[Federal Register Volume 71, Number 192 (Wednesday, October 4, 2006)]
[Proposed Rules]
[Pages 58716-58734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8524]



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Part III





Federal Trade Commission





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16 CFR Part 310



 Denial of Petition for Proposed Rulemaking; Revised Proposed Rule With 
Request for Public Comments; Revocation of Non-enforcement Policy; 
Proposed Rule

  Federal Register / Vol. 71, No. 192 / Wednesday, October 4, 2006 / 
Proposed Rules  

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FEDERAL TRADE COMMISSION

16 CFR Part 310

RIN: 3084-0098


Telemarketing Sales Rule (``TSR'')

AGENCY: Federal Trade Commission.

ACTION: Denial of petition for proposed rulemaking; revised proposed 
rule with request for public comments; revocation of non-enforcement 
policy.

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SUMMARY: In this document, the Federal Trade Commission (``FTC'' or 
``Commission'') announces decisions on four issues involving the 
Telemarketing Sales Rule (``TSR''): the denial of a petition submitted 
by Voice Mail Broadcasting Corporation (``VMBC'') requesting creation 
of a new safe harbor for the TSR that would permit the use of 
prerecorded messages in calls to established customers; a new proposal 
to amend the TSR by expressly prohibiting unsolicited prerecorded 
telemarketing calls without the consumer's prior written agreement; 
revocation of the Commission's previously announced policy of 
forbearance from bringing enforcement actions against sellers and 
telemarketers who make prerecorded telemarketing calls to established 
customers effective January 2, 2007; and a new proposal to amend the 
prescribed method for measuring the maximum allowable call abandonment 
rate in the TSR's existing safe harbor provision, in response to a 
petition from the Direct Marketing Association, Inc. (``DMA''). The 
Commission is requesting public comment on the proposed amendments 
during a comment period ending November 6, 2006.

DATES: Written comments must be received on or before November 6, 2006.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``TSR Prerecorded Call Prohibition and Call 
Abandonment Standard Modification, Project No. R411001'' to facilitate 
the organization of comments. A comment filed in paper form should 
include this reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room H-159 (Annex K), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
SUPPLEMENTARY INFORMATION section. The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form should be submitted by visiting the 
Web site at https://secure.commentworks.com/ftc-tsr and following the 
instructions on the Web-based form.
    To ensure that the Commission considers an electronic comment, you 
must file it on the Web-based form at the https://secure.commentworks.com/ftc-tsr Web site. You may also visit http://www.regulations.gov to read this Proposed Rule, and may file an 
electronic comment through that Web site. The Commission will consider 
all comments that regulations.gov forwards to it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. The Commission will consider all timely and responsive 
public comments that it receives, whether filed in paper or electronic 
form. Comments received will be available to the public on the FTC Web 
site, to the extent practicable, at http://www.ftc.gov. As a matter of 
discretion, the FTC makes every effort to remove home contact 
information for individuals from public comments it receives before 
placing those comments on the FTC Web site. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at http://www.ftc.gov/ftc/Privacy.htm.

FOR FURTHER INFORMATION CONTACT: Craig Tregillus, Staff Attorney, (202) 
326-2970; Division of Marketing Practices, Bureau of Consumer 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

    This document sets out the reasons for the Commission's decision to 
deny VMBC's petition for amendment of the TSR's call abandonment 
provisions to add a new safe harbor, and to seek public comment on 
amendments the Commission is now proposing in response to the record 
created by the VMBC and DMA petitions. These actions are based on a 
careful analysis of the public comments received in response to a 
Notice of Proposed Rulemaking (``NPRM'') published in the Federal 
Register on November 17, 2004.\1\ The NPRM generated nearly 13,600 
unique comments--23 submitted by telemarketers and business trade 
associations representing numerous members, and the balance from 
consumers and consumer advocates.
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    \1\ 69 FR 67287 (Nov. 17, 2004).
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    Section 310.4(b)(1)(iv) of the TSR prohibits telemarketers from 
abandoning calls. An outbound telemarketing call is ``abandoned'' if 
the telemarketer does not connect the call to a sales representative 
within two seconds of the completed greeting of the person who answers. 
Call abandonment is an unavoidable consequence of the use of 
``predictive dialers''--telemarketing equipment that increases the 
productivity of telemarketers by placing multiple calls for each 
available sales representative. Predictive dialers maximize the amount 
of time representatives spend speaking with consumers and minimize the 
time they spend waiting to speak to a prospective customer. An 
inevitable side effect of this functionality, however, is that the 
dialer will reach more consumers than can be connected to available 
sales representatives. In these situations, the dialer either 
disconnects the call (resulting in a ``hang-up'' call) or keeps the 
consumer connected with no one on the other end of the line in case a 
sales representative becomes available (resulting in ``dead air''). The 
call abandonment prohibition, added to the TSR pursuant to the 
Telemarketing and Consumer Fraud and Abuse Prevention Act 
(``Telemarketing Act''),\2\ is designed to remedy these abusive 
practices.\3\
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    \2\ 15 U.S.C. 6101 et seq. This and other amendments to the 
original TSR resulting from a rule review mandated by the 
Telemarketing Act, 15 U.S.C. 6108, took effect on March 31, 2003. 
TSR Statement of Basis and Purpose (``TSR SBP''), 68 FR 4580 (Jan. 
29, 2003).
    \3\ TSR SBP, 68 FR at 4641-45. The Telemarketing Act directed 
the Commission to prescribe rules prohibiting deceptive and abusive 
telemarketing acts or practices, including ``a requirement that 
telemarketers may not undertake a pattern of unsolicited telephone 
calls which the reasonable consumer would consider coercive or 
abusive of such consumer's right to privacy.'' 15 U.S.C. 
6102(a)(3)(A).
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    Notwithstanding the prohibition on call abandonment, Sec.  
310.4(b)(4) of the TSR contains a safe harbor designed to preserve 
telemarketers' ability to use predictive dialers, subject to four 
conditions. The safe harbor is available if the telemarketer or seller: 
(1) Abandons no more than three percent of all calls answered by a 
person (as opposed to an answering machine); (2) allows the telephone 
to ring for fifteen seconds or four rings; (3) plays a prerecorded 
message stating the name and telephone number of the seller on whose 
behalf the call was placed whenever a sales representative is 
unavailable within two seconds of the

[[Page 58717]]

completed greeting of the person answering the call; and (4) maintains 
records documenting compliance.\4\ Thus, to comply with this provision 
of the TSR, at least 97 percent of a telemarketer's calls that are 
answered by a person (rather than an answering machine) must be 
connected to a sales representative. A telemarketing campaign that 
consists solely of prerecorded messages, therefore, would violate Sec.  
310.4(b)(1)(iv) and would not meet the safe harbor requirements.
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    \4\ 16 CFR Sec. Sec.  310.4(b)(4)(i)-(iv).
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    VMBC submitted a request for an advisory opinion requesting an 
additional safe harbor for prerecorded message telemarketing to 
consumers with whom the seller has an established business 
relationship, which the Commission treated as a petition to amend the 
TSR under Sec.  1.25 of the FTC's Rules of Practice.\5\ VMBC's 
submission sought permission to deliver prerecorded messages to 
consumers who have an established business relationship with the seller 
on whose behalf the telemarketing calls are made, asserting that such 
calls would not result in the twin harms of ``hang ups'' and ``dead 
air'' that the prohibition on abandoned calls in Sec.  310.4(b)(1)(iv) 
was designed to remedy.
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    \5\ 16 CFR 1.25.
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    The amendment requested by DMA, in contrast, sought modification of 
the method for calculating the maximum three percent call abandonment 
rate prescribed in the existing safe harbor provision. DMA asked that 
the requirement in Sec.  310.4(b)(4)(i) that sellers and telemarketers 
use ``technology that ensures abandonment of no more than three (3) 
percent of all calls answered by a person, measured per day per calling 
campaign'' be revised so that the three percent standard instead could 
be ``measured over a 30-day period'' for all of a telemarketer's 
calling campaigns.

II. The VMBC Petition

    The VMBC petition for an additional safe harbor was premised on a 
business model that, VMBC contended, would not result in the harms the 
call abandonment prohibition in Sec.  310.4(b)(1)(iv) was designed to 
prevent. Under VMBC's proposed model, prerecorded messages would give 
the called party an opportunity to assert a company-specific Do Not 
Call request. The messages would allow the called party to do so either 
by pressing a button on the telephone keypad to speak to a sales 
representative at any time during the message, or alternatively by 
dialing a toll-free number that would connect to a sales 
representative. Finally, as indicated above, the prerecorded messages 
would be delivered exclusively to consumers who have an ``established 
business relationship'' \6\ with the seller on whose behalf the calls 
are made.
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    \6\ 16 CFR 310.2(n) (`` `Established business relationship' 
means a relationship between a seller and a consumer based on: (1) 
The consumer's purchase, rental, or lease of the seller's goods or 
services or a financial transaction between the consumer and seller, 
within the eighteen (18) months immediately preceding the date of a 
telemarketing call; or (2) the consumer's inquiry or application 
regarding a product or service offered by the seller, within the 
three (3) months immediately preceding the date of a telemarketing 
call.'').
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A. VMBC's Rationale for a Safe Harbor

    VMBC advanced three primary reasons for adding a new safe harbor to 
the TSR's call abandonment prohibition to permit calls delivering such 
prerecorded messages to consumers with whom the seller has an 
established business relationship. First, VMBC asserted that the harms 
that prompted inclusion of the call abandonment prohibition in the TSR 
would not be present in campaigns conducted according to its proposed 
business model. Specifically, VMBC argued that the use of prerecorded 
messages would make it unnecessary to subject a consumer to ``dead 
air'' while waiting for a sales representative, and would not result in 
a ``hang-up'' when no representative is available. Moreover, because 
the prerecorded messages would immediately identify the seller, the 
seller would not be engaging in telemarketing under the cloak of 
anonymity that often prompts consumer concern about ``dead air'' and 
``hang ups.''
    Second, VMBC contended that because the prerecorded messages would 
be delivered only to existing customers, sellers would have a strong 
incentive to preserve their customers' goodwill.\7\ This incentive 
would serve, VMBC posited, as a sufficient check on the potential for 
abuse such that prerecorded calls to established customers would be 
unlikely to prompt substantial consumer objection.\8\
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    \7\ VMBC noted that the FTC suggested that ``the incentive to 
nurture established business relationships may provide an adequate 
restraint on the growth of recorded message telemarketing'' in its 
Report to Congress Pursuant to the Do Not Call Implementation Act 
(``DNCIA Report''), p. 35.
    \8\ In support of this argument, VMBC cited one prerecorded 
campaign for a major retailer in which only .02 of 1 percent of 5.8 
million customers asserted their Do Not Call rights. 69 FR at 67288 
n. 8. See also n. 30, infra. The Commission noted in the NPRM, 
however, that any incentive to preserve consumer goodwill could be 
outweighed in practice by the fact that ``it may be more economical 
for companies to contact consumers via prerecorded messages rather 
than using live telemarketers, so the volume of commercial calls 
that consumers receive may increase. ``
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    Finally, VMBC argued that a new safe harbor for prerecorded 
messages is necessary to conform the FTC's TSR to the rules and 
regulations issued by the Federal Communications Commission (``FCC'') 
\9\ pursuant to the Telephone Consumer Protection Act of 1991 
(``TCPA'').\10\ VMBC pointed out that the FCC's rules--which largely 
parallel the Do Not Call and certain other of the TSR's provisions--
since the early 1990s have permitted prerecorded message telemarketing 
to consumers with whom a seller has an established business 
relationship. In most other circumstances, however, the FCC's rules 
under the TCPA prohibit prerecorded message telemarketing, absent a 
consumer's prior express consent.\11\
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    \9\ 47 CFR 64.1200. See also FCC Rules and Regulations 
Implementing the Telephone Consumer Protection Act of 1991, CC 
Docket No. 92-90, Report and Order, 7 FCC Rcd 8752 (1992), available 
at http://gullfoss2.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf = 
pdf&id--document=1071340001, summarized in 57 FR 48333 (Oct. 23, 
1992) (``1992 FCC Order''); amended by FCC Rules and Regulations 
Implementing the Telephone Consumer Protection Act of 1991, CG 
Docket No. 02-278, Report and Order, 18 FCC Rcd 14014, available at 
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-153A1.pdf, 
summarized in 68 FR 44143 (July 25, 2003) (``2003 FCC Order'').
    \10\ 47 U.S.C. 227 (1991).
    \11\ 47 CFR 64.1200(a)(2). The FCC's TCPA regulations make an 
exception for calls placed by a seller or telemarketer that has 
obtained the called party's prior express consent to receive 
telemarketing calls, or has an established business relationship 
with the called party. 47 CFR 64.1200(a)(2). The regulations also 
exclude calls for emergency purposes, calls not made for a 
commercial purpose that do not include a solicitation, and calls 
made by or on behalf of a tax-exempt nonprofit organization. 47 CFR 
64.1200(a)(2)(i)-(v). In addition, the FCC's regulations absolutely 
prohibit all live and prerecorded telemarketing calls to a cellular 
telephone, regardless of any established business relationship or 
prior express consent a seller or telemarketer may have obtained. 47 
CFR 64.1200(a)(1)(iii).
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B. The Safe Harbor Proposal and Specific Issues Raised for Public 
Comment

    To assist interested parties in commenting on the VMBC petition, 
the NPRM included a proposed new Sec.  310.4(b)(5) that would have 
amended the TSR to permit prerecorded telemarketing messages to 
established customers.\12\ As drafted, the proposed safe harbor 
provision would have required sellers and telemarketers to: (1) Allow 
the telephone to ring for at least 15 seconds or four rings before 
disconnecting an unanswered call; (2) play a prerecorded message within 
two seconds of the called party's completed

[[Page 58718]]

greeting; (3) give the called party an opportunity to assert an entity-
specific Do Not Call request at the outset of the message, with only 
the disclosures required by Sec. Sec.  310.4(d) or (e) preceding that 
opportunity; \13\ and (4) ensure that the message complies with all 
other requirements of the TSR and other applicable State and Federal 
laws.\14\
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    \12\ 69 FR at 67289.
    \13\ Section 310.4(d) requires the following prompt oral 
disclosures in outbound commercial telemarketing calls: (1) The 
identity of the seller; (2) that the purpose of the call is to sell 
goods or services; (3) the nature of the goods or services; and (4) 
that no purchase or payment is necessary to be able to win a prize 
or participate in a prize promotion if a prize promotion is offered, 
and that any purchase or payment will not increase the chances of 
winning. Section 310.4(e) requires the following oral disclosures in 
outbound charitable solicitation calls: (1) The identity of the 
charitable organization on behalf of which the request is being 
made; and (2) that the purpose of the call is to solicit a 
charitable contribution.
    \14\ 69 FR at 67294.
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1. The ``Ring-Time'' Standard
    The NPRM explained that the first prerequisite for meeting the safe 
harbor requirements, the ``ring time'' standard requiring 15 seconds or 
four rings to elapse while awaiting an answer, is identical to the 
analogous element of the existing safe harbor in Sec.  310.4(b)(4)(ii). 
That standard, modeled on what were then DMA's ethical guidelines for 
its members, was designed to give consumers, including the elderly or 
infirm who may struggle to get to a telephone, a reasonable opportunity 
to answer telemarketing calls before the connection is terminated.
2. The ``Dead Air'' Standard
    The second prerequisite of the proposed safe harbor, requiring that 
the prerecorded message be played within two seconds of the called 
party's completed greeting, was intended to minimize ``dead air.'' It 
was based on the analogous element of the existing safe harbor in Sec.  
310.4(b)(4)(iii), allowing no more than two seconds of dead air before 
the called party is connected to a sales representative. The Commission 
specifically requested public comment on whether the maximum amount of 
dead air should be less than two seconds in the new safe harbor for 
prerecorded messages in which there would be no need to connect a sales 
representative. The Commission also requested information on the 
relative costs and benefits of a standard that would set the maximum 
amount of dead air at a level lower than two seconds.
3. Prompt Opportunity for Company-Specific Do Not Call Requests
    The purpose of the third prerequisite, mandating a prompt 
opportunity for consumers to assert a company-specific Do Not Call 
request, was to ensure the same Do Not Call rights for consumers who 
receive prerecorded message calls as are available to consumers 
receiving live telemarketing calls from a sales representative. Absent 
such parity, the Commission was concerned that, in view of the likely 
increase in the frequency of lower-cost prerecorded message calls 
(compared to the cost of live calls by sales representatives), the 
privacy protection provided by the National Do Not Call Registry might 
become illusory. The NPRM emphasized:

    Accordingly, the Commission believes that, if allowed, 
telemarketing calls that deliver prerecorded messages to consumers 
with whom a seller has an established business relationship must 
preserve the ability of those consumers to assert their Do Not Call 
rights quickly, effectively, and efficiently, so that consumers 
retain an effective right to decide whether to receive commercial 
calls, including prerecorded messages.\15\
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    \15\ 69 FR at 67288-89 (emphasis added).

