Proposed Rule2024-07182
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
April 16, 2024
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("FTC" or "Commission") proposes to amend the Telemarketing Sales Rule ("Rule") to extend its coverage to inbound telemarketing calls by consumers to technical support services--i.e., calls that consumers make in response to an advertisement through any medium or to a direct mail solicitation. The proposed amendment is necessary in light of the widespread deception and consumer injury caused by tech support scams. The amendment would provide the Commission with the ability to obtain stronger relief in cases involving tech support scams, including civil penalties and consumer redress.
Full Text
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<title>Federal Register, Volume 89 Issue 74 (Tuesday, April 16, 2024)</title>
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[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Proposed Rules]
[Pages 26798-26807]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07182]
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FEDERAL TRADE COMMISSION
16 CFR Part 310
RIN 3084-AB19
Telemarketing Sales Rule
AGENCY: Federal Trade Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'')
proposes to amend the Telemarketing Sales Rule (``Rule'') to extend its
coverage to inbound telemarketing calls by consumers to technical
support services--i.e., calls that consumers make in response to an
advertisement through any medium or to a direct mail solicitation. The
proposed amendment is necessary in light of the widespread deception
and consumer injury caused by tech support scams. The amendment would
provide the Commission with the ability to obtain stronger relief in
cases involving tech support scams, including civil penalties and
consumer redress.
DATES: Comments must be received by June 17, 2024.
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 (16 CFR part 310--NPRM) (Project No. R411001)'' on your comment,
and file your comment online at <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, Mail Stop H-144 (Annex T), Washington, DC
20580.
FOR FURTHER INFORMATION CONTACT: Benjamin R. Davidson, (202) 326-3055,
<a href="/cdn-cgi/l/email-protection#bddfd9dccbd4d9ced2d3fddbc9de93dad2cb"><span class="__cf_email__" data-cfemail="15777174637c71667a7b557361763b727a63">[email protected]</span></a>, or Patricia Hsue, (202) 326-3132, <a href="/cdn-cgi/l/email-protection#fa8a92898f9fba9c8e99d49d958c"><span class="__cf_email__" data-cfemail="93e3fbe0e6f6d3f5e7f0bdf4fce5">[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 Federal Trade Commission issues this notice of proposed
rulemaking (``NPRM'') to invite public comment on a proposed amendment
to the TSR that would require inbound technical support (``tech
support'') calls to comply with the Rule.\1\ The Rule is currently
framed to exempt from its requirements: (1) calls initiated by a
customer in response to an advertisement through any medium, and (2)
calls initiated by a customer in response to a direct mail
solicitation.\2\ The proposal would specifically exclude tech support
calls from these inbound call exemptions. The NPRM also explains the
Commission's decision to refrain from proposing changes to the TSR that
would: (1) require a notice and cancellation mechanism with negative
option sales or (2) further address business to business (``B2B'')
calls.\3\
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\1\ See 16 CFR part 310. References to the TSR will cite the
section number (e.g., Sec. 310.6(b)(5)).
\2\ See Sec. 310.6(b)(5) and (b)(6). The exemptions currently
exclude certain categories of calls that are likely to be deceptive,
such as calls relating to investment opportunities and debt relief
services.
\3\ The Commission is concurrently issuing a Final Rule that
would require B2B calls to comply with the TSR's prohibitions on
deception.
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This NPRM invites written comments on all issues raised by the
proposed amendment, including answers to the specific questions set
forth in Section IV of this Notice. The Commission has issued a final
rule--published elsewhere in this same issue of the Federal Register--
that, among other things, will require telemarketers and sellers to
maintain additional records of their telemarketing transactions and
prohibit material misrepresentations and false or misleading statements
in B2B telemarketing calls.
II. Overview of the Telemarketing Sales Rule
Congress enacted the Telemarketing and Consumer Fraud and Abuse
Prevention Act (``Telemarketing Act'' or ``Act'') in 1994 to curb
deceptive and abusive telemarketing practices and provide anti-fraud
and privacy protections for consumers receiving
[[Page 26799]]
telephone solicitations to purchase goods or services.\4\ The
Telemarketing Act directed the Commission to adopt a rule prohibiting
deceptive or abusive telemarketing practices, including prohibiting
telemarketers from undertaking a pattern of unsolicited calls that
reasonable consumers would consider coercive or abusive of their
privacy, restricting the time of day telemarketers may make unsolicited
calls to consumers, and requiring telemarketers to promptly and clearly
disclose that the purpose of the call is to sell goods or services.\5\
The Act also directed the Commission to address in its rule other acts
or practices that it found to be deceptive or abusive, including acts
or practices of entities or individuals that assist and facilitate
deceptive telemarketing, and to consider including recordkeeping
requirements.\6\ Finally, the Act authorized State Attorneys General,
or other appropriate State officials, and private litigants to bring
civil actions in federal district court to enforce compliance with the
FTC's rule.\7\
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\4\ 15 U.S.C. 6101-6108.
\5\ 15 U.S.C. 6102(a)(3). The Telemarketing Act was subsequently
amended in 2001 to add 15 U.S.C. 6102(a)(3)(D), which requires a
telemarketer to promptly and clearly disclose the purpose calls made
to solicit charitable contributions. See Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act (``USA PATRIOT Act''), Pub. L. 107-56, 115
Stat. 272 (Oct. 26, 2001).
\6\ 15 U.S.C. 6101(a); see also 2002 Notice of Proposed
Rulemaking, 67 FR 4492, 4510 (Jan. 30, 2002).
\7\ 15 U.S.C. 6103, 6104.
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Pursuant to the Act's directive, the FTC promulgated the TSR on
August 23, 1995.\8\ Since then, the Commission has amended the Rule's
substantive provisions on four occasions: (1) in 2003 to, among other
things, create the National Do Not Call Registry and extend the Rule to
telemarketing calls soliciting charitable contributions; \9\ (2) in
2008 to prohibit calls playing a recorded message (``robocalls'')
selling a good or service or soliciting charitable contributions; \10\
(3) in 2010 to ban the telemarketing of debt relief services requiring
an advance fee; \11\ and (4) in 2015 to bar the use in telemarketing of
certain novel payment mechanisms widely used in fraudulent
transactions.\12\
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\8\ See Statement of Basis and Purpose and Final Rule
(``Original TSR''), 60 FR 43842 (Aug. 23, 1995).
\9\ See Statement of Basis and Purpose and Final Amended Rule
(``2003 TSR Amendments''), 68 FR 4580 (Jan. 29, 2003) (adding Do Not
Call Registry, charitable solicitations, and other provisions).
\10\ See Statement of Basis and Purpose and Final Rule
Amendments (``2008 TSR Amendments''), 73 FR 51164 (Aug. 29, 2008)
(addressing the use of robocalls).
\11\ See Statement of Basis and Purpose and Final Rule
Amendments (``2010 TSR Amendments''), 75 FR 48458 (Aug. 10, 2010)
(adding debt relief provisions). The prohibition on misrepresenting
material aspects of debt relief services in Sec. 310.3(a)(2)(x) was
added in 2010 along with other debt relief provisions. See 2010 TSR
Amendments, 75 FR at 48498. The Commission subsequently published
correcting amendments to the text of Sec. 310.4 of the TSR.
Telemarketing Sales Rule; Correcting Amendments, 76 FR 58716 (Sept.
22, 2011).
