Advertising Law Blog

FTC Argues For Expansive Interpretation Of Telemarketing Law

These days, class-action lawsuits for illegal telemarketing calls are popping up like weeds or flowers (depending on your perspective) in a spring garden. The statute in question, the Telephone Consumer Protection Act, or TCPA, holds not only the caller responsible for illegal calls, but in some cases, the party on whose behalf the call was made.

These days, class-action lawsuits for illegal telemarketing calls are popping up like weeds or flowers (depending on your perspective) in a spring garden. The statute in question, the Telephone Consumer Protection Act, or TCPA, holds not only the caller responsible for illegal calls, but in some cases, the party on whose behalf the call was made. With penalties running as high as $1500 per illegal call and autodialers capable of making thousands of calls an hour, TCPA class actions have the potential to bankrupt all but the best-heeled of companies.

The question of the moment that courts all over the country are being asked to decide is how far liability can be stretched under the TCPA. Plaintiffs are arguing for the broadest possible definition of "on behalf of", so that virtually anyone who benefits from the telemarketing, no matter how far up or down the chain they are, should be on the hook for up to $1500 per call. Defendants want a narrower definition of liability.

The issue began bubbling through the courts in late 2009. A professional plaintiff named Philip Charvat sued satellite television provider Echostar Satellite in Ohio federal court, claiming that Echostar had hired telemarketers who made illegal calls to him after he requested to be put on their do-not-call list (According to court records, "Plaintiff argues that even if EchoStar did not initiate the calls, EchoStar can still be held liable for the TCPA violations because the calls were made by authorized agents acting on behalf of EchoStar to sell Dish Network brand satellite services").

Echostar argued that it did not make the calls, and had no ability to control the independent contractors who did make the call. The independent contractors should be responsible, said Echostar. In December 2009, the court agreed with Echostar and dismissed the case, writing that "The retailers have the sole authority to determine how to best market Dish Network brand products and whom to solicit. The retailers also remain free to solicit business on behalf of other companies, including EchoStar's competitors. Under these circumstances, it cannot be said that the telemarketing calls were made on EchoStar's behalf such that EchoStar should be held vicariously liable for the retailers' conduct."

The plaintiff appealed this decision to the Sixth Circuit Court of Appeals, and in December 2010, the Sixth Circuit referred the question to the FCC, who is given the authority by Congress to interpret the TCPA. The matter fell through the cracks for a couple of months because no one ever followed up with the FCC, until an Illinois federal court referred the matter to the FCC again, this time in February.

As part of its decision making process, the FCC in April opened the matter up for public comment. The FTC responded this month with a public comment to its sister agency. Predictably, the FTC wants a broad standard of liability that extends to what it labels "the ultimate seller". According to the FTC, a telemarketing call should be considered "on behalf of" an entity if the entity simply if the entity benefits from the telemarketing call. " There is no requirement that the person making the solicitation be the entity's agent," argued the FTC. Thus, the FTC wants to make sure "sellers will not be rewarded for turning a blind eye to those who market sellers' goods or services and whose marketing efforts inure to sellers' benefit. The seller alone is in the best position to monitor the manner in which its products are marketed because it knows who is marketing and because it benefits most substantially from those marketing activities... a narrower interpretation of "on behalf of" would result in a variety of scenarios that could completely subvert Congress's privacy-protection goals.

However, the FTC's (and class-action plaintiffs') desired interpretation is at odds with traditional principals of agency law. Under normal circumstances, companies are legally responsible for the acts of their employees, but not the acts of independent contractors as long as the companies do not micro-manage how the contractors do their jobs.

The FCC will now take the matter under advisement and issue its decision. The issue will then go back to various courts around the country as the FCC's interpretation is tested to see if it accords with state laws of agency, as well as Congressional intent in passing the TCPA and principles of fairness.