    The proposed safe harbor therefore required that the prerecorded 
message provide, ``at the outset of the call'' (i.e., preceded only by 
the prompt oral disclosures required by the TSR), an opportunity for 
the called party to assert a seller-specific Do Not Call request by 
pressing a button on his or her telephone keypad to connect to a sales 
representative or an automated system. By stressing that ``the 
Commission believes that the Do Not Call option should allow consumers 
to assert their Do Not Call rights during the prerecorded message,'' 
\16\ the NPRM distinguished this element of the Commission's safe 
harbor proposal from FCC rules allowing prerecorded messages to provide 
a toll-free number consumers may call to make a Do Not Call request 
during or after the message.\17\ The NPRM expressly declined to adopt 
the FCC approach, which requires ``consumers to be prepared with pen 
and paper at the ready when they answer the phone, to take down the 
number and to place a separate call'' to make a Do Not Call request, 
because that approach ``encumbers consumers'' assertions of company-
specific Do Not Call rights.'' \18\
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    \16\ 69 FR at 67289 (emphasis added).
    \17\ 47 CFR 64.1200(b)(2).
    \18\ 69 FR at 67289.
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    Noting that the VMBC petition ``contemplates some prerecorded 
messages that would enable consumers to speak with a sales 
representative during the call by pressing a button on their telephone 
keypads,'' the NPRM specifically ``incorporated this feature into the 
proposed amendment to the call abandonment safe harbor,'' \19\ stating 
that it would ``satisfy the proposed safe harbor.'' \20\ This 
endorsement gave advance assurance to sellers and telemarketers that 
they could adopt this means of compliance during the pendency of this 
proceeding when the Commission announced it would forebear from 
enforcing the call abandonment provision if they complied with the 
proposed safe harbor.\21\
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    \19\ Id.
    \20\ Id. at 67290.
    \21\ See the discussion in Section II.F, infra.
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    Although the NPRM did not similarly endorse prerecorded messages 
providing a toll-free number for consumers to call to be placed on a 
company-specific Do Not Call list, the Commission sought ``information 
and data about the costs and benefits of requiring that the disclosure 
of how to make a Do Not Call request be made at the outset of the 
call,'' as well as about ``alternative methods of preserving the 
consumer's ability to assert a Do Not Call request when receiving a 
prerecorded message telemarketing call.'' \22\ In addition, the NPRM 
sought information and data about the technical feasibility and costs 
of implementing the interactive technology that allows consumers to 
make a company-specific Do Not Call request with the press of a keypad 
button, and the costs to industry of requiring this mechanism.
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    \22\ 69 FR at 67289.
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4. Effect on Other Laws
    The fourth and final element of the draft proposal simply made it 
clear that the new safe harbor would not obviate or negate any other 
provision of the TSR or other Federal or State laws, in order to 
preserve consistency with the existing TSR call abandonment safe 
harbor. It placed sellers and telemarketers on notice that other 
applicable regulations may be stricter than the proposed safe harbor. 
The NPRM sought comment on whether or not this requirement was 
appropriate.

C. Public Comment

    In general, the industry comments on the VMBC petition supported 
liberalizing the TSR to allow the use of prerecorded telemarketing 
messages, and consumers and consumer advocates opposed it.\23\ Although 
both industry

[[Page 58719]]

and consumer comments addressed the major issues raised by the NPRM, 
not all responded to each of the questions on which the Commission 
requested public comment.
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    \23\ All of the public comments, excluding 442 judged obscene or 
not germane, appear at http://www.ftc.gov/os/comments/tsrcallabandon/index.htm, where they are listed alphabetically under 
the name of the person who submitted the comment. The first citation 
of each comment includes the name of the commenter, the name in 
parentheses of the person or entity submitting the comment if it is 
different from the name of the commenter, and the comment number 
(e.g., ABC Corp. (Smith, J.), No. OL-123456). Comment numbers 
without a prefix were delivered to the Commission in paper form; 
those with the prefix ``OL'' were submitted online at the FTC's Web 
site; and those with the prefix ``EREG'' were submitted to http://www.regulations.gov. Subsequent citations to a comment omit the 
comment number.
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    Many of the comments, both from the telemarketing industry and 
consumers, exhibited a fundamental misconception of the TSR's scope. 
They presumed that, absent the proposed safe harbor, the TSR's call 
abandonment prohibition would prevent sellers from using prerecorded 
messages to provide important information to customers with whom they 
have an established business relationship, such as notifications of 
flight cancellations, reminders of medical appointments and overdue 
payments, and notices of dates and times for delivery of goods or 
service appointments. Such strictly informational calls, however, 
whether live or prerecorded, have never been covered by the TSR. The 
TSR applies only to ``telemarketing,'' which is defined, in pertinent 
part, as ``a plan, program or campaign which is conducted to induce the 
purchase of goods or services.'' \24\ It does not apply to 
informational calls, unless the calls combine the informational message 
with a sales invitation or promotional pitch.
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    \24\ 16 CFR 310.2(cc). For the same reason, it is unnecessary to 
grant the request made in a comment on behalf of credit and 
collection professionals that the Commission forbear from enforcing 
alleged violations of the Fair Debt Collection Practices Act based 
on the FCC's requirement that debt collectors identify themselves by 
their State-registered name in prerecorded telephone messages. ACA 
International, No. OL-113912. As the Commission has previously 
stated, pure debt collection calls are not covered by the TSR 
because they are not ``telemarketing'' calls. TSR SBP, 68 FR at 4664 
n.1020 (noting, however, that ``if the debt collection call also 
included an upsell, the upsell portion of the call would be subject 
to the Rules as long as it also met the criteria for `telemarketing' 
and was not otherwise exempt from the Rule. All debt collection 
calls must comply with the FDCPA.'').
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1. Industry Comments
    Comments from 21 telemarketers and business trade associations 
uniformly favored allowing sellers to use prerecorded telemarketing 
messages to reach their customers, arguing that this is a cost-
effective method for communicating without the need for sales 
representatives.\25\ Several noted not only that prerecorded messages 
avoid the harms associated with abandoned calls (i.e., ``dead air'' and 
``hang ups''), but also ensure better quality service to customers than 
telemarketers because there is no risk that the intended message will 
vary from call to call.\26\
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    \25\ Only 21 of the 23 industry comments addressed this issue. 
E.g., VMBC (Wiley Rein & Fielding), No. OL-113915 at 8; Joint 
Comment of the United States Chamber of Commerce, The Coalition for 
Healthcare Communication, The Consumer Bankers Association, The 
Magazine Publishers of America, The Mortgage Bankers Association, 
The National Newspaper Association, The Newspaper Association of 
America, and The Independent Insurance Agents and Brokers (``U.S. 
Chamber'') (Wiley Rein & Fielding), No. OL-113911 at 5; The Heritage 
Company (``Heritage''), No. OL-112918 at 1; West Corporation 
(``West''), No. OL-112911 at 2.
    \26\ VMBC at 7, 11; U.S. Chamber at 5; West at 1; Direct 
Marketing Association and American Teleservices Association 
(``DMA''), No. OL-113918 at 9; Visa U.S.A., Inc. (``Visa''), No. 
000023 at 2; Call Command, LLC (``Call Command'') No. 000025 at 1-2; 
Verizon Telephone Companies (``Verizon''), No. OL-113893 at 4.
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    Several industry comments posited that consumers are interested in 
receiving prerecorded messages.\27\ Although some of the examples cited 
to support this contention were prerecorded messages governed by the 
TSR (such as letting customers know of special promotional events or 
upcoming sales),\28\ many of the examples, if not most, were 
informational messages that are not covered by the TSR at all.\29\ For 
example, SBC cited a survey of 1217 of its DSL Internet access 
customers on the use of prerecorded informational messages to remind 
them of their service installation dates, in which 55.1 percent said 
they would like to receive such messages in the future.\30\ As 
previously noted, such informational messages are neither governed nor 
prohibited by the TSR, because they are not ``telemarketing'' as 
defined by the Telemarketing Act \31\ or the Rule.\32\
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    \27\ VMBC at 6, 10; U.S. Chamber at 4; Call Command at 2; SBC 
Communications, Inc. (``SBC''), No. 000026 at 2, 4.; National Retail 
Federation (``NRF''), No. 000027 at 3.
    \28\ VMBC at 2; SBC at 2; NRF at 3.
    \29\ E.g., Call Command at 2 (asking that the Commission 
acknowledge that prerecorded informational messages, such as 
notification about a change in flight schedules or about a product 
recall, are permissible, and suggesting that all such 
``transactional'' messages, as that term is used in the CAN-SPAM 
Act, 15 U.S.C. 7702(17), be exempt from the TSR); Broadcast 
Solutions, No. OL-113933 at 1; SBC at 3; NRF at 3; VMBC at 2; 
Verizon at 5.
    \30\ SBC at 3 (acknowledging that the survey reports were not 
``directly apposite, as they relate to service activation and 
related transactional messages''). Similarly, VMBC cited arguably 
favorable reaction from 5.8 million consumers to prerecorded 
campaigns as measured by an increase of from 20 to 40 percent in 
response rates to ``promotions'' and ``showing up for appointments'' 
with Do Not Call requests ``averaging 2/100ths of one percent.'' 
VMBC at 6. Unfortunately, this merging of data for prerecorded 
messages that are not governed by the TSR with those that are, 
without specifying the opt-out method provided to consumers, 
provides little help in evaluating the potential impact of the 
proposed safe harbor.
    \31\ 15 U.S.C. 6106(4).
    \32\ 16 CFR 310.2(cc).
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    Adopting VMBC's view that sellers would self-regulate and not abuse 
the goodwill of their customers, most of the industry comments that 
addressed the issue doubted that the volume of prerecorded 
telemarketing messages that consumers receive would increase if the 
safe harbor proposal were adopted.\33\ VMBC's comment further predicted 
that the likely result would not be an increase in calls, but that many 
``non-sale'' calls would convert from live calls from sales 
representatives to cost-effective recorded messages.\34\ Two industry 
comments disagreed. One acknowledged that, if allowed, prerecorded 
telemarketing messages would increase in number given their low 
cost.\35\ Another observed that the proposed safe harbor would free it 
and its telemarketers from using recorded messages solely for 
informational purposes, ``and put prerecorded messages to additional 
valuable uses.'' \36\
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    \33\ E.g., VMBC at 10; U.S. Chamber at 5; DMA at 9; SBC at 2; 
NRF at 4.
    \34\ VMBC at 10. However, since such ``non-sale'' calls are not 
governed by the TSR, the Rule does not prevent the use of 
prerecorded messages for this purpose.
    \35\ West at 2.
    \36\ SBC at 3 n.7.
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    Only two industry comments addressed the question posed in the NPRM 
of whether the proposed safe harbor would complicate Commission 
enforcement actions against sellers or telemarketers who falsely claim 
to have an established business relationship with the consumers they 
call. Both opined that potential enforcement problems should not be an 
issue because the burden of proving the existence of an established 
business relationship falls on the seller or telemarketer, not the 
Commission.\37\
---------------------------------------------------------------------------

    \37\ Infocision Management Corp. (``Infocision''), No. OL-113920 
at 4; West at 3.
---------------------------------------------------------------------------

    The industry comments uniformly urged the FTC to adjust the TSR to 
track the FCC's regulations that permit the use of prerecorded messages 
for telemarketing to established customers.\38\ Some went so far as to 
argue that the Commission lacks jurisdiction to regulate prerecorded 
telemarketing messages because Congress has given exclusive authority 
to the FCC to do so.\39\ One conceded

[[Page 58720]]

that the Commission may have authority to regulate deceptive, unfair, 
and abusive telemarketing practices, but cited a need for clarification 
of the TSR's applicability to prerecorded messages.\40\
---------------------------------------------------------------------------

    \38\ VMBC at 12; Infocision at 1; SoundBite Communications, Inc. 
(``Soundbite''), No. OL-112919 at 1-2.
    \39\ Soundbite at 1-2; Infocision at 1; but see, United States 
Senate, No. OL-113862 (Senators Bill Nelson and Dianne Feinstein 
commented that ``there is no reason why the FTC should promulgate an 
anti-consumer rule to meet the FCC's lower standard for prerecorded 
messages.'').
    \40\ Verizon at 5.
---------------------------------------------------------------------------

    The subject that elicited the greatest industry comment was the 
proposed safe harbor requirement that consumers be presented, at the 
outset of a prerecorded message, with an interactive mechanism to 
exercise their company-specific Do Not Call rights. Almost all opposed 
this aspect of the proposal,\41\ with two objecting that it 
unconstitutionally mandated compelled or ``forced speech.'' \42\ 
Several argued that requiring a disclosure at the outset would result 
in a large number of Do Not Call requests, and might confuse consumers 
who would otherwise wish to hear the message.\43\ Others contended that 
the method authorized by the FCC of providing a number during or at the 
end of the message that consumers can call with a Do Not Call request 
works well, and should be adopted by the FTC.\44\ Many objected that 
interactive technology, either to connect to a representative or to 
make an automated Do Not Call request, is costly, burdensome, and not 
widely available,\45\ notwithstanding the arguments by two industry 
members that the technology is available on ``a very cost effective 
basis.'' \46\ One comment doubted that it ``would necessarily be the 
case that the interactive feature would connect the consumer to a live 
sales representative any faster than if the customer were simply to 
dial an 800-number.'' \47\ Several comments recommended that the 
Commission leave the timing and method of providing a Do Not Call 
option up to the industry, as the FCC has done, so that sellers will 
have the flexibility to choose the method most suitable to their 
operations based on preferences and costs.\48\
---------------------------------------------------------------------------

    \41\ DMA at 11; Infocision at 4; Heritage at 1-2; SBC at 4; West 
at 3; Visa at 2; Verizon at 6; Soundbite at 2; Convergys Corp. 
(``Convergys''), No. OL-113952 at 5-6; National Association of 
Realtors (``NAR''), No. EREG-000005 at 1-2; National Retail 
Federation (``NRF''), No. 000027 at 5; The Broadcast Team, No. OL-
112822 at 2.
    \42\ Heritage at 2; Infocision at 3.
    \43\ VMBC at 10; U.S. Chamber at 5; DMA at 9; SBC at 2; NRF at 
4; Heritage at 1-2; Soundbite at 2; SBC at 4; West at 3.
    \44\ Call Command at 1; Convergys at 5; DMA at 11; NAR at 1-2; 
Visa at 2; Verizon at 6-7; NRF at 4-5. Verizon also argued that 
requiring that Do Not Call information be provided ``at the outset'' 
of a prerecorded message would conflict with current FCC 
regulations. Verizon at 6.
    \45\ DMA at 11-12 (estimating that reprogramming calling 
stations would cost ``$25,000 per location''); SBC at 4 (citing the 
``significant investment of time and capital to synchronize 
telephonic dialing capabilities with interactive voice platforms and 
databases,'' the significant cost of requiring the availability of 
sales agents, and asserting that the ``number of calls able to be 
made in a single day would decrease by more than 99%''); Convergys 
at 5 (arguing that connection to an agent would be cost prohibitive 
because of the increase in telecommunications costs to maintain 
``bridges'' to customer service personnel); Visa at 2 (``[T]he 
technology to permit registration [on company-specific Do Not Call 
lists] during the telemarketing call presently is not widely 
implemented and * * * would be costly and complicated'').
    \46\ Soundbite at 2; VMBC at 10.
    \47\ SBC at 14 n.13.
    \48\ VMBC at 13-14; U.S. Chamber at 6; West at 3; Visa at 2; cf. 
NRF at 4 (suggesting a more flexible disclosure timing such as 
``reasonably promptly'').
---------------------------------------------------------------------------

2. Consumer Comments
    Nearly all the consumers and consumer advocacy groups who commented 
opposed the proposal to permit telemarketing calls that are 
prerecorded, regardless of whether the party called has an established 
business relationship with the seller.\49\ Their comments show that 
consumers overwhelmingly find prerecorded telemarketing messages more 
intrusive and invasive of the privacy they enjoy in their homes than 
live telemarketing calls,\50\ primarily because they are powerless to 
make themselves heard.\51\ As one consumer put it, ``[t]he telephone is 
for conversing with another human being, not for invading my home with 
inexpensive advertising.'' \52\
---------------------------------------------------------------------------

