[Federal Register Volume 68, Number 65 (Friday, April 4, 2003)]
[Rules and Regulations]
[Pages 16414-16415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8233]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

16 CFR Part 310


Telemarketing Sales Rule

AGENCY: Federal Trade Commission.

ACTION: Stay of compliance date.

-----------------------------------------------------------------------

SUMMARY: In this document, the Federal Trade Commission (``FTC'' or 
``Commission'') announces that in response to supplemental petitions 
from the Direct Marketing Association (``DMA'') and the American 
Teleservices Association (``ATA''), the Commission has decided to 
extend the date by which it will require full compliance with the 
amended Telemarketing Sales Rule (``amended TSR'' or ``amended Rule''), 
until October 1, 2003.

DATES: The rule amending the TSR, published January 29, 2003 (68 FR 
4580), became effective March 31, 2003. The Commission will require 
full compliance with Sec. Sec.  310.4(b)(1)(iv) and Sec.  310.4(b)(4) 
on October 1, 2003.

ADDRESSES: Requests for copies of the amended Rule and this document 
should be sent to Public Reference Branch, Room 130, Federal Trade 
Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Catherine Harrington-McBride, (202) 
326-2452, Karen Leonard, (202) 326-3597, Michael Goodman, (202) 326-
3071, or Carole Danielson, (202) 326-3115, Division of Marketing 
Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 
Pennsylvania Ave., NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: On January 29, 2003, the Federal Trade 
Commission published the amended TSR, 16 CFR part 310, and its 
Statement of Basis and Purpose in the Federal Register.\1\ The document 
stated that the Amended Rule would become effective March 31, 2003; 
that full compliance with Sec.  310.4(a)(7), the caller identification 
transmission provision, would be required by January 29, 2004; and that 
the Commission would announce at a future time the date by which full 
compliance with Sec.  310.4(b)(1)(iii)(B), the ``do-not-call'' registry 
provision, would be required.
---------------------------------------------------------------------------

    \1\ 68 FR 4580 (Jan. 29, 2003).
---------------------------------------------------------------------------

    In response to petitions filed February 27, 2003, by DMA and 
February 27, 2003, by ATA, the Commission determined to extend the date 
by which it will require full compliance with Sec.  310.4(b)(4)(iii) 
(the recording requirement of the call abandonment safe harbor 
provision) until October 1, 2003. The Commission also stayed until 
October 1, 2003, the date by which it will require full compliance with 
the safe harbor record retention requirement, Sec.  310.4(b)(4)(iv), to 
the extent it would require record keeping to document the use of a 
recorded message in instances of call abandonment.
    At that time, the Commission determined not to stay the requirement 
of full compliance with the prohibition on call abandonment (Sec.  
310.4(b)(1)(iv)) or the other requirements of the call abandonment safe 
harbor provision (Sec. Sec.  310.4(b)(4)(i), (ii) & (iv)) because the 
petitioners had not demonstrated that telemarketers would be unable to 
comply with these call abandonment provisions.
    Subsequently, on March 25, 2003, DMA renewed its request to stay 
the compliance date of the call abandonment provisions.\2\ DMA 
submitted numerous affidavits from manufacturers and users of 
predictive dialers containing information not previously submitted to 
the Commission, either in the rulemaking proceeding or in the initial 
petitions to stay various provisions of the amended TSR. These 
affidavits stated that, as a practical matter, compliance with the call 
abandonment safe harbor by March 31, 2003, would be very difficult or 
impossible for some telemarketers. Specifically, these affidavits 
stated that it is difficult if not impossible to set some predictive 
dialer equipment currently in use to a maximum abandonment rate of 3% 
of answered calls, as required by Sec.  310.4(b)(4)(i). According to 
the DMA petition and supporting affidavits, this equipment incorporates 
hardware or software designed to calculate the abandonment rate on the 
basis of all calls placed, not all calls answered. This means that the 
equipment cannot, or cannot easily, be set to abandon no more than 3% 
of all calls answered by the called consumer, as required by Sec.  
310.4(b)(i). According to DMA, additional time is therefore necessary 
for some telemarketers to comply with Sec.  310.4(b)(4)(i), given this 
limitation on their current predictive dialer equipment. The ATA 
supplemental petition echoes similar arguments.
---------------------------------------------------------------------------

