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Update on Do Not Call, Commercial Faxes and CAN-SPAM

FTC Announces $5.3 Million Fine for Violating Federal Do Not Call Law
The FTC announced that satellite television provider DIRECTV will pay $5.3 million to settle FTC charges that DIRECTV and companies it hired to promote its services violated the federal Do Not Call (DNC) law. This is the largest civil penalty the FTC has ever announced for a consumer protection violation.

The complaint was filed against DIRECTV, five telemarketing firms and six principals of those firms. FTC Chairman Deborah Platt Majoras stated that “this multimillion dollar penalty drives home a simple point: sellers are on the hook for calls placed on their behalf. The Do Not Call Rule applies to all players in the marketing chain, including retailers and their telemarketers.”

The complaint alleged that telemarketers calling on behalf of DIRECTV contacted consumers on the DNC registry and abandoned calls to consumers by failing to put a live sales representative on the line within two seconds, as required by law. As part of the settlement, DIRECTV agrees to terminate any marketer who DIRECTV knows or should know is making cold calls to consumers without express, written authorization from DIRECTV, and DIRECTV agrees to allow the FTC to monitor DIRECTV’s oversight of the marketers it hires to sell its goods or services.

FCC Starts Rulemaking Process Relating to New Commercial Fax Provisions
The FCC has initiated a rulemaking procedure to implement the provisions contained in the Junk Fax Prevention Act which amends the Telephone Consumer Protection Act (TCPA). The Junk Fax Prevention Act codifies in the TCPA an established business relationship (EBR) exemption when sending unsolicited faxes. (This amendment was a response to the FCC’s earlier announcement that the TCPA did not contain an EBR exemption for unsolicited faxes.) A final rule must be issued by April 5, 2006.

In addition to amending the TCPA Rule to comply with the Junk Fax Prevention Act, the FCC is also seeking comments on the following:

  1. Whether the FCC should limit the duration of the EBR, for example, to mirror the time limits on the EBR in the context of telemarketing (i.e., 18 months following a purchase or transaction and three months after an application or inquiry);
  2. Whether the FCC should define “clear and conspicuous” in the context of providing notice of a recipient’s right to opt-out of receiving future faxes;
  3. What is meant by “the shortest reasonable time” for honoring an opt-out request;
  4. What would constitute a cost-free method for opting out of receiving future faxes;
  5. Whether certain classes of small businesses should be exempt from providing a cost-free mechanism for opting out;
  6. Should a recipient’s opt-out request terminate the EBR exemption even if the recipient continues to do business with the sender;
  7. If a sender is a third-party or fax broadcaster, should an opt-out apply to the underlying business on whose behalf the third-party or fax broadcaster is operating;
  8. Should a sender be required to honor an opt-out request that is sent by means other than those listed in the opt-out notice, for example, by mail or email if the notice only lists a fax number or toll-free telephone number;
  9. If a recipient provides an express invitation or permission to receive faxes, who bears the burden of proving the recipient provided such invitation or permission, and what constitutes “prior express invitation or permission”.

Comments are due on or before 30 days after the FCC’s notice is published in the Federal Register.

FCC Seeks Comments on Preemption Issue
In a separate notice, the FCC announced that it is seeking comments on the Commission’s jurisdiction over interstate faxes and whether the TCPA preempts state laws that purport to regulate interstate faxes. The issue of preemption has not been clearly defined by the FCC and it became a hot topic for marketers when California passed a law that applies to interstate faxes and does not contain an EBR exemption.

The FCC’s request for comments is in response to a petition filed by the Fax Ban Coalition, a group of businesses and trade organizations that asked the FCC to declare that it has exclusive jurisdiction to regulate interstate faxes and that state laws that purport to do so are preempted by the TCPA. Comments are due on or before the 30th day after the notice is published in the Federal Register.

Court Orders California Company to Pay $3.4 million for CAN-SPAM Violations
The Washington Attorney General announced that a Washington court has ordered a California company to pay $3 million in civil penalties, $375,000 in restitution and $67,882 in attorney’s fees for violating the federal CAN-SPAM Act and Washington’s consumer protection statute.

The complaint alleged that AvTech Direct marketed desktop computers and sent at least 1,500 emails to employees of the Seattle school district that concealed header information to make it appear that the emails came from someone else and used deceptive subject lines, such as “Staff Bulletin”. The complaint also alleged that AvTech Direct continued to send unsolicited emails to recipients who had opted-out of receiving such emails. The court entered an order of default against AvTech Direct because it failed to respond to the law suit.

Regulators and legislators are clearly continuing their efforts to ensure that marketers are not overly aggressive in their use of some very effective marketing tools: phone, fax and email. Stay tuned for further developments in 2006.

This client alert is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

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