Telemarketing: Implementation of the National Do-Not-Call
Registry (28-JAN-05, GAO-05-113).
In response to consumer frustration and dissatisfaction with
unwanted telemarketing calls, Congress has passed several
statutes directing the Federal Trade Commission (FTC) and Federal
Communications Commission (FCC) to regulate intrusive and
deceptive telemarketing practices, authorizing both agencies to
establish the National Do-Not-Call Registry (the national
registry), and authorizing FTC to collect fees to fund this
national registry. The objective of the national registry is to
limit the numbers of unwanted telemarketing calls that registered
consumers receive. The Conference Report for the Consolidated
Appropriations Act, 2004, mandated that GAO evaluate the
implementation of the national registry. Specifically, this
report addresses (1) how FTC and FCC have implemented and
operated the national registry, (2) fees collected to cover costs
to operate the national registry, and (3) how FTC has measured
the success of the national registry.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-113
ACCNO: A16436
TITLE: Telemarketing: Implementation of the National Do-Not-Call
Registry
DATE: 01/28/2005
SUBJECT: Consumer protection
Data collection
Performance measures
Telephone
Surveys
Appropriated funds
Marketing
Fees
Interagency relations
Regulatory agencies
Telemarketing
******************************************************************
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GAO-05-113
United States Government Accountability Office
GAO
Report to Congressional Committees
January 2005
TELEMARKETING
Implementation of the National Do-Not-Call Registry
GAO-05-113
[IMG]
January 2005
TELEMARKETING
Implementation of the National Do-Not-Call Registry
What GAO Found
FTC and FCC have done several things to implement the national registry,
including issuing regulations and coordinating with each other on the
development of regulations and enforcement efforts. FTC has contracted out
management of the operational aspects of the registry.
Fees for the national registry were less than costs incurred in fiscal
year 2003 but covered costs in fiscal year 2004, the first full year of
operation. Fees collected by FTC in fiscal year 2003 fell short of actual
costs incurred by about $9.4 million. However, fees collected in fiscal
year 2004 covered FTC's $14 million in costs incurred. FTC uses
appropriated funds to cover costs associated with the national registry
and, as required, reduces its appropriations by the amount of fees
collected. FCC uses appropriated funds to cover its costs associated with
the national registry.
FTC established three objectives to measure whether the national registry
was successful-(1) having the system operational in calendar year 2003,
(2) having the system capable of enrolling about 60 million telephone
numbers within the first 12 months of operation, and (3) reducing by 80
percent unwanted calls to consumers who sign up for the registry. The
national registry was operational in calendar year 2003, and 62 million
telephone numbers had been registered by consumers as of June 2004, within
12 months after registration opened. FTC cannot measure how much unwanted
calls have been reduced because it does not know how many calls were being
received before the establishment of the registry. However, as an
alternative, FTC relied upon two surveys. The results of one survey showed
that respondents had an 80 percent reduction in unwanted telemarketing
calls since registering on the national registry. However, this result is
questionable because, among other problems, the survey relied on
respondents' recall of the number of telemarketing calls received at least
three months prior. The two surveys found that about 90 percent and 87
percent of registered consumers surveyed reported receiving fewer calls.
The surveys may provide indications of the national registry's overall
performance; however, GAO is uncertain how representative the results are
because, for example, one survey did not use a probability sample that can
be projected nationwide. FTC and FCC provided informal technical comments
to our report, which we incorporated where appropriate. According to FTC,
there is no evidence that the national registry is not working.
FTC Fees Collected and Costs Incurred for the National Registry
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
Implementation and Operation of the National Registry
Fees Collected for the National Registry Did Not Cover Costs in
Fiscal Year 2003 But Did in Fiscal Year 2004 FTC Reported Three Objectives
to Measure Whether the National Registry Was Successful Agency Comments
1
2 5 8
17
22 24
Appendix I FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry
Appendix II Information on the Two Surveys About the National Do-Not-Call
Registry
Appendix III Comments from the Federal Trade Commission
Appendix IV GAO Contacts and Staff Acknowledgments 35
GAO Contacts 35 Staff Acknowledgments 35
Tables
Table 1: FTC and FCC Identified Inconsistencies Related to the
National Registry Enforcement 12 Table 2: FTC's Estimation of National
Registry Fee to Raise about $18 million to Cover Estimated Costs to
Implement, Operate, and Enforce the National Registry in Fiscal Year 2003
19 Table 3: FTC's Estimation of National Registry Fee to Raise About
$18 Million to Cover Estimated Costs to Implement,
Operate, and Enforce the National Registry in Fiscal Year
2004 21
Page i GAO-05-113 National Do Not Call Registry
Table 4: FTC's Costs Related to the National Registry for Fiscal
Years 2003 and 2004 22 Table 5: FCC Enforcement Actions under the National
Registry as
of December 31, 2004 28
Figures
Figure 1: Timeline of FTC and FCC Actions to Implement the National
Registry 10 Figure 2: Number of Telemarketers Who Accessed the National
Registry, as of June 1, 2004. 20
Abbreviations
FCC Federal Communications Commission FTC Federal Trade Commission
This is a work of the U.S. government and is not subject to copyright
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Page ii GAO-05-113 National Do Not Call Registry
United States Government Accountability Office Washington, DC 20548
January 28, 2005
The Honorable Thad Cochran
Chairman
The Honorable Robert C. Byrd
Ranking Member
Committee on Appropriations
United States Senate
The Honorable Jerry Lewis
Chairman
The Honorable David R. Obey
Ranking Member
Committee on Appropriations
House of Representatives
The Federal Trade Commission (FTC) and Federal Communications
Commission (FCC) have promulgated regulations governing the $720
billion telemarketing industry pursuant to a number of statutory mandates
to regulate telephone solicitations. In response to consumer frustration
and dissatisfaction with unwanted telemarketing calls, Congress has
passed several statutes directing the FTC and FCC to regulate intrusive
and deceptive telemarketing practices, authorizing both agencies to
establish the National Do-Not-Call Registry (the national registry), and
authorizing the FTC to collect fees to fund the national registry. In
general, the national registry is a listing of telephone numbers received
from consumers, who registered with the FTC to prevent unwanted
telemarketing calls. Telemarketers are required to access the national
registry to remove registered consumers from their telephone call lists
and
violators may be subject to enforcement actions. The objective of this
national registry is to limit the number of unwanted telemarketing calls
that registered consumers receive.
The Conference Report for the Consolidated Appropriations Act of 2004
directed that we evaluate FTC's and FCC's implementation of the national
registry and determine whether FTC has achieved its goal of reducing by
80 percent the number of telemarketing calls received by registered
consumers.1 Accordingly, taking into consideration our consultation with
1H.R. Conf. Rep. No. 108-401, at 637 (2003).
your staff, this report addresses (1) how FTC and FCC have implemented and
operated the national registry, (2) fees collected to cover the costs to
operate the registry, and (3) how FTC has measured the success of the
national registry, including its assessment of whether telemarketing calls
received by registered consumers have been reduced by 80 percent.
To respond to the first objective, we reviewed laws, regulations, and
rules related to the national registry and FTC and FCC documents
describing the roles and responsibilities of each commission with respect
to the implementation, operation, and enforcement of the national
registry. We obtained and reviewed FTC's contract with AT&T Government
Solutions, which is managing the operational aspects of the national
registry database that contains telephone numbers of consumers who have
registered and information about alleged violations of the national
registry's provisions reported by registered consumers (e.g., consumer
complaint data). For the second objective, we reviewed FTC's Federal
Register notices of proposed rulemaking and final rules to establish the
national registry fees and obtained information from FTC about its
estimation of the national registry fees to be paid by telemarketers,
actual fees collected, and actual costs incurred to implement, operate,
and enforce the national registry. To assess the reliability of FTC's cost
and fee collection data, we talked with agency staff about data quality
control procedures and reviewed relevant documentation. We determined the
data were sufficiently reliable for the purposes of this report.
For the third objective, we obtained information on FTC's objectives for
assessing the national registry's success. FTC included in its assessment
of the national registry's success surveys conducted by two private
companies addressing the effectiveness of the national registry. We
reviewed these surveys to determine whether they could be used to measure
the success of the national registry. We also met with FTC and FCC staff
to discuss all three objectives. We conducted our review from April
through December 2004 in accordance with generally accepted government
auditing standards.
