FTC Undertakes Periodic Rule Review of Telemarketing Sales Rule

The Federal Trade Commission (FTC) has published in the Federal Register a Request for Comments on all aspects of its Telemarketing Sales Rule (TSR) as part of a routine review of the effectiveness, costs and benefits of its rules. Though the Request for Comments targets several TSR issues in particular (discussed below), it views the review as assessing generally whether the Rule is serving a “useful purpose,” and whether it can be improved to reflect changes in the marketplace since it was previously amended in 2003, 2008 and 2010. Comments are due October 14, 2014. The Request for Comments does not itself propose specific changes to the TSR but rather invites input on several specific topics, as well as on any issues relevant to the TSR that commenters wish to address. Notably, the advent of the National Do-Not-Call Registry culminating in 2003 started as precisely this kind of “routine” review of the TSR. Here, the FTC specifically seeks comment on issues surrounding: • Whether there is a need to expand the TSR’s recordkeeping requirements; • The use of pre-acquired account information, i.e., that which a customer has previously provided to a seller or telemarketer to subsequently charge his or her account in a new transaction; and • Negative option marketing transactions, where consumer silence or failure to act within a certain time results in an agreement to purchase goods or services. The FTC asks a number of specific questions in each of these areas. For example, it seeks input on the costs and burdens that the TSR’s current recordkeeping rules place on sellers and telemarketers. It does so with an eye toward the fact that, at present, the rules do not require retention of records of telemarketing calls placed. The FTC originally based this on an assumption that such records would be available from carriers through which calls are made, but in practice the FTC has found that problematic. The Request for Comments notes that the “simple solution” to these “enforcement obstacles” – i.e., requiring sellers and/or telemarketers to retain their own call records – would likely create compliance and costs burdens, and thus asks about the nature and efficacy of those burdens, and whether there are feasible alternatives. The FTC also wades into whether the TSR has been effective in preventing telemarketers from using preacquired account information to charge customers’ accounts without authorization. It asks whether the Rule has significantly increased the costs of doing business, and whether companies should face heightened disclosure and/or consent requirements when using preacquired information with negative option features. With respect to negative option marketing, the Request notes that when the FTC adopted the current negative option rules, and exempted transactions arising from general media advertising, there was little record of negative option offers being consummated ancillary to such ads. Now, with outbound calling significantly limited by the TSR (and corresponding FCC rules) general media are used more frequently to solicit inbound calls, including those used to make negative-option offers. The FTC thus asks a series of wide-ranging questions in this area. Again, while the FTC is not proposing specific changes to the TSR, it is important to note that it often uses input received on these types of comment requests to formulate rulemaking proposals. And with the FTC opening the door to any and all input on any aspect of the TSR, this may be a key opportunity to seek rule reform for those so inclined.