    \49\ E.g., Electronic Privacy Information Center (``EPIC''), No. 
OL-113823 at 2; Privacy Rights Clearinghouse (``PRC''), No. OL-
113986 at 2-4; National Consumers League (``NCL''), No. OL-112905 at 
5. Well over 13,000 of the 13,550 consumer comments in the record 
clearly opposed allowing prerecorded telemarketing messages, with no 
more than 77 of the comments indicating arguable support for the 
proposed amendment.
    \50\ Some 2,100 of the consumer comments opposing prerecorded 
telemarketing calls specifically objected that they constitute an 
invasion of privacy.
    \51\ E.g., Myers, M., No. OL-100768 (``Pre-recorded messages are 
even more annoying than calls from live people. You can't interrupt, 
you can't ask questions and you can't respond.''); Allen, No. OL-
103079 (``I cannot ask a recording to clarify who they are or what 
our existing relationship is.''); Stahl, K., No. OL-101878 (``The 
very worst form of telemarketing is the one made by a machine. Pre-
recorded messages are just as invasive and unwanted, and far more 
frustrating.''); Levy, No. OL-102365 (``No business should be able 
to call me unless I have a pre-existing relationship (one that >I< 
recognize), but even a company I do business with should hire 
someone to actually speak to me.'') (punctuation in original); 
Powell, D., No. OL-113775 (``Recorded messages like this are more 
than an annoyance, they are a way for business to avoid talking to 
their customers, and instead just talk at them.'').
    \52\ Watson, B., No. OL-108960; cf. Nungesser, R., No. OL-112535 
(uninvited prerecorded calls are ``no different than a door to door 
salesman breaking you[r] window, and entering your home to sell you 
his product only * * * it will be a robot, not a person.'').
---------------------------------------------------------------------------

    Like many industry comments, most of the consumer comments that 
seemed to support the proposal to allow prerecorded messages in 
telemarketing calls to established customers exhibited a basic 
misunderstanding of the TSR's applicability. Specifically, the majority 
of these relatively few supportive consumer comments indicated that 
they did not want the Commission to prohibit prerecorded informational 
messages such as reminder messages--although such messages have never 
been covered, much less barred, by the TSR.\53\ These consumers 
expressed appreciation for prerecorded informational messages about 
delivery dates for previously purchased goods or services, medical 
prescription order notifications, flight cancellation alerts, and 
overdue bill and appointment reminders.\54\ Yet some of the same 
consumers made it clear they opposed receiving prerecorded 
telemarketing sales pitches.\55\ Thus, there is only the barest 
consumer support in the record for the proposed safe harbor for 
prerecorded telemarketing sales calls to established customers.
---------------------------------------------------------------------------

    \53\ Of the 77 positive consumer comments, more than half--47--
sought only to preserve prerecorded informational messages that are 
not prohibited by the TSR. These 47 consumers opposed any limitation 
on prerecorded ``reminder'' messages, with some 36 of them seeking 
to avoid any need to sign a consent form to receive such messages, 
apparently in the mistaken belief that this would be necessary if 
the proposed amendment were not adopted. E.g., Haas, No. OL-113929; 
Tran, No. OL-113929; Lopez, No. OL-113975; Schroeter, No. OL-113882; 
DeSantis, No. OL-113892. One consumer group correctly noted that 
such strictly informational messages ``would not fall under the 
definition of 'telemarketing''' in the TSR. NCL at 3.
    \54\ E.g., Matthews, D., No. OL-100004; Forrette, No. OL-113959; 
Bartholow, D., No. OL-113662; Auerbach, No. OL-101665; Oberly, No. 
OL-105967.
    \55\ E.g., Matthews, D., No. OL-100004 (``Some pre-recorded 
computer generated calls are convenient and necessary'' but 
``[t]elemarketing computer generated 'cold calls'' are definitely a 
problem.''). Forrette, No. OL-113959 (``I can think of several cases 
where I find this very useful, such as notification from my airline 
when there's a schedule change to my flight. As long as the 
prohibition on the use of pre-recorded messages for 'cold calling' 
remains in place, I think it's okay.''); Bartholow, D. No. OL-113622 
(``Bill reminders are not the same as telemarketing sales calls.''); 
Consumer Assistance Network, No. OL-113928 (``The consumer would 
rather receive a [reminder] message rather than a telemark[et]ed 
call.'').
---------------------------------------------------------------------------

    The widespread opposition expressed in this record to the 
infringement on personal privacy through prerecorded telemarketing 
calls to home telephones stands in sharp contrast to the consumer 
support in the record of the TSR amendment proceeding for including an 
established business relationship exemption for telemarketing using 
sales

[[Page 58721]]

representatives. In that proceeding, the Commission provided such an 
exemption from the Do Not Call provisions after 40 percent of the 
consumers who commented supported the exemption.\56\ Here, only 15 
consumer comments--a scant tenth of one percent of the more than 13,000 
consumer comments that addressed the proposed amendment--expressed 
unambiguous support for the proposed safe harbor for prerecorded 
message telemarketing to established customers.\57\
---------------------------------------------------------------------------

    \56\ TSR SBP, 68 FR at 4593 n.141.
    \57\ Only 15 of the 77 consumer comments that arguably supported 
prerecorded telemarketing calls did so without reservation or 
apparent misunderstanding. E.g., Hamilton, No. OL-113099 (``I would 
be in support of the change. * * * I would rather hang up on an 
automated machine than a live person.''); Curran, D., No. OL-105145; 
Childress, No. OL-102612; Young, E., No. OL-112546. Another 13 
approved of prerecorded sales calls from businesses they know and 
regularly patronize, but not necessarily from any business from 
which they have made a purchase. E.g., Leader, No. OL-110416 (``I am 
not in favor of this amendment. * * * [T]he only calls that should 
be allowed are to companies who have an ongoing existing and real 
business relationship with the customer.''); Dusenbury, No. OL-
113951 (supporting prerecorded reminder messages generally, 
including ``sale reminders from my favorite stores.''); Bartholow, 
D., No. OL-113622. Two consumers backed prerecorded messages in the 
mistaken belief that such messages would be ``permission based'' 
opt-in messages. Taylor, J., No. OL-105274; Taylor, R., No. OL-
105171. The remaining 47 supported prerecorded ``reminder'' 
messages, as previously noted. See note 53, supra.
---------------------------------------------------------------------------

    Consumers also expressed concern about the potential costs, 
including the risks to health and safety, if the proposed safe harbor 
allowing prerecorded telemarketing messages to established customers 
were adopted. For example, consumers who subscribe to a telephone 
company or other voice mail services protested having to pay for 
storage of messages they do not want, which can exceed their allotted 
storage capacity and prevent them from receiving the messages they 
need, as did owners of answering machines.\58\ Consumers with home-
based businesses objected to the costs incurred when their home 
telephone lines are tied up by telemarketing calls,\59\ and even small 
businesses and government agencies that are not protected by the TSR 
lodged the same complaint.\60\ Several consumers cited the danger of 
the loss of use of their telephone lines, which can be tied up for some 
period of time even after the recipient hangs up on a prerecorded 
message.\61\ A few consumers cited instances when prerecorded messages 
prevented them from making emergency calls,\62\ and a community shelter 
that forwards its calls to allow staff counselors to receive them on 
their home telephones reported that ``[w]e are dealing with life and 
death situations from suicide to substance abuse to domestic violence'' 
and clients ``are unable to get to a crisis counselor due to the high 
volume of telemarketers calling our [home] phone number.'' \63\
---------------------------------------------------------------------------

    \58\ E.g., Allison, No. OL-108414 (``In the recent election one 
citizen had her answering machine [so] filled with phone messages 
from a candidate that her child could not get word to her of an 
emergency at the child's school.''); O'Connor D., OL-111858; Rose, 
C., OL-111837; Micret, OL-111402; Rickey, OL-104029; see also PRC at 
6-7; NCL at 3. Neither the TSR nor the proposed new safe harbor, 
however, prohibits the use of prerecorded messages when an answering 
machine picks up a call. See the discussion in Section II.E, infra.
    \59\ E.g., Brown, R., No. OL-104366; Amsberry, No. OL-105113; 
Lasting Fitness, No. OL-110413; Miller, No. OL-103424; Grover, No. 
OL-109774; Pearlman, S., No. OL-112275.
    \60\ E.g., Northeast Harbor Inn, Inc., No. OL-113439; Bart's 
Pneumatics Corp., No. OL-107508; Bus. Innovations, No. OL-110414; 
cf. Idaho Small Bus. Dev. Ctr., No. OL-113259; County of Berks--
Prison, No. OL-105593.
    \61\ E.g., Graham, No. OL-104100 (``If you needed to call for a 
fire truck or an ambulance or poison control and some recorded 
message was tying up your phone, would you think it was OK?''); 
Vernen, No. OL-110383 (prerecorded calls ``most dangerously--
frequently fail to release the line promptly when hung up on. This 
presents an immediate risk to the health and safety of the call 
recipient since the telephone line is unavailable in an 
emergency.''); see also, e.g., Adkins, No. OL-104921; Albright, D., 
No. OL-105813; Alquist, No. OL-113229; Schmaljohn, No. OL-110028; 
Granzo, No. OL-104469; Pickett, A., OL-104461; Simnacher, No. OL-
108720; Miller, C., No. OL-105006. As the legislative history of the 
TCPA notes, S. Rep. No. 102-178, at 10 (1991), some telephone 
networks are not capable of notifying callers that a consumer has 
hung up, thereby excusing telemarketers from complying with an FCC 
requirement that they release the line ``within 5 seconds of the 
time [such] notification is transmitted.'' 47 CFR 68.318(c). It 
appears from the comments that many networks still lack this 
capability. Thus, depending on their local network, consumers may 
have to wait until the end of what may be a lengthy prerecorded 
message before their telephone line is released.
    \62\ Friedman, No. OL-110265 (a disabled consumer unable to make 
an emergency call because the recorded message would not 
disconnect); Gardiner, W., No. OL-100542 (an elderly consumer who 
complained that the receipt of prerecorded messages twice prevented 
him from contacting a doctor). See also, NCL at 3; PRC at 11 (citing 
a comment it received from a self-identified ``former legitimate 
telemarketing salesman'' objecting to allowing prerecorded messages 
because ``[t]here are one or more deaths on record Nationally that 
were precipitated by a prerecorded message that would not cede the 
line it was on, even though the receiving party had hung up! '').
    \63\ Chico Community Shelter Partnership, No. OL-109650; cf. 
Udehn, No. OL-114005 (``Callers are persistent and do not like to 
release phone lines until they make a sale, even to allow emergency 
patient calls. I need a line uncluttered by telephone SPAM to 
continue emergency room coverage.'').
---------------------------------------------------------------------------

    Consumers emphasized the difficulties they experience with 
prerecorded messages in exercising their company-specific Do Not Call 
rights. Many objected to the fact that they could not tell a 
prerecorded message to put them on the seller's Do Not Call list, as 
they could with a sales representative.\64\ Some consumers reported 
that the mechanism typically provided for exercising their Do Not Call 
rights is impractical,\65\ both because they have to wait until the end 
of what may be a lengthy message to get a number to call to speak to an 
agent,\66\ and because the Do Not Call option provided at the end of 
the message simply does not work.\67\
---------------------------------------------------------------------------

    \64\ E.g., Sahagian, No. OL-113021 (a self-described 
``unemployed telemarketing manager, laid off as a direct result of 
the national do not call list'' who finds prerecorded messages ``the 
most intrusive'' because ``I can't ask the message to get to the 
point or never call again.''); Bedell, No. OL-105951 (``A machine 
can't hear me say `put me on your do-not-call list! ' ''); Schares, 
No. OL-110388 (``At least with a live person, you can have the 
illusion of requesting removal from the list, with a machine, you 
are just out of luck.''); Irving, No. OL103862; see also, e.g., 
Sawyer, No. OL-108895; Goltz, OL-107085; Hancock, J., No. OL-112529; 
Blumberg, No. OL-104484; O'Daire, No. OL-113753; Salgado, No. OL-
111816; Von Kennen, No. OL-113646; Ianson, No. OL-105278; Valum, No. 
OL-102442; Van Baren, No. OL-101942; Zimmerman, J., No. OL-113999.
    \65\ E.g., Hohm, No. OL-104448 (``Allowing automated calls will 
let telemarketers flood consumers with sales calls * * * with no 
practical means for the consumer to challenge their propriety or to 
refuse further calls.''); Sartin, No. OL-104554 (``If [prerecorded 
calls] are to be allowed, it should only be through opt-in, not an 
inherently awkward and unreliable opt-out.''); Von Kennen, No. OL-
113646 (``I can only imagine the telephone ping-pong game between 
menus, voice-mail, call transfers, and the inevitable disconnection 
that I'll have to play before I can hope to talk to someone who will 
listen [to a Do Not Call request].'').
    \66\ E.g., Sahagian, No. OL-113021 (an ``unemployed 
telemarketing manager'' who states that ``[o]ften one must wait 
until the end of the message for contact information, write down a 
phone number, call back, turn down a live sales offer, ask to speak 
with a manager, and then finally ask to be deleted from future 
calling campaigns.''); Nobles, No. OL-105403, (``The requirement[s] 
that they identify themselves and allow me to ask them to remove me 
from their calling list are meaningless, since that information is 
always supplied at the very end of the call.''); Stahl, K., No. OL-
101878; Schneider, P., No. OL-101484. The call-back requirement that 
consumers describe, if permitted by FCC rules, does not comply with 
the safe harbor proposal in the NPRM because it fails to give 
consumers an opportunity to exercise their Do Not Call Rights during 
the call.
    \67\ E.g., Blumberg, No. OL-104484 (``There is always an option 
to wait until the end of the message and press a number to talk with 
a person but only in rare instances does this work.''); Vinegra, No. 
OL-104055 (``[I]n my experience, automated phone spam is the MOST 
likely to not have a valid way to get off the list. Oh, sure, it may 
give you an 800 number to call, but that's likely to reach some 
convoluted voicemail system that never gets you anywhere.''); Fiol, 
No. OL-112458 (``I do not believe that offering consumers the option 
of hanging up and calling an 800 number is an effective one. It only 
worsens the interruption and imposition on the consumer's time, and 
* * * frustrate[s] the consumer if the 800 number is busy or even 
inoperative.'').
---------------------------------------------------------------------------

    More generally, the comments attest that consumers found the 
company-specific opt-out regime required to stop unwanted prerecorded 
messages prior to

[[Page 58722]]

the advent of the Registry extremely burdensome and frequently 
ineffective.\68\ Apparently assuming that a company-specific opt-out 
might not take the form of an interactive method at the outset of the 
call (as proposed by the Commission), some consumers complained that 
the burden would be placed on them to listen until the end of unwanted 
messages to obtain an opt-out telephone number, to copy the opt-out 
number, and to wait to call that number during normal business hours to 
ask not to be called again--a process they would have to repeat for 
each company that calls.\69\
---------------------------------------------------------------------------

    \68\ E.g., Gollinger, No. OL-103929 (``This puts an undue burden 
upon the consumer to attempt to contact the company to have their 
name deleted from the call list.''); Wahlig, No. OL-104503 at 1 
(citing the ``unjustifiable burden on citizens who wish to assert 
their DNC rights''); Tomas, No. OL-101671 (``Instead, the burden is 
placed on the victim's shoulders to contact the telemarketer to have 
himself removed from the call list.''); Ayers, T., No. OL-113131; 
Bashor, No. OL-113062; Fiol, No. OL-112458; LaMountain, No. OL-
101888; Boyd, M., No. OL-113844; Hall, No. OL-104082; Grace, No. OL-
113784; Piro, No. OL-112925.
    \69\ E.g., Hancock, J., No. 112529; Sahagian, No. OL-113021; 
Kleger, No. OL-103115.
---------------------------------------------------------------------------

    Some consumers and consumer groups questioned the adequacy of the 
proposed interactive mechanism that would permit consumers to exercise 
their Do Not Call rights by pressing a button on the telephone keypad. 
At least one consumer noted that this approach would be ineffective for 
her, and presumably many thousands of other consumers who still have 
rotary dial telephones without keypads.\70\ A consumer group and at 
least one consumer questioned whether the proposed interactive 
mechanism would be effective in the absence of a requirement that a 
representative be promptly available.\71\ Another consumer group 
doubted that consumers would really benefit from the proposed 
interactive mechanism.\72\
---------------------------------------------------------------------------

    \70\ Sachau, No. EREG-000002; see also Argyropoulos, No. OL-
102968 at 2 (``[N]one of the proposed options allow a person 
answering on a non-touch-tone phone to efficiently make a Do Not 
Call request.''). While other mechanisms undoubtedly exist to 
provide equivalent functionality for rotary dial telephone users, no 
industry comment addressed this problem in response to the NPRM's 
request for information about ``alternative mechanisms.''
    \71\ NCL at 5 (``The FTC proposal seems to assume that when the 
consumer presses the number to speak to a live company 
representative, one will be readily available. It is unclear what 
happens if that is not the case. Will the consumer get dead air? Be 
put on hold with recorded music? Be hung up on?''); Argyropoulos, 
No. OL-102968 at 2.
    \72\ PRC at 7 (arguing that most prerecorded telemarketing 
messages are left on answering machines or voice mail services, 
depriving consumers of the benefits of such an option, and 
ultimately clogging their message storage with unwanted 
telemarketing messages). However, nothing in the TSR's call 
abandonment prohibition bars the use of equipment that channels a 
call to a sales representative if a consumer answers, but to a 
recorded message if an answering machine picks up. See TSR SBP, 68 
FR at 4645; see also the discussion in Section II.E, infra.
---------------------------------------------------------------------------