Results in Brief FTC and FCC initially responded to their statutory
mandates by regulating certain telemarketing practices, ranging from
limiting the hours when unsolicited calls may be made to prohibiting calls
altogether under certain circumstances (i.e., when a consumer had asked
the entity not to call), but both commissions ultimately decided to
implement the national registry to address continued consumer frustration
regarding unwanted telemarketing calls. As directed by statute, FTC and
FCC consulted and
coordinated with each other to maximize the consistency of their
regulations and enforcement of the national registry. FTC entered into a
contract with AT&T Government Solutions to manage the operational aspects
of the national registry and a consumer complaint database.
The national registry started accepting consumer telephone number
registrations in late June 2003, and telemarketers began accessing the
national registry to obtain registered consumer telephone numbers in
September 2003. FTC and FCC began enforcing the provisions of the national
registry in October 2003-the beginning of fiscal year 2004.
Consumers can register their telephone numbers and file complaints by
telephone (1-888-382-1222) or on FTC's Web site (www.donotcall.gov), the
latter being the most popular method. Registered consumers can file
complaints when they believe a telemarketer has called them in violation
of the national registry provisions. FTC's Web site provides guidance to
consumers about how to register their telephone numbers and file
complaints. Another Web site (www.telemarketing.donotcall.gov) provides
guidance to organizations2 (hereafter referred to as telemarketers) about
how to access the national registry database to obtain the telephone
numbers of persons who do not wish to receive telemarketing calls.
Telemarketers pay an annual fee3 to subscribe to the registry and are to
renew their subscription every 12 months after their initial subscription
date. FTC and FCC do not take action on every complaint alleging a
violation of the national registry provision; rather they consider a
number of factors, such as the number of complaints filed against a
telemarketer and the potential that a telemarketer will make
2Organizations that may use the Web site include telemarketers, sellers,
service providers, and exempt organizations. Telemarketers include
persons, who in connection with telemarketing, initiate or receive
telephone calls to or from a customer. Sellers include organizations that,
in connection with a telemarketing transaction, provide, offer to provide,
or arrange for others to provide goods or services to a consumer. A seller
may also be a telemarketer, if it is calling on its own behalf. Or a
seller may retain one or more telemarketer(s). Service providers are
persons who provide assistance to sellers or telemarketers to engage in
telemarketing. Exempt organizations are organizations that are exempt from
both FTC's and FCC's requirements to access the national registry, such as
charities and political fundraisers, but that voluntarily choose to access
the information solely for the purpose of preventing telephone calls to
telephone numbers in the national registry.
3FTC defines an "annual period" consisting of 12 months following the
first day of the month in which the telemarketer paid the fee. For
example, a telemarketer that pays its annual fee on September 15, 2003,
has an annual period that runs from September 1, 2003, through August 31,
2004.
future unlawful calls, to determine whether to take action against a
telemarketer for violations of the national registry provisions. FTC's
enforcement actions usually are accomplished by seeking injunctive relief
and sometimes consumer redress in federal court;4 actions for civil
penalties are generally filed by the Department of Justice on behalf of
FTC and are less common. FCC's enforcement efforts are generally
accomplished through an administrative process. Both commissions can
obtain civil penalties up to $11,000 per violation.
Fees collected by FTC did not cover all costs to implement, operate, and
enforce the national registry in fiscal year 2003. FTC collected about
$5.2 million in fiscal year 2003 and incurred costs of about $14.6
million-a shortfall of about $9.4 million. FTC set fees in fiscal year
2003 based on its estimate of the number of telemarketers that would pay
to access the national registry, and the average number of area codes that
a telemarketer would pay to access. According to FTC, it collected fewer
fees than costs incurred for two reasons. First, FTC did not begin
collecting fees until September 2003 because its appropriations funding,
which provided the total estimated fees that could be collected, was
enacted later than anticipated, delaying implementation of the fee
collection process. Second, FTC overestimated the number of telemarketers
that would pay to access the registry and the average number of area codes
that would be accessed. FTC revised its fee, effective September 1, 2004,
based on the number of telemarketers that had paid to access the national
registry and the average number of area codes accessed. FTC collected
about $14 million in fiscal year 2004 that covered costs incurred of about
$14 million. FTC uses appropriated funds to cover costs to implement,
operate, and enforce the national registry and is required to reduce its
appropriations by the amount of fees collected. FCC uses appropriated
funds to cover costs associated with its enforcement of the national
registry.
According to FTC staff, the commission has measured the success of the
national registry on the basis of three objectives-(1) having the national
registry operational during calendar year 2003 (consumers could register
their telephone numbers, telemarketers could access the national registry
to obtain telephone numbers, and FTC and FCC could obtain information
4Injunctive relief is to prevent or stop violations of law under both the
Telemarketing Sales Rule and section 5 of the Federal Trade Commission Act
(FTC act), 15 U.S.C. S: 45 (2000) and consumer redress is to compensate
for any harm to the consumer.
from the national registry for enforcement purposes); (2) having a system
that could enroll about 60 million telephone numbers in the national
registry within the first 12 months of when consumers began to register;
and (3) reducing unwanted calls to consumers who sign up for the national
registry, approximating Missouri's experience (some states had previously
established their own do not call registries) of reducing by about 80
percent the telemarketing calls to registered consumers.5 With respect to
its objectives, FTC (1) had the national registry operational in October
2003 and (2) achieved its objective when it reached about 62 million
telephone numbers registered in its system within the first 12 months of
consumer registration. With respect to reducing unwanted calls, FTC cannot
measure how much unwanted calls have been reduced because it does not know
how many calls were being received before the establishment of the
registry. However, as an alternative, FTC has cited two private survey
polls as evidence that the national registry has resulted in a reduction
of unwanted telemarketing calls. The results of one survey showed that
respondents had an 80 percent reduction in unwanted telephone calls since
registering on the national registry. This result is questionable because
the survey relied on respondent recall of the number of calls received at
least 3 months prior. In addition, one poll found that over 90 percent of
registered consumers surveyed reported receiving fewer telemarketing
calls, and the other poll found that 87 percent of those who had signed up
for the national registry had reported receiving fewer telemarketing
calls. The two surveys may provide indications of the national registry's
overall performance; however, we are uncertain about how representative
the results of each actually are of the opinions and experiences of adults
nationwide because, for example, one survey did not use a probability
sample that can be projected nationwide, and the other survey had a low
response rate, among other things. Notwithstanding these concerns about
the surveys' methodologies, the FTC told us that they found no evidence,
anecdotal or otherwise, that contradicts the results of the surveys.
The Telephone Consumer Protection Act of 1991 (FCC's basic statutory
mandate with respect to telemarketers) required FCC to issue regulations
to protect consumers' privacy by preventing unwanted telemarketing calls
and authorized, but did not require, FCC to fulfill this requirement by
5In the supplementary information to a final rule issued January 29, 2003,
FTC noted that Missouri reported a 70 to 80 percent reduction in the
number of telephone calls people had received after the implementation of
the state registry, based on anecdotal information.
Background
creating a national do-not-call database.6 The Telemarketing and Consumer
Fraud and Abuse Prevention Act of 1994 (FTC's specific statutory mandate
regarding telemarketing) required FTC to issue rules prohibiting deceptive
telemarketing acts or practices and other abusive telemarketing acts or
practices 7 but did not specifically mention a national registry.8 Both
commissions have promulgated regulations imposing requirements on
telemarketing practices, ranging from restrictions on the hours when
unsolicited calls may be made to provisions prohibiting calls under
certain circumstances. FTC's regulations are known as the Telemarketing
Sales Rule,9 and FCC's as the Rules and Regulations Implementing the
Telephone Consumer Protection Act of 1991.10
The two commissions have different but overlapping jurisdiction over the
activities of entities that make telemarketing calls: thus, telemarketers
may have to comply with one or both sets of regulations. FCC's authority
covers entities that use the telephone to advertise, including those
making intrastate telephone solicitations, while FTC's authority under its
telemarketing law is limited to entities engaged in interstate
telemarketing. In addition, by statute, certain entities are wholly or
partially exempt from FTC jurisdiction but remain subject to FCC
jurisdiction. These include common carriers,11 banks, credit unions,
savings and loan institutions, airlines, nonprofit organizations, and
insurance companies.