\12\ 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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On June 3, 2022, the Commission issued an advance notice of
proposed rulemaking (``ANPR'') and a separate notice of proposed
rulemaking (``June NPRM'') \13\ concerning several potential changes to
the TSR. The June NPRM proposed amending the TSR's recordkeeping
requirements and requiring B2B calls to comply with the TSR's
prohibitions on several types of misrepresentations.\14\ The TSR
currently excludes most B2B calls from the Rule's coverage.\15\ The
ANPR sought comment on: (1) whether to further modify the TSR's
treatment of B2B calls including removing the exemption entirely; (2)
whether the Rule should require sellers of negative option products to
provide consumers notice before they are billed and a simple mechanism
to cancel the negative option; and (3) whether to extend the Rule to
apply to inbound tech support calls.
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\13\ 87 FR 3367.
\14\ Id. at 3367. The June NPRM also proposed adding a new
definition of ``previous donor.''
\15\ See Sec. 310.6(b)(7). The exemption for B2B calls excludes
calls selling nondurable office or cleaning supplies.
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III. Discussion of Comments
A. Negative Option
The Commission received seven comments that addressed whether the
Rule should require a notice and cancellation mechanism with negative
option sales.\16\ Six of the comments supported creating additional
protections for negative option sales, and one opposed any changes.
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\16\ Many commenters filed one comment either in response to the
ANPR or June NPRM that addressed issues raised by both documents. We
address relevant comments that were filed in response to both
rulemakings. We cite public comments by name of the commenting
organization or individual, the rulemaking (ANPR comments were
assigned ``33'' and the NPRM comments were assigned ``34'') and the
comment number.
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The Professional Association for Customer Engagement (``PACE'')
opposed any changes to the Rule to address negative options. PACE
claimed many consumers ``embrace negative option offers'' and regularly
check their bank statements to identify and stop unwanted recurring
charges.\17\ PACE also argued requiring sellers or telemarketers to
give notice to consumers before they are billed for recurring payments
would ``amount to yet another nuisance.'' \18\
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\17\ PACE 34-21 at 9.
\18\ Id.
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The other six commenters supported amending the Rule to create
greater protections for negative option sales. Three of those comments
expressed general support for the Rule requiring notice and a simple
cancellation method for negative options sales.\19\ The National
Association of Attorneys General (``NAAG''), and the Electronic Privacy
Information Center, along with thirteen other consumer organizations
(``EPIC''), observed that negative options continue to grow in
popularity.\20\ NAAG's comment ``echoes sentiments expressed by State
AGs for more than a decade,'' though those sentiments were directed to
negative options generally as opposed to the specific benefits or risks
of negative options sold by telemarketing.\21\ NAAG noted negative
option plans have become ``increasingly prevalent'' over the past
decade ``especially as home delivery became more popular during the
COVID-19 pandemic.'' \22\ EPIC cited a prediction made by UBS that the
``subscription economy'' will more than double by 2025, and it noted
the rise of a ``cottage industry'' to help consumers manage and cancel
their subscriptions.\23\
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\19\ Two of those comments were anonymous, 33-10 and 33-11, and
one was made by Kara V, 33-12.
\20\ NAAG 33-16; EPIC 33-17. The other individuals and
organizations participating in the EPIC comment are: National
Consumer Law Center (on behalf of its low-income clients), Center
for Digital Democracy, Consumer Action, Consumer Federation of
America, FoolProof, Mountain State Justice, National Consumers
League, New Jersey Citizen Action, Patient Privacy Rights, Public
Good Law Center, Public Justice Center, Public Knowledge, South
Carolina Appleseed Legal Justice Center, Cathy Lesser Mansfield
(Senior Instructor in Law, Case Western Reserve University School of
Law).
\21\ NAAG 33-16 at 3-4.
\22\ Id. at 3.
\23\ EPIC 33-17 at 7.
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Commenters also expressed concern for rules that would create
inconsistent regulation of negative options. The Third Party Payments
Association (``TPPA'') urged the FTC to use its rule making authority
to ``promulgate consistent requirements across its various rules,
regardless of sales channel, means of communication and/or method of
obtaining payment authorization.'' \24\ EPIC also noted Visa and
Mastercard require sellers to provide advance notice before the end
[[Page 26800]]
of a trial period, and it cautioned ``leaving these safeguards up to
individual companies will create a patchwork of different policies.''
\25\
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\24\ TPPA 34-14 at 2.
\25\ EPIC 33-17 at 8. EPIC also proposed that the Rule specify
the timing, manner of delivery, and content of the notice and also
set standards for cancellation.
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At the same time the Commission has been considering amendments to
the Rule, it has also been considering a broader rule that would
address negative option sales regardless of the method through which
the sale is made. On October 2, 2019, the Commission issued an advance
notice of proposed rulemaking regarding the need for a ``Rule
Concerning the Use of Prenotification Negative Option Plans,'' \26\ and
on April 24, 2023, the Commission issued a notice of proposed
rulemaking (``Negative Option NPRM'').\27\ The Negative Option NPRM
would apply to sales calls made by telephone. It proposes a rule that
would, among other things: require a clear and conspicuous disclosure
of the negative option feature and its conditions; require sellers to
obtain consumers' express informed consent to the negative option
transaction; and require sellers to provide a simple mechanism to
cancel the negative option that is at least as easy as the method used
to initiate the transactions. Because the proposed Negative Option Rule
addresses the commenters' suggestions including the preference for a
rule that would apply to all transactions, instead of potentially
creating different regulatory regimes depending on the sales channel,
the Commission will not amend the TSR to address negative option
transactions at this time.
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\26\ See ANPR, 84 FR 52393 (Oct. 2, 2019).
\27\ 88 FR 24716 (Apr. 24, 2023).
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B. Business to Business
The Commission received fifteen comments addressing the ANPR's
question of whether the Commission should modify the TSR's B2B
provision beyond the proposal in the June NPRM that would subject B2B
calls to the TSR's prohibitions on misrepresentations. Ten comments
supported removing the B2B exemption entirely, and five comments
opposed making any changes. Eight of the ten comments supporting
removing the B2B provision were made by consumers.\28\ Two of the
consumers referred to the B2B exemption as a ``loophole,'' and one
complained about receiving unwanted B2B telemarketing calls.\29\
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\28\ The comments are 34-9, 34-11, 33-5, 33-9, 33-10, 33-11, 33-
12, and 33-13.
\29\ See 33-5; 33-9.
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NAAG and EPIC supported removing the B2B exemption entirely. NAAG
called the exemption a ``relic of a bygone era.'' \30\ NAAG cited data
showing that: in 2020 more than 62% of U.S. households did not have a
landline; in 2020 only 26% of employees have employer-provided mobile
phones; and in 2018 36% of workers participated in the gig economy in
some capacity.\31\ EPIC noted the ``operational realities of work have
changed'' and the TSR should be amended to better reflect those
realities.\32\
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\30\ NAAG 33-16 at 8.
\31\ Id.
\32\ EPIC 33-17 at 11-12.
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Several commenters who opposed making any changes to the Rule
argued the Commission lacks the legal authority to remove the B2B
exemption because the Telemarketing Act is focused on harms to
consumers.\33\ Three commenters supported keeping the B2B exemption
without modification. The Chamber of Commerce asserted the B2B
exemption ``has proven beneficial to the business community.'' \34\ The
Revenue Based Finance Coalition (``RBFC'') argued additional regulation
of business activities is unwarranted ``given the sophistication of the
parties to the transaction'' and regulation could ``increase the cost
of capital available to small businesses.'' \35\ TPPA also noted its
members use telemarketing to engage with and acquire potential
customers.\36\
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\33\ National Federation of Independent Business 34-1 at 9-11;
PACE 33-20 at 7.