    A number of consumers also challenged a presumption implicit in the 
proposed safe harbor that would have permitted prerecorded 
telemarketing calls to established customers. Notwithstanding the FCC's 
rationale for allowing sellers to use prerecorded messages in calls to 
established customers,\73\ many consumers contended that neither a 
prior inquiry nor purchase implied their consent to receipt of future 
prerecorded solicitations from a seller,\74\ contrary to prior consumer 
support for live telemarketing calls.\75\ Many of the consumer comments 
argued that, given the intrusive and impersonal nature of prerecorded 
messages, prerecorded telemarketing calls should not be permitted at 
all without the consumer's prior consent.\76\ In addition, many 
objected to what they regard as the overbreadth of the TSR's definition 
of an ``established business relationship,'' \77\ which some regarded 
as threatening to make a ``mockery'' of the Registry \78\--especially 
if the use of prerecorded messages is permitted.\79\ These consumers 
foresee that allowing prerecorded messages will likely increase the 
number of ``established business relationship'' telemarketing 
campaigns, with the result that consumers will have to assert company-
specific Do Not Call requests repeatedly for different sellers from 
which they made a one-time purchase.\80\ Moreover, some consumers 
reported that they receive both live and prerecorded telemarketing 
calls from businesses with which they have no ``established business 
relationship.'' \81\
---------------------------------------------------------------------------

    \73\ 1992 FCC Order, 7 FCC Rcd 8752, ] 34 (concluding that a 
``solicitation can be deemed invited or permitted by a subscriber in 
light of the business relationship.'').
    \74\ E.g., Sancibrian, No. OL-106078; Salem, No. OL-107247; 
Sartin, No. OL-104554; Laucik, No. OL-104859; Wortman, No. OL-
103376; Corey, No. OL-105981; Innes, No. OL-105931; Brown, R., No. 
OL-107136; Troup, No. OL-103143; Goland, No. OL-100107.
    \75\ See note 56, supra, and accompanying text. Many of the 
consumer comments opposing expansion of the ``established business 
relationship'' exemption did not distinguish between prerecorded 
calls and live calls from a sales representative. Consequently, it 
is impossible to determine whether these comments would support an 
established business relationship exemption for live telemarketing 
calls, or whether they reflect a change in consumer attitudes toward 
the exemption.
    \76\ EPIC at 2, 14; PRC at 4, 9; NCL at 4; see also, e.g., 
Barry, A., No. OL-104109; Williams, K., No. OL-101321; North, W., 
No. OL-103090; Schnautz, No. OL-104508; Tipping, No. OL-109310; 
Twilling, No. OL-108395; Viggiano, No. OL-108516.
    \77\ E.g., Nuglat, No. OL-109584 (``[T]hese companies will be 
calling a purchase of a stick of gum a year ago the basis of an 
established business relationship.''); Touretzky, No. OL-100891 (``I 
work nights and sleep in the daytime. I do not want to be dragged 
out of bed by every low-life outfit that once sold me a box of 
paperclips.''); Holt, C., No. OL-102518 (``Time Warner owns some 80% 
of the media markets, does that mean if I buy one copy of Time 
magazine that I should have to receive phone calls from every other 
media outlet Time owns? That's the way it functions now.''); see 
also, e.g., Holt, C., No. OL-102518; Schendel, K., No. OL-101419; 
Veech, No. OL-110162; Ehlinger, No. OL-105751; Eide, No. OL-102754; 
Erskine, D., No. OL-109355; Volek, No. OL-100697; Inman, J., No. OL-
102319; Verner, No. OL-104134; Islam-Zwart, No. OL-100028; Sampson, 
No. OL-106004; Salisbury, No. OL-104292.
    \78\ Sanderson, No. OL-447. See also Sager, No. OL-104269; 
Yarrow, No. OL-102563.
    \79\ EPIC at 14; PRC at 9; NCL at 3.
    \80\ E.g., Hancock, J., No. OL-112529 (``Since a `business 
relationship' is readily established by any inquiry or purchase, the 
universe of companies that can claim a basis to make junk phone 
calls is huge.''); Talmo, No. OL-110438 (``A few years ago, most of 
my purchases were made within my community.* * * The digital world 
has opened up very far-reaching so-called relationships. * * * I now 
make many one-time [Internet] purchases from companies I may never 
contact again. I fear that these simple one time purchases will 
constitute a so-called business relationship.''); Argyropoulos, No. 
OL-102968 at 1 (``Companies are offering free or below-cost 
inducements to establish business relationships for the primary 
purpose of acquiring the ability to telemarket to consumers in the 
Do Not Call registry.'').
    \81\ E.g., Fryman, No. OL-101503 (``The established business 
relationship clause of the existing system has been stretched and 
twisted beyond all recognition, such that companies that we have had 
no `business relationship' with in over 5 years are still 
calling.''); Anderson, J., No. OL-102561 (``I get 3-5 calls a day, 
with recorded messages. And NO, they are NOT people I've done 
business with!''); Holt, C., No. OL-102518, (``I constantly receive 
solicitations from companies who claim I have a relationship with 
them, and I've never heard of them before. STILL get calls, both 
human and PRE-Recorded.* * *[A]s I was writing this, I was just 
interrupted by a TELEMARKETING CALL!!!!!! * * *[I]t was not a 
company we had ever done business with and they would not tell me 
how they got this number.'').
---------------------------------------------------------------------------

    Many consumers also commented that since they listed their 
telephone numbers on the National Do Not Call Registry, they have come 
to rely on it to shield them from unwanted telemarketing calls, 
including prerecorded messages.\82\ A large number fear the proposed 
safe harbor will create a ``loophole'' that will dilute the 
effectiveness of the Registry in preventing unwelcome intrusions on

[[Page 58723]]

their privacy at home.\83\ Consumers and their advocates expressed 
concern that, if the proposed new safe harbor were adopted, marketplace 
economics could soon produce a flood of prerecorded telemarketing 
messages that would engulf the privacy protection provided by the 
Registry. They cited, in particular, such recent digital technologies 
as Voice Over Internet Protocol (``VoIP'') as likely to lower the costs 
of prerecorded telemarketing messages to the point that they would be 
used extensively, if permitted.\84\ Thus, several comments argued that 
allowing the use of prerecorded messages in telemarketing to 
established customers would in effect create the telephonic equivalent 
of ``spam,'' overwhelming consumers with unwanted messages that cost 
the caller little or nothing to send.\85\
---------------------------------------------------------------------------

    \82\ E.g., Thompson, A., No. OL-104385 (``I recently moved, and 
my new phone number was not on the Do Not Call list; I received more 
`junk' calls than I received normal phone calls. Adding my new 
number to the list made having a phone bearable again.''); Musgrave, 
No. OL-106135; Sampson, No. OL-106004; Anholt, No. OL-104141; 
Dougherty, J., No. OL-106035; Gordon, M., No. OL-109877; Matson, No. 
OL-111933; Gunnells, No. OL-108503; McCarthy, L., No. OL-101367; 
Sayer, No. OL-100407.
    \83\ Over 5,900 consumer comments asserted that there is no need 
to create a ``loophole'' or to adopt the amendment. E.g., Brown, R., 
No. OL-101294; Hill, A., No. 000037; Moore, M., No. OL-101468; 
Fryman, No. OL-101503; Vrignaud, No. OL-101542; Jester, No. OL-
101685; Selmi, No. OL-102168; Miller, No. OL-103424; Vogel, No. OL-
105708 at 1.
    \84\ Sacerdote, No. OL-112192 (``The cost of placing such 
automatic call[s] is essentially zero, and the desire to place such 
calls will therefore be nearly infinite.'') (emphasis added); EPIC 
at 5-6 (citing a 1999 news report that VMBC could leave ``messages 
with 1% of the U.S. population over a two-day period,'' and the 
increasing use of low cost Internet services such as VoIP or 
Internet telephony); PRC at 8-9 (citing an August 10, 2004, CNET 
article about software that can deliver up to 1,000 synthetic calls 
every five seconds to Internet Protocol addresses assigned to 
telephones); NCL at 2-3 (arguing that low cost use of prerecorded 
messages rather than salespersons and expansive reading of 
`established business relationship' will result in increase of 
telemarketing calls); see also, e.g., Allan, A., No. OL-103079; 
United States Senate, No. OL-113862 at 3; Bates, J., No. OL-100012; 
Fisher, B., No. OL-109494; Watson, B., No. 108960.
    \85\ E.g., Anderson, No. OL-106320 (``E-mail spam is killing e-
mail for legitimate business communication and phone spam would do 
the same for telephone communications.''); Kislo, No. OL-102924 
(``Such a modification would change telemarketing rules in such a 
radical fashion, you risk bringing the `e-mail spam' problem to the 
telephones across the US.''); Malone, S., No. OL-107630 (objecting 
to FTC proposal to allow ``pre-recorded `spam blitzes'' '); Miller, 
No. OL-103424 (``Left unchecked (as I believe it is today) the phone 
system will become much like e-mail, 80% spam.'').
---------------------------------------------------------------------------

D. Analysis of the Comments, Discussion and Conclusion

    Two themes strikingly emerge from the record. First, there is 
virtually no consumer support for allowing the use of prerecorded 
messages; and second, neither industry nor consumers support the 
proposal's effort to ensure that consumers would be able to assert an 
entity-specific Do Not Call request in an ``established business 
relationship'' call delivering a prerecorded message as easily and as 
quickly as in a similar call using sales representatives. Thus, the 
Commission's analysis begins from the premise that a new safe harbor 
that treats prerecorded telemarketing calls to established customers 
differently from other prerecorded calls might be appropriate if: (1) 
The consumer aversion to prerecorded calls (which led to enactment of 
the TCPA ban on such calls) does not apply when such calls are made to 
established customers; (2) any harm to consumer privacy is outweighed 
by the value of prerecorded calls to established customers; or (3) 
there is something unique about the relationship between sellers and 
their established customers that gives sellers a sufficient incentive 
to self-regulate so that they would avoid prerecorded telemarketing 
campaigns that their customers would consider abusive. Based on careful 
consideration of the comments, the Commission concludes that the record 
does not support any of these possible rationales for treating 
prerecorded telemarketing calls to established customers differently 
from other prerecorded calls.
    First, if consumers had little or no aversion to prerecorded calls 
from sellers with whom they have an established business relationship, 
the fact that such calls avoid the twin harms of ``dead air'' and 
``hang ups'' associated with abandoned calls would weigh heavily in 
favor of the adoption of a new safe harbor. The record here provides 
compelling evidence, however, that consumer aversion to prerecorded 
message telemarketing--regardless of whether an established business 
relationship exists--has not diminished since enactment of the TCPA, 
which, in no small measure, was prompted by consumer outrage about the 
use of prerecorded messages. The comments in this record demonstrate 
that consumers continue to view such calls as an abusive invasion of 
their privacy, and an even greater invasion of their privacy than live 
telemarketing calls because they are powerless to interact with a 
recording. Indeed, almost all of the very few consumers who commented 
in favor of prerecorded messages confined their comments strictly to 
informational calls, in some cases qualifying their support with 
negative comments about prerecorded sales calls.\86\
---------------------------------------------------------------------------

    \86\ See note 54, supra.
---------------------------------------------------------------------------

    In addition, some consumers are troubled by the potential hazards 
that prerecorded messages may pose for their health and safety when 
home telephone lines cannot be released in emergencies. As this record 
attests, in at least a few instances, prerecorded messages of 
indeterminate length have prevented consumers from making emergency 
calls--a concern which was an important factor leading to passage of 
the TCPA.\87\ While the record does not suggest that obstruction of 
emergency calls by prerecorded messages is a common occurrence, the 
seriousness of the potential consequences when it does occur creates 
legitimate cause for concern.
---------------------------------------------------------------------------

    \87\ S. Rep. No. 102-178, at 10 (1991).
---------------------------------------------------------------------------

    Likewise, the possibility that any harm to consumer privacy might 
be outweighed by the value of prerecorded calls to established 
customers is convincingly refuted by the consumer comments. There is 
support in the record for prerecorded informational messages--i.e., 
messages without any sales pitch--which are not prohibited by the TSR; 
yet there is virtually none for prerecorded telemarketing messages. 
Accordingly, this second potential rationale for adoption of a new safe 
harbor is not supported by the record--a fact that assumes particular 
importance in view of Supreme Court precedent that has long recognized 
the significant governmental interest in protecting residential 
privacy.\88\
---------------------------------------------------------------------------

    \88\ E.g., Frisby v. Schultz, 487 U.S. 474 (1988); Rowan v. U.S. 
Post Office Dep't, 397 U.S. 728 (1970).
---------------------------------------------------------------------------

    The third possible rationale for a new safe harbor--that sellers 
will self-regulate the number of prerecorded messages they send in 
order to preserve the goodwill of established customers \89\--is 
similarly unpersuasive. Although it may be that well-established 
businesses with brand or name recognition will engage in such 
restraint, the same is not necessarily true for new entrants and small 
businesses in highly competitive markets. The proposed safe harbor, if 
approved, would expose consumers, including those who have entered 
their telephone numbers on the Registry, to such prerecorded messages, 
potentially from every seller from whom they have made a single 
purchase in the past 18 months. In addition, because the TSR's 
definition of an ``established business relationship'' includes 
consumers who have not made a prior purchase, but simply an inquiry, 
sellers would have

[[Page 58724]]

less of an incentive to self-regulate the number of prerecorded 
messages they send to such consumers, because they have no established 
customer to lose, but only a customer to gain. The likelihood that 
industry-wide self-restraint would be effective must be assessed with 
an eye toward the industry's record of compliance with the TSR to date. 
While overall compliance with the Do Not Call provisions of the TSR is 
quite good, not all covered entities are complying.\90\ The compliance 
record presents a particular problem with respect to consumer concerns 
about the breadth of the industry's interpretation of what constitutes 
an ``established business relationship,'' as the consumer comments and 
the Commission's law enforcement experience indicate.\91\
---------------------------------------------------------------------------

    \89\ Several industry comments inconsistent with this rationale 
argue that because the burden of proof of an established business 
relationship would fall on the seller, no new enforcement concerns 
would be created by a safe harbor for prerecorded calls. As these 
comments reflect, the industry recognizes that the burden of this 
affirmative defense rests on sellers and telemarketers to prove that 
the seller has an established business relationship with the party 
called, 16 CFR 310.4(b)(1)(iii)(B)(ii), just as in the express 
written agreement exception, 16 CFR 310.4(b)(1)(iii)(B)(i), and the 
Do Not Call safe harbor, 16 CFR 310.4(b)(3).
    \90\ From December 31, 1995 until March 25, 2003, the Commission 
brought 162 cases against telemarketers alleging violations of the 
TSR. Since March 31, 2003, the effective date of the amended TSR, 24 
cases alleging violations of the TSR's Do Not Call provisions, and 
another 37 cases alleging other TSR violations by telemarketers have 
been brought by the Commission or the Department of Justice at the 
Commission's request. E.g., FTC v. Universal Premium Serv., No. 06-
0849 (C.D. Cal. entered Feb. 21, 2006) (ex parte TRO entered to halt 
alleged TSR violations in ``WalMart Shopping Spree Scam'' involving 
continuing calls to consumers who had asked to be placed on the 
seller's company-specific Do Not Call list); United States v. 
DirecTV, Inc., No. SACV05-1211 (C.D. Cal. filed Dec. 12, 2005) ($5.3 
million civil penalty settlement for alleged TSR violations in 
making calls to consumers on the Registry, and for allegedly 
assisting a telemarketer in making prerecorded telemarketing calls 
that violated the call abandonment safe harbor).
    \91\ In United States v. Columbia House Co., No. 05C-4064 (N.D. 
Ill. filed July 14, 2005), the Commission obtained a $300,000 civil 
penalty settlement for alleged calls to tens of thousands of numbers 
on the Registry. Although the defendant claimed an ``established 
business relationship'' with the consumers it called, the Commission 
alleged, after investigation and analysis, that most were calls to 
consumers who last made a purchase from the defendant far outside 
the prior 18-month period during which the exemption would have 
applied, and that other calls were made to consumers who had 
previously instructed the company not to call them.
---------------------------------------------------------------------------

    This argument also ignores the fact that the cost of conducting 
live telemarketing campaigns with sales agents, as now permitted by the 
TSR, is itself a separate, significant check on the number of such 
campaigns. Thus, it is reasonable to expect that the substantially 
lower cost of prerecorded message telemarketing (compared to live 
telemarketing campaigns with sales agents) would significantly increase 
the use of such campaigns, at least by new entrants and small 
businesses that lack brand or name recognition. It is no less 
reasonable to predict that, as new digital technologies further reduce 
the cost of prerecorded telemarketing, the volume of prerecorded calls 
will increase. The record indicates that new digital technologies, 
including VoIP, are likely to reduce the cost of transmitting 
prerecorded telemarketing messages by telephone dramatically, if not to 
``essentially zero,'' in the foreseeable future.\92\ As the costs 
decrease, the economic incentives to increase the use of prerecorded 
telemarketing messages for advertising will multiply, increasing the 
flow of prerecorded messages consumers receive in their homes.
---------------------------------------------------------------------------

