15, 2017, available at <a href="https://www.nytimes.com/2017/02/15/us/remote-workers-work-from-home.html">https://www.nytimes.com/2017/02/15/us/remote-workers-work-from-home.html</a> (last visited Jan. 31, 2022). See
also U.S. Bureau of Labor Statistics (``BLS''), Ability to Work From
Home: Evidence From Two Surveys and Implications for the Labor
Market in the COVID-19 Pandemic, at n.1 (June 2020), available at
<a href="https://www.bls.gov/opub/mlr/2020/article/ability-to-work-from-home.htm#_edn1">https://www.bls.gov/opub/mlr/2020/article/ability-to-work-from-home.htm#_edn1</a> (last visited Jan. 31, 2022) (citing to a survey
conducted by Global Workforce Analytics that reported the number of
workers who worked at home at least half the time increased by 115%
from 2005 to 2017); see also BLS, Job Flexibilities and Work
Schedules--2017-2018: Data from the American Time Use Survey (Sept.
19, 2019), available at <a href="https://www.bls.gov/news.release/flex2.nr0.htm">https://www.bls.gov/news.release/flex2.nr0.htm</a> (last visited Jan. 31, 2022) (reporting that
approximately 25% of wage and salary workers worked at home
occasionally); BLS, Work at Home Summary in 2004 (Sept. 25, 2005),
available at <a href="https://www.bls.gov/news.release/homey.nr0.htm">https://www.bls.gov/news.release/homey.nr0.htm</a> (last
visited Jan. 31, 2022) (reporting that approximately 15% of workers
reported working from home at least once per week).
\185\ The Federal Reserve, Update on the Economic Well-Being of
U.S. Households: July 2020 Results, at 4 (Sept. 22, 2020), available
at <a href="https://www.federalreserve.gov/publications/files/2019-report-economic-well-being-us-households-update-202009.pdf">https://www.federalreserve.gov/publications/files/2019-report-economic-well-being-us-households-update-202009.pdf</a> (last visited
Jan. 31, 2022) (reporting that approximately 41% and 31% of workers
were working from home when the surveys were conducted in April 2020
and July 2020, respectively.).
\186\ See Press Release, Gartner, Inc., Gartner HR Survey
Reveals 41% of Employees Likely to Work Remotely at Least Some of
the Time Post Coronavirus Pandemic (April 14, 2020), available at
https://www.gartner.com/en/newsroom/press-releases/2020-04-14-
gartner-hr-survey-reveals-41--of-employees-likely-to- (last visited
Jan. 31, 2022); See also, McKinsey & Company, The Future of Telework
after Covid-19 (Feb. 18, 2021), available at <a href="https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-after-covid-19">https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-after-covid-19</a> (last visited Jan. 31, 2022) (reporting that
approximately 4-5 times more telework is possible post Covid-19 in
advanced economies and in jobs in which remote work can be done
without loss of productivity and that a survey of executives
revealed they planned to reduce their office footprint by
approximately 30%); PwC, US Remote Work Survey (Jan. 12, 2021),
available at <a href="https://www.pwc.com/us/en/library/covid-19/us-remote-work-survey.html#content-free-1-24f5">https://www.pwc.com/us/en/library/covid-19/us-remote-work-survey.html#content-free-1-24f5</a> (last visited Jan. 31, 2022)
(reporting a hybrid workplace where employees rotate in and out of
the offices configured for shared spaces is a likely outcome post
Covid-19).
\187\ 2003 TSR Amendments, 68 FR at 4631.
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Additionally, the rise of the gig economy and the economic impact
of the pandemic has resulted in more people utilizing alternative work
arrangements to supplement their income, or as a means of full-time
employment.\188\ The gig economy refers to alternative work
arrangements including independent contractors, online platform
workers, contract firm work, on-call workers, and temporary
workers.\189\ Given the nature of gig work, it is likely gig workers
utilize their personal phones for business purposes rather than relying
on separate phone lines dedicated for business purposes. Thus, for gig
workers, allowing B2B telemarketing might subject them to an increasing
number of unwanted calls they cannot avoid by using call-blocking
technology \190\ or by placing their numbers on the FTC's DNC
Registry.\191\ This is not a new dilemma; one commenter to the
Regulatory Review highlighted it as a challenge for home-based
businesses several years ago.\192\ But it may be on the rise along with
the gig economy. This issue likely affects more than just home-based
businesses and applies to any person who utilizes one phone for both
personal purposes and business purposes. Despite the Commission's
amendments in 2015 to make explicit that the B2B telemarketing
exemption only applies to the sale of goods or services to a business,
unscrupulous telemarketers could take advantage of this rising trend to
assert the B2B exemption should apply if a person does have a dual
purpose phone.