\34\ Chamber of Commerce 34-24 at 2.
\35\ RBPFC 34-13 at 3-5.
\36\ TPPA 34-14 at 2.
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The Commission is persuaded that it is appropriate to modify the
B2B exemption to require compliance with the TSR's prohibitions on
misrepresentation and false or misleading statements but not to require
compliance with all other TSR requirements. The comments do not provide
sufficient support to warrant modifying the B2B exemption beyond the
proposal in the ANPR that would require all B2B calls to comply with
the TSR's prohibitions on misrepresentations. The ANPR sought
information about the market for B2B telemarketing generally, including
whether businesses appreciate B2B telemarketing as a way to sell or buy
products. The ANPR also sought comment on whether businesses believe
they are harmed by B2B telemarketing or subject to unwanted B2B calls.
The Commission noted it is ``particularly interested in seeking comment
on the number of sellers or telemarketers who engage in telemarketing
to businesses'' \37\ and it asked about the kinds of goods or services
that are sold through B2B telemarketing, as well as how often
businesses receive B2B telemarketing calls.\38\ Only three comments
addressed these broader questions. TPPA claimed its members rely on
telemarketing to sell their products, and two anonymous commenters
claimed they receive an excessive volume of B2B telemarketing
calls.\39\ As NAAG and EPIC described, the Commission recognizes the
increasing interchangeability of personal and business phones. But, as
a whole, these comments do not adequately address the nature or scope
of relevant problems, and they do not enable the Commission to assess
related harm flowing from B2B telemarketing in order to craft proposed
changes that would mitigate or address such harm. The Commission will
consider further modifications to the B2B exemption at a later date if
the record demonstrates any modifications may be warranted.
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\37\ ANPR, 87 FR at 33674.
\38\ Id. at 33675.
\39\ TPPA 34-14 at 2; 33-5; and 33-10.
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C. Tech Support
The Commission received ten comments addressing whether the TSR
should require inbound tech support calls to comply with the TSR. Nine
comments supported the proposal: six filed anonymously or by consumers
and three filed by organizations.\40\ NAAG ``wholeheartedly'' agreed
with the proposal and believed that amending the TSR will have a
``substantial effect'' on tech support scams.\41\ NAAG stated the scams
``have become one of the most prevalent scams in the nation over the
past few years.'' \42\ EPIC also supported the proposal and noted the
``serious nature of this fraud is comparable to that in the
transactions already singled out for coverage of inbound calls.'' \43\
USTelecom--The Broadband Association (``USTelecom'') also supported the
proposal, noting tech support scams are a ``significant menace for both
consumers and businesses.'' \44\
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\40\ The comments are Jennifer Pierce 33-04; Kara V. 33-12;
Anonymous 33-02; Anonymous 33-10; and Anonymous 33-11.
\41\ NAAG 33-16 at 6.
\42\ Id. at 7.
\43\ EPIC 33-17 at 10.
\44\ UST 33-14 at 7.
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TPPA opposed ``prohibiting inbound telemarketing calls.'' \45\ TPPA
[[Page 26801]]
acknowledged these scams disproportionately affect older adults, but it
contended those problems will ``diminish over time'' as consumers
become more familiar with technology.\46\ TPPA also cautions that
``prohibiting'' inbound tech support calls could raise conflicts with
the FTC's Policy Statement on Repair Restrictions, create confusion for
consumers and businesses, and ``unduly burden legitimate business
activity by prohibiting Inbound telemarketing of technical support
services.'' \47\
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\45\ TPPA 34-14 at 2. The ANPR did not propose prohibiting
inbound tech support calls. It proposed requiring inbound tech
support calls to comply with the TSR. It is not clear from TPPA's
comment whether TPPA's concerns are limited to the effects of
prohibiting tech support calls as opposed to merely requiring the
calls to comply with the TSR.
\46\ Id.
\47\ Id.
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As explained below, the scope and severity of injury from tech
support scams, including their impact on older adults, warrants
amending the TSR.\48\ The Commission is mindful of concerns the
proposed amendment may unduly burden businesses, and the Commission
seeks comment on whether the proposed Rule will burden businesses and
how any undue burdens can be ameliorated.
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\48\ See FTC Report to Congress, Protecting Older Consumers,
2021-2022 (``2022 Protecting Older Consumers Report'') at 31 (Oct.
18, 2022), available at <a href="https://www.ftc.gov/reports/protecting-older-consumers-2021-2022-report-federal-trade-commission">https://www.ftc.gov/reports/protecting-older-consumers-2021-2022-report-federal-trade-commission</a> (last
visited Apr. 24, 2023).
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IV. Proposed Rule
A. Overview of Tech Support Scams
Tech support scams can begin in a variety of ways. Sometimes the
scammer places outbound calls to consumers warning them their computers
have been infected.\49\ Other scammers use deceptive computer pop-up
messages that claim the consumer's computer has a problem and direct
the consumer to call a phone number to fix the errors.\50\ Still other
scammers place advertisements with search engines that appear when
consumers search for their computer company's tech support telephone
number.\51\ And sometimes, scammers pay computer security software
companies so that when consumers call to activate their service, they
reach the scammer and are pitched additional and unnecessary products
and services.\52\ Once consumers connect with the scammer, whether
through outbound telemarketing or inbound telemarketing, the scammers
deceive consumers about a variety of problems with their computers and
dupe consumers into purchasing subscription tech support services or
software they do not need.\53\
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\49\ 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).
\50\ Id.
\51\ Id; see also FTC v. Click4Support, LLC, 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).
\52\ See FTC v. Inbound Call Experts, No. 9:14-cv-81935 (S.D.
Fla. Nov. 19, 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/141119icecmpt.pdf">https://www.ftc.gov/system/files/documents/cases/141119icecmpt.pdf</a> (last visited June 23, 2023).
\53\ Tech Support Testimony at 3.
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Although tech support scams have typically targeted consumers
looking for help with computers, tech support scams also target
consumers looking for help with other electronic devices, such as
cellular phones and smart home devices. News stories report on
consumers encountering tech support scams when they search for help
with their iPhones \54\ or look for support for their Kindle
tablets.\55\ In August 2022, Amazon filed a lawsuit alleging a tech
support operation targeted consumers who were seeking help with their
smart home doorbells and streaming video services.\56\
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\54\ ``Woman loses $1,500 to fake Apple Customer Service Scam,''
WCPO ABC 9, Cincinnati, (May 20, 2022), available at <a href="https://www.wcpo.com/money/consumer/dont-waste-your-money/woman-loses-1-500-to-fake-apple-customer-service-scam">https://www.wcpo.com/money/consumer/dont-waste-your-money/woman-loses-1-500-to-fake-apple-customer-service-scam</a> (last visited June 23, 2023).
\55\ ``Don't get Scammed by Fake Amazon Kindle and Fire Tablet
Support Sites'' (Feb. 22, 2016), available at <a href="https://blog.the-ebook-reader.com/2016/02/22/dont-get-scammed-by-fake-amazon-kindle-and-fire-tablet-support-sites/">https://blog.the-ebook-reader.com/2016/02/22/dont-get-scammed-by-fake-amazon-kindle-and-fire-tablet-support-sites/</a> (last visited June 23, 2023).
