FCC Decision on TCPA Has Wide Ramifications for Telemarketing
The FCC’s decision over who has liability for Telephone Consumer Protection Act (TCPA) violations committed by a third party is expected to have a significant effect in the world of telemarketing and telemarketers’ contracts with retailers, observers said. The FCC was asked earlier this year by the 6th U.S. Circuit Court of Appeals, Cincinnati, to weigh in on the law’s ambiguities for a case on who is ultimately responsible for TCPA violations by telemarketers hired by Dish Network. A lower court dismissed the original claims, but the plaintiff appealed (CD Jan 3 p5). The FCC isn’t tasked with reviewing the specifics of the case, only interpreting parts of the law the appeals court considered vague.
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The FCC’s role as the “the primary agency to interpret and administer TCPA,” makes it the expert agency considering such ambiguities, said Gerard Waldron of Covington & Burling. Waldron helped draft the TCPA, which was passed in 1991, when he was a lawyer with the office of Rep. Ed Markey, D-Mass., who was then chairman of the House Telecom Subcommittee. The issue of third party liability in the TCPA has been “lurking out there for a decade” and has really just “bubbled up to surface,” he said. The appeals court isn’t required to agree with the FCC’s take, but it’s unlikely the court would go a different route, Waldron said. The FCC’s decision will likely come out of the Consumer and Governmental Affairs bureau, with input from the Office of the General Counsel, but it’s “possible they could bump it up to the full Commission” for “strategic reasons,” he said.
"In interpreting the Telephone Act and its regulations, courts have reached different conclusions about whether an entity on whose behalf a call is made can be liable under the [TCPA], announcing different measures for determining whether an independent contractor or an agent acts on behalf of a company,” the appeals court said in referring the decision to the FCC (http://xrl.us/bk2ufz). “Although a decision by the FCC would not guarantee nationwide uniformity, it would narrow the scope of judicial inquiry to whether the agency reasonably interpreted the statute."
Generally, in the telemarketing world, the assumption has been that if one company hires a third party to make calls on its behalf the hiring company is liable for third party violations, said Judith Harris of Reed Smith. What is trickier about this situation, though, is the hiring of outside marketers who make calls using their own lists, rather than using a list of who to call provided by the retailer, she said. At issue is really who initiates a phone call, said Harris. While it seems understood that initiation goes beyond the individual actually making the call, it isn’t clear how far beyond, she said. “This is interesting case because it is a novel question that goes beyond what people in the business world have come to accept."
The FCC will likely look to the TCPA statute to find the Congressional intent as well as common law understandings of the meaning of “agency”, said Waldron. Part of the ambiguity of the statute is the use of the phrase “on behalf of,” said Waldron. While that phrase would seem to ultimately include the retailer, the phrase isn’t used in every instance, leading to the question of whether Congress wanted that liability in every instance, he said.
The FCC’s decision is likely to have a larger effect on contracts between companies and the telemarketers. If the FCC decides a retailer is responsible for calls made on its behalf, the “biggest impact would be on relationship between the [Dish Networks] of the world and who they hire,” said Waldron. “It would lead to some tighter contracts about who is liable and would definitely impact the legal relationship between the seller and the entity used to make phone calls.” If the FCC decides the retailer isn’t liable, it’s likely more big retailers would outsource their marketing campaigns as way to contract away liability, Waldron said.
The Justice Department has said in FCC filings that if the FCC doesn’t find the retailer to be liable for third party TCPA violations, an increase in TCPA violations would result and consumers and regulators will have little recourse. Dish Network believes the Justice Department is seeking to expand the law’s scope and shift the enforcement burden to private entities through this decision, the company said in a recent ex parte filing (CD July 21 p16). Asked for comment, Dish said to refer to its filings at the FCC. The Justice Department had no comment.
If the FCC takes the DOJ’s position on this it would likely hurt the telemarketing industry, said an industry lawyer. By eliminating a retailer’s defense in such cases, retailers would be far less likely to hire third parties, the lawyer said. “If [retailers] have no defense” for violations of outside firms, why would “[they] do phone solicitation,” said the lawyer.
"Each side here has different elements of the TCPA in their corner,” said the American Teleservices Association (ATA) in a statement. “It really depends on what your definition of ‘on behalf of’ is. ATA’s recommendation to all member companies is to always uphold the highest standards of quality for the channel. That means not relying on the ‘Chain of Liability’. Have a plan, protect your assets, evaluate your contact center compliance practices, and those of your outsource vendors, on a regular basis. After all, doesn’t a company have a responsibility to its stakeholders to manage and minimize risk while optimizing returns?”