    \2\ On March 26, 2003, the United States District Court for the 
Western District of Oklahoma denied petitioner DMA's motion for a 
preliminary injunction based on the same arguments and facts 
presented here. U.S. Security v. FTC, Case No. CIV-03-122-W. 
Although the Commission believes that this was the correct decision 
under the legal standards for obtaining a preliminary injunction, 
the Commission notes that it has broad discretionary authority to 
grant a stay where it believes that the goals of the rule making 
will be served.
---------------------------------------------------------------------------

    Based on information newly submitted by DMA, together with 
information obtained from other sources, the Commission has determined 
that full compliance with the requirement in the call abandonment safe 
harbor that no more than 3% of all calls answered by a consumer be 
abandoned (Sec.  310.4(b)(4)(i)) by March 31, 2003, may constitute an 
undue burden on some telemarketers and sellers, who need to

[[Page 16415]]

reprogram or purchase software for their equipment, or replace their 
current equipment.
    The Commission weighs the burden on industry against the reasons 
for implementing the amended Rule provisions. Evidence on the record 
establishes that abandoned calls ``frighten consumers, invade their 
privacy, cause some of them to struggle to answer the phone only to be 
hung up on, and waste the time and resources of consumers working from 
home.'' 68 FR 4580, 4642 (Jan. 29, 2003) (footnotes omitted). The 
Commission therefore determined that the abandoned call provisions of 
the amended TSR are necessary to remedy the abusive practice of call 
abandonment that can result from the use of predictive dialers.
    Given the information on the record, however, the Commission 
concludes that the economic harm to industry that is likely to occur 
narrowly outweighs the harm to consumers of a brief delay in 
implementing the abandoned call provision. Therefore, the Commission 
has determined to extend the date by which it will require full 
compliance with Sec. Sec.  310.4(b)(1)(iv) and Sec.  310.4(b)(4) until 
October 1, 2003.\3\
---------------------------------------------------------------------------

    \3\ The decision to stay the requirement of full compliance with 
two key components of the safe harbor provision (Sec. Sec.  
310.4(b)(4)(i) & (iii)) as well as the record keeping component of 
the safe harbor insofar as it would require records of compliance 
with the two stayed components, compels that full compliance with 
the prohibition on call abandonment, Sec.  310.4(b)(1)(iv) also be 
stayed. Otherwise, industry members would be liable for a rule 
violation if they abandoned any calls and would have no safe harbor 
enabling them to continue use of predictive dialers. As noted in the 
Statement of Basis and Purpose, ``a total ban on abandoned calls, 
which would amount to a ban on predictive dialers, would not strike 
the proper balance between addressing an abusive practice and 
allowing for the use of a technology that provides substantially 
reduced costs for telemarketers.'' 68 FR 4643 (Jan. 29, 2003). 
Further, having stayed the requirement of full compliance with the 
prohibition on call abandonment, the final element of the safe 
harbor, Sec.  310.4(b)(4)(ii) (requiring that the seller or 
telemarketer allow the telephone to ring for at least fifteen 
seconds or four rings before disconnecting an unanswered call) would 
have no application. The requirement of full compliance with the 
entire safe harbor provision, Sec.  310.4(b)(4), is therefore stayed 
until October 1, 2003.
---------------------------------------------------------------------------

    Given the impact on consumers of abandoned calls, the Commission 
encourages the industry to use its best efforts to come into full 
compliance with the abandoned call provisions as soon as possible. 
After six months (i.e., October 1, 2003), the Commission believes that 
the balance of equities weighs in favor of preventing further consumer 
harm by requiring compliance with the abandoned call provisions; and, 
therefore, it is unlikely that the Commission will provide a further 
stay of their implementation. The additional six months should give 
industry ample time to make the changes in their operations necessary 
to comply with the recording requirement of the call abandonment safe 
harbor.
    The Commission has now announced that it will require full 
compliance on October 1, 2003 with: (1) Sec.  310.4(b)(1)(iv) (the 
prohibition on abandoned calls); (2) Sec.  310.4(b)(4) (the safe harbor 
for call abandonment) as well as any record keeping requirements 
associated with the safe harbor; and (3) Sec.  310.4(b)(1)(iii)(B) (the 
national ``do-not-call'' registry provisions of the amended Rule). The 
Commission will require full compliance on January 29, 2004 with Sec.  
310.4(a)(7) (the caller identification provisions). Full compliance 
with all other provisions of the amended TSR will be required by the 
date on which the amended Rule is effective, March 31, 2003.

    By direction of the Commission.


Donald S. Clark,
Secretary.
[FR Doc. 03-8233 Filed 4-3-03; 8:45 am]
BILLING CODE 6750-01-P