\56\ <a href="http://Amazon.com">Amazon.com</a>, Inc. v. Pionera, Inc., 2:22-cv-1491 (E.D. Cal.
Aug. 23, 2022).
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Consumer complaints about tech support scams have increased
dramatically over the last few years, ranging from approximately 40,000
complaints in 2017 to nearly 115,000 complaints in 2021.\57\ 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 of approximately $500 for consumers over the age of
60.\58\
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\57\ See FTC Consumer Sentinel Network Databook 2022 at 86,
available at <a href="https://www.ftc.gov/reports/consumer-sentinel-network-data-book-2021">https://www.ftc.gov/reports/consumer-sentinel-network-data-book-2021</a> (last visited June 23, 2023).
\58\ See, FTC Data Spotlight (``Tech Support Spotlight''),
available at <a href="https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-sugpport-scams">https://www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-sugpport-scams</a> (last visited
Jan. 31, 2022).
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Moreover, tech support scams disproportionately harm older
consumers, with consumers 60 years of age and older being five times
more likely to report a financial loss to tech support scams compared
to younger consumers.\59\ Data shows tech support scams have
consistently caused such disproportionate harm to older consumers. From
2015 to 2018, older consumers filed more reports on tech support scams
than on any other fraud category.\60\
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\59\ See 2022 Protecting Oder Consumers Report at 31, available
at <a href="https://www.ftc.gov/reports/protecting-older-consumers-2021-2022-report-federal-trade-commission">https://www.ftc.gov/reports/protecting-older-consumers-2021-2022-report-federal-trade-commission</a> (last visited June 23, 2023). In
2020, older consumers were six times as likely to report a financial
loss to tech support scams as compared to younger consumers. See 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 April.
24, 2023).
\60\ Tech Support Spotlight; see also FTC Report to Congress,
Protecting Older Consumers, 2018-2019 (``2019 Protecting Older
Consumers Report'') 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 2021,
reports of online shopping frauds and business imposter frauds were
the top fraud complaint for older consumers, with tech support scams
dropping to third. 2022 Protecting Older Consumers Report, at 31.
Older consumers, however, are disproportionately more likely to lose
money to tech support scams. Id.
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B. Law Enforcement and Other Responses
The Commission has responded to tech support scams through consumer
education and law enforcement actions. For consumer education, the
Commission has issued guidance to consumers including ``How to Spot,
Avoid, and Report Tech Support Scams,'' \61\ and ``Keep tech support
strangers out of your computer.'' \62\ The Commission has also
responded to particular tech support campaigns with consumer education
such as ``Fake Calls from Apple and Amazon Support: What you need to
know,'' \63\ ``No gift cards for tech support scammers,'' \64\ and
``FTC asking for access to your computer? It's a scam.'' \65\ Other
government agencies and consumer organizations have also
[[Page 26802]]
issued guidance on tech support scams.\66\
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\61\ ``How to Spot, Avoid, and Report Tech Support Scams''
(Sept. 6, 2022), available at <a href="https://consumer.ftc.gov/articles/how-spot-avoid-and-report-tech-support-scams">https://consumer.ftc.gov/articles/how-spot-avoid-and-report-tech-support-scams</a> (last visited June 23,
2023).
\62\ ``Keep tech support strangers out of your computer'' (Mar.
7, 2019), available at <a href="https://consumer.ftc.gov/consumer-alerts/2019/03/keep-tech-support-strangers-out-your-computer">https://consumer.ftc.gov/consumer-alerts/2019/03/keep-tech-support-strangers-out-your-computer</a> (last visited
June 23, 2023).
\63\ ``Fake Calls from Apple and Amazon Support: What you need
to know'' (Dec. 3, 2020), available at <a href="https://consumer.ftc.gov/consumer-alerts/2020/12/fake-calls-apple-and-amazon-support-what-you-need-know">https://consumer.ftc.gov/consumer-alerts/2020/12/fake-calls-apple-and-amazon-support-what-you-need-know</a> (last visited June 23, 2023).
\64\ ``No gift cards for tech support scammers'' (June 6, 2018),
available at <a href="https://consumer.ftc.gov/consumer-alerts/2018/06/no-gift-cards-tech-support-scammers">https://consumer.ftc.gov/consumer-alerts/2018/06/no-gift-cards-tech-support-scammers</a> (last visited June 23, 2023).
\65\ ``FTC asking for access to your computer? It's a scam''
(Apr. 6, 2018), available at <a href="https://consumer.ftc.gov/consumer-alerts/2018/04/ftc-asking-access-your-computer-its-scam">https://consumer.ftc.gov/consumer-alerts/2018/04/ftc-asking-access-your-computer-its-scam</a> (last
visited June 23, 2023).
\66\ See, e.g., AARP, ``How to Get Good Tech Support'' (Jan. 3,
2022), available at <a href="https://www.aarp.org/home-family/personal-technology/info-2021/tips-for-getting-tech-support.html">https://www.aarp.org/home-family/personal-technology/info-2021/tips-for-getting-tech-support.html</a> (last
visited June 23, 2023); CFPB, ``What you should do about tech
support scams'' (Jan. 21, 2021), available at <a href="https://www.consumerfinance.gov/about-us/blog/what-you-should-know-about-tech-support-scams/">https://www.consumerfinance.gov/about-us/blog/what-you-should-know-about-tech-support-scams/</a> (last visited June 23, 2023).
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In addition to consumer education, the Commission and other State
and Federal law enforcement partners have brought a multitude of
actions against tech support scams. For example, on May 12, 2017, the
Commission announced ``Operation Tech Trap'' which consisted of 29 law
enforcement actions brought by the Commission and other law enforcement
agencies against tech support schemes.\67\ On March 7, 2019, the
Department of Justice announced the largest-ever elder fraud sweep,
which focused on tech-support scams and involved actions against ``more
than 260 defendants from around the globe who victimized more than two
million Americans.'' \68\ The Commission has filed numerous tech
support cases outside the scope of the sweeps.\69\
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\67\ Press Release, FTC and Federal, State and International
Partners Announce Major Crackdown on Tech Support Scams (May 12,
2017), 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 June 23, 2023).
\68\ Press Release, Justice Department Coordinates Largest-Ever
Nationwide Elder Fraud Sweep (Mar. 7, 2019), available at <a href="https://www.justice.gov/opa/pr/justice-department-coordinates-largest-ever-nationwide-elder-fraud-sweep-0">https://www.justice.gov/opa/pr/justice-department-coordinates-largest-ever-nationwide-elder-fraud-sweep-0</a> (last visited June 23, 2023).
\69\ See, e.g., United States v. Nexway SASU, No. 1:23-cv-900
(D.D.C. Apr. 3, 2023) (complaint alleging that Nexway provided
payment processing services for several deceptive tech support
operations), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/nexway-complaint.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/nexway-complaint.pdf</a> (last visited Apr. 19, 2023); FTC v.
RevenueWire, Inc., No. 1:20-cv-1032 (D.D.C. April 21, 2020)
(complaint alleging that 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),
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.
Click4Support, LLC, 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)
(``Click4Support''); FTC v. Inbound Call Experts, LLC, 9:14-cv-81395
(S.D. Fla. Nov. 2014), available at <a href="https://www.ftc.gov/system/files/documents/cases/141119icecmpt.pdf">https://www.ftc.gov/system/files/documents/cases/141119icecmpt.pdf</a> (last visited June 23, 2023)
(``Inbound Call Experts'').