    \92\ E.g., Mari-Len de Guzman, Spam may be a future threat to 
VoIP, Computerworld, Sept. 7, 2005, at 2, available at http://www.computerworld.com/networkingtopics/networking/ story/
0,10801,104442,00.html (citing Spam over Internet Telephony (SPIT) 
as a growing concern for VoIP users because technology would allow 
artificial messages to be sent to 30,000 IP phones in a second and 
costs would be ``essentially zero'') (emphasis added); Associated 
Press, Voice Over Internet Use Soaring, Yahoo! News, Mar. 1, 2006, 
available at http://www. ladlass.com/ice/archives/010819.html 
(reporting that the number of users of Internet telephone services 
tripled in 2005, jumping from 1.3 million users of VoIP to 4.5 
million); Deborah Solomon, AARP's Antagonist, N.Y. Times Magazine, 
Mar. 13, 2005, at 23 (explaining how automated telephone messages 
are ``extraordinarily inexpensive'' and efficient, and citing, as an 
example, calling every household in North Dakota in just four hours 
for $10,000); VoIP to Open Door for Flood of Overseas Telemarketing, 
VoIPNEWS, May 17, 2005, http://web.archive.org/eb/20050316232140/www.voip-news.com/art/6q.html (citing Burton Group analyst Fred 
Cohen who predicts that ``the average enterprise or household could 
see as much as 150 calls a day'' from telemarketers using VoIP based 
in part on the price of Internet telephony which has cut costs by a 
factor of 100).
---------------------------------------------------------------------------

    Thus, there is no apparent rationale for according special 
treatment to prerecorded telemarketing calls to established customers. 
Nevertheless, there remains the industry contention that failure to 
adopt the proposed safe harbor would be contrary to the mandate of the 
Do Not Call Implementation Act (``DNCIA''),\93\ because FCC regulations 
permit certain prerecorded telemarketing calls, even though the DNCIA 
directed the FCC to maximize the consistency of its Do Not Call 
regulations with the FTC's TSR.\94\
---------------------------------------------------------------------------

    \93\ Public Law No. 108-10, 117 Stat. 557 (2003). A related 
argument asserted in some industry comments, that Congress gave 
exclusive jurisdiction to the FCC to regulate the use of automated 
dialing and announcing devices, has been rejected by each court that 
has considered the question. Mainstream Mktg. Servs. v. FTC, 358 
F.3d 1228, 1237, 1259 (10th Cir.), cert. denied, 543 U.S. 812 
(2004); Nat'l Fed'n of the Blind v. FTC, 420 F.3d 331, 337 (4th Cir. 
2005), cert. denied, 126 S.Ct. 2058 (2006); see also Broad. Team, 
Inc. v. FTC, 429 F.Supp.2d 1292, 1301-02 (M.D. Fla. 2006), appeal 
docketed, No. 06-13520-EE (11th Cir. June 23, 2006).
    \94\ Section 3 of the DNCIA directed that ``the Federal 
Communications Commission shall consult and coordinate with the 
Federal Trade Commission to maximize consistency with the rule 
promulgated by the Federal Trade Commission (16 CFR 310.4(b))'' in 
issuing the 2003 FCC Order to implement and enforce the Do Not Call 
Registry.
---------------------------------------------------------------------------

    When the FCC first promulgated its regulations under the TCPA in 
1992, that agency recognized that the TCPA did not exempt prerecorded 
calls to a consumer who has an established business relationship with a 
seller.\95\ In adopting regulations prohibiting virtually all 
prerecorded message telemarketing calls where the called party has not 
given ``prior express consent'' to receive such calls, the FCC 
nonetheless elected to create an ``established business relationship'' 
exemption from that prohibition.\96\ The FCC explained that, in its 
view, a ``solicitation can be deemed invited or permitted by a 
subscriber in light of the business relationship,'' \97\ that requiring 
``prior express consent'' would ``significantly impede communications 
between businesses and their customers,'' and thus, that a 
``solicitation to someone with whom a prior business relationship 
exists does not adversely affect subscriber privacy interests.'' \98\ 
In updating its regulations in 2003 to comply with the DNCIA, the FCC 
elected to retain the exemption, stating that ``[t]he record reveals 
that an established business relationship exemption is necessary to 
allow companies to contact their existing customers.'' \99\
---------------------------------------------------------------------------

    \95\ 1992 FCC Order, 7 FCC Rcd 8752, ] 34. In fact, the TCPA 
states that Congress has found that ``residential telephone 
subscribers consider automated or prerecorded telephone calls * * * 
to be a nuisance and an invasion of privacy,'' and that ``[b]anning 
such automated or prerecorded telephone calls to the home, except 
when the receiving party consents to receiving the call * * * is the 
only effective means of protecting telephone consumers from this 
nuisance and privacy invasion.'' TCPA, Pub. L. No. 102-243, 105 
Stat. 2394 (1991) at Sec. Sec.  2(10) and (12).
    \96\ 47 CFR 64.1200(a)(2)(iv). The only requirements are that 
the prerecorded message must clearly identify the business 
responsible for initiating the call and provide, ``during or after 
the message,'' a telephone number that consumers can call during 
normal business hours to make a company-specific Do Not Call 
request. 47 CFR 64.1200(b).
    \97\ 1992 FCC Order, 7 FCC Rcd 8752, ] 34. But cf., Telecom 
Decision, CRTC 2004-35, ] 111 (in which the Canadian Radio-
Television and Telecommunications Commission declined to create an 
established business relationship exemption for prerecorded 
telemarketing calls on the ground that ``when a consumer purchases a 
service or product from a company * * * there is no `implied 
consent' as a result of that purchase to receive future 
solicitations'').
    \98\ 1992 FCC Order, 7 FCC Rcd 8752, ] 34.
    \99\ 2003 FCC Order, 68 FR at 44165. In comments filed with the 
FCC during the rulemaking it conducted pursuant to the DNCIA, the 
FTC specifically urged the FCC to eliminate this discrepancy, as the 
FCC's ruling acknowledged. 2003 FCC Order, 18 FCC Rcd 14014, 14109, 
] 156 & n.556. However, the FCC declined to conform its prerecorded 
message rules to the FTC's TSR, with no explanation except that the 
``current exception is necessary to avoid interfering with ongoing 
business relationships.'' Id. at 95.
---------------------------------------------------------------------------

    As a result, the relevant provisions of the FCC rules and the TSR 
differ to the extent that the FCC rules permit

[[Page 58725]]

prerecorded calls where the seller has an established business 
relationship with the party called, and the TSR's call abandonment 
prohibition does not.\100\ While regulatory uniformity may be a 
laudable goal, it is not a sufficient basis for conforming the TSR to 
the FCC's regulations given the Congressional mandate that the 
Commission's Telemarketing Act regulations prohibit abusive 
telemarketing calls--and particularly given the lack of support in the 
record for exempting such calls from the Rule's prohibition.\101\ In 
sum, the record does not establish a rationale that would warrant 
special treatment for prerecorded message telemarketing when directed 
to consumers with whom the seller has an established business 
relationship.
---------------------------------------------------------------------------

    \100\ As noted, the TSR addresses only calls delivering a 
recorded message when a person answers, as opposed to an answering 
machine or voice mail system.
    \101\ The Commission's view might be otherwise if the two sets 
of regulations were so contradictory that they imposed inconsistent 
obligations on sellers and telemarketers, but that is not the case 
here, where compliance with the more restrictive requirements of the 
TSR does not violate the FCC regulations.
---------------------------------------------------------------------------

    An additional consideration articulated in the record supports the 
Commission in its conclusion not to adopt the new safe harbor VMBC 
sought: the potential of such a change to undermine the effectiveness 
of the National Do Not Call Registry. There can be no question that 
public support for the Do Not Call Registry is overwhelming and 
widespread. As of September 1, 2006, consumers had registered more than 
130 million telephone numbers, choosing to ``opt in'' to the protection 
provided by the Registry to keep unwanted telemarketing calls from 
invading and disturbing the privacy of their homes. The importance of 
the Registry to millions of consumers in preserving personal privacy in 
their homes cannot be understated or underestimated, as the consumer 
comments on the record in this proceeding make clear.
    Nevertheless, the Commission is mindful of the legitimate interest 
of businesses in communicating with their established customers. The 
communication interest in such calls is one reason the TSR expressly 
permits sellers and telemarketers to make live telemarketing calls to 
consumers whose telephone numbers are listed on the Registry, provided 
the seller has an established business relationship with each consumer 
who is called, or has obtained a written agreement to receive such 
calls that is signed by the consumer. The safe harbor VMBC requested 
would have altered the delicate balance the Commission has struck 
between legitimate, but competing, privacy and communication interests. 
If a safe harbor that would permit prerecorded telemarketing messages 
to established customers were created, it seems certain that consumers 
whose telephone numbers are listed on the Registry would receive some 
greater number of telemarketing messages than they do now. Although 
reasonable people may differ on the likely size and scope of that 
increase, there can be no dispute that it would come at some cost to 
the privacy of consumers in their homes. Based on the record to date, 
the concern is a very real one that consumers, to some degree, would 
return to the same burdensome situation that existed before the 
Registry, when they were repeatedly having to assert a company-specific 
Do Not Call remedy that the Commission deemed inadequate for commercial 
sales solicitation calls when it created the Registry.\102\
---------------------------------------------------------------------------

    \102\ TSR SBP, 68 FR at 4631 (``[T]he company-specific approach 
is seriously inadequate to protect consumers' privacy from an 
abusive pattern of calls placed by a seller or telemarketer.'').
---------------------------------------------------------------------------

    Only one issue remains to be considered. In drafting the proposed 
new safe harbor in response to the VMBC petition, the Commission sought 
to minimize the potential harms of prerecorded calls to established 
customers by requiring sellers and telemarketers to provide a prompt 
opportunity at the outset of the message for customers to assert a 
company-specific Do Not Call request. The Commission specifically 
endorsed an interactive mechanism that would permit the party called to 
connect to a sales representative during the message by pressing a 
button on the telephone keypad. The purpose of this provision was to 
put recipients of a prerecorded message on an equal footing in 
asserting their company-specific Do Not Call rights with customers who 
now receive live telemarketing calls from sales representatives under 
the TSR's established business relationship exemption.
    A majority of both industry and consumer comments on the record 
have resoundingly rejected this proposal. Most of the sellers and 
telemarketers who commented on the proposed interactive mechanism 
objected to it as costly, burdensome, and not widely available.\103\ 
Consumers and their advocates protested that the mechanism would be 
ineffective because touchtone keypads are not universal,\104\ there is 
no guarantee that a sales representative would be available 
promptly,\105\ and because, in their view, most prerecorded messages 
end up on answering machines or voice mail services, so that the 
interactive mechanism would not materially assist consumers in avoiding 
the costs and encumbrances of asserting their company-specific opt-out 
rights.\106\ No industry or consumer comment proffered a suitable 
alternative that would serve the same purpose as the interactive 
mechanism proposed.
---------------------------------------------------------------------------

    \103\ See note 45, supra, and accompanying text.
    \104\ See note 70, supra, and accompanying text.
    \105\ See note 71, supra, and accompanying text.
    \106\ See note 72, supra, and accompanying text.
---------------------------------------------------------------------------

    In the absence of any mechanism widely acceptable to industry and 
consumers that would provide recipients of prerecorded telemarketing 
messages the opportunity to assert their Do Not Call rights ``quickly, 
effectively and efficiently,'' the Commission does not believe that it 
can craft conditions for the proposed safe harbor that would preserve 
the balance between the consumer privacy interests that Congress 
intended to protect and the interest of sellers and telemarketers in 
communicating sales and promotional offers to their established 
customers via prerecorded messages.
    It is important to reiterate, however, that many (if not most) of 
the communications sellers wish to send via prerecorded messages, and 
that customers wish to receive, are informational communications not 
governed by the TSR, and thus are not prohibited by its call 
abandonment provision.\107\ It is equally noteworthy that because the 
proposed new safe harbor would have been predicated on an ``established 
business relationship,'' sellers would have had an opportunity during 
their business dealings to obtain the prior written agreement of their 
customers to receive telemarketing calls that deliver prerecorded 
messages.\108\
---------------------------------------------------------------------------

    \107\ Examples of informational calls--provided they are not 
combined with a sales pitch--include calls from an airline notifying 
consumers about a cancelled flight or a schedule change to a booked 
flight, or calls from a company notifying consumers about the recall 
of a purchased product. See notes 29 & 54, supra, and accompanying 
text.
    \108\ Sellers would have the same opportunity if the amendment 
discussed in Section II.E, infra, is adopted.
---------------------------------------------------------------------------

    For this and all the other reasons discussed above, the Commission 
has concluded that, on balance, the record in this proceeding fails to 
provide the support necessary to justify the proposed additional safe 
harbor. Accordingly, the Commission has determined not to adopt the 
proposed amendment, and to deny the VMBC petition. The Commission's 
Rules of Practice afford VMBC and other sellers and telemarketers the 
right to seek any advisory opinions they may need to

[[Page 58726]]

clarify the types of prerecorded informational messages that are not 
covered by the TSR, and thus are not prohibited.\109\
---------------------------------------------------------------------------

    \109\ 16 CFR Sec. Sec.  1.1-1.4.
---------------------------------------------------------------------------

    Additionally, the Commission has decided, based on the record in 
this proceeding, to propose an amendment of the TSR, pursuant to Sec.  
3(a)(3)(A) of the Telemarketing Act,\110\ to add an express prohibition 
against unsolicited prerecorded telemarketing calls, unless the seller 
has obtained a consumer's express prior written agreement to receive 
such calls. In so doing, the Commission also seeks to address the 
criticism, encountered by FTC staff in providing industry guidance, 
that the text of the TSR does not straightforwardly address prerecorded 
message telemarketing, and instead places the burden on industry 
members and their legal advisors to divine that the call abandonment 
provisions effectively bar this practice (except for the very 
restricted use of recorded messages in the call abandonment safe 
harbor). The Commission continues to think that the plain language of 
the call abandonment provision itself prohibits calls delivering 
prerecorded messages when answered by a consumer, a position it has 
repeatedly stated,\111\ and that has been accepted by at least one 
court.\112\ However, the Commission believes that it might be 
beneficial to make the prohibition more prominent by adding a provision 
that makes explicit the prohibition on telemarketing calls delivering 
prerecorded messages (while clarifying that the call abandonment safe 
harbor continues to allow the use of prerecorded messages in very 
limited circumstances).
---------------------------------------------------------------------------

    \110\ 15 U.S.C. 6102(a)(3)(A).
    \111\ E.g., 68 Fed. Reg. at 4644; 69 Fed. Reg. at 67,288; DNCIA 
Report at 33-34.
    \112\ Broad. Team, Inc. v. FTC, 429 F.Supp.2d 1292, 1301-02 
(M.D. Fla. 2006), appeal docketed, No. 06-13520-EE (11th Cir. June 
23, 2006).
---------------------------------------------------------------------------

    This record demonstrates that the overwhelming majority of 
consumers consider prerecorded telemarketing calls a particularly 
``coercive or abusive'' infringement on their right to privacy.\113\ 
Nevertheless, the Commission believes that all interested parties 
should be afforded an opportunity to comment on the proposed 
prohibition, and will base its final decision on the full record of 
comments it receives.
---------------------------------------------------------------------------

    \113\ 15 U.S.C. 6102(a)(3)(A); see TSR SBP, 68 FR at 4613.
---------------------------------------------------------------------------

E. Proposed Amendment

    Accordingly, the Commission has decided to propose the following 
addition to the ``Pattern of Calls'' prohibitions in Sec.  310.4(b)(1) 
of the TSR, and to invite public comment on the proposal until November 
6, 2006. Section 3.10(b)(1) will continue to provide that ``It is an 
abusive telemarketing act or practice and a violation of this rule for 
a telemarketer to engage in, or for a seller to cause a telemarketer to 
engage in, the following conduct:'' The new subsection would add:

    (v) Initiating any outbound telemarketing call that delivers a 
prerecorded message when answered by a person, unless the seller has 
obtained the express agreement, in writing, of such person to place 
prerecorded calls to that person. Such written agreement shall 
clearly evidence such person's authorization that calls made by or 
on behalf of a specific party may be placed to that person, and 
shall include the telephone number to which the calls may be placed 
and the signature of that person; provided, however, that 
prerecorded messages permitted for compliance with the call 
abandonment safe harbor in Sec.  310.4(b)(4)(iii) do not require 
such an agreement.\114\
---------------------------------------------------------------------------

    \114\ This proposed language is modeled on existing Sec.  
310.4(b)(1)(iii)(B)(i), which permits calls to numbers on the 
Registry with the consumer's prior written agreement, and is 
consistent with the call abandonment prohibition in Sec.  
310.4(b)(1)(iv). As such, the proposed amendment would permit 
digital and electronic signatures to the extent recognized by 
applicable Federal or State contract law. 16 CFR 
310.4(b)(1)(iii)(B)(i) n.6; see also TSR SBP, 68 FR at 4608-09.