FTC and FCC initially responded to the statutory mandate to address
unwanted telemarketing by prohibiting calls to individuals who previously
had stated to telemarketers that they did not wish to receive calls made
by
6Pub. L. No. 102-243, S: 3(a), 105 Stat. 2394, 2396-97 (1991) (codified at
47 U.S.C. S: 227(c)).
7Pub. L. No. 103-297, S: 3(a)-(c), 108 Stat. 1545, 1546 (1994) (codified
at 15 U.S.C. S: 6102(a)(c)).
8Several lawsuits challenged both the constitutionality of the national
registry and FTC's authority to establish it and one court enjoined FTC
from implementing the registry. On October 7, 2003, the court of appeals
stayed the injunction pending FTC's appeal and the court's review. FTC v.
Mainstream Marketing Services, Inc., 345 F.3d 850 (10th Cir. 2003). The
decisions against the national registry were overturned on appeal early in
2004. Mainstream Marking Services, Inc., v. FTC, 358 F.3d 1228 (10th Cir.
2004), cert. denied, 125 S.Ct. 47 (2004).
96 C.F.R. pt. 310 (2004).
1047 C.F.R. S: 64.1200 (2004).
11In a telecommunications context, a common carrier is a
telecommunications company that holds itself out to the public for hire to
provide communications transmission services.
or on behalf of a particular seller. These regulatory provisions are
called "entity-specific" do-not-call provisions, and they remain in effect
as a complement to the national registry. 12 Telemarketers are required to
maintain lists of consumers who have specifically requested to have their
names placed on the company-specific do-not-call list, and it is a
violation of law for them to call a consumer who has asked to be placed on
the company's list. Thus, those consumers who have not placed their
telephone numbers on the national registry still can instruct
telemarketers to place them on an entity-specific do-not-call list. In
addition to FTC's and FCC's entity-specific do-not-call provisions,
consumers can register their telephone numbers on state do-not-call lists.
FCC stated in a July 2003 Report and Order that 36 states had established
their own statewide donot-call lists to respond to the growing consumer
frustration with unsolicited telemarketing calls.13
Entering one's telephone number on the national registry will not stop all
unwanted solicitations. There are several exemptions in the law that allow
organizations to call consumers, even if their telephone numbers are on
the national registry. Exempt organizations include charities,
organizations conducting surveys, political fundraisers, those calling on
behalf of tax exempt organizations, and those calling under an
"established business relationship" or with the consumer's written
permission. Under an established business relationship, a telemarketer can
call a consumer for a period of up to 18 months after the consumer's last
purchase or financial transaction with the business or up to 3 months
after the consumer's last inquiry or application to the business. However,
even if a business relationship was established, the company is required
to
12The original entity-specific program did not apply to calls made by or
on behalf of charitable organizations-FTC's statute addressed only calls
"to induce purchases of goods or services," and FCC's statute-exempted
calls by tax-exempt nonprofits (which FCC extended to calls by or on
behalf of tax-exempt nonprofits when it set up the program). The
definition of telemarketing in FTC's statute was subsequently amended to
cover charitable solicitations. In response, FTC decided to expand its
entity-specific program to cover charitable calls by for-profit
telemarketers hired by charities to solicit donations. It was not able to
cover calls made directly by charities because the amendment to cover
charitable calls did not alter the telemarketing law's reliance on the FTC
act's jurisdictional limitations as to nonprofit organizations.
13The 36 states, identified in supplementary information to FCC's July
2003 regulations for the national registry are Alabama, Alaska, Arizona,
Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho,
Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana, New Jersey, New
Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, South
Dakota, Tennessee, Texas, Utah, Vermont, Wisconsin, and Wyoming.
Implementation and Operation of the National Registry
comply with a request under the previously mentioned entity-specific
donot-call provision. Thus, if the consumer tells the company they do not
want to be solicited by telephone, the company is prohibited from calling
again. Similarly, the consumer can use the entity-specific option to ask a
paid fundraiser for a charitable organization to stop soliciting them for
a specific charity by telephone.14
On the basis of its experience and growing evidence that the
entityspecific provisions were ineffective and overly burdensome on
consumers, in January 2002, FTC proposed a national do-not-call registry
and 1 year later adopted its proposal to amend its Telemarketing Sales
Rule to create the national registry and prohibit telemarketing calls to
consumers who registered their telephone numbers. FTC also allowed states
to transfer to the national registry those consumer telephone numbers on
their state registries. As of December 2004, 17 states have transferred
their state list and adopted the national registry as the state
registry.15
FCC revised its regulations pursuant to the Telephone Consumer Protection
Act, in June 2003, to require telemarketers under its jurisdiction to
comply with the requirements of the national registry. In addition, in
accordance with the Telephone Consumer Protection Act, FCC required states
with their own state registries to include on the state registry those
telephone numbers registered on the national registry from their
respective states. FCC required this to reduce the potential for consumer
confusion and reduce regulatory burdens on the telemarketing industry. FCC
allowed an 18-month transition period for states to download information
from the national registry to their state registry.
In March 2003, Congress passed the Do-Not-Call Implementation Act (the
Implementation Act), which authorized FTC to establish fees "sufficient to
implement and enforce" the national registry.16 Initial registration of
14However, only paid fundraisers subject to FTC jurisdiction are required
to abide by the request, because FCC exempted such businesses from its
entity-specific do-not-call provision while FTC expanded its
entity-specific provision to cover such businesses in response to a 2001
statutory amendment.
15The 17 states (identified by FTC) are Alabama, Arkansas, California,
Colorado, Connecticut, Florida, Georgia, Idaho, Kansas, Kentucky, Maine,
Massachusetts, Minnesota, New York, North Dakota, Oklahoma, and
Pennsylvania. According to FTC, eight states do not now share their
registries with the FTC-Indiana, Louisiana, Mississippi, Missouri,
Tennessee, Texas, Wisconsin, and Wyoming. FTC staff said they continue to
work with the states to coordinate the registries with the National
Do-Not-Call Registry.
16Pub. L. No. 108-10, S: 2, 117 Stat. 557, 557 (2003).
consumer telephone numbers began in late June 2003. In July 2003, FTC set
fees to be paid by telemarketers to access the national registry. In
September 2003, in response to legal challenges to the national registry
and requirements, Congress passed additional legislation expressly
authorizing FTC to implement and enforce a national do-not-call registry
under the Telemarketing and Consumer Fraud and Abuse Prevention Act and
ratifying the National Do-Not-Call Registry regulation as promulgated by
FTC in 2002.17 To manage the anticipated large number of consumers who
would want to register via the telephone, FTC had a two-stage process
whereby consumers west of the Mississippi could register by telephone
starting June 27, 2003, and on July 7, 2003, telephone registration was
opened to the rest of the country. FTC and FCC began enforcement of the
national registry on October 1, 2003; and FTC issued a revised rule to
increase telemarketer fees in July 2004. Figure 1 provides a timeline of
FTC and FCC actions to implement the national registry.
17Pub. L. No. 108-82, 117 Stat. 1006 (2003). The United States Court of
Appeals for the 10th Circuit also ruled that, on the basis of FTC's
existing statutory responsibilities prior to the September 2003
legislation, FTC had the authority to create the national registry.
Mainstream Marketing Services, Inc., v. FTC, 358 F.3d 1228 (10th Cir.
2004), cert. denied, 125 S.Ct. 47 (2004).
Figure 1: Timeline of FTC and FCC Actions to Implement the National
Registry
Source: GAO analysis of FTC data.