---------------------------------------------------------------------------
\188\ Shane McFeely and Ryan Pendell, The Gig Economy and
Alternative Work Arrangements, at 6 (Aug. 18, 2018), available at
<a href="https://www.gallup.com/workplace/240929/workplace-leaders-learn-real-gig-economy.aspx">https://www.gallup.com/workplace/240929/workplace-leaders-learn-real-gig-economy.aspx</a> (last visited Jan. 31, 2022) (reporting
approximately 36% of workers are involved in the gig economy); see
also The Federal Reserve, Report on the Economic Well-Being of U.S.
Households in 2019, Featuring Supplemental Data from April 2020, at
18 (May 2020), available at <a href="https://www.federalreserve.gov/publications/files/2019-report-economic-well-being-us-households-202005.pdf">https://www.federalreserve.gov/publications/files/2019-report-economic-well-being-us-households-202005.pdf</a> (last visited Jan. 31, 2022) (reporting approximately one
in three of all adults engaged in gig work). Another survey
estimated that approximately 30% of the population freelanced or
participated in the gig economy in the U.S., and projected that
approximately 50% of the population will be freelancing in 10 years.
Elaine Pofeldt, Are We Ready For A Workforce That Is 50% Freelance?,
Forbes, Oct. 17, 2017, available at <a href="https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforce-that-is-50-freelance/#6c123af23f82">https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforce-that-is-50-freelance/#6c123af23f82</a> (last visited Jan. 31, 2022). See also,
Matthew Lavietes and Michael McCoy, Waiting for Work: Pandemic
Leaves U.S. Gig Workers Clamoring for Jobs, Reuters, Oct. 19, 2020,
available at <a href="https://www.reuters.com/article/us-biggerpicture-health-coronavirus-gigw/waiting-for-work-pandemic-leaves-u-s-gig-workers-clamoring-for-jobs-idUSKBN2741DM">https://www.reuters.com/article/us-biggerpicture-health-coronavirus-gigw/waiting-for-work-pandemic-leaves-u-s-gig-workers-clamoring-for-jobs-idUSKBN2741DM</a> (last visited Jan. 31,
2022) (reporting that with unemployment soaring, more workers are
joining the gig economy).
\189\ See Shane McFeely and Ryan Pendell, The Gig Economy and
Alternative Work Arrangements, at 6 (Aug. 18, 2018), available at
<a href="https://www.gallup.com/workplace/240929/workplace-leaders-learn-real-gig-economy.aspx">https://www.gallup.com/workplace/240929/workplace-leaders-learn-real-gig-economy.aspx</a> (last visited Jan. 31, 2022) (examples of gig
workers include Uber drivers, Task Rabbit workers, contract nurses,
and free lancers).
\190\ While call-blocking technology may be effective for a
consumer's personal phone, businesses and individuals using their
personal phones for business purposes may not feel able to employ
call-blocking technology to the same extent if they anticipate
receiving calls from prospective customers.
\191\ Because the TSR exempts B2B telemarketing calls, a seller
or telemarketer engaged in B2B telemarketing may argue that it is
not prohibited from calling people on the FTC's Do Not Call registry
if those people are also using their phone numbers for business
purposes and the seller or telemarketer is calling to sell a good or
service to a business.
\192\ West Italian, No. 00113, at 3.
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In light of these changes in workforce dynamics, the Commission is
seeking comment on whether the TSR should continue to exempt B2B
telemarketing calls. Specifically, the Commission seeks comments on
whether: (1) The exemption should be repealed in its entirety; \193\
(2) the exemption should be partially repealed so that only specific
provisions of the TSR would apply to B2B telemarketing; or (3) the
exemption should be partially repealed so that the TSR applies to a
subset of B2B telemarketing based on, for example, the particular goods
or services offered for sale.
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\193\ The Commission is publishing an NPRM in conjunction with
this ANPR. The NPRM proposes, among other things, prohibiting
deception in business-to-business telemarketing calls. This ANPR
seeks additional comment on the B2B exemption including whether it
should be repealed in its entirety.
