Major revisions underway for the FTC's telemarketing sales rule

When this article was drafted in May 1995, the Federal Trade Commission was preparing to make major revisions to its proposed telemarketing sales rule. As previously reported (see Telemarketing(R) May 1995), the proposed rule, as initially issued, would have imposed broad, sweeping disclosure, recordkeeping and other related requirements on telemarketers utilizing the telephone or any other telephonic medium, including on-line services, to sell goods or services. The initial proposed rule also contained severe aiding-and-abetting provisions which would have had a chilling effect on those companies providing necessary support services and supplies to telemarketers.

The initial rule, issued in February, prompted more than 300 written comments by various industry, consumer and regulatory groups. Members of the industry universally opposed many of the provisions of the rule as being overly broad and cumbersome and failing to adequately distinguish between the activities of legitimate and fraudulent telemarketers in accord with the Congressional mandate.

In April 1995, the Commission hosted a three-day, intensive workshop session at which approximately 25 groups who had filed written comments were invited to participate. The purpose of the workshop session was to see if the gap could be narrowed between the interests of the industry and those representing the various consumer activist and regulatory interests.

Shortly after the three-day workshop, the FTC staff held a public hearing during which it provided a report to the Commissioners on the status of the rule-making proceeding. In a somewhat unprecedented move, the Commission staff reported to the Commissioners that the staff would be recommending the issuance of a second proposed rule to be followed by a second comment period. Eileen Harrington, who is heading the rule-making proceeding on behalf of the Commission, reported to the Commissioners that based on comments received from the industry, the Commission staff was convinced that many of the provisions of the initially proposed rule would have imposed severe burdens on the activities of legitimate telemarketers and, as a result, substantial modifications to the rule were required. The following are some of the key provisions of the rule that will be the subject of the revisions:

* The original proposed rule would have included within its purview all on-line services even though the Congressional statute covered only sales of goods and services by telephone. The Commission has indicated it will drop on-line services from coverage in the revised rule.

* The original proposed rule imposed numerous mandatory disclosures for both outbound and inbound telemarketing campaigns without any distinction between them. The Commission has indicated the disclosure burdens for inbound calls may be lessened in the revised rules, if the requisite disclosures have already been made in the advertising generating the call.

* The extreme aiding-and-abetting provisions of the proposed rule will be modified. Rather than holding suppliers liable if they "knew or should have known" the marketer was violating the law, the newly issued rule will impose liability on suppliers only if the suppliers had actual knowledge of the violation or acted in conscious disregard of the truth.

* The initial proposed rule contained a per se ban on reloading and on resoliciting within a three-month period. It is expected that both of these provisions will be either eliminated or substantially modified.

* The original rule contained a per se ban on courier pick ups. This ban will be eliminated.

* The original proposed rule contained severe disclosure requirements for sweepstakes. Specifically, the rule would have required the telemarketer to send the consumer a detailed written disclosure and obtain a signed acknowledgment of receipt of the notice back from the consumer before accepting any payment. This would have amounted to a de facto ban on the use of sweepstakes in conjunction with telemarketing programs. The Commission has indicated the written disclosure/signed acknowledgment requirement will be eliminated and replaced by a more moderate and singular disclosure requirement which will simply require the key provisions of the sweepstakes to be clearly and conspicuously disclosed.

The revised rule as scheduled to be issued on June 1, and as with the initial proposed rule, the industry will have the opportunity to again file written comments.

The proceedings to date are a testament to the industry's ability to make its views known to the Commission, and the Commission is to be commended for having listened to and responded to the industry's concerns while not compromising Congress' desire to curb abusive telemarketing acts and practices. The industry is encouraged to maintain its proactivity with respect to the revised rule to help ensure that the final rule achieves the proper balance. We will continue to keep you posted of developments in this area.

Linda Goldstein is a partner in the New York office of Hall, Dickler, Kent, Friedman & Wood, a law firm specializing in advertising and marketing law, with particular expertise in direct marketing and telemarketing.

Copyright Technology Marketing Corporation Jul 1995
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