Under the Implementation Act, FTC and FCC were to consult and coordinate
with each other to maximize consistency between their regulations
governing the national registry. The Implementation Act required both FTC
and FCC to provide a written report to Congress 45 days after FCC
finalized its rulemaking on the national registry. Each commission's
report was to cover their efforts to maximize consistency in their
enforcement efforts by (1) conducting an analysis of the telemarketing
rules implemented by both commissions, (2) listing any inconsistencies
between the two commissions and the effects of such inconsistencies on
consumers and on telemarketers paying for access, and (3) providing
proposals to remedy any inconsistencies. FTC and FCC issued reports in
September 2003 that analyzed differences related to enforcement of the
national registry and other areas where they had
common enforcement interests related to solicitations by telemarketers,
such as abandoned calls and calling time restrictions.18
As shown in table 1, differences related specifically to the national
registry that FTC and FCC identified in their reports included (1)
jurisdiction, (2) definition of established business relationship, (3)
instances where the telemarketer caller had a personal relationship with a
consumer, and (4) instances where tax-exempt nonprofit entities use
for-profit telemarketers to solicit on their behalf. FTC and FCC consulted
and coordinated to address the inconsistencies that they identified. For
example, since FCC's jurisdiction is broader than FTC's, FCC decided to
focus its enforcement efforts on activities over which FTC does not have
jurisdiction, such as common carrier and intrastate telemarketing. In
other cases, the two agencies proposed monitoring the impact of the
inconsistencies to determine whether any action was needed. Table 1
summarizes FTC's and FCC's inconsistencies with respect to the national
registry and decisions made to address the differences.
18"Call abandonment" occurs when a consumer answers the telephone, only to
find no one on the line. This happens because telemarketers use automatic
equipment to increase their efficiency and sometimes results in no sales
representative on the telephone when the consumer answers the calls.
"Calling time restrictions" refers to hours of the day that telemarketers
are allowed to make telephone solicitations.
Table 1: FTC and FCC Identified Inconsistencies Related to the National
Registry Enforcement
FTC FCC
FTC's jurisdiction is narrower than FCC's FCC's jurisdiction is broader in
that it in that it excludes purely intrastate includes the types of
business activities telemarketing campaigns and calls exempt from FTC
jurisdiction and both involving certain industries. interstate and
intrastate activities.
FTC defines an established business FCC defines established business
relationship on the basis of either (1) a relationship as a voluntary
two-way consumer's purchase, rental, or lease of a communication between a
person or entity seller's goods or services or a financial and a consumer
based on the consumer's transaction between the consumer and the purchase
or transaction with the entity or on seller; or (2) the consumer's inquiry
or the consumer's inquiry or application application regarding a product
or service. regarding the entity's products or services,
FTC and/or FCC remedy
FCC will focus its enforcement efforts on entities such as common carriers
and intrastate activities.
FTC reported that the commissions would monitor whether telemarketers take
advantage of the potentially broader FCC exemption for an established
business relationship and whether consumers reported receiving more
unwanted telemarketing calls as a result. If this occurs, the two
Commissions are to work together to reconcile the different requirements.
regardless of whether any payment was involved.
FTC does not make exceptions for FCC makes an exception for telemarketing
telemarketing calls to persons known calls to persons known by the
telemarketer personally by the telemarketer. caller (e.g., family member
or friend).
FTC requires for-profit telemarketers FCC rules exempt such entities from
its making interstate telephone solicitations entity-specific do-not-call
provisions and on behalf of tax-exempt nonprofit entities from the
national registry provisions. to comply with the entity-specific
do-not call provisions but not with the provisions of the national
registry.
FTC reported that it would monitor instances where this might occur to
determine whether it needs to modify its enforcement of this provision.
FCC reported that the commissions would work together to remedy the
inconsistency.
Source: FTC and FCC September 8, 2003, reports to Congress on regulatory
coordination.
In addition to the above, FTC noted minor differences related to
monitoring and enforcement with respect to safe harbor provisions and
differences regarding entities that can be held liable for violations.19
FTC did not believe differences for these two issues were significant
enough to warrant any action, and FCC had not identified these as
inconsistencies in its report.
FTC and FCC entered into a Memorandum of Understanding that further
established both commissions' intent to work together in a cooperative and
coordinated fashion to implement consistent, comprehensive, efficient, and
nonredundant enforcement of federal telemarketing statutes and rules. FTC
and FCC agreed that (1) the commissions would meet at
19Safe harbor provisions protect a telemarketer from liability when a
violation of the national registry is made in error, and the telemarketer
can demonstrate compliance with each of several provisions of the national
registry.
least quarterly to discuss matters of mutual interest; (2) FTC would
provide FCC with national registry information through the Consumer
Sentinel system; 20 (3) the commissions would make available to each other
consumer complaints regarding possible violations of federal telemarketing
rules; (4) the commissions would endeavor to avoid unnecessarily
duplicative enforcement actions; (5) the commissions would engage in joint
enforcement actions, when necessary, that are appropriate and consistent
with their respective jurisdictions; (6) the commissions would coordinate
public statements on joint cases; and (7) the Memorandum of Understanding
was to remain in effect until modified by mutual consent of both parties
or terminated by either party upon 30 days advance written notice. FTC and
FCC staff said that they tend to meet more frequently than quarterly to
discuss matters of mutual interest.
Operation of the National Registry
FTC's December 2002 regulation establishing the national registry set
forth a process for consumers to register their telephone numbers and for
telemarketers to obtain these numbers to remove them from their call
lists. Consumers who want to place their telephone number(s) on the
national registry can register either on FTC's Web site
(www.donotcall.gov) or by telephone (1-888-382-1222). A consumer can enter
up to three telephone numbers at one time by registering online. The
consumer must also enter their e-mail address, which is used for
confirmation and completion of the registration process. Consumers are to
receive an e-mail of the Web site registration, which they must respond to
within 72 hours in order to confirm registration. To register a number by
telephone, a consumer must call the national registry from the telephone
he or she wants to register. The consumer's telephone number is confirmed
at the time the call is made, and registration is completed at that time.
A registered telephone number remains on the national registry for 5 years
before expiration at which time the consumer may re-register it. A
consumer can use FTC's national registry Web site or toll free number to
verify the registration's expiration date. According to FTC, of the
approximately 62 million registered consumer telephone numbers as of
August 2004, 61 percent registered on FTC's Web site, 22 percent
registered using the toll-free telephone number, and 17 percent came from
state downloads.
20Consumer Sentinel is an FTC law enforcement resource that contains a
database of more than 1 million consumer complaints, as well as litigation
resources and guides. It is accessible to more than 1,000 law enforcement
agencies. Consumer Sentinel contains complaints on consumer fraud,
identity theft, and national registry violations.
FTC entered into a contract, dated March 1, 2003, with AT&T Government
Solutions to provide services necessary to develop, implement, and operate
the national registry. The contract provided that the contractor was to
develop and provide a secure database that included the telephone numbers
collected from consumers during the registration process as well as
receive telephone numbers from states that decided to include consumer
telephone numbers from their do-not-call registries in the national
registry. The database was also to include information on the date the
registration was made and the expiration date of the registration. The
automated database was to, among other things, permit consumers to confirm
or alter their registration; provide reports and access to information
regarding registration to FTC personnel; provide a system to allow
telemarketers to access consumer telephone numbers and pay fees, when
required; provide for a system to gather consumer complaint information
concerning alleged violations of the national registry; provide a system
that transferred all valid processed consumer complaints to the FTC in a
format that would be compatible with the FTC's Consumer Sentinel system;
and allow appropriate federal, state, and other law enforcement personnel
access to consumer registration and telemarketer information maintained in
the national registry.
Until December 31, 2004, covered telemarketers are to access the national
registry within 3 months of making a call to drop from their call lists
the telephone numbers of consumers who have registered. However, Congress
directed FTC to amend its regulation to require telemarketers to access
information at least once a month.21 FTC issued a notice of proposed
rulemaking February 13, 2004, and a final rule on March 29, 2004, to
require, effective January 1, 2005, that telemarketers must obtain
national registry telephone numbers and purge registered telephone numbers
from their call lists at least every 31 days. In promulgating the final
rule, FTC explained that 31 days was used to define the statutory monthly
requirement in order to provide a set interval at which telemarketers must
access the telephone numbers in the national registry. An interval of 31
days rather than 30 days was used to mirror the length of the most
frequently occurring and longest month. The FCC rule was also amended to
require that telemarketers download the registry every 31 days. FTC also
explained in promulgating the final rule that it had set the effective
date as January 2005 to allow businesses 9 months to ready their systems
and procedures and to enable FTC and its contractor sufficient time to
21Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, div. B, tit.
V, 118 Stat. 3, 89.
implement necessary changes to the national registry system to accommodate
the increased usage.