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Because, as PACE has noted, telemarketers cannot easily
differentiate between residential phone numbers and business phone
numbers,\194\ the Commission believes it is possible many telemarketers
who engage in telemarketing to businesses may already ensure that they
do not make calls to numbers on the FTC's DNC Registry even though they
are not currently required to comply with the DNC provisions of the
TSR. As such, the Commission is also particularly interested in seeking
comment on the number of sellers or telemarketers who engage in
telemarketing to businesses. The Commission is also interested in
whether, in the ordinary course of business, such sellers or
telemarketers make any attempts to determine whether a phone number is
on the FTC's DNC Registry or to differentiate between phone numbers
used for personal purposes and those used for business purposes.
---------------------------------------------------------------------------
\194\ PACE, No. 00107, at 6.
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From its law enforcement experience and through its policy work in
connection with the Every Community Initiative, the Commission is
cognizant that fraud and other consumer and business concerns can have
disproportionate negative impacts on underserved communities.\195\
Thus, the Commission is also interested in understanding whether its
proposal to apply more completely the TSR to B2B telemarketing will
impact underserved communities differently. For example, would applying
the TSR to B2B telemarketing impose greater burdens on minority-owned
businesses engaged in telemarketing? Would it create barriers to
entrepreneurship when entrepreneurs from communities of color are
already underrepresented compared to their share of the
population?\196\ Or would it provide greater protection to minority-
owned businesses against fraud and disruptive telemarketing? The
Commission has found very few sources of data on these issues and
invites comments that can help the Commission understand the full
impact of its proposal on underserved communities.
---------------------------------------------------------------------------
\195\ See Serving Communities of Color: A Staff Report on the
Federal Trade Commission's Efforts to Address Fraud and Consumer
Issues Affecting Communities of Color, available at <a href="https://www.ftc.gov/system/files/documents/reports/serving-communities-color-staff-report-federal-trade-commissions-efforts-address-fraud-consumer/ftc-communities-color-report_oct_2021-508-v2.pdf">https://www.ftc.gov/system/files/documents/reports/serving-communities-color-staff-report-federal-trade-commissions-efforts-address-fraud-consumer/ftc-communities-color-report_oct_2021-508-v2.pdf</a> (last
visited Jan. 31, 2022).
\196\ See, Michael McManus, Minority Business Ownership: Data
from the 2012 Survey of Business Owners, Office of Advocacy, U.S.
Small Business Administration, at 1-2 (Sept. 14, 2016), available at
<a href="https://cdn.advocacy.sba.gov/wp-content/uploads/2016/09/07141514/Minority-Owned-Businesses-in-the-US.pdf">https://cdn.advocacy.sba.gov/wp-content/uploads/2016/09/07141514/Minority-Owned-Businesses-in-the-US.pdf</a> (last accessed June 29,
2021).
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[[Page 33675]]
C. Questions for Business-to-Business Telemarketing Calls
Questions Regarding Possible Benefits to People and Businesses From
Repealing the B2B Exemption
1. How many telemarketing calls do businesses and non-profit
charitable organizations receive on average per year, per month, or per
day? What kinds of goods or services are the subject of those B2B
telemarketing calls? Do businesses and non-profit charitable
organizations receive B2B telemarketing calls utilizing prerecorded
messages, including soundboard technology? If yes, how many do
businesses receive on average per year, per month, or per day? What
kinds of goods or services are sold to businesses and non-profit
charitable organizations via prerecorded message? How many of these
calls involve soundboard technology?
2. Do businesses and non-profit charitable organizations receive
telemarketing calls soliciting charitable contributions? If yes, how
many such calls do businesses receive on average per year, per month,
or per day? On behalf of what kinds of organizations do telemarketers
solicit charitable contributions from businesses and non-profit
charitable organizations? Do businesses and non-profit charitable
organizations receive B2B telemarketing that use prerecorded messages
to solicit charitable contributions? How many such calls do businesses
and non-profit charitable organizations receive on average per year,
per month, or per day? Do those messages utilize soundboard technology?
3. Do people or businesses support repealing the business-to-
business exemption from the TSR? If not, why not? If yes, what harm
does B2B telemarketing cause to people, to small businesses, or to
businesses of any size? What is an accurate estimate of annual harm
suffered by businesses as a result of B2B telemarketing?