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While the Commission has sued tech support scams for engaging in
deceptive practices under the TSR where applicable, the Commission has
brought cases under the FTC Act alone if the telemarketer's practices
could arguably fall within an exception to the TSR. In FTC v.
PCCare247, for example, the Commission used the FTC Act to seek
monetary relief from a tech support operation that placed deceptive
online advertisements to induce consumers to place inbound calls.\70\
The calls at issue in PCCare 247 may have fallen outside of the Rule to
the extent they were telephone calls initiated by a consumer in
response to an advertisement.\71\ Similarly in FTC v. Vylah Tec LLC,
the Commission used the FTC Act to seek monetary relief from a tech
support operation that lured consumers by placing deceptive pop up
messages warning consumers their computers had been infected with
viruses.\72\ The calls at issue in Vylah Tec may have fallen outside
the Rule if a court were to determine that pop-up messages are a form
of advertisement or a direct mail solicitation under the Rule.\73\
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\70\ FTC v. PCCare247, Inc., 12-cv-7189 (S.D.N.Y. Oct. 3, 2012)
(``PCCare247''), 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) (``PCCare247'').
\71\ See Sec. 310.6(b)(5). Even if the consumer's call was in
response to an advertisement, the Rule would still apply to
instances of upselling included in the call. Section
310.6(b)(5)(iii). If, for example, the consumer initiated a call for
technical support with their computer and the consumer was pitched
additional software products or computer services, that transaction
would likely be an upsell under the Rule.
\72\ See, e.g., FTC v. Vylah Tec LLC, No. 17-cv-228-FtM-99MRM
(M.D. Fla. May 17, 2017) (``Vylah Tec''), 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).
\73\ In an abundance of caution, the Commission pursued its
claim regarding the pop-ups under section 5. The Commission,
however, does not believe such pop-up messages are exempt under the
Rule. The exemption in Sec. 310.6(b)(5) ``applies to calls in
response to television commercials, infomercials, home shopping
programs, magazine and newspaper advertisements, and other forms of
mass media advertising solicitation. . . . In the Commission's
experience, calls responding to general media advertising do not
typically involve the forms of deception and abuse the Act seeks to
stem.'' 60 FR at 43860. The Commission also generally has not
observed pop-up messages that contained the disclosures necessary to
fall within the exemption for direct mail solicitations.
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In April 2021, the Supreme Court's decision in AMG Capital
Management, LLC v. FTC overturned forty years of precedent from the
U.S. Circuit Courts of Appeal that held the Commission could take
action under the FTC Act to return money unlawfully taken from
consumers through deceptive practices.\74\ As a result, the Commission
is now limited in its ability to obtain monetary relief from tech
support scams whose business practices, in some cases, arguably place
the scams beyond the reach of the Rule. Amending the Rule will clarify
all tech support scams are potentially subject to the Rule.
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\74\ See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352
(2021).
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C. Discussion of the Proposed Rule
The proposed rule would define ``technical support service'' and
amend the exemptions for calls in response to advertisements and calls
in response to direct mail solicitations, to add technical support
services to the categories of calls excluded from the exemptions.
1. Definition of Technical Support Service.
The proposed rule defines technical support services as ``any plan,
program, software or service that is marketed to repair, maintain, or
improve the performance or security of any device on which code can be
downloaded, installed, run, or otherwise used, such as a computer,
smartphone, tablet, or smart home product.'' This definition is broad
enough to encompass a wide range of electronic devices.
A broad definition is necessary because, in the Commission's
experience, tech support scams have shown an ability to evolve with
changes in consumer behavior and technology. The Commission's first
actions against tech support scams involved telemarketers making
outbound calls to consumers in which the telemarketer claimed to be a
Microsoft technician who had identified a virus on the consumer's
computer.\75\ As consumers learned that Microsoft does not call
consumers to warn them about viruses on their computers, tech support
scams began relying on intrusive popup messages that claimed the
computers had been infected with viruses.\76\ As web browsers began
blocking popup messages, tech support scammers have taken other means
to reach consumers, including placing advertisements that solicit
inbound calls from consumers looking for tech support.\77\ The
techniques scammers use to alarm consumers have also evolved. Early
tech support scams relied on ``red x's'' in a computer's event viewer
while later scams have instructed consumers to download software
programs that run
[[Page 26803]]
diagnostics of computers and exaggerated the risks the diagnostics
reveal.\78\ Scammers have also evolved from targeting computers to also
targeting a variety of electronic devices.\79\
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\75\ Press Release, ``FTC Halts Massive Tech Support
Scams''(Oct. 3, 2012), available at <a href="https://www.ftc.gov/news-events/news/press-releases/2012/10/ftc-halts-massive-tech-support-scams">https://www.ftc.gov/news-events/news/press-releases/2012/10/ftc-halts-massive-tech-support-scams</a>
(last visited June 23, 2023).
\76\ See Vylah Tec. Microsoft has also advised consumers to keep
in mind that Microsoft does not make unsolicited phone calls ``to
request personal or financial information, or to fix your
computer.'' ``Tech Support scams.'' available at <a href="https://learn.microsoft.com/en-us/microsoft-365/security/intelligence/support-scams?view=o365-worldwide">https://learn.microsoft.com/en-us/microsoft-365/security/intelligence/support-scams?view=o365-worldwide</a> (last visited Apr. 19, 2023).
\77\ See Click4Support; Inbound Call Experts.
\78\ See PCCare247; Elite IT.
\79\ Supra notes 54-56.
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The unifying characteristic of tech support scams is that scammers
attempt to profit from consumers' problems with technology and
potential lack of familiarity with complicated electronic devices. As
technology changes, tech support scams are likely to change as well,
and the definition of tech support in the proposed rule is intended to
be broad enough to encompass these changes.
The definition of tech support also excludes ``any plan, program,
software, or services in which the person providing the repair obtains
physical possession of the device being repaired.'' In the Commission's
experience, tech support scams have not involved situations where the
repair includes physical interaction with the device, such as replacing
a computer hard drive or repairing a broken phone screen.\80\ Whether
this interaction involves face-to-face contact between the consumer and
the person providing the repair or the consumer shipping the device to
the repair person and waiting for a return shipment, the Commission
believes tech support scams rarely involve physical repair of
electronic devices.\81\ The Rule currently exempts calls in which
payment is not required until ``after a face-to-face sales or donation
presentation by the seller.'' \82\ In creating that exemption, the
Commission explained the ``occurrence of a face-to-face meeting limits
the incidence of telemarketing deception and abuse'' because the
``paradigm of telemarking fraud involves an interstate telephone call
in which the customer has no other direct contact with the caller.''
\83\ Here too, the ``paradigm'' of tech support scams are consumers
speaking with third parties with whom they have limited contact and
often at a time when they have been misled to believe they have a
problem with their electronic device. Physical in-person repair does
not involve the same pressures as remote tech support, and it is less
conducive to scams. The Commission seeks comment on the proposed
definition of tech support.
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\80\ Tech support scammers sometimes obtain remote access to a
computer or electronic device to perform diagnosis or service. The
``physical possession'' is not intended to apply when the tech
support involves remote access to a device.
\81\ The Commission's lawsuit against Office Depot is an
exception to this pattern. See FTC v. Office Depot Inc., 9:19-cv-
80431 (S.D. Fla. Mar. 29, 2019) (alleging that Office Depot and
<a href="http://Support.com">Support.com</a> deceived consumers who brought their computers into
Office Depot stores for support services).