FTC and FCC have mechanisms in place to handle consumer complaints. Both
commissions provide numerous ways for consumers to file complaints. These
include by mail, over the telephone, by facsimile, by email directly to
the agency and through their Web sites for the national registry. In
filing a complaint, both FTC and FCC require that the consumer have been
on the national registry for 3 months, but differ in the information
consumers are to provide. For example, FTC requires consumers to provide
their telephone number, the company name or telephone number, and the date
of the violation. FCC requires consumers to provide their name and
telephone number, the telemarketer's name or telephone number, any
specific information about the complaint, and the date of the violation.
According to FTC and FCC, the requirement that consumers have been on the
national registry for 3 months will be revised to 31 days on January 1,
2005, when telemarketers are required to remove registered telephone
numbers from their call lists every 31 days. As of December 11, 2004,
consumers had filed 557,727 complaints through the national registry's Web
site and 117,610 complaints via the telephone. According to FCC staff, FCC
has established a process for handling complaints against common
23
carriers22 that differs from those used for noncommon carriers. Under this
process, FCC serves a common carrier with a notice of complaint that
includes a copy of the complaint and a specified time in which to respond.
With respect to noncommon carriers, FCC and FTC may initiate an
investigation of the complaint depending on the number of complaints they
have received against the company and other factors.
FTC and FCC do not take action on all consumer complaints. Rather, FTC and
FCC said that they consider a number of factors when determining which
alleged violations to pursue that include the type of violation alleged,
the nature and amount of harm to consumers (e.g. invasion of privacy or
financial harm), the potential that telemarketers will make future
unlawful calls, and securing meaningful relief for affected
22See 47 C.F.R. S:S: 1.716-1.718 (2003).
23Noncommon carrier entities subject to FCC enforcement include companies
engaged in the business of banking, credit unions, savings and loans,
airlines, and companies engaging in the business of insurance.
consumers. FTC's enforcement actions generally are accomplished by seeking
injunctive relief and sometimes consumer redress in federal court; actions
for civil penalties (up to $11,000 per violation) are filed by the
Department of Justice on behalf of FTC and are less common.24 FCC's
enforcement efforts are generally accomplished through an administrative
process whereby FCC first issues citations against entities not otherwise
regulated by FCC for violations of laws it enforces. For subsequent
violations by such entities, or for initial violations by FCC regulated
entities (such as common carriers, broadcasters, or other licensees), FCC
may impose a civil penalty through forfeiture proceedings or take
additional enforcement actions that include, for example, cease and desist
proceedings, injunctions, and revocation of common carrier license
operating authority for violations of the requirements of the national
registry.25 Enforcement of a forfeiture order is done in federal court
through the Department of Justice, which handles violations of statutes
that FCC enforces.26 Fines collected through civil penalties go to the
U.S. Treasury's general fund and are not retained in either commission's
27
accounts for their use.
As of December 2004, FTC filed 9 lawsuits for injunctive relief, and in
some cases, consumer redress, and the Department of Justice had filed one
lawsuit on behalf of FTC for violations of the national registry. As of
December 2004, FCC reported that it had initiated 99 investigations
against companies that allegedly made calls to consumers on the national
registry.
24FTC can seek civil penalties on its own when the Department of Justice
fails to bring suit within 45 days of FTC having forwarded the case for
filing and litigation. 15 U.S.C. S:56 (2000).
25Forfeiture proceedings are administrative proceedings to determine the
appropriate monetary penalty for repeated or willful violations. They must
follow a violation of a previously issued citation, unless the violator
holds an FCC license or other authorization, in which case no warning is
necessary before a forfeiture is proposed. They involve notice and an
opportunity to respond before issuance of a forfeiture order requiring
payment of a civil penalty. See 47 U.S.C. S:S: 503(b) (2001); 47 C.F.R. S:
1.80 (2003). Cease and desist proceedings generally involve an order to
show cause why an order to cease and desist from violating any FCC rule or
regulation should not be issued. After a hearing or waiver of the hearing,
FCC may decide to issue the cease and desist order, and the order may be
appealed to the U.S. Court of Appeals for the District of Columbia. See 47
U.S.C. S:S: 312(b)(c), 402(b) (2001). An injunction requiring compliance
with an FCC order may be issued by a federal court upon application by the
FCC or the U.S. Department of Justice for enforcement of the order. See 47
U.S.C. S: 401(b) (2001).
2647 U.S.C. S:S: 504(a), 401(c) (2001).
2747 U.S.C. S: 504(a) (2001); 31 U.S.C. S:3302(b) (2001).
Fees Collected for the National Registry Did Not Cover Costs in Fiscal Year
2003 But Did in Fiscal Year 2004
FCC's investigations have resulted in 16 citations for violations of the
national registry. In addition, 2 companies have entered into consent
decree settlements28 involving substantial voluntary monetary payments and
implementation of strict compliance plans, 54 investigations have been
closed because the calls underlying the complaints were not legally
actionable, and the remaining 27 investigations are under active
consideration. In some instances, consumers had an established business
relationship but did not realize it. Also, as mentioned earlier, FTC and
FCC have various factors they consider with respect to which complaints to
pursue; therefore, not all complaints are investigated. Appendix I
provides more information on FTC's ten lawsuits, and FCC's 16 citations
and 2 consent decrees related to enforcement of the national registry
provisions.29
FTC collected about $5.2 million in fees in fiscal year 2003 and incurred
costs of about $14.6 million to implement, operate, and enforce the
national registry. This is a shortfall of about $9.4 million. In fiscal
year 2004, FTC collected about $14 million in fees and incurred costs of
about $14 million to implement, operate, and enforce the national
registry. FTC attributed the FY 2003 shortfall in fees to unexpectedly
short partial year operations (less than one month) and to fees being set
too low due to lack of information about (1) the number of telemarketers
that would pay to access the registry and (2) the average number of area
codes that telemarketers would access.30 FTC revised the national registry
access fee effective September 1, 2004, using information on the number of
telemarketers that had actually paid to access the registry in fiscal year
2003 and the number of average area codes accessed. FTC uses funds
28FCC officials told us that unlike consent decrees at other agencies,
FCC's consent decree process doesn't involve adoption by court order. In
this context, a consent decree settlement is a written agreement between
FCC and the party under investigation that is adopted by FCC order. See 47
C.F.R S:1.93. Such a settlement may be reached in the context of ongoing
FCC administrative proceedings, such as forfeiture or cease and desist
proceedings. See id. S:1.94. Any violation of such a consent decree is
considered a violation of an FCC order and can subject the party to the
sanctions associated with such a violation. See id. S:1.95.
29FTC and FCC have taken additional enforcement actions against
telemarketers under each agency's telemarketing statutes. The 10 lawsuits,
16 citations, and 2 consent decrees reflect enforcement actions specific
to the national registry.
30According to FTC staff, the short operations period in fiscal year 2003,
which affected the fees collected, also had continuing effects into fiscal
year 2004.
from its salaries and expenses account to cover costs of implementing,
operating, and enforcing the national registry and is required to reduce
its general fund appropriations by the amount of fees collected. In fiscal
years 2003 and 2004, appropriations estimates of fees to be collected for
the national registry ($18.1 million and $23.1 million, respectively) were
greater than the actual amount of fees collected and costs incurred.31
Because the estimates were greater than the actual amounts of fees
collected by the national registry, the differences represented funds
available for other allowable expenses covered by the salaries and
expenses appropriation.32 FCC's costs associated with its enforcement of
the national registry are funded in its salaries and expenses account.
According to FCC staff, FCC does not distinguish costs associated with
enforcing the national registry from its other enforcement efforts.
In 2003 when FTC initiated its fee structure, it based the fee for the
national registry on the number of entities that would be required to pay
the fee and the number of area codes that a telemarketer would access
annually. FTC estimated that $18 million would be needed to implement,
operate, and enforce the national registry requirements. In two separate
notices of proposed rule making for the original national registry fee,
FTC stated that it made a number of assumptions to estimate the number of
entities that would be required to pay and the number of areas codes to be
accessed. Because of an absence of information available about the number
of companies then in the marketplace that made telemarketing calls to
consumers covered by national registry regulations, FTC sought public
comment on its assumptions and methodology but received virtually no
comments. Consequently, FTC estimated the fee based on those assumptions
and estimates and noted that the fees might need to be reexamined
periodically and adjusted to reflect actual experience with operating the
registry. FTC's original fee rule established an annual fee of $25 for
each area code requested from the national registry, up to a
31The estimates were closer to FTC's actual costs for implementing and
enforcing all of the provisions of its telemarketing regulations (the
Telemarketing Sales Rule), which were $20.1 million for fiscal year 2003
and $21.2 million for fiscal year 2004. While the Do-Not-Call
Implementation Act authorizes the FTC to establish only fees "sufficient
to implement and enforce the provisions relating to the `do-not-call'
registry of the Telemarketing Sales Rule," it provides that fees actually
collected are available "to offset the costs of activities and services
related to the implementation and enforcement of the Telemarketing Sales
Rule, and other activities resulting from such implementation and
enforcement." Pub. L. No. 108-10,117 Stat. 557, 557 (2003).
