So I’ve only been working for the Czar for a week now and the first thing he said when I walked in the (figurative) door was that the FTC’s new NPRM for marketers involved in direct-to-consumer sales was incredibly important and that he wanted me to be an expert on it right away.
Well, mission accomplished.
I know the Czar has already dove into the critical business-records retentions provisions—and I tend to agree with him on his constitutionality concerns—but records retention is only a piece of this. (Although it is arguably the most important piece, so be sure to reach out if you have questions—or just to say hi or to welcome me to TCPAWorld!)
Remember also, the current TSR designates which recordkeeping obligations fall on the telemarketer and which fall on the seller. The Commission is proposing to modify the rule to require the seller and telemarketer to allocate recordkeeping obligations between them—definitely a clause you’ll want added to your MSAs folks—and if the parties fail to allocate the recordkeeping obligation, then they both have to comply separately. Reasonable.
Of course, the parties can allocate their respective responsibilities and should. It will be interesting to see how allocation of business record retention plays out in the open market. On the one hand you’d expect parties to want to punt the record-keeping requirements like a hot potato—you punt those right?— on the other hand, however, a failure to meet a record-keeping obligation can lead to exceptionally high penalties (remember every failure to maintain records is a separate TSR violation) so perhaps more sophisticated parties will want to maintain control over the record-keeping protocols. Then again, since the majority of transactional-level detail will be in the control of the marketer (at least initially) sellers may have no choice but to trust their sellers (and their allocation provisions) to protect them. Will be fascinating to see how this plays out, and we’re happy to chat it through.
Moving beyond record keeping, the NPRM also effects an expansion on the TSR’s anti-deception provisions to apply to B2B callers.
Now, on the one hand, this is a sea change. Other than B2B callers that sell office cleaning supplies—no, I’m serious—the TSR has never applied to B2B callers. So just like “one” is a small number that is still infinitely larger than zero, the application of any TSR provision to B2B callers is still a huge expansion of the rule, from one perspective.
Indeed, back in 2003, the Commission reconsidered the scope of the B2B exemption and ultimately decided not to modify it because the Commission, in its own words, wanted 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.”
I guess the internet marketing revolution is complete, because the FTC is now ready to impose new rules on B2B callers, albeit in fairly-narrow fashion. Specifically, the NPRM requires all B2B telemarketing calls to now comply with the TSR’s existing prohibitions on misrepresentations articulated in Sections 310.3(a)(2) and 310.3(a)(4).
As a refresh, Section 310.3(a)(2) prohibits businesses from making misrepresentations in the sale of a good or service and Section 310.3(a)(4) prohibits a person from making a false or misleading statement to induce any person to pay for goods or services or to induce a charitable contribution.
In other words, the FTC is banning lies in the context of B2B sales. Pretty tough to argue with this expansion says the Baroness. In my mind, this is a good thing. We should be trying to prevent deceptive marketing practices, while implementing more honest ones. But if you have questions or concerns this is a “speak now or forever hold your peace” sort of thing. So let us know if you’d like to comment on the new rule before it takes effect.
Finally, the Commission proposes adding a definition of “previous donor” apparently to effectuate its original intent in the 2008 TSR Amendments. The Commission’s original stated intent was to allow robocalls solicitating charitable donations on behalf of a particular non-profit charitable organization only to consumers who have an established relationship with that organization. Although the 2008 TSR Amendments make it clear that the Commission intended “previous donor” to mean a donor who has previously provided a charitable contribution to a particular non-profit charitable organization, the Commission did not include a definition of the term “previous donor” to explicitly effect that intention. Additionally, because the 2008 TSR Amendment could be misinterpreted as allowing a telemarketer to send robocalls to any consumer it has previously solicited for a donation on behalf of a non-profit charitable organization, regardless of whether the consumer actually agreed to donate to that charitable organization, the proposed definition of “previous donor” helps clarifies this.
The proposed definition also adds that the consumer must have made a donation to the non-profit charitable organization within the two-years prior immediately preceding the date of the robocall. That’s a pretty luxurious timeframe—the EBR for regular marketing calls is merely 18 months.
Notably, the “previous donor” rule would not apply to political campaigns. Political solicitations are not covered by the TSR at all.
So, there you go. Big changes afoot, although the document-retention issues the Czar already covered are the really big take away here.
You now have a Baroness on duty here at TCPAWorld, so feel free to reach out if you ever want to chat TCPA, TSR, or the wonderful world of U.S. Telecom law more broadly.