\82\ Section 310.6(b)(3).
\83\ Original TSR, 60 FR at 43860.
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2. Requirements.
The proposed rule would add ``tech support services'' to the
categories of calls excluded from the TSR's exemptions for inbound
calls ``in response to an advertisement through any medium'' and
inbound calls in response to ``a direct mail solicitation,'' including
email.\84\ The Commission created these exemptions in the original Rule
based on its consideration of four factors: whether Congress intended
certain types of sales activity to be exempt under the Rule; whether
the conduct or business in question ``already is regulated extensively
by Federal or State law''; whether the conduct ``lends itself easily to
the forms of deception or abuse that the Act is intended to address'';
and whether requiring business to comply the Rule would be ``unduly
burdensome weighed against the likelihood that sellers or telemarketers
engaged in fraud would use an exemption to circumvent Rule coverage.''
\85\
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\84\ Sections 310.6(b)(5) and 310.6(b)(6). For ``direct mail
solicitations'' to qualify for the exemption, the solicitations must
``clearly, conspicuously, and truthfully disclose[] all material
information listed in Sec. 310.3(a)(1)'' and contain ``no material
misrepresentation regarding any item contained in Sec. 310.3(d).''
\85\ Original TSR, 60 FR at 43859.
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The Commission decided to create exemptions from the rule for calls
in response to advertisements and direct mail solicitation because, in
the Commission's experience, calls in response to these solicitations
``do not typically involve the forms of deception and abuse the Act
seeks to stem.'' \86\ At the same time, the Commission recognized
``some deceptive sellers or telemarketers use mass media or general
advertising to entice their victims to call, particularly in relation
to the sale of investment opportunities, specific credit-related
programs'' and other areas.\87\ The Commission decided to exclude
certain categories of calls from the exemptions given its ``experience
with the marketing of these deceptive telemarketing schemes.'' \88\ The
Commission's experience with tech support schemes also supports
excluding tech support calls from the exemptions for inbound calls in
response to advertisements and direct mail solicitations.
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\86\ Id. at 43860.
\87\ Id.
\88\ Id.
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The Commission is mindful of the potential burden the proposed
amendment may have on tech support businesses that do not engage in
deceptive practices. The proposed amendment has been drafted in an
attempt to minimize the burden on these businesses, and the Commission
seeks comment on whether the burden would be undue or can be further
reduced.
Two features of the proposed amendment would minimize the burden on
legitimate tech support businesses. First, tech support calls ``that
are not the result of any solicitation by a seller, charitable
organization, or telemarketer'' would still be exempt under Sec.
310.6(b)(5). As the Commission recognized when it created this
exemption, these type of calls are not ``part of a telemarketing `plan,
program, or campaign * * * to induce the purchase of goods or services'
under the Act.'' \89\ The Commission further explained: ``This
exemption covers incidental uses of the telephone that are not in
response to a direction solicitation, e.g., calls from a customer . . .
to obtain information or customer technical support.'' \90\ Under this
exemption, as long as the call is not solicited, a consumer calling
their computer manufacturer for technical support or a home security
company about a disruption to their service would not be subject to the
Rule unless, as part of that transaction, the company also engaged in
an upsell.\91\
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\89\ Id.
\90\ Id.
\91\ Section 310.6(b)(4).
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Second, excluding tech support where the person providing the
service takes physical possession of the device will also limit the
breadth of the rule. Consumer calls to a local repair shop or to the
manufacturer of their device seeking physical repairs will not be
subject to the Rule. The Commission seeks comment on whether it should
consider other approaches to reduce any burden imposed by the Rule.
V. Request for Comment
The Commission seeks comments on all aspects of the proposed
regulation. The Commission also seeks comments on the estimated burden
that compliance with the proposed regulations will 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 costs of complying with the proposed amendment.
[[Page 26804]]
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before June 17, 2024.
Write ``Telemarketing Sales Rule (16 CFR 310--NPRM) (Project No.
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 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
(16 CFR 310--NPRM) (Project No. 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, Mail
Stop H-144 (Annex T), Washington, DC 20580. If possible, please submit
your paper comment to the Commission by overnight service.
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.'' 15 U.S.C.
46(f); see FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, your
comment should not include 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), 16 CFR 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), 16 CFR 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), 16 CFR 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), 16 CFR 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 June 17, 2024. 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>.
In addition to the issues raised above, the Commission solicits
public comment on the list of questions below regarding the costs and
benefits of the proposed amendment. The Commission requests that
comments provide the factual data upon which they are based. These
questions are designed to assist the public and should not be construed
as a limitation on the issues on which a public comment may be
submitted.
A. Questions for Comments
1. Should the Commission finalize the proposed rule as a final
rule? Why or why not? How, if at all, should the Commission change the
proposed rule in promulgating a final rule?
2. Is the definition of ``technical support service'' clear and
understandable? It is ambiguous in any way? How, if at all, should it
be improved?
3. Is the definition of ``technical support service'' appropriately
tailored? Is it overinclusive or underinclusive in any way? How, if at
all, should it be improved?
4. Do you support excluding from the definition of technical
support instances in which the person providing the repair obtains
physical possession of the device being repaired? Why or why not?
5. Do you support the proposal to add technical support services to
the list of calls that do not qualify for the exemptions for calls in
response to advertisements and direct mail solicitations in Sec.
310.6(b)(5) and Sec. 310.6(b)(6)? Should the Commission consider other
modifications to the Rule to address tech support scams?
6. Would the proposed rule place an undue burden on technical
support operations that do not engage in deceptive acts or practices?
If so, what burden would it impose and how can the burden be reduced?
7. Do you agree with the estimates in the Paperwork Reduction
Analysis? Why or why not?
8. How many new calls would be subject to the TSR if the proposed
rule is adopted?
9. Would the proposed rule disproportionately benefit or burden
original equipment manufacturers? If so, how should the proposed rule
be changed?
VI. Paperwork Reduction Act
The current Rule contains various provisions that constitute
information collection requirements as defined by 5 CFR 1320.3(c), the
definitional provision within the Office of Management and Budget
(``OMB'') regulations implementing the Paperwork Reduction Act (PRA).
44 U.S.C. chapter 35. OMB has approved the Rule's existing information
collection requirements through October 31, 2025 (OMB Control No. 3084-
0097). The proposed amendment will newly require certain inbound tech
support calls to comply with the Rule's recordkeeping and disclosure
requirements. This will increase the PRA burden for sellers or
telemarketers as detailed below. Accordingly, FTC staff is
simultaneously submitting this notice of proposed rulemaking and the
associated Supporting Statement to OMB for review under the PRA.\92\
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\92\ This PRA analysis focuses specifically on the information
collection requirements created by or otherwise affected by the
proposed amendment.
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A. Estimated Annual Hours Burden
The Commission estimates the PRA burden of the proposed amendment
based on its knowledge of the telemarketing industry and data compiled
from the Do Not Call Registry. The annual hours of burden for sellers
or telemarketers will consist of two components: the time required to
make disclosures and the costs of complying with the Rule's
recordkeeping requirements.
[[Page 26805]]
First the Commission estimates that the disclosure burden will take
19,566 hours. Calculating the disclosure burden requires estimating the
number of inbound tech support calls that will now be subject to the
TSR if the proposed amendment goes into effect. The Commission uses the
same methodology it has used in the past to calculate the disclosure
burden for categories of calls that are excluded from the TSR's
exemptions for inbound calls.\93\
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\93\ See, e.g., Agency Information Collection Activities;
Proposed Collection; Comment Request; Extension. 87 FR 23179 (April
19, 2022).