4. Do underserved communities support repealing the business-to-
business exemption from the TSR? If not, why not? If yes, what harm
does B2B telemarketing cause to underserved communities? What is an
accurate estimate of annual harm suffered by underserved communities as
a result of B2B telemarketing?
5. Do B2B telemarketing calls cause harm to non-profit charitable
organizations? If yes, what harm does B2B telemarketing calls cause? If
not, why not?
6. Should the TSR apply to all B2B telemarketing calls? If so, why?
If not, why not? If not, what types of B2B telemarketing calls should
the TSR apply to and why? What harm do those B2B telemarketing calls
cause to people, businesses, or non-profit charitable organizations?
7. Should the TSR apply only to B2B telemarketing calls offering
digital marketing goods or services to businesses or non-profit
charitable organizations and imposter scams? If not, why not? If yes,
why? How would you define digital marketing goods or services? What
harm is caused by telemarketing these goods or services to businesses
or non-profit charitable organizations? If the TSR were applied to B2B
telemarketing calls of digital marketing goods or services or imposter
scams harming businesses, should the TSR carve out any exceptions? If
yes, what exceptions and why?
8. Should the TSR be limited to B2B telemarketing calls of specific
goods or services? If yes, what goods or services? What harm is caused
by telemarketing those goods or services to businesses or non-profit
charitable organizations? What existing Federal or state laws apply to
the telemarketing of those goods or services to businesses or non-
profit charitable organizations? Why are the existing laws governing
the sale of those goods or services to businesses or non-profit
charitable organizations insufficient to prevent the identified harm?
Should all provisions of the TSR apply to the telemarketing of those
goods or services to businesses? If not, why not and what specific TSR
provisions should apply? Should there be any carve outs from applying
the TSR or specific provisions of the TSR to the telemarketing of those
goods or services to businesses or non-profit charitable organizations?
9. Should the TSR eliminate the exemption for inbound B2B
telemarketing calls? If not, why not? If so, why? What harm is caused
by inbound B2B telemarketing?
10. Should the TSR eliminate the exemption for outbound B2B
telemarketing calls? If not, why not? If so, why? What harm is caused
by outbound telemarketing that affects businesses or non-profit
charitable organizations?
11. Should all of the provisions of the TSR apply to B2B
telemarketing calls? If yes, why? If not, which provision(s) of the TSR
should apply to B2B telemarketing calls? What harm would be prevented
by applying that provision?
12. Should the TSR's provisions regarding the use of prerecorded
messages apply to B2B telemarketing calls? If no, why not? If yes, why?
What harm is caused by B2B telemarketing calls that utilize prerecorded
messages?
13. How many people work from home? How many days per week do
people work from home? Do people who work from home use a separate
phone number for business purposes? Do people who work from home use
their personal mobile or home landline for business purposes? Do people
who work from home receive B2B telemarketing calls? Do they receive
those calls on their personal phone numbers or business phone numbers?
How many B2B telemarketing calls do they receive? Do any of those B2B
telemarketing calls use prerecorded messages? How many B2B
telemarketing calls using prerecorded messages do they receive? What
types of goods or services are offered for sale in B2B telemarketing
calls that use prerecorded messages?
14. How many people are employed in the gig economy? How many gig
workers use a separate business phone number for their gig work? How
many gig workers use one phone number for personal purposes and another
for their gig work? Do gig workers receive B2B telemarketing calls? How
many B2B telemarketing calls do they receive? Do any of those B2B
telemarketing calls use prerecorded messages? How many B2B
telemarketing calls that use prerecorded messages do they receive? What
types of goods or services are offered for sale in the B2B
telemarketing calls that gig workers receive?
15. Do businesses or non-profit organizations employ call-blocking
technologies? If yes, do they successfully reduce the number of
unwanted B2B telemarketing calls? If they don't use such technologies,
why not?
16. Do people who work from home or gig workers use call-blocking
technologies? If yes, do they use such technologies on their business
phones or personal phones? Do the call-blocking technologies
successfully reduce the number of unwanted telemarketing calls,
including unwanted B2B calls, if any? If they don't use such
technologies, why not?