32GAO, Federal User Fees: Budgetary Treatment, Status, and Emerging
Management Issues, GAO/AIMD-98-11 (Washington, D.C.: Dec. 19, 1997), 18.
maximum of $7,375 (300 area codes or more). The first 5 area codes are
provided at no cost. FTC provided for free access to the first 5 area
codes to limit the burden that might be placed on small businesses that
only require access to a small portion of the national registry. FTC's
rule also permits exempt organizations to have free access to the national
registry with the intent that should the exempt organizations want to
purge their calling lists as a matter of customer service, they would be
able to obtain the information necessary to do so. Once a telemarketer
paid for access to a selected number of area codes, or was granted free
access, it could access those area codes as often as it deemed appropriate
for the annual period covered. If, during the course of the annual period,
a telemarketer needed to access telephone numbers from more area codes
than those initially selected, it would be required to pay for access to
those additional area codes. For purposes of additional payments, the
annual period was divided into two periods of 6 months each. Obtaining
additional area codes for the first 6-month period required a payment of
the full year fee of $25 for each new area code whereas for new area codes
to be used for the second 6-month period, telemarketers would be assessed
a reduced $15 fee for each area code. Table 2 shows FTC's estimation of
the national registry fee to raise approximately $18 million in fiscal
year 2003.
Table 2: FTC's Estimation of National Registry Fee to Raise about $18
million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2003
Average number of area codes accessed
Multiplied by cost per area code $25
Average amount of fees to be collected per entity $1,825
Multiplied by estimated number of entities accessing database 10,000
Estimated total amount to be collected in fees $18,250,000
Source: Federal Register dated July 31, 2003.
Note: Federal Register Vol. 68. No. 147, (dated July 31, 2003), pg. 45141.
According to FTC, it collected about $5.2 million in fiscal year 2003. FTC
said it collected fewer fees than anticipated for two reasons. First, FTC
did not begin collecting fees until September 2003 because its
appropriations funding, which provided the total estimated fees that could
be collected, was enacted later than anticipated, delaying implementation
of the fee collection process. Second, the number of telemarketers that
accessed the national registry and the average number of area codes that
they accessed were smaller than FTC estimated. FTC estimated that 10,000
companies would pay for the national registry data and that, on average,
telemarketers would access 73 area codes. In June 2004, FTC used
information from the national registry to reexamine its estimates for
setting the fee. As figure 2 shows, about 7,100 companies had paid for
access to the national registry as of June 2004. The average number of
area codes accessed was 63.
Figure 2: Number of Telemarketers Who Accessed the National Registry, as
of June 1, 2004
FTC published a revised fee rule for the national registry on July 30,
2004. The revised final fee rule established the fee for each area code to
be $40 per year, with the first 5 area codes provided to each telemarketer
at no charge. Exempt organizations would continue to be allowed access to
the national registry at no charge. The maximum amount that would be
charged any single telemarketer would be $11,000, which would be
charged to any telemarketer accessing 280 or more area codes.33 The
reduced fee charged to telemarketers requesting access to additional area
codes during the second 6 months of the semiannual period would be $20.
The fee was based on the number of telemarketers that had accessed the
national registry as of June 1, 2004, the actual average number of area
codes accessed, and FTC's estimate that $18 million would be needed to
cover estimated costs associated with the national registry in fiscal year
2004. 34 Table 3 shows FTC's estimation for the national registry fee to
raise approximately $18 million in fiscal year 2004. In fiscal year 2004,
FTC collected about $14 million in fees.
Table 3: FTC's Estimation of National Registry Fee to Raise About $18
Million to Cover Estimated Costs to Implement, Operate, and Enforce the
National Registry in Fiscal Year 2004
Average number of area codes accessed
Multiplied by cost per area code $40
Average amount of fees to be collected per entity $2,520
Multiplied by estimated number of entities accessing database 7,100
Estimated total amount to be collected in fees $17,892,000
Source: FTC.
Funds collected through the national registry fees are to cover FTC costs
related to the implementation, operation, and enforcement of the national
registry. In its original fee rule dated July 31, 2003, FTC identified its
costs as falling into three broad categories.35 First are the actual
contract costs along with associated agency costs to develop and operate
the national registry. The second category of costs relates generally to
enforcement efforts. The third category of costs covers FTC infrastructure
and administration costs, including information technology structural
supports. Table 4 summarizes the costs incurred for the three broad
categories plus overhead costs for fiscal years 2003 and 2004, as reported
33The final rule for the fee structure reduced the maximum number of area
codes for which an entity would be charged from 300 to 280 to more closely
correlate the charges with the number of active area codes in the country.
34While FTC estimated that $18 million would be needed to cover costs
associated with the national registry in fiscal years 2003 and 2004, FTC
said that estimates of the annual costs associated with operating the
national registry may vary from fiscal year to fiscal year.
35Federal Register Vol. 68. No. 147, pg. 45141.
by FTC. As shown in the table 4, FTC incurred costs of about $15 million
in fiscal year 2003 and about $14 million in fiscal year 2004.
Table 4: FTC's Costs Related to the National Registry for Fiscal Years
2003 and 2004
Cost for fiscal Cost for fiscal
Cost category year 2003 year 2004
Contract $4,332,338 $4,339,200
Enforcement $3,449,715 $7,282,188
Infrastructure and overhead $12,375,012 $9,432,276
Total $20,157,065 $21,053,664
Minus costs associated with other
telemarketing $5,550,815 $7,077,409
sales rule efforts
Net total costs for national registry $14,606,250 $13,976,255
FTC Reported Three Objectives to Measure Whether the National Registry Was
Successful
Source: FTC.
According to FTC staff, the commission had three objectives to measure
whether the national registry was successful. These were to (1) have the
system up and running during calendar year 2003, (2) to ensure that the
system could enroll about 60 million telephone numbers in the national
registry in the first year of operation, and (3) reduce unwanted calls to
consumers who sign up for the national registry, approximating Missouri's
experience of reducing telemarketing calls by about 80 percent.
The national registry was up and running in calendar year 2003.
Performance goals were contained in FTC's contract with AT&T Government
Solutions to develop and maintain the national registry. The contractor
was responsible for, among other things, consumer registration,
telemarketer access to the registry, law enforcement access to the
registry, and collecting consumer complaint information concerning
violations of the national registry provisions. The contract contained
specific performance measurements for completing various tasks associated
with the national registry. FTC considered the national registry to be
fully operational October 2003 when both commissions began enforcing
national registry provisions.
FTC also reached its expectation based on states' experience to enroll 60
million telephone numbers in the national registry in the first year of
operation. FTC began receiving consumer registration of telephone
numbers in June 2003, and, as of June 2004, 62 million telephone numbers
had been registered on the national registry.
On the basis of the experience of certain states with do-not-call registry
laws, FTC anticipated that consumers who entered their telephone numbers
in the national registry would experience as much as an 80 percent
reduction in unsolicited telemarketing calls. However, measuring the
actual reduction in telemarketing calls is not possible because baseline
data on the volume of telemarketing calls consumers received prior to the
national registry's implementation are not available to make a comparison
and determine what change has occurred in calls received. As an
alternative, FTC has cited polls taken by Harris Interactive(R) and the
Customer Care Alliance as evidence that the national registry has resulted
in a reduction of unwanted telemarketing calls. Specifically, in January
2004, Harris Interactive(R) found that about 90 percent of those who
signed up for the national registry had fewer telemarketing calls, and 25
percent of those registered indicated they had received no telemarketing
calls since signing up.36 In June 2004, a Customer Care Alliance telephone
survey reported that 87 percent of those who had signed up for the
national registry had received fewer telemarketing calls.37 This survey
also attempted to quantify changes in the volume of unsolicited calls
registered consumers had received since signingup, reporting an 80 percent
reduction; however, we have concerns about how this was done and the
accuracy of the results. The two surveys may provide indications of the
national registry's overall performance; however, we are uncertain about
how representative the results of each actually are of the opinions and
experiences of adults nationwide because, for example, the Harris survey
did not use a probability sample that can be projected nationwide and the
Customer Care survey had a low response rate, among other things.