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As it has in the past, the Commission estimates that there are 1.8
billion inbound telemarketing calls that result in sales, that consumer
injury from telemarketing fraud is $40 billion a year, and that it
takes seven seconds to make the disclosures required by the Rule in
inbound calls.\94\ The Commission estimates the disclosure burden for
particular categories of calls that are excluded from the TSR's
exemptions by extrapolating a percentage of those calls based on their
complaint rates in the FTC's Consumer Sentinel system.\95\ The
resulting percentage of total fraud complaints must be adjusted to
reflect the fact that only a relatively small percentage of
telemarketing calls are fraudulent. To extrapolate the percentage of
fraudulent telemarketing calls, staff divides a Congressional estimate
of annual consumer injury from telemarketing fraud ($40 billion) \96\
by available data on total consumer and business-to-business
telemarketing sales ($310.0 billion projected for 2016),\97\ or 13%.
The two percentages are then multiplied together to determine the
percentage of the 1.8 billion annual inbound telemarketing calls
represented by each type of fraud complaint. That number is then
rounded to the nearest ten. In 2022, there were 2,369,527 fraud
complaints and 89,158 complaints about tech support.\98\ Thus, the
general sales disclosure burden is 19,566 hours (1.8 billion inbound
calls xthe percentage of fraud complaints for tech support (89,158/
2,369,527) xthe percentage of telemarketing calls that are estimated to
be fraudulent (.13) xthe length of the disclosures (8 seconds per
disclosure, / 3,600 to convert to hours).
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\94\ Id.
\95\ Id.
\96\ House Committee on Government Operations, The Scourge of
Telemarketing Fraud: What Can Be Done Against It, H.R. Rep. 421,
102nd Cong., 1st Sess. at 7 (Dec. 18, 1991). The FBI believes that
this estimate overstates telemarketing fraud losses as a result of
its investigations and closings of once massive telemarketing boiler
room operations. See FBI, A Byte Out of History: Turning the Tables
on Telemarketing Fraud (Dec. 8, 2010), available at <a href="https://www.fbi.gov/news/stories/2010/december/telemarketing_120810/telemarketing_120810">https://www.fbi.gov/news/stories/2010/december/telemarketing_120810/telemarketing_120810</a>. See also Internet Crime Complaint Center, 2020
Annual Report on Internet Crime (citing $4.1 billion of losses
claimed in consumer complaints for 2020), available at <a href="https://www.ic3.gov/Media/PDF/AnnualReport/2020_IC3Report.pdf">https://www.ic3.gov/Media/PDF/AnnualReport/2020_IC3Report.pdf</a>.
\97\ DMA 2013 Statistical Fact Book (January 2013) projection up
through 2016, p. 5 (no associated DMA updates made or otherwise
found thereafter).
\98\ See FTC, Consumer Sentinel Network Data Book 2022 (February
2023) (``Sentinel Data'') at 9, 87, available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/CSN-Data-Book-2022.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/CSN-Data-Book-2022.pdf</a> (last
visited June 12, 2023).
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Second, the estimated recordkeeping burden is 104,250 hours.
Estimating this burden requires estimating how many new telemarketing
entities will be subject to the TSR if the proposed amendment goes into
effect. To create this estimate, staff first estimates the number of
existing telemarketing entities that engage in tech support sales. In
calendar year 2022, 10,804 telemarketing entities accessed the Do Not
Call Registry; however, 549 were ``exempt'' entities obtaining access
to data.\99\ Of the non-exempt entities, 6,562 obtained data for a
single State. Staff assumes that these 6,562 entities are operating
solely intrastate, and thus would not be subject to the TSR. Therefore,
staff estimates that approximately 3,693 telemarketing entities
(10,804--549 exempt--6,562 intrastate) are currently subject to the
TSR. To estimate the percentage of those entities that sell tech
support products and services, staff again relies on the percentage of
fraud complaints for tech support out of the total fraud complaints.
(89,158/2,369,527) which is multiplied by the number of telemarketing
entities, (3,693) to produce the estimate that 139 telemarketing
entities receive tech support calls.
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\99\ See National Do Not Call Registry Data Book for Fiscal Year
2022 (``Data Book''), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/DNC-Data-Book-2022.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/DNC-Data-Book-2022.pdf</a> (last visited March 21, 2024). An
exempt entity is one that, although not subject to the TSR,
voluntarily chooses to scrub its calling lists against the data in
the Registry.
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If the proposed amendment goes into effect, additional businesses
will likely be covered by the TSR. For example, tech support companies
that advertise their products through general advertisements and do not
engage in upselling may be subject to the Rule for the first time.\100\
On the other hand, companies that market through a combination of
advertisements and outbound telemarketing are already subject to the
Rule. Companies that receive inbound calls from consumers with
questions about their products who then engage in upsells of technical
support services are also already subject to the Rule. The Commission
estimates that the Proposed amendment will increase the number of
telemarketing entities that receive inbound tech support calls by a
factor of 5, which would mean that an additional 695 entities will be
covered by the Rule.
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\100\ See Sec. 310.6(b)(5).
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The Commission estimates that after implementation of the separate
Final Rule proceeding which, among other things, requires telemarketers
and sellers to maintain additional records of their telemarketing
transactions, complying with the TSR's current recordkeeping
requirements requires 150 hours for new entrants to develop
recordkeeping systems that comply with the TSR, for a total annual
recordkeeping burden of 104,250 hours.\101\
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\101\ The Commission is using a Final Rule simultaneously with
this NPRM.
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B. Estimated Annual Labor Costs
The Commission estimates annual labor costs by applying appropriate
hourly wage rates to the burden hours described above. The Commission
estimates that the annual labor cost for disclosures will be $315,991.
This total is the product of applying an assumed hourly wage of $16.15
for 19,566 hours of disclosures.\102\ The Commission estimates that the
annual labor cost for recordkeeping will be $3,228,623. This is
calculated by applying a skilled labor rate of $30.97/hour \103\ to the
estimated 150 burden hours for the estimated 695 entities that will now
be covered by the Rule ($30.97 x 150 x 695).
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\102\ This figure is derived from the mean hourly wage shown for
Telemarketers. See ``Occupational Employment and Wages-May 2022,''
U.S. Department of Labor, released April 25, 2023 Table 1
(``National employment and wage data from the Occupational
Employment Statistics survey by occupation, May 2022''), available
at <a href="https://www.bls.gov/news.release/ocwage.t01.htm">https://www.bls.gov/news.release/ocwage.t01.htm</a> (last visited
July 19, 2023).
\103\ This figure is derived from the mean hourly wage shown for
Computer Support Specialists from the U.S. Department of Labor
source set out in the prior footnote.
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C. Estimated Annual Non-Labor Costs
The final rule published in this same issue of the Federal Register
estimates that the annual non-labor costs are $55 a year, derived from
$5 for electronically storing audio files, and $50 for storing the
required records. The Commission thus estimates that the annual non-
labor costs will be $38,255 (695 entries x $55).
The Commission invites comments on the accuracy of the FTC's burden
estimates, including whether the methodology and assumptions used are
valid. Specifically, the Commission invites comments on: (1) whether
the
[[Page 26806]]
proposed collection of information is necessary for the proper
performance of the functions of the FTC, including whether the
information will have practical utility; (2) the accuracy of the FTC's
estimate of the burden of the proposed collection of information; (3)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (4) ways to minimize the burden of collecting
information on those who respond.