17. How many home-based businesses have a dedicated phone number
for business purposes? How many B2B telemarketing calls do such
businesses receive on their business phone numbers on average per year,
per month, or per day? How many home-based businesses utilize one phone
number for both personal and business purposes? How many B2B
telemarketing calls do such businesses receive on their dual purpose
phone number on average per year, per month, or per day? Do home-based
businesses use call-blocking technologies? If yes, do such businesses
use call-blocking
[[Page 33676]]
technologies on their business lines? Do call-blocking technologies
successfully reduce the number of unwanted telemarketing calls,
including unwanted B2B calls, if any? If not, why don't home-based
businesses use call-blocking technologies? What types of goods or
services are offered for sale in the B2B telemarketing calls that home-
based businesses receive?
18. How many small businesses have a dedicated phone number for
business purposes? How many B2B telemarketing calls do such businesses
receive on their business lines on average per year, per month, or per
day? How many small businesses have one phone number that they use for
personal and business purposes? How many B2B telemarketing calls do
such businesses receive on their dual purpose phone number on average
per year, per month, or per day? Do small businesses use call-blocking
technologies? If yes, do small businesses use call-blocking
technologies on their business lines? Do call-blocking technologies
successfully reduce the number of telemarketing calls, including
unwanted B2B calls, if any? If not, why don't small businesses use
call-blocking technologies? What types of goods or services are offered
for sale in the B2B telemarketing calls that small businesses receive?
19. How do sellers or telemarketers determine whether a phone
number belongs to a person or a business? Has this determination been
made more difficult by people working from home or participating in the
gig economy?
Questions Regarding the Potential Burden to Telemarketers and Sellers
From Repealing the B2B Exemption
1. How many sellers or telemarketers engage in telemarketing to
businesses? How much revenue do sellers or telemarketers make in
telemarketing to businesses and how would removing the exemption for
B2B sales affect their revenue?
2. How many sellers or telemarketers engage in telemarketing
exclusively to businesses and do not engage in telemarketing to people?
3. How many telemarketers solicit charitable contributions from
businesses? Do those same telemarketers also solicit charitable
contributions from people?
4. What goods or services do sellers offer for sale to businesses
through telemarketing? Do sellers utilize other means of marketing
those same goods or services to businesses? Do sellers sell those same
goods or services to people?
5. How many outbound B2B telemarketing calls do sellers or
telemarketers make on average per year, per month, or per day? How many
of those calls or what percentage of those outbound B2B telemarketing
calls result in a sale? How many inbound B2B telemarketing calls do
sellers or telemarketers receive on average per year, per month, or per
day? How many of those calls or what percentage of those inbound
telemarketing calls result in a sale? Do sellers or telemarketers keep
records of the outbound calls or inbound B2B telemarketing calls in the
ordinary course of business? What type of records do sellers or
telemarketers keep of those telemarketing calls? How long are they
kept?
6. Do sellers or telemarketers offer goods or services to
businesses by using prerecorded messages, including through soundboard
technology? If so, how many B2B telemarketing calls do sellers or
telemarketers make using prerecorded messages on average per year, per
month, or per day? How many of those calls result in a sale?
7. Do sellers or telemarketers make B2B telemarketing calls
involving debt relief services? If so, how many calls involving debt
relief services do sellers or telemarketers make on average per year,
per month, or per day? How many of those calls or what percentage of
those calls result in a sale?
8. What is the estimated burden of complying with the TSR if the
B2B exemption is repealed for both outbound and inbound telemarketing?
What is the basis for the estimated burden?
9. What is the estimated burden of complying with the TSR if the
B2B exemption for outbound telemarketing is repealed? What is the basis
for the estimated burden?
10. What is the estimated burden to underserved communities of
complying with the TSR if the B2B exemption is repealed for outbound
telemarketing? What is the estimated burden to underserved communities
of complying with the TSR if the B2B exemption is repealed for inbound
telemarketing? What is the basis for the estimated burden?
11. What is the estimated burden of complying with the TSR if the
B2B exemption is repealed for the sale of digital marketing goods or
services or imposter scams that harm businesses? What is the basis for
the estimated burden?
12. What is the estimated burden of complying with the TSR if the
B2B telemarketing calls are required to comply with the TSR's
provisions regarding prerecorded messages? What is the basis for the
estimated burden?