    The purpose of the proposed amendment is to make it explicit that 
the TSR prevents sellers and telemarketers from delivering a 
prerecorded message when a person answers a telemarketing call, 
regardless of whether the call is made to a consumer whose number is 
listed on the Do Not Call Registry or to a consumer who has an 
established business relationship with the seller, without the 
consumer's express prior written agreement.\115\ The prohibition 
contains a proviso that would permit the use of prerecorded messages 
required by the call abandonment safe harbor when a telemarketing call 
is answered by a consumer who cannot be connected to a sales 
representative.
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    \115\ The proposal would not prohibit placement of prerecorded 
messages on answering machines of consumers who have listed their 
number on the Registry if they have an established business 
relationship with the seller, or on answering machines of consumers 
who have not listed their numbers on the Registry. The Commission 
notes, however, that any telemarketing campaign directed at leaving 
pre-recorded messages on answering machines could still run afoul of 
the abandoned call requirements of the TSR if calls that are 
answered by an actual consumer, rather than an answering machine, 
are not transferred to a sales agent as required by Sec.  
310.4(b)(1)(iv) But cf. 47 CFR 64.1200(a)(2) (FCC regulation stating 
that ``[n]o person or entity may initiate any telephone call to any 
residential line using an artificial or prerecorded voice to deliver 
a message.'') (emphasis added).
---------------------------------------------------------------------------

    The proposed amendment barring prerecorded telemarketing calls 
without a consumer's prior written agreement would make the present 
prohibition explicit, and would implement the Commission's broad 
authority under the Telemarketing Act to prohibit abusive telemarketing 
practices. The Telemarketing Act directs the FTC to ``include in [the 
TSR] a requirement that telemarketers may not undertake a pattern of 
unsolicited telephone calls which the reasonable consumer would 
consider coercive or abusive of such consumer's right to privacy.'' 
\116\
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    \116\ 15 U.S.C. 6102(a)(3)(A). This directive appears consistent 
with the previously expressed intent of Congress, as stated in the 
preamble to the TCPA, that ``banning * * * automated or prerecorded 
telephone calls to the home, except when the receiving party 
consents to receiving the call * * * is the only effective means of 
protecting telephone consumers from this nuisance and privacy 
invasion.'' TCPA, Pub. L. No. 102-243, 105 Stat. 2394 (1991) at 
Sec.  2(12).
---------------------------------------------------------------------------

    The consumer comments in this proceeding have made it clear that 
consumers overwhelmingly consider prerecorded telemarketing calls 
coercive and abusive of their right to privacy. They find prerecorded 
calls more coercive and abusive than live telemarketing calls because 
they are powerless to interact with a recording, either to assert their 
Do Not Call rights or to request additional information about the 
product or service offered. Thus, the present record supports a finding 
that a reasonable consumer would consider prerecorded telemarketing 
calls coercive or abusive of such consumer's right to privacy, unless 
the consumer had given his or her express prior written agreement to 
receive such calls.
    The proposed amendment would prohibit only the initiation of a call 
``that delivers a prerecorded message when answered by a person.'' The 
Commission specifically seeks comment on whether the limitation ``when 
answered by a person'' is necessary and appropriate or whether the 
prohibition on prerecorded messages should be extended to calls 
answered by a voicemail system or an answering machine. For example, 
the intrusion of a telemarketing call delivering a prerecorded message 
would seem less disruptive if it arrives when the party called is not 
home than if it arrives when he or she is at home in the midst of daily 
activities. Nevertheless, the Commission seeks comment on whether there 
are other harms when a telemarketing call delivering a prerecorded 
message is answered by an answering machine or voice mail

[[Page 58727]]

service, and whether such harms rise to the level of an intrusion that 
the ``reasonable consumer would consider coercive or abusive of such 
consumer's right to privacy.'' \117\
---------------------------------------------------------------------------

    \117\ See discussion of the Commission's authority to prohibit 
``abusive'' practices in the notice of proposed rulemaking for the 
amended TSR. 67 FR 4493 at 4510 (Jan. 30, 2002).
---------------------------------------------------------------------------

    In soliciting comments on the proposed amendment, the Commission 
again wishes to emphasize that the proposed prohibition will not 
prevent telemarketers from transmitting prerecorded informational 
messages to consumers that are not part of a ``plan, program or 
campaign which is conducted to induce the purchase of goods or services 
or a charitable contribution.'' With that caveat, the Commission will 
be interested in comments that address the costs and benefits to 
industry and to consumers of the proposed amendment, as more fully 
elaborated in Section VIII below.

F. Revocation of Non-Enforcement Policy Against Prerecorded 
Telemarketing Calls

    In view of the foregoing decision, the Commission will no longer 
continue the forbearance policy announced in the NPRM on enforcement 
actions for violation of the TSR's call abandonment prohibition in 
Sec.  310.4(b)(1)(iv), against sellers or telemarketers that, in 
conformity with the now-rejected call abandonment safe harbor, place 
telephone calls delivering prerecorded messages to consumers with whom 
the seller has an established business relationship. The Commission 
wishes to emphasize that although many prerecorded informational 
messages are not covered by the TSR, the TSR does cover (and prohibit) 
telemarketing calls that deliver prerecorded messages to 
consumers.\118\
---------------------------------------------------------------------------

    \118\ 16 CFR Sec.  310.2(cc).
---------------------------------------------------------------------------

    Nevertheless, in order to prevent any reasonably foreseeable 
hardship for sellers or telemarketers that have relied on the 
Commission's forbearance policy, the Commission will give such sellers 
and telemarketers until January 2, 2007 to revise their practices to 
conform to the TSR, and will take no enforcement action based on calls 
to consumers with whom the seller has an established business 
relationship that are placed before that date and that conform to the 
previously proposed, and now rejected, safe harbor.

III. The DMA Petition

    The DMA petition urges a change in the standard of the TSR's 
existing call abandonment safe harbor in Sec.  310.4(b)(4) for 
measuring the maximum permissible percentage of answered calls that may 
be abandoned when a telemarketer is not available. Rather than 
measuring the three (3) percent maximum ``per day per calling 
campaign,'' as prescribed in Sec.  310.4(b)(4)(i), to limit ``hang 
ups'' and ``dead air,'' DMA asks that the maximum be ``measured over a 
30-day period.''
    In adopting the ``per day, per campaign'' standard for calculating 
the maximum level of abandoned calls, the Commission stated:

    The `per day per campaign' unit of measurement is consistent 
with DMA's guidelines addressing its members use of predictive 
dialer equipment. Under this standard a telemarketer running two or 
more calling campaigns simultaneously cannot offset a six percent 
abandonment rate on behalf of one seller with a zero percent 
abandonment rate for another seller in order to satisfy the Rule's 
safe harbor provision. Each calling campaign must record a maximum 
abandonment rate of three percent per day to satisfy the safe 
harbor.\119\
---------------------------------------------------------------------------

    \119\ TSR SBP, 68 FR at 4643 (footnotes omitted).

    DMA's petition conceded that former DMA Guidelines for Ethical 
Business Practices set a ``per day per campaign'' standard for the 
maximum percentage of calls that DMA members could abandon, but 
emphasized that the Guidelines set a five percent abandonment rate, 
rather than the three percent rate incorporated in the TSR's safe 
harbor. However, as the NPRM noted, the petition provided no factual 
support for DMA's apparent argument that a ``per day per campaign'' 
standard would be feasible at a five percent call abandonment rate, but 
not at three percent.

A. DMA's Rationale for Revising The Safe Harbor

    The DMA petition advanced three reasons for modifying the three 
percent standard: (1) The standard is ``virtually impossible'' for 
vendors who run multiple campaigns each day to meet; (2) the California 
Public Utilities Commission--whose three percent call abandonment rate 
the Commission cited in adopting the standard--measures abandoned calls 
on a ``per 30-day'' basis according to the DMA; and (3) the FTC should 
defer to the FCC's determination that the call abandonment rate should 
be measured over a 30-day period, because the issue ``lies closer to 
the core expertise of the FCC than of the FTC.'' \120\
---------------------------------------------------------------------------

    \120\ DMA petition at 3, available at http://www.ftc.gov/os/2004/10/ 041019dmapetition.pdf.
---------------------------------------------------------------------------

    As the NPRM noted, however, DMA's first argument, the near 
impossibility for vendors to meet the ``per day per campaign'' standard 
when running multiple campaigns each day, suggested that telemarketers 
engage in precisely the practices that the ``per day per campaign'' 
standard was designed to prevent. DMA argued that predictive dialer 
systems manage call abandonment rates ``as an average of all campaigns 
per day, so it is inevitable that certain logins would end the day at 
say, 3.1% and other at 2.9%, yet the overall average would still be 3% 
or less.'' \121\ The DMA petition did not explain why telemarketing 
systems cannot dynamically maintain a steady level of no more than 
three percent overall, or could not be modified to keep the abandonment 
rate below three percent separately for each campaign.
---------------------------------------------------------------------------

    \121\ Id. at 2.
---------------------------------------------------------------------------

    The NPRM rejected the last two arguments in DMA's petition as 
insufficient to warrant a change in the call abandonment standard. The 
Commission noted that ``compliance with the FTC's more precise standard 
would constitute acceptable compliance'' with both the 30-day standard 
adopted by California and the FCC, and that court decisions 
``controvert DMA's argument that the FTC's expertise or legal authority 
regarding the acceptable level of call abandonment is inferior to that 
of the FCC.'' \122\
---------------------------------------------------------------------------

    \122\ 69 FR at 67291 & n.19.
---------------------------------------------------------------------------

    The NPRM further explained that, in its petition, DMA had provided 
no information that would tend to counter the foreseeable shortcomings 
of a 30-day standard that the Commission set forth at length in its 
DNCIA Report.\123\ The potential for a 30-day standard to ``enable 
telemarketers to target call abandonments at certain less valued groups 
of consumers,'' and thus ``offset a high abandonment rate in low income 
zip codes and make up the difference by abandoning no calls in affluent 
ones'' led the Commission to adopt the ``per day per campaign'' 
standard to reduce ``the potential for concentrating abuse by ensuring 
an even distribution of abandoned calls to all segments of the 
public.'' \124\
---------------------------------------------------------------------------

    \123\ DNCIA Report at 31.
    \124\ 69 FR at 67291.
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B. Request for Public Comment and Response

    The NPRM sought public comment on the petition, noting that ``the 
Commission is receptive to any factual information that would establish 
that such a change is warranted,'' but observing that DMA had ``not 
provided an adequate factual basis that would compel'' a modification. 
The

[[Page 58728]]

Commission emphasized that it was particularly interested in three 
types of information: (1) Any elaboration on the problems telemarketers 
who are running multiple campaigns at the same time face in attempting 
to comply with the current requirement; (2) any information 
demonstrating that telemarketers who make a relatively small number of 
calls per day may be differentially disadvantaged by the current 
requirements; and (3) information and data demonstrating that it is 
unlikely that, if additional flexibility were provided, telemarketers 
would intentionally set the abandonment rates above 3 percent for some 
campaigns or calls directed to certain consumers, while setting lower 
rates of call abandonment for other campaigns or calls in order to stay 
within the three percent maximum call abandonment rate.
 1. Consumer Comments
    Comments from some 230 consumers and three consumer advocacy groups 
addressed issues raised by the DMA petition. All but a smattering of 
these comments opposed changing the call abandonment standard to a 30-
day average across all telemarketing campaigns.\125\ Many argued that 
the DMA did not offer a compelling reason for the change, with at least 
two noting that the difficulties DMA cited for some telemarketers in 
meeting the current standard could easily be eliminated by modifying or 
upgrading their software.\126\ Consumer groups expressed continued 
concern that a 30-day standard would enable telemarketers to target 
high call abandonment rates at less valued groups of consumers,\127\ 
offsetting the high rates with lower abandonment rates for preferred 
groups, while a number of consumers were more concerned that the number 
of abandoned calls would increase on some days or in some 
campaigns.\128\
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    \125\ Three of ten consumers who supported a change suggested 
limiting it to 30-days ``per calling campaign,'' with two of them 
proposing reducing the period further to ``the lesser of'' 30 days 
or the duration of a specific campaign. McCorvey, No. OL-104248 
(``As an engineer, I recognize the possibility that various causes 
outside the control of the marketing organization may make it 
difficult for them to ensure compliance when measured across a very 
narrow time span. This expansion of the compliance window would not 
(in my opinion) create any real opportunity for abuse ONLY if it is 
tied to each campaign. Therefore, wording of the form `measured over 
a 30-day period per campaign' would be both fair, practical and 
provide continued protection for consumers.''); Kaufmana, No. OL-
102724 (``I would recommend the changed phrase to be `measured over 
a 30-day period or the calling campaign, whichever is less.' ''); 
Zajonc, No. OL-102790 (``I'm not against the 30-day provision for 3% 
abandonment, though I would probably shrink it, or have it be the 
lesser of 30 days or a specific campaign.''). See also Tukey, D, 
PhD, No. OL-104725 (``I understand the nature of statistical 
fluctuation, so it seems a longer time period is not out of 
order.''); Yamane, No. OL-101436 (``[A] 30-day period seems less of 
a problem, although it does seem to make abuses of the system more 
likely by providing a larger window over which abuses can be 
measured.''); cf. Holm, M., No. OL-100438 (``If this is merely a 
technical change * * * then I am not opposed.''); Frye, T., No. OL-
106806; VanDusen, No. OL-113869; Thornton, No. OL-111679; Cummings, 
No. OL-113849.
    \126\ E.g., Argyropoulos, No. OL-102968 at 3; Protigal, No. 
000010 at 11.
    \127\ NCL at 5-6; PRC at 10; EPIC at 14.
    \128\ E.g., Bullard, No. OL-101198; Kislo, No. OL-102924; 
Ripple, No. OL-101379; Giuliani, No. OL-108532.
---------------------------------------------------------------------------

 2. Industry Comments
    Eleven comments from telemarketers, their trade associations and 
other business trade associations unanimously supported revision of the 
``per day per campaign'' standard,\129\ with several echoing the 
argument that the FTC should defer to the FCC standard,\130\ and some 
contending that there is no evidence that telemarketers would abuse a 
30-day standard by discriminating against disfavored groups of 
consumers.\131\ DMA and the American Teleservices Association (``ATA'') 
argued in their joint comment that compliance with the current standard 
is difficult because the pace of outbound calls placed by predictive 
dialers is based on the average number of calls answered by consumers, 
and unexpected fluctuations in the number answered, or the time sales 
agents spend speaking with consumers, make it difficult to predict the 
call abandonment rate and ensure compliance, particularly in smaller 
campaigns, and in campaigns focusing on evening calls at the end of the 
day.\132 \
---------------------------------------------------------------------------

    \129\ E.g., DMA at 2; American Teleservices Ass'n., No. 000058 
at 3; VMBC at 15; Heritage at 3; U.S. Chamber at 7; Infocision at 6 
(advocating a 30-day standard for each separate campaign, while all 
other industry comments supported DMA's proposal for an overall 30-
day standard for all of a telemarketers's concurrent campaigns).
    \130\ DMA at 8; VMBC at 15; Infocision at 6; U.S. Chamber at 7.
    \131\ Infocision at 5; DMA at 8; see U.S. Chamber at 8.
    \132\ DMA at 3-4; U.S. Chamber at 8.
---------------------------------------------------------------------------

    DMA and ATA explained that predictive dialers base the rate at 
which they place calls on a projection of the average number of 
consumers who will answer and the number of sales agents available. The 
margin of error for these projections, in turn, is a function of the 
number of consumers to be called. The larger the number of consumers to 
be called, the smaller the deviation is likely to be from the projected 
call abandonment rate. Conversely, the smaller the number of consumers 
to be called, the greater the deviation can be from the desired 
abandonment rate.\133\ Since the projected average answering rate is 
determined by predictive dialer sampling as calls are made, larger 
periods of calling time limit the impact of unexpected fluctuations in 
the answering rate, while shorter periods of time exaggerate their 
effect. Any unexpected spike in answered calls could, according to DMA 
and ATA, ``make it impossible to recover within the same day based upon 
such a small time frame of calling.'' \134\
---------------------------------------------------------------------------

    \133\ This follows, according to DMA and ATA, from ``a bedrock 
principle of statistical analysis that the smaller the size of the 
sample, the larger the standard deviation and sampling errors.'' DMA 
at 3; see also, U.S. Chamber at 8 (`` In general, the smaller the 
list or the smaller the campaign (or the fewer days over which the 
call abandonment rate is measured), the more likely that the 
abandonment rate may deviate from the targeted rate of three 
percent.'').
    \134\ DMA at 4.
---------------------------------------------------------------------------