Written comments and recommendations for the proposed information
collection should be sent within 30 days of publication of this notice
to <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>. Find this particular information
collection by selecting ``Currently under Review--Open for Public
Comments'' or by using the search function. The <a href="http://reginfo.gov">reginfo.gov</a> web link is
a United States Government website produced by OMB and the General
Services Administration (GSA). Under PRA requirements, OMB's Office of
Information and Regulatory Affairs (OIRA) reviews Federal information
collections.
VII. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires that the
Commission conduct an analysis of the anticipated economic impact of
the proposed amendment on small entities.\104\ The RFA requires that
the Commission provide an Initial Regulatory Flexibility Analysis
(``IRFA'') with a proposed rule unless the Commission certifies that
the rule will not have a significant economic impact on a substantial
number of small entities.\105\
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\104\ 5 U.S.C. 601 through 612.
\105\ 5 U.S.C. 605.
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The Commission believes that the proposed amendment would not have
a significant economic impact upon small entities, nor will it affect a
substantial number of small businesses. In the Commission's view, the
proposed amendment should not significantly increase the costs of small
entities that are sellers or telemarketers. Therefore, based on
available information, the Commission certifies that amending the Rules
as proposed will not have a significant economic impact on a
substantial number of small entities, and hereby provides notice of
that certification to the Small Business Administration (``SBA'').
Nonetheless, the Commission has determined that it is appropriate to
publish an IRFA to inquire into the impact of the proposed amendment on
small entities. The Commission invites comment on the burden on any
small entities that would be covered and has prepared the following
analysis.
A. Description of the Reasons the Agency Is Taking Action
The Commission proposes amending the TSR to explicitly exclude tech
support calls from the exemptions for inbound calls by consumers in
response to advertisements and direct mail solicitations from tech
support services. As described in Section IV, the proposed amendment is
intended to address the widespread harm caused by deceptive tech
support services, which disproportionately impact older consumers
compared to younger ones.
B. Statement of Objectives of, and Legal Basis for, the Proposed
Amendment
The objective of the proposed amendment is to lessen the harm
caused by deceptive tech support scams. The legal basis for the
proposed amendment is the Telemarketing Act, which authorizes the
Commission to issue rules to prohibit deceptive or abusive
telemarketing practices.
C. Description and Estimated Number of Small Entities to Which the Rule
Will Apply
The proposed amendment to the Rule affects sellers and
telemarketers that sell technical support services through inbound
telemarketing calls that are made in response to advertisements and
direct mail solicitations. As noted above, staff estimates that there
are 695 such entities that would be covered by the Rule. For
telemarketers, a small business is defined by the SBA as one whose
average annual receipts do not exceed $25.5 million.\106\ It is not
possible to identify how many of these entities would be a small
business as defined by the SBA. Commission staff are unable to
determine a precise estimate of how many sellers or telemarketers
constitute small entities as defined by SBA. The Commission invites
comment and information on this issue.
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\106\ Telemarketers are typically classified as ``Telemarketing
Bureaus and Other contact Centers,'' (NAICS Code 561422). See Table
of Small Business Size Standards Matched to North American Industry
Classification System Codes, available at <a href="https://www.sba.gov/sites/sbagov/files/2023-06/Table%20of%20Size%20Standards_Effective%20March%2017%2C%202023%20%282%29.pdf">https://www.sba.gov/sites/sbagov/files/2023-06/Table%20of%20Size%20Standards_Effective%20March%2017%2C%202023%20%282%29.pdf</a>.
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D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements, Including Classes of Small Entities and Professional
Skills Needed To Comply
The proposed amendment would require sellers and telemarketers that
sell technical support services through inbound telemarketing calls
that are made in response to advertisements and direct mail
solicitations to comply with the TSR's disclosure and recordkeeping
requirements. The small entities potentially covered by the proposed
amendment will include all such entities subject to the Rule. The
Commission has described the skills necessary to comply with these
recordkeeping requirements in Section VI above on the Paperwork
Reduction Act.
E. Identification of Duplicative, Overlapping, or Conflicting Federal
Rules
The Commission has not identified any other Federal statutes,
rules, or policies currently in effect that may duplicate, overlap or
conflict with the proposed amendment. The Commission invites comment
and information regarding any potentially duplicative, overlapping, or
conflicting Federal statutes, rules, or policies.
F. Significant Alternatives to the Proposed Amendment
The Commission believes that there are no significant alternatives
to the proposed amendment but is seeking comment on whether the
proposed rule places an undue burden on technical support operations
that do not engage in deceptive acts or practices and, if so, how can
the burden be reduced. The Commission has over many years pursued
alternatives to the proposed amendment in the form of law enforcement
and consumer outreach. The continued injury caused by these scams shows
that the proposed amendment to the Rule is necessary.
VIII. Communications by Outside Parties to the Commissioners or Their
Advisors
Written communications and summaries or transcripts of oral
communications respecting the merits of this proceeding, from any
outside party to any Commissioner or Commissioner's advisor, will be
placed on the public record.\107\
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\107\ See 16 CFR 1.26(b)(5).
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List of Subjects in 16 CFR Part 310
Advertising; Consumer protection; Telephone; Trade practices.
[[Page 26807]]
For the reasons stated above, the Federal Trade Commission proposes
to amend part 310 of title 16 of the Code of Federal Regulations as
follows:
PART 310--TELEMARKETING SALES RULE
0
1. The authority for part 310 continues to read as follows:
Authority: 15 U.S.C. 6101-6108.
0
2. Amend Sec. 310.2 by:
0
a. Redesignating paragraphs (ff) through (hh) as paragraphs (gg)
through (ii); and
0
b. Adding new paragraph (ff).
The addition reads as follows:
Sec. 310.2 Definitions.
* * * * *
(ff) Technical Support Service means any plan, program, software,
or service that is marketed to repair, maintain, or improve the
performance or security of any device on which code can be downloaded,
installed, run, or otherwise used, such as a computer, smartphone,
tablet, or smart home product. Technical support service does not
include any plan, program, software, or services in which the person
providing the repair, maintenance, or improvement obtains physical
possession of the device being repaired.
* * * * *
0
3. Amend Sec. 310.6 by revising paragraphs (b)(5)(i) and (b)(6)(ii) to
read as follows:
Sec. 310.6 Exemptions.
* * * * *
(b) * * *
(5) * * *
(i) Calls initiated by a customer or donor in response to an
advertisement relating to investment opportunities, debt relief
services, technical support services, business opportunities other than
business arrangements covered by the Franchise Rule or Business
Opportunity Rule, or advertisements involving offers for goods or
services described in Sec. 310.3(a)(1)(vi) or Sec. 310.4(a)(2)
through (4);
* * * * *
(6) * * *
(ii) Calls initiated by a customer in response to a direct mail
solicitation relating to prize promotions, investment opportunities,
debt relief services, technical support services, business
opportunities other than business arrangements covered by the Franchise
Rule or Business Opportunity Rule, or goods or services described in
Sec. 310.3(a)(1)(vi) or Sec. 310.4(a)(2) through (4);
* * * * *
By direction of the Commission.
Joel Christie,
Acting Secretary.
[FR Doc. 2024-07182 Filed 4-15-24; 8:45 am]
BILLING CODE 6750-01-P
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