13. Do sellers or telemarketers who engage in B2B telemarketing
take any steps to ensure they are not making calls to phone numbers on
the DNC Registry? If so, what steps do sellers or telemarketers take?
Do such sellers or telemarketers also engage in telemarketing to
people? Do sellers or telemarketers who engage in B2B telemarketing
exclusively take steps to ensure that they are not making calls to
phone numbers on the FTC's DNC Registry? If so, what steps do such
sellers or telemarketers take? Do they access the DNC Registry?
D. Questions for Negative Option Notice and Cancelation Mechanisms
As discussed in Section IV.C, the Commission seeks comment on the
proposal that negative option sellers and telemarketers provide
consumers with notice and the opportunity to cancel before they are
billed for negative option products. The Commission also seeks comment
on the scope of deceptive or abusive inbound telemarketing with a
negative option feature.
1. How many telemarketing calls involve a negative option feature
on average per year, per month, or per day? How many of those calls or
what percentage of those calls result in a sale?
2. Which industries offer negative option goods or services through
telemarketing and what products do they sell? How many of the goods or
services sold by these industries are sold through telemarketing that
includes negative options?
3. When sellers or telemarketers sell goods, or services with
negative option features, how often (e.g., weekly, monthly, annually)
do the sellers bill consumers and businesses?
4. Do sellers or telemarketers already provide consumers notice
when consumers and businesses are billed as part of negative option
programs? How is that notice provided? How often is the notice provided
before the consumer and business is billed? What is the cost of
providing this notice?
5. Do consumers want notification that they are about to be charged
for a subscription plan? If so, how would they like to be notified? How
often would they like to be notified? When would they like the
notification to take place (e.g., one week before being charged)?
6. What cancelation mechanisms do sellers or telemarketers provide
for consumers and businesses to cancel their negative option programs?
What is the cost of these mechanisms? Are some mechanisms easier for
consumers to use than others? If sellers or telemarketers offer
multiple cancelation mechanisms, how often do consumers use each
mechanism?
[[Page 33677]]
7. Do consumers and businesses who purchase a negative option
product or service through telemarketing have a preference for how they
communicate with the seller (e.g., email, phone, online chat, or some
other method)?
8. Do consumers and businesses who purchase negative option
products or services through telemarketing typically have email
accounts where they can receive notice of negative option programs? Do
they typically provide email addresses to sellers or telemarketers? Do
they have a preference for how they cancel the negative option or
service? If not, what is the best way for those consumers and
businesses to cancel negative-option programs?
9. When sellers or telemarketers sell negative option programs to
consumers and businesses, what personal information do they obtain? How
often do sellers or telemarketers communicate with consumers by email?
10. How often do sellers or telemarketers use unfair or deceptive
acts or practices to sell goods or services with a negative option
feature solely through inbound telemarketing that are not part of an
upsell? Are goods or services other than tech support sold in this
manner? If so, which goods or services and how often are they sold in
this manner? Should the TSR be further amended to provide consumers
with additional protections against these deceptive acts or practices?
How so?
VI. Comment Submissions
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before August 2, 2022.
Write ``Telemarketing Sales Rule ANPR, R411001'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Because of the public health emergency in response to the COVID-19
outbreak and the agency's heightened security screening, postal mail
addressed to the Commission will be subject to delay. We strongly
encourage you to submit your comment online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website. To ensure the Commission considers your
online comment, please follow the instructions on the web-based form.
If you file your comment on paper, write ``Telemarketing Sales Rule
ANPR, R411001'' on your comment and on the envelope and mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B),
Washington, DC 20580.
Because your comment will be placed on the publicly accessible
website, <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure your comment does not include any
sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted publicly at <a href="http://www.regulations.gov">www.regulations.gov</a>--as legally required by FTC
Rule 4.9(b)--we cannot redact or remove your comment from the FTC
website, unless you submit a confidentiality request that meets the
requirements for such treatment under FTC Rule 4.9(c), and the General
Counsel grants that request.
Visit the FTC website to read this document and the news release
describing it. The FTC Act and other laws the Commission administers
permit the collection of public comments to consider and use in this
proceeding as appropriate. The Commission will consider all timely and
responsive public comments it receives on or before August 2, 2022. For
information on the Commission's privacy policy, including routine uses
permitted by the Privacy Act, see <a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2022-10922 Filed 6-2-22; 8:45 am]
BILLING CODE 6750-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.