Notwithstanding these concerns about the surveys' methodologies and
implementation problems, the FTC told us that they found no evidence,
anecdotal or otherwise, that contradicts the results of the surveys.
Furthermore, FTC considers the surveys' results to have found that most
people know about the national registry and that most people who say
36Harris Interactive(R) conducted an on-line poll within the United States
between January 19 and 28, 2004, among 3,378 adults nationwide.
37Customer Care Alliance is a consortium of companies that provides, among
other things, services for clients to assess consumer satisfaction with
their products. The company conducted its national registry telephone
survey of 851 people from February through April 2004.
they have a telephone number on the national registry say they are getting
fewer calls, creating some confidence that the results are generally
correct. See appendix II for a more detailed discussion of the two
surveys.
FTC staff said that complaints filed also provide an alternative measure
of the success of the national registry. As of December 11, 2004, 675,337
complaints had been filed since FTC and FCC began accepting complaints in
October 2003. FTC staff noted that as a percentage of the total number of
telephone numbers registered, this is about 1 percent and is indicative of
the success of the national registry. While the number of complaints may
be an indication of the national registry's success, few complaints could
also be the result of consumer complacency or reluctance to take the time
to file a complaint.
The Implementation Act required FTC and FCC to each provide an annual
written report for fiscal years 2003 through 2007 on the national registry
to include (1) an analysis of the effectiveness of the national registry;
(2) the number of consumers who have placed their telephone numbers on the
national registry; (3) the number of persons paying fees for access to the
national registry and the amount of such fees; (4) an analysis of the
progress of coordinating the operation and enforcement of the national
registry with similar registries established and maintained by the various
states; (5) an analysis of the progress of coordinating operation and
enforcement of the national registry with the enforcement activities of
the FCC pursuant to the Telephone Consumer Protection Act; and (6) a
review of the enforcement proceedings under the Telemarketing Sales Rule
in the case of FTC and Telephone Consumer Protection Act in the case of
FCC. The FCC issued its annual report for fiscal year 2003 on December 15,
2004. As of December 2004, the FTC had not issued its annual report for
fiscal year 2003, but it plans to have it issued by February 2005.
We provided FTC and FCC with draft copies of this report for their review
and comment. FTC and FCC agreed with the contents of our report and
provided informal technical comments on the draft, which we have
incorporated where appropriate. In addition, FTC noted that quantitative
measurement of the effectiveness of a program based on "before and after"
snapshots is difficult, particularly in situations like the national
registry where only anecdotal evidence of a baseline for the "before"
figure exists. According to FTC, when reports from consumers, the media,
and professional surveyors consistently conclude that the national
registry effectively and successfully protects registered consumers
against
Agency Comments
invasions of their privacy by most commercial telemarketing calls, it is
reasonable to infer the program is working as intended.
We plan to provide copies of this report to Commissioners of the Federal
Trade Commission and the Federal Communications Commission and
interested congressional committees. We will make copies available to
others upon request. In addition, this report will be available at no
charge
on GAO's Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact
me on (202) 512-8777 or at [email protected]. Individuals making key
contributions to this report are listed in appendix IV.
Paul L. Jones, Director
Homeland Security and Justice Issues
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the National
Do-Not-Call Registry
The Federal Trade Commission (FTC) identified ten lawsuits related to the
National Do-Not-Call Registry (the national registry) since enforcement of
the national registry became effective October 1, 2004. The Federal
Communications Commission (FCC) has issued 16 citations for violations of
the national registry and has entered into 2 consent decrees settling
investigations of alleged violations of the national registry.
The ten FTC lawsuits are as follows:
o Telephone Protection Agency, Inc., was charged with falsely claiming
that it would register consumers with the FCC's national registry, when,
in fact, FCC had no such list at the time. The charge also included other
violations of the Telemarketing Sales Rule. (Ongoing litigation.)
o National Consumer Council was charged with engaging in or causing
others to engage in initiating telephone calls to consumers on the
national registry and initiating or causing others to initiate telephone
calls to consumers within a given area code without first paying the
required access fee for the national registry data, among other violations
of the Telemarketing Sales Rule. (Preliminary injunction in place,
litigation ongoing.)
o Braglia Marketing Group was charged with engaging in or causing others
to engage in initiating telephone calls to consumers on the national
registry, abandoning or causing others to abandon telephone calls, and
initiating telephone calls to consumers within a given area code without
first paying the required access fee for the national registry data.
(Filed on behalf of FTC by the Department of Justice, ongoing litigation.)
o Internet Marketing Group, Inc.; OnesetPrice, Inc.; First Choice
Terminal, Inc., (Louisiana and Arizona Corporations); B & C Ventures,
Inc.; RPM Marketing Group, Inc.; National Event Coordinators, Inc.; and
several individual defendants were charged with engaging in or causing
others to engage in initiating telephone calls to consumers on the
national registry, among other violations of the Telemarketing Sales Rule.
(Preliminary injunction in place; litigation ongoing.)
o Free Do Not Call List.org and National Do Not Call List. US was
charged with falsely claiming that for a fee it would arrange for
consumers' telephone numbers to be placed on the national registry.
(Stipulated permanent injunction.)
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry
o Vector Direct Marketing, LLC was charged with unauthorized billing to
consumers' for purported do-not-call protection services and for removal
of personal information from telemarketers' files and falsely claiming to
consumers that for a fee it would remove consumers' personal information
from telemarketers' lists. (Stipulated permanent injunction entered June
2004.)
o 4086465 Canada, Inc., a corporation doing business as International
Protection Center and Consumers Protection Center was charged with falsely
claiming to consumers inter alia, that for a fee it would arrange for
consumers' telephone numbers to be placed on the national registry.
(Ongoing litigation.)
o Debt Management Foundation Services was charged with engaging in or
causing others to engage in initiating telephone calls to consumers on the
national registry and initiating telephone calls to consumers within a
given area code without first paying the required access fee for the
national registry data, among other violations of the Telemarketing Sales
Rule. (Preliminary injunction in place; litigation ongoing.)
o 3R Bancorp was charged with engaging in or causing others to engage in
initiating telephone calls to consumers on the national registry and
initiating or causing others to initiate telephone calls to consumers
within a given area code without first paying the required access fee for
the national registry data, among other violations of the Telemarketing
Sales Rule. (Litigation ongoing.)
o FGH International, Inc. was charged with initiating or causing
telephone calls to numbers on the national registry and calls to consumers
within a given area code without first paying the required access fee.
(Litigation ongoing.)
FCC has issued 16 citations for violations of the national registry and
has entered into 2 consent decrees settling investigations of alleged
violations of the national registry. Table 5 summarizes FCC's enforcement
actions as of December 31, 2004.
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry
Table 5: FCC Enforcement Actions under the National Registry as of
December 31, 2004
No. of States where affected Type of enforcement Date of action Company
name complaints consumers located action taken
1. Sep. 27, 2004 Equity One 6 California, Florida, Oregon, and Warning
letter/citation sent to Pennsylvania company.
2. Sep. 16, 2004 Envision Mortgage 13 California Warning letter/citation
sent to Services, Inc. company.
3. Sep. 07, Primus 98 California, Connecticut, Consent decree settlement
2004 Florida, -
Georgia, Illinois, $400,000 voluntary
Maryland, payment and
Massachusetts, Michigan, implementation of
New compliance
Jersey, New York, North plan.
Carolina, Ohio,
Pennsylvania,
Puerto Rico, Tennessee,
Texas, and Virginia
4. July BLS Funding 31 Arizona, California, Warning letter/citation
06, 2004 Colorado, sent to
Connecticut, Florida,
Illinois, company.
Maryland, Massachusetts,
Michigan, New Mexico, New
Jersey, and Virginia
5. July 02, 2004 See Through 123 Maryland and Virginia Warning
letter/citation sent to Windows & Doors company. LLC
6. June 04, 2004 Planet Mortgage 42 California Warning letter/citation
sent to Corporation company.