    For these reasons, DMA and ATA argued that the present ``per day 
per campaign'' standard inhibits the use of smaller, ``segmented'' 
lists of fewer than 15,000 names that target consumers most likely to 
be interested in an offer.\135\ This disadvantages consumers, the 
comment contended, by making it more likely they will receive calls 
about sales offers in which they have no interest, and also 
particularly disadvantages small business sellers with small 
clienteles, as well as the smaller telemarketing companies that serve 
them.\136\ DMA also asserted that the Commission significantly 
increased the compliance burden for small business users of segmented 
lists, given the difficulties of predicting abandonment rates with 
shorter calling lists, by setting the safe harbor call abandonment rate 
at three percent, rather than the five percent figure in DMA's former 
guidelines, with the result that predictive dialer economic 
``efficiencies disappear almost entirely.'' \137\
---------------------------------------------------------------------------

    \135\ DMA and ATA not that ``some'' predictive dialers require 
callings lists of ``approximately 15,000 names'' and ``at least 7 or 
8 telemarketing agents for any one program'' to meet the current 
``per day per campaign'' standard. DMA at 5.
    \136\ DMA at 4; see also, U.S. Chamber at 8 (``In particular, 
the current test for call abandonment in the TSR inflicts a 
disproportionate harm on smaller businesses. Smaller businesses have 
smaller calling lists; one consequence of this is that a small 
business may inadvertently exceed the three percent figure 
comparatively quickly. To stay within the limits, the small business 
must recalibrate its dialing equipment, hire more sales 
representatives (which could cost overtime rates under the per day 
test), or risk violating the law.''); VMBC at 15-16; Visa at 3.
    \137\ DMA at 6.
---------------------------------------------------------------------------

    DMA and ATA further argued that ``[t]he actual number of abandoned 
calls would not increase if the measurement

[[Page 58729]]

occurs on a 30-day basis rather than per day per campaign.'' \138\ In 
fact, they noted, if a telemarketer's call abandonment rate were to 
exceed three percent on any given day under the current standard (e.g., 
due to an unexpected spike in answered calls at the end of the day), 
there may be more abandoned calls than if the telemarketer had 30 days 
to correct for the unexpected increase in call abandonments on that 
day. For the same reason, DMA and ATA contended that the ``per day per 
campaign'' standard is more likely to force sellers and telemarketers 
to discriminate between different groups of consumers than a 30-day 
standard. This is because, if the call abandonment rate unexpectedly 
exceeds three percent on any given day, the telemarketer could attempt 
to compensate by calling phone numbers less likely to be answered by a 
consumer, but also less likely to belong to a consumer interested in 
the product or service being offered. With a 30-day standard, DMA and 
ATA argued, there would be no need nor incentive for telemarketers to 
discriminate in the distribution of abandoned calls.\139\
---------------------------------------------------------------------------

    \138\ In theory, if a list of 240,000 telephone numbers were 
called at the rate of 24,000 a day for 10 days, the three percent 
maximum would be 720 abandoned calls a day (.03 x 24,000 = 720), or 
7200 for 10 days, which is three percent of 240,000 (.03 x 240,000 = 
7200).
    \139\ DMA and ATA agreed that `` there should not be a group of 
`less valued' consumers that receive a larger rate of abandoned 
calls,'' and insisted that ``our members do not engage in such 
tactics,'' but appeared tacitly to acknowledge that there is nothing 
in the 30-day standard they advocate that would necessarily prevent 
such an offensive practice. DMA at 7. Another industry comment 
objected that there has never been any evidence that telemarketers 
target less favored consumers with higher call abandonment rates. 
Infocision at 5.
---------------------------------------------------------------------------

    Finally, DMA and ATA asserted that the TSR's protection of 
consumers would not otherwise be diminished if the 30-day standard were 
adopted because of other protections provided to consumers when the TSR 
was amended in 2003. They pointed out that consumers can: (1) Place 
their numbers on the national Do Not Call Registry; (2) assert company-
specific Do Not Call requests; and (3) use Caller ID to find out the 
names of telemarketers that have abandoned calls to their telephone 
numbers.\140\
---------------------------------------------------------------------------

    \140\ Another comment noted that the Caller ID requirement 
should allay any concerns of elderly consumers that abandoned calls 
were precursors of home burglaries. Heritage at 3 n.2.
---------------------------------------------------------------------------

    Two of the industry comments appeared to acknowledge that it is 
technically possible to configure predictive dialers to comply with the 
current standard.\141\ Both argued, however, that compliance with the 
current standard is costly and burdensome. One reported that ``[o]n a 
daily basis, campaigns must be shut down and managed in a manual mode 
to ensure compliance with this overly burdensome requirement,'' and as 
a result, ``[e]fficiency is destroyed and the resulting increase in 
costs has made many programs no longer cost-effective.'' \142\ The 
other asserted that ``having the freedom to run a higher abandonment 
rate at times when customers are less likely to be home (such as 8 a.m. 
to 5 p.m.) and lowering it when people are more likely to be home (such 
as 6-9 p.m.) would make an outbound campaign more efficient,'' noting 
that ``[w]hile this approach could theoretically be used under the 
three percent per campaign per day system, it would be far more 
difficult to manage without significantly risking being over the three 
percent threshold.'' \143\
---------------------------------------------------------------------------

    \141\ Heritage at 3; Infocision at 5-6 (``Yes, the technology 
allows controls to be placed on the algorithms determining the speed 
at which the system dials. It is possible to maintain a steady level 
but it is not an exact science.''). Both stated, however, that while 
they can comply with the present standard, a 30-day standard would 
permit greater efficiency and flexibility in their telemarketing 
campaigns.
    \142\ Infocision at 5.
    \143\ Heritage at 3.
---------------------------------------------------------------------------

C. Analysis of the Comments, Discussion and Conclusion

    As discussed above, the Commission adopted the call abandonment 
provision of the TSR to prevent the abusive practice of ``dead air'' 
calls and ``hang-ups.'' The safe harbor exception to the call 
abandonment prohibition was designed to minimize this abuse, while 
allowing the telemarketing industry to benefit from the economies 
provided by predictive dialer technologies. In attempting to strike an 
appropriate balance between consumer and industry interests, the 
Commission adapted DMA's ``per day per campaign'' guideline when it 
established the three percent call abandonment ceiling as an element of 
the Sec.  310.4(b)(4) safe harbor.
    It appears from the record, however, that the impact of the three 
percent ``per day per campaign'' call abandonment limit may be 
disturbing the balance the Commission sought to achieve by frustrating 
the full realization of the potential economies provided by predictive 
dialers, particularly with respect to the use of segmented lists. The 
comments suggest that this unintended consequence may be having an 
adverse effect on small business sellers and telemarketers in 
particular, by increasing the costs of their telemarketing, and in some 
instances making telemarketing campaigns using small, segmented lists 
prohibitively expensive.
    The record also shows that many consumers regard their home as 
their castle, and vehemently object to receiving what they regard as 
uninvited telemarketing calls. Their comments give eloquent testimony 
to the fact that consumers despise ``dead air'' and ``hang ups'' even 
more than telemarketing, and that many believe they should not receive 
any telemarketing calls at all when they have chosen to place their 
home telephone number on the Do Not Call Registry, regardless of 
whether they have an established business relationship with the seller 
who calls. While this popular view of the Registry may be widespread, 
as the record reflects, it overlooks the fact that in establishing the 
Registry, the Commission expressly authorized live telemarketing calls 
to consumers who have an established business relationship with the 
seller on whose behalf the calls are made, provided they have not 
asserted a company-specific Do Not Call request.\144\
---------------------------------------------------------------------------

    \144\ TSR SBP, 68 FR at 4633-34. The Commission established a 
limited exemption balancing the privacy needs of consumers and the 
need of businesses to contact their current customers, noting: 
Industry comments were nearly unanimous in emphasizing that it is 
essential that sellers be able to call their existing customers. 
Although the initial comments from consumer groups opposed an 
exemption for `established business relationships,' * * * their 
supplemental comments expressed the view that such an exemption 
would be acceptable, as long as it was narrowly-tailored and limited 
to current, ongoing relationships. * * * 60 percent of consumers * * 
* stated that they opposed an exemption for `established business 
relationship,' [although] 40 percent favored such an exemption.
---------------------------------------------------------------------------

    The comments also illustrate consumer concern that any loosening of 
the current standard would enable telemarketers to target disfavored 
groups of consumers with a disproportionate share of abandoned calls, 
even though the total number of abandoned calls for any calling list 
would not exceed three percent if the standard were modified.\145\ For 
its part, the industry apparently cannot and does not deny that this 
offensive practice may be more likely to occur if a change were made to 
a 30-day average for all campaigns. It is left to argue the good faith 
of trade association members, and the absence of empirical evidence 
that such an abusive practice has occurred in the past, notwithstanding 
the existence of economic incentives that seem likely to promote the 
abuse. At the same time, the Commission does not take the

[[Page 58730]]

industry argument lightly that the ``per day per campaign'' standard 
may be more restrictive than intended, given the limitations of 
predictive dialers in adjusting to unexpected spikes in average call 
abandonment rates. The record shows that particular problems arise in 
connection with the use of smaller, segmented lists that are the most 
economical for small businesses and the most useful in targeting only 
those consumers most likely to be interested in a particular sales 
offer. As a result, the Commission is inclined to believe that an 
amendment of the present standard may be warranted.
---------------------------------------------------------------------------

    \145\ The total number of abandoned calls might increase 
slightly, however, because telemarketers may have had to set their 
predictive dialers below three percent to meet the present ``per day 
per calling campaign'' standard.
---------------------------------------------------------------------------

D. Proposed Amendment

    Accordingly, the Commission has decided to propose the following 
substitute for the present ``per day per campaign'' standard in Sec.  
310.4(b)(4)(i), and to invite public comment on the proposal until 
November 6, 2006:

    (i) The seller or telemarketer employs technology that ensures 
abandonment of no more than three (3) percent of all calls answered 
by a person, measured over the duration of a single calling 
campaign, if less than 30 days, or separately over each successive 
30-day period or portion thereof that the campaign continues.

    The proposed amendment is limited, in accordance with the 
suggestions of the supportive consumer comments and an industry 
comment, by requiring that the three percent ceiling be met separately 
by each of a seller's or telemarketer's calling campaigns. The 
Commission believes such a limitation is important to prevent sellers 
and telemarketers from running multiple campaigns with what could be 
significantly different call abandonment rates that together average 
only three percent over a 30-day period. Allowing the flexibility that 
DMA proposed would more likely create incentives for a seller to ensure 
that its most favored customers experience lower call abandonment 
rates, thus preserving their goodwill, at the cost of less favored 
customers. Thus, the Commission's proposal is designed to reduce the 
potential for discriminatory treatment of disfavored consumer groups by 
subjecting them to higher than average call abandonment rates.
    Because the proposal would measure call abandonment on a ``per 
campaign'' basis, it must account for the possibility that a campaign 
may continue for less than 30 days, or for more than 30 days. The 
proposal would accomplish this, and provide needed certainty to sellers 
and telemarketers, by specifying that the call abandonment rate will be 
measured over the duration of the campaign. If the campaign continues 
for less than 30 days, the call abandonment rate must be at or below 
three percent for the duration of the campaign; if it continues for 
more than 30 days, the three percent ceiling must be measured 
separately for each successive 30-day period during which the campaign 
is conducted. If the campaign continues for more than 30 days, but less 
than an additional 30-day period, the three percent maximum would be 
measured both for the initial 30-day period, and separately for the 
remaining period of less than 30 days.
    In inviting public comment on this proposal from interested 
parties, the Commission wishes to emphasize that it has not yet reached 
any final conclusion on whether or not to amend the present ``per day 
per campaign'' standard, although it is inclined to do so on this 
record. That ultimate decision will be informed by the public comment 
received on the proposed amendment.

IV. Invitation To Comment

    All persons are hereby given notice of the opportunity to submit 
written data, views, facts, and arguments addressing the amendments 
proposed in this notice. Written comments must be submitted on or 
before November 6, 2006. Comments should refer to: ``TSR Prerecorded 
Call Prohibition and Call Abandonment Standard Modification, Project 
No. R411001'' to facilitate the organization of comments. A comment 
filed in paper form should include this reference both in the text 
and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room H-159 (Annex K), 600 Pennsylvania Avenue, NW., Washington, DC 
20580. If the comment contains any material for which confidential 
treatment is requested, it must be filed in paper (rather than 
electronic) form, and the first page of the document must be clearly 
labeled ``Confidential.'' \146\ The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, 
if possible, because U.S. postal mail in the Washington area and at 
the Commission is subject to delay due to heightened security 
precautions.
---------------------------------------------------------------------------

    \146\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record.

    To ensure that the Commission considers an electronic comment, you 
must file it on the Web-based form at the http://secure.commentworks.com/ftc-tsr Web site. You may also visit http://www.regulations.gov to read this proposed Rule, and may file an 
electronic comment through that Web site. The Commission will consider 
all comments that regulations.gov forwards to it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. The Commission will consider all timely and responsive 
public comments that it receives, whether filed in paper or electronic 
form. Comments received will be available to the public on the FTC Web 
site, to the extent practicable, at  http://www.ftc.gov. As a matter of 
discretion, the FTC makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC Web site. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, which is available at http://www.ftc.gov/ftc/
privacy.htm.

V. Communications by Outside Parties to Commissioners or Their Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding from any 
outside party to any Commissioner or Commissioner's advisor will be 
placed on the public record. See 16 CFR 1.26(b)(5).

VI. Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (``PRA''), 44 U.S.C. 
Sec. Sec.  3501-3502, the Office of Management and Budget (``OMB'') 
approved the information collection requirements in the TSR and 
assigned OMB Control Number 3084-0097. The proposed rule amendments, as 
discussed above, would explicitly prohibit all prerecorded 
telemarketing calls answered by a person without a written agreement 
signed by the consumer to receive such calls, and alter the standard 
for measuring the three percent call abandonment rate permitted by the 
TSR's call abandonment safe harbor.
    The proposed amendment explicitly limiting the use of prerecorded 
telemarketing calls will not change the existing paperwork burden on 
sellers or telemarketers. It simply makes the TSR's existing 
prohibition explicit rather than imposing a new prohibition. Thus, the 
proposed amendment will, if anything, reduce the paperwork burden and 
the amount of time required for telemarketers to comply with the TSR. 
In addition, an FCC regulation prohibiting prerecorded calls has been 
in effect since 1992, following the enactment of the TCPA.\147\ The FCC 
regulation prohibits prerecorded calls delivering unsolicited 
advertisements or

[[Page 58731]]

telephone solicitations to residential telephones unless, inter alia, 
the caller has an ``established business relationship'' with the person 
called, or has obtained that person's ``prior express consent'' to 
receive such calls.\148\ The proposed TSR amendment therefore will not 
change the paperwork burden created by the pre-existing FCC regulation.
---------------------------------------------------------------------------

    \147\ 47 CFR 64.1200(a)(2).
    \148\ Thus, under the FCC regulation, it is unlawful for a 
seller or telemarketer to place a prerecorded call to a residential 
telephone unless it can show compliance with one of the two 
exemptions. The ``prior express consent'' requirement, in 
particular, imposes essentially the same recordkeeping burden as the 
proposed amendment. Moreover, in adopting regulations to implement 
the Do Not Call Registry pursuant to the DNCIA, the FCC determined 
that sellers must obtain a written agreement signed by a consumer 
whose number is listed on the Registry to satisfy the ``prior 
express consent'' requirement. 2003 FCC Order, 18 FCC Rcd. at 14043-
44, ] 44. Although the FCC subsequently concluded that an oral 
consent would suffice to authorize calls to consumers whose numbers 
were not listed on the Registry, Rules and Regulations Implementing 
the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, 
Second Order on Reconsideration, 20 FCC Rcd. 3788 (2005), sellers or 
telemarketers still must create records evidencing any such oral 
consent because the caller bears the burden of demonstrating that 
prerecorded calls are lawful. See In re Septic Safety, Inc., 20 FCC 
Rcd. 2179 (2005); In re Warrior Custom Golf, Inc., 19 FCC Rcd. 23648 
(2004).
---------------------------------------------------------------------------

    Nor will the proposed change to the standard for measuring the 
three percent call abandonment rate substantially affect the existing 
paperwork burden. The present ``per day per campaign'' standard 
requires sellers and telemarketers to establish recordkeeping systems 
evidencing their compliance, and the proposed amendment may lessen this 
burden slightly because it relaxes the current requirement.
    Thus, the proposed amendments would not impose any new or affect 
any existing reporting, recordkeeping, or third-party disclosure 
requirements that are subject to review by OMB under the PRA.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. Sec. Sec.  601-
12, requires an agency to provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with a proposed rule and a Final Regulatory 
Flexibility Analysis (``FRFA'') with the final rule, if any, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. See 5 U.S.C. 
Sec. Sec.  603-05.
    The Commission has determined that it is appropriate to publish an 
IRFA in order to inquire into the impact of the proposed rule amendment 
on small entities. Therefore, the Commission has prepared the following 
analysis.