7. May 28, 2004 Fresh Start 1 California Warning letter/citation sent to
Financial company.
8. May 17, 2004 Key Financial 97 Alabama, California, Florida, Warning
letter/citation sent to Corporation Ohio, and Virginia company.
9. March 31, 2004 American Standard 13 Colorado, Illinois, and Ohio
Warning letter/citation sent to Mortgage company.
10. Feb. 12, 2004 Mortgage Concepts, 480 Arizona, California, Georgia,
Warning letter/citation sent to
Inc. Nevada, Ohio, Oregon, South company. Carolina, and Washington
11. Jan. 30, 2004 L.A.P. Holdings, 84 Arizona, California, Florida,
Warning letter/citation sent to LLC a.k.a. First Maryland, and Michigan
company. Finance
12. Jan. 12, 2004 Nations Mortgage 163 Florida and Ohio Warning
letter/citation sent to company.
13. Dec. 22, 2003 Debt Masters 1 Nebraska Warning letter/citation sent to
company.
14. Dec. 22, 2003 Ban-Cor Mortgage 109 California Warning letter/citation
sent to company.
15. Dec. 22, 2003 Cactus Cash, Inc. 14 Arizona Warning letter/citation
sent to company.
16. Dec. 22, 2003 Dynasty Mortgage 259 Arizona and California Warning
letter/citation sent to company.
Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the
National Do-Not-Call Registry
No. of States where affected Type of enforcement Date of action Company
name complaints consumers located action taken
17. Dec. 18, 2003 CPM Funding, Inc. 8 California, Florida, and New Warning
letter/citation sent to Mexico company.
18.
Nov. AT&T 29 Alabama, Initially proposed
03, Corporation California, forfeiture
2003
(FTC's Connecticut, $780,000 ($10,000 per
contractor, complainants Florida, violation)
Georgia,
Michigan, for company-specific
AT&T Government reporting 78 Minnesota, violations
New
Solutions, is a Jersey, Ohio, (Forfeiture not
unit separate Oregon, Rhode final).
Consent decree
settlement -$490,000
alleged voluntary payment and
within the company-specific Island, South implementation of
larger do-not-call Carolina, and compliance plan for
corporation.) violations, as Washington separate national
well as 438 registry and
complaints company-specific
do-not-call
investigations.
alleging
national
registry
violations
Source: FCC staff and Web site.
Appendix II: Information on the Two Surveys About the National Do-Not-Call
Registry
Two surveys have been conducted about the National Do-Not-Call Registry
(the national registry) since it went into effect in October 2003-one
survey by Harris Interactive(R) and one by Customer Care Alliance.1 The
results of these surveys may provide some indications of the national
registry's overall performance; however, we are uncertain about how
representative the results of each actually are of the opinions and
experiences of adults nationwide, and we are uncertain of the accuracy of
the measures in the Customer Care Alliance survey. Notwithstanding
limitations of these surveys, FTC considers the surveys' results to have
found that most people know about the national registry and that most
people who say they have a telephone number on the national registry say
they are getting fewer calls creating some confidence that the results are
generally correct.
The Harris Interactive Survey
The Harris Interactive survey was conducted on-line within the United
States in January 2004 with a sample of nearly 3,400 adults from its
multimillion-member Harris Poll market research panel of individuals
specially recruited to participate in large surveys. In this brief survey,
respondents were asked whether they knew about the national registry;
whether they had registered for it; and, for those who had registered, an
opinion question was asked about whether they had received more, about the
same, or less telemarketing calls since registering. While respondents
were asked whether they believed survey research firms and pollsters were
exempt from calling restrictions, they were asked no further questions
about their knowledge of what types of telemarketing calls are prohibited
and what types of calls are exempt. Of all respondents, 91 percent
indicated that they had heard of the national registry, and 57 percent
indicated that they had signed-up for it. Of those who had registered, 25
percent answered that they had received no telemarketing calls since
signingup, and 67 percent responded that they had received a little or far
less calls than before signingup. Two-thirds (68 percent) of respondents
who had registered answered that they did not know if survey
1Harris Interactive(R) conducted an additional Harris Poll survey on the
national registry; however, it was done in August 2003, just before the
registry went into effect. In this brief telephone survey of just over
1,000 adults, respondents were asked whether they knew about the national
registry, whether they had already registered or were planning to register
for it, the extent to which they expected unsolicited telephone calls to
decrease for people who registered, and asked about their knowledge of the
types of unsolicited calls to which the registry applied. There was no
attempt to measure the number of telemarketing calls respondents had
received during any time period.
Appendix II: Information on the Two Surveys About the National Do-Not-Call
Registry
research firms and pollsters were allowed to call. The survey data were
weighted using both demographic and propensity score weights to be
representative of the total adult population. However, because the survey
sample consisted of computer users in its market research panel and the
sample was selected using nonprobabilistic methods, we are uncertain how
representative the results actually are of the opinions and experiences of
adults nationwide.
Customer Care Alliance Survey
Customer Care Alliance conducted a telephone survey during February
through April 2004 with about 850 adults nationwide. Among other topics
and as in the Harris survey, respondents were asked whether they were
aware of the national do-not-call legislation, and if so, whether they had
signedup for the national registry. However, unlike the Harris survey, for
those who had signed-up, this survey attempted to quantify changes in the
number of telemarketing calls the respondents had received since signingup
for the national registry compared to prior to registering. To measure
changes in telemarketing call volume, these respondents were asked to
estimate about how many telemarketing calls they had received per month
prior to registering for the national registry and in the month prior to
being interviewed for the survey. Respondents were also asked whether they
had been on the national registry for more or less than 3 months. No
questions were asked about respondents' knowledge of what types of
telemarketing calls are prohibited and what types of calls are exempt from
the national registry. Ninety-two percent of all respondents answered that
they were aware of the national do-not-call legislation, and 60 percent of
all respondents said that they had placed their primary home telephone
number on the national registry. Respondents who had signedup for the
national registry reported receiving an average of about 30 telemarketing
calls per month prior to registering and an average of 6 calls per month
after signingup, for an 80 percent reduction.
We are uncertain how representative the results of the Customer Care
Alliance survey are of the opinions and experiences of adults nationwide
because of certain limitations. First, the reported survey response rate
was only 20 percent. Second, there appears to be a high degree of
nonresponse bias in the respondent sample that may be due to the low
response rate. The report indicates that the sample of survey respondents
overrepresented adults in the U.S. population 45 years of age and older
and underrepresented adults between the ages of 18 and 44. Additionally,
individuals with incomes of less than $35,000 were greatly
Appendix II: Information on the Two Surveys About the National Do-Not-Call
Registry
underrepresented and those with incomes of more than $50,000 were
overrepresented.
We are also uncertain about the accuracy of the measures used in the
survey because of additional limitations. First, calls from charitable
organizations were incorrectly included in a list of the types of
prohibited telemarketing calls that was read to respondents in several
questions. Second, while the approach to quantify changes in telemarketing
call volume gives the appearance of obtaining quantifiable numbers about
the national registry's effect on the telemarketing call volume, we are
uncertain about the validity of the answers to these questions. In a
telephone interview, a month is a long time period to expect respondents
to accurately recall telemarketing call volume. This recall is even more
of a problem when respondents are asked to recollect during a telephone
interview monthly call volumes from more than 3 months in the past, and
over 80 percent of the individuals who reported signingup for the national
registry said they had done so more than 3 months prior to being
interviewed. So, given the length of time that had transpired since
registering for such a large percentage of the survey sample and the
complexities of what types of telemarketing calls are prohibited and what
types of calls are exempt, we believe that it is unlikely that respondents
could have accurately estimated the average number of calls received per
month either before or after registering.
Appendix III: Comments from the Federal Trade Commission
Appendix III: Comments from the Federal Trade Commission
Appendix IV: GAO Contacts and Staff Acknowledgments
GAO Contacts
Staff Acknowledgments
(440300)
Paul L. Jones, Director (202) 512-8777
Linda R. Watson, Assistant Director (202) 512-8685
In addition to those mentioned above, David Alexander, John E. Bagnulo,
Frances Cook, Katherine Davis, and Julian L. King made key contributions
to this report.
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