A. Reasons for the Proposed Rule Amendment

    The proposed explicit prohibition of all prerecorded telemarketing 
calls answered by a person without the consumer's express prior written 
agreement, discussed in Section II.E above, implements the 
Telemarketing Act requirement that the Commission prohibit a pattern of 
unsolicited telephone calls that ``the reasonable consumer would 
consider coercive or abusive of such consumer's right to privacy,'' and 
effectuates the apparent intent of Congress in the TCPA to prohibit 
prerecorded telemarketing calls.
    The proposed modification of the TSR's call abandonment provision, 
discussed in Section III.D above, would modify the existing safe harbor 
to allow sellers and telemarketers to measure the three percent maximum 
call abandonment rate prescribed in Sec.  310.4(b)(4)(i) for a single 
calling campaign over a 30-day period. The Commission proposes to 
revise the standard to permit measurement of the three percent maximum 
``over the duration of a single calling campaign, if less than 30 days, 
or separately over each successive 30-day period or portion thereof 
that the campaign continues.''

B. Statement of Objectives and Legal Basis

    The objectives of the proposed rule amendments are discussed above. 
The legal basis for the proposed rule amendment is the Telemarketing 
and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. Sec. Sec.  6101-
6108.

C. Description of and, Where Feasible, an Estimate of the Number of 
Small Entities to Which the Proposed Rule Will Apply

    Each of the proposed rule amendments will affect sellers and 
telemarketers that make interstate telephone calls to consumers 
(outbound calls) as part of a plan, program or campaign which is 
conducted to induce the purchase of goods or services or a charitable 
contribution. For the majority of entities subject to the proposed 
rule, a small business is defined by the Small Business Administration 
as one whose average annual receipts do not exceed $6 million or that 
has fewer than 500 employees.\149\
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    \149\ These numbers represent the size standards for most retail 
and service industries ($6 million total receipts) and manufacturing 
industries (500 employees). A list of the SBA's size standards for 
all industries can be found at http://www.sba.gov/size/summary-whatis.html.
---------------------------------------------------------------------------

    The Commission has not previously requested comment on an explicit 
prohibition of all prerecorded telemarketing calls answered by a person 
without the consumer's express prior written agreement, but believes 
that the impact of the proposal on small business sellers and 
telemarketers would be de minimis because such calls are currently 
prohibited by the TSR's call abandonment provision. Based on the 
absence of available data in this and related proceedings, the 
Commission believes that a precise estimate of the number of small 
entities that would be subject to the proposal is not currently 
feasible, and specifically requests information or comment on this 
issue.
    In the proceedings to amend the TSR in 2002, the Commission sought 
public comment and information on the number of small business sellers 
and telemarketers that would be impacted by amendment of the standard 
for measuring the three percent call abandonment rate. In its request, 
the Commission noted the lack of publicly available data regarding the 
number of small entities that might be impacted by the proposed 
Rule.\150\ The Commission received no information in response to its 
requests.\151\
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    \150\ See TSR SBP, 68 FR at 4667 (noting that Census data on 
small entities conducting telemarketing does not distinguish between 
those entities that conduct exempt calling, such as survey calling, 
those that receive inbound calls, and those that conduct outbound 
calling campaigns. Moreover, sellers who act as their own 
telemarketers are not accounted for in the Census data.).
    \151\ Id.; see also 68 FR 45134, 45143 (July 31, 2003) (noting 
that comment was requested, but not received, regarding the number 
of small entities subject to the National Do Not Call Registry 
provisions of the amended TSR).
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    Likewise, neither the petition to amend the call abandonment safe 
harbor to expand the period over which the three percent call 
abandonment ceiling for live telemarketing calls is calculated, nor the 
industry comments on that issue, provide any data regarding the number 
of small entities that may be affected by the Commission's ultimate 
determination.\152\ Based on the absence of available data in this and 
related proceedings, the Commission believes that a precise estimate of 
the number of small entities that fall under the proposed rule is not 
currently feasible, and specifically requests information or comment on 
this issue.
---------------------------------------------------------------------------

    \152\ Although industry comments have argued that the proposed 
revision would remove an obstacle to small business compliance with 
the call abandonment safe harbor, as discussed in Section III, 
supra, none of the comments has addressed the number of small 
businesses that might benefit from revision of the current standard.

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[[Page 58732]]

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Rule

    The proposed rule amendment explicitly prohibiting prerecorded 
telemarketing calls answered by a person unless the consumer has agreed 
in writing to accept such calls will affect the TSR's recordkeeping 
requirements insofar as it would compel regulated entities to keep 
records of such agreements under the general recordkeeping requirements 
of the existing rule.\153\ It appears, however, that there should be no 
change in this burden since regulated entities, regardless of size, 
already should be maintaining records of such agreements in the 
ordinary course of business in order to demonstrate compliance with 
existing FTC and FCC restrictions on prerecorded calls, as explained in 
the prior Paperwork Reduction Act discussion. Likewise, the prerecorded 
calls amendment would not impose or affect any new or existing 
reporting, recordkeeping or third-party disclosure requirements within 
the meaning of the Paperwork Reduction Act.
---------------------------------------------------------------------------

    \153\ See 16 CFR 310.5(a)(5).
---------------------------------------------------------------------------

    In addition, the Commission does not believe that the proposal to 
expand the period over which the three percent call abandonment ceiling 
for live telemarketing calls is calculated will create any new burden 
on sellers or telemarketers, because the existing ``per day per 
campaign'' standard of the TSR has already required them to establish 
recordkeeping systems to demonstrate their compliance. The Commission 
also does not believe that this modification of the Rule will increase 
or otherwise modify any existing compliance costs, and may in fact 
reduce them for small entities that are able to take advantage of the 
revised safe harbor requirement.

E. Identification of Other Duplicative, Overlapping, or Conflicting 
Federal Rules

    The FTC is mindful that the proposed TSR amendment explicitly 
prohibiting all prerecorded telemarketing calls answered by a person 
without the consumer's express prior written agreement differs from the 
FCC's regulations and some State laws, which permit sellers to place 
such calls to consumers who have given their prior express consent or 
to consumers with whom the seller has an ``established business 
relationship.'' \154\ However, the Commission does not believe that an 
explicit prohibition would conflict with the FCC regulations or similar 
State laws, because compliance with the TSR's present prohibition does 
not violate those more permissive standards.
---------------------------------------------------------------------------

    \154\ 47 CFR 64.1200(a)(2)(iv). See also, e.g., Ariz. Rev. 
Stat., Sec.  44-1278(B)(4) (permitting prerecorded calls with called 
party's ``prior express consent''); Ind. Code, Sec.  24-5-14-5 
(permitting prerecorded calls where there is a ``current business or 
personal relationship'').
---------------------------------------------------------------------------

    Except as indicated below, the FTC has not identified any other 
Federal or State statutes, rules, or policies that would overlap or 
conflict with the proposed revision of the call abandonment safe 
harbor. The proposed amendment would help to reduce the differences on 
this issue between the TSR and the FCC's TCPA rules, as well as similar 
state requirements.\155\ As explained in Section III above, compliance 
with the FTC's more precise standard would constitute acceptable 
compliance with the FCC rule and similar state requirements, so there 
is no conflict between these regulations.
---------------------------------------------------------------------------

    \155\ See, e.g., Cal. Pub. Util. Comm'n, Decision 03-03-038 
(Mar. 13, 2003), at 19 (adopting the FCC's 30-day standard for 
measuring call abandonment rates).
---------------------------------------------------------------------------

F. Discussion of Significant Alternatives to the Proposed Rule That 
Would Accomplish the Stated Objectives and Minimize Any Significant 
Economic Impact of the Proposed Rule on Small Entities

    The proposed amendment to add an explicit prohibition of all 
prerecorded telemarketing calls answered by a person without a 
consumer's express prior written agreement would implement the 
requirement in the Telemarketing Act that the Commission prescribe 
rules that include a prohibition against ``a pattern of unsolicited 
telephone calls which the reasonable consumer would consider 
coercive or abusive of such consumer's right to privacy.'' The only 
alternatives to this explicit prohibition would be to continue the 
present prohibition of prerecorded calls in Sec.  310.4(b)(4)(i), 
the call abandonment provision, or to permit prerecorded calls, 
which the Commission has declined to do based on the record in this 
proceeding to date.
    The proposed amendment of the existing call abandonment safe 
harbor would replace the present requirement that the three percent 
maximum call abandonment rate be measured ``per day per campaign,'' 
with a revised requirement that the maximum be measured ``over the 
duration of the campaign, if less than 30 days, or separately over 
each successive 30-day period or portion thereof that the campaign 
continues.'' Other regulatory options under consideration include 
retaining the present ``per day per campaign'' standard, or, at the 
other end of the spectrum, requiring that the maximum call 
abandonment rate be measured over a 30-day period for all of a 
telemarketer's campaigns. The Commission has yet to be persuaded, 
however, that this more liberal standard would be as likely as the 
proposed standard to prevent telemarketers from targeting disfavored 
consumers with a disproportionate share of abandoned calls.

    The explicit prohibition on prerecorded calls and the proposed 
revision in the call abandonment safe harbor are intended to apply to 
all entities subject to the Rule, and it does not appear that a delayed 
effective date for small entities or other alternatives to the current 
proposal would necessarily result in any further reduction in the 
compliance burdens of the Rule for small entities. The Commission 
nonetheless seeks comments and information on what other alternative 
formulations, if any, of the proposed safe harbor might further 
minimize compliance burdens for small entities, without compromising 
the intent and purpose of the Rule to prevent abusive telemarketing 
practices, including the need, if any, for a delayed effective date for 
small business compliance.

VIII. Specific Issues for Comment

    The Commission seeks comment on various aspects of the proposed 
amendment to add an explicit prohibition of prerecorded telemarketing 
calls to the TSR and the proposed amendment to the TSR's call 
abandonment safe harbor provision. Without limiting the scope of issues 
on which it seeks comment, the Commission is particularly interested in 
receiving comments on the questions that follow. In responding to these 
questions, comments should include detailed, factual supporting 
information whenever possible.

A. General Questions for Comment

    Please provide comment, including relevant data, statistics, 
consumer complaint information, or any other evidence, on the 
Commission's proposal to add an explicit prohibition of prerecorded 
telemarketing calls and the proposal to measure the maximum allowable 
call abandonment rate under the existing safe harbor in 16 CFR 
310.4(b)(4)(i) ``over the duration of a single calling campaign, if 
less than 30 days, or separately over each successive 30-day period or 
portion thereof that the campaign continues'' rather than on a ``per 
day per campaign'' basis. Please include answers to the following 
questions:
    1. What is the effect (including any benefits and costs), if any, 
on consumers?
    2. What is the impact (including any benefits and costs), if any, 
on individual firms that must comply with the Rule?

[[Page 58733]]

    3. What is the impact (including any benefits and costs), if any, 
on industry, including those who may be affected by these proposals but 
not obligated to comply with the Rule?
    4. What changes, if any, should be made to the proposed Rule to 
minimize any costs to industry, individual firms that must comply with 
the Rule, and/or consumers?
    5. How would each suggested change affect the benefits that might 
be provided by the proposed Rule to industry, individual firms that 
must comply with the Rule, and/or consumers?
    6. How would the proposed Rule affect small business entities with 
respect to costs, profitability, competitiveness, and employment?
    7. How many small business entities would be affected by each of 
the proposed amendments?

B. Questions on Specific Issues

    In response to each of the following questions, please provide: (1) 
Detailed comment, including data, statistics, consumer complaint 
information, and other evidence, regarding the issue referred to in the 
question; (2) comment as to whether the proposed changes do or do not 
provide an adequate solution to the problems they were intended to 
address, and why; and (3) suggestions for additional changes that might 
better maximize consumer protections or minimize the burden on 
industry:
    1. Should the Commission include an explicit prohibition of 
prerecorded telemarketing calls in the TSR?
    2. Is the Commission correct in its understanding that a reasonable 
consumer would consider prerecorded telemarketing sales calls and 
prerecorded charitable solicitation calls to be coercive or abusive of 
his or her right to privacy?
    3. Does a consumer's choice not to list his or her telephone number 
on the Do Not Call Registry indicate not only that he or she is willing 
to accept live telemarketing calls, but also prerecorded telemarketing 
calls?
    4. Should the Rule specify disclosures that must be made when 
obtaining a consumer's express written agreement to receive such calls? 
If so, what disclosures are needed?
    5. What is the effect on consumers' privacy interests, if any, of 
not applying the call abandonment safe harbor requirements to calls 
left on consumers' answering machines?
    6. Are prerecorded messages left on answering machines less 
intrusive than prerecorded messages answered by a person?
    7. What are the costs and benefits to consumers, if any, of 
allowing companies to leave prerecorded messages, as opposed to live 
messages, on consumers' answering machines? Do consumers incur 
additional costs in terms of (a) paying for storage of messages they do 
not want; (b) exceeding their allotted storage capacity; (c) being 
unable to receive messages they want or need; (d) being unable to use 
home telephone lines tied-up by prerecorded messages; or (e) retrieving 
messages? Do consumers receive additional benefits, such as lower 
marketing costs that are eventually passed on to them?
    8. What are the costs and benefits to companies in not having to 
apply the call abandonment safe harbor limit to calls left on answering 
machines?
    9. Should a 30-day standard, if adopted, cover all of a 
telemarketer's campaigns within that period, be limited to a single 
campaign, or be limited to the duration of each campaign?
    10. Are there significant efficiencies that can be obtained with a 
requirement to meet a 30-day standard averaged across all of a 
telemarketer's campaigns that cannot be obtained with a 30-day 
campaign-specific requirement? If so, what are they and what effect do 
they have?
    11. Are there technological problems that limit the ability of 
telemarketers who are running multiple campaigns to measure abandonment 
rates separately for each campaign? If so, what are they, how many 
telemarketers do they affect, what remedies, if any, are available, and 
what is the cost of such remedies?
    12. Are upgrades available that can reduce the rate at which 
predictive dialers place calls in the case of an unexpected spike in 
call abandonments, so that it would not be necessary to run them 
manually?
    13. Would retaining a ``per campaign'' standard, but extending the 
period over which the call abandonment maximum is measured, make the 
use of smaller segmented lists by small businesses and other sellers 
more economical? Please provide specific examples of why or why not.
    14. What effect would the proposed change in the standard for 
measuring the call abandonment rate have on the number of abandoned 
calls that consumers receive?
    15. Do small businesses and other sellers have alternatives that 
are equally or more effective and economical than live telemarketing, 
such as postcard or email announcements, to notify their established 
customers of sales offers and to obtain orders? Would the costs of such 
alternatives be outweighed by benefits to consumers in avoiding 
additional abandoned calls to their homes?

IX. Conclusion

    For the reasons discussed above, the Commission has decided, on 
balance, to deny the petition seeking amendment of the TSR to create an 
additional safe harbor to permit prerecorded telemarketing calls to 
established customers. The Commission is also proposing an amendment 
explicitly prohibiting unsolicited prerecorded telemarketing calls 
without a consumer's express prior written agreement to accept such 
calls. The Commission will therefore cease its forbearance from 
considering law enforcement actions against sellers and telemarketers 
engaged in making prerecorded calls to established customers, after 
allowing a reasonable time, as specified above, for them to bring 
themselves into compliance with the TSR.
    The Commission has also decided to propose an amendment to the 
existing safe harbor to permit measurement of the three percent maximum 
call abandonment rate ``over the duration of a single calling campaign, 
if less than 30 days, or separately over each successive 30-day period 
or portion thereof that the campaign continues.'' The Commission will 
accept public comment on this proposal until November 6, 2006.

X. Proposed Rule

List of Subjects in 16 CFR Part 310

    Telemarketing, Trade practices.

    Accordingly, the Commission proposes to amend title 16, Code of 
Federal Regulations, as follows:

PART 310--TELEMARKETING SALES RULE

    1. The authority citation for part 310 continues to read as 
follows:

    Authority: 15 U.S.C. 6101-6108.

    2. Amend Sec.  310.4 by adding new paragraph (b)(1)(v), and 
revising paragraph (b)(4)(i) to read as follows:


Sec.  310.4  Abusive telemarketing acts or practices.

* * * * *
    (b) * * *
    (1) * * *
    (v) Initiating any outbound telemarketing call that delivers a 
prerecorded message when answered by a person, unless the seller has 
obtained the express agreement, in writing, of such person to place 
prerecorded calls to that person. Such written agreement

[[Page 58734]]

shall clearly evidence such person's authorization that calls made by 
or on behalf of a specific party may be placed to that person, and 
shall include the telephone number to which the calls may be placed and 
the signature of that person; provided, however, that prerecorded 
messages permitted for compliance with the call abandonment safe harbor 
in Sec.  310.4(b)(4)(iii) do not require such an agreement.
* * * * *
    (4) * * *
    (i) The seller or telemarketer employs technology that ensures 
abandonment of no more than three (3) percent of all calls answered by 
a person, measured over the duration of a single calling campaign, if 
less than 30 days, or separately over each successive 30-day period or 
portion thereof that the campaign continues.
* * * * *

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 06-8524 Filed 10-3-06; 8:45 am]
BILLING CODE 6750-01-P