UNITED STATES – Big business was dealt a blow this past July when the FCC issued a new Declaratory Ruling that significantly strengthens the Telephone Consumer Protection Act (TCPA). The TCPA is probably best known for spurring the FCC in 2003 to implement a National Do Not Call Registry (Registry) that generally prohibits telemarketers from placing solicitation calls to consumers who have added their names to the Registry. The FCC has since issued in 2012 the prior-express-written-consent rule whereby telemarketers who use an artificial voice, pre-recorded message, or automatic telephone dialing system (ATDS) can no longer solicit consumers by phone without first obtaining express, written consent from the consumer and offering an easy opt-out mechanism for the call. Nevertheless, some companies using these techniques have continued to solicit customers, relying on laxer consent standards or established business relationships between the consumer and the company. The FCC’s Declaratory Ruling this past July clarifies that the 2012 prior-express-written-consent rule applies to each call, and no prior consent will suffice unless that express, written consent includes a “clear and conspicuous disclosure” that: (1) the telemarketing call may be made using an ATDS, an artificial voice, or a prerecorded message; and (2) consent is not required to make a purchase. See TCPA Declaratory Ruling and Order, FCC 15-72, F.C.C. (July 10, 2015). This order, which will take effect October 8, 2015, will greatly undercut current telemarketing practices and have a dramatic impact on businesses that rely on telemarketing to make sales.
New hope for such businesses has sprouted, though, in the Eastern District of Michigan where the U.S. District Court has announced that companies who contract their cash flows appropriately can continue to push their product by phone on National Do Not Call Registry subscribers under the “Nonprofit Exception” to the TCPA regulations. See generally Wengle v. DialAmerica Marketing, Inc., No. 14-cv-10644 (E.D. Mich., Sept. 22, 2015).
In Wengle, DialAmerica Marketing, Inc. (“DialAmerica”), a for-profit telemarketing company, contracted with the Special Olympics of Michigan (“SOMI”), a nonprofit tax-exempt organization, to sell magazines to partially benefit SOMI. DialAmerica contacted the plaintiff, a member of the National Do Not Call Registry, pursuant to this SOMI program on multiple occasions. The plaintiff brought suit against DialAmerica, claiming that the telemarketing company had violated 47 CFR § 64.1200(c)(2), which prohibits telephone solicitation to consumers on the Do Not Call Registry. The issue was whether DialAmerica’s arrangement with SOMI, despite attempting to sell magazine, met a nonprofit exception whereby calls placed “by or on behalf of” a tax-exempt nonprofit organization are not considered telephone solicitation. 47 CFR § 64.1200(f)(14).
The court ultimately granted summary judgment for DialAmerica, finding that the SOMI program was within the nonprofit exception. What’s so interesting about this decision, though, is where the court has opted to draw the line. DialAmerica had previously touted a Sponsor Program in which the company contacted consumers to sell magazines and donated a percentage of the proceeds to a non-profit organization. The FCC rejected this program, however, labeling it outside the scope of the nonprofit exception. Under the SOMI program, DialAmerica telemarketers similarly called consumers on the National Do Not Call Registry to sell magazines. However, the court noted a couple of “material” differences: (1) the SOMI contract expressly provided that SOMI had engaged DialAmerica to sell magazines “on behalf of” SOMI; (2) SOMI had authority to alter the telemarketing script that DialAmerica used; (3) the resulting contractual relationship from any magazine sale was between SOMI and the consumer; (4) customers paid SOMI directly; and (5) DialAmerica could collect direct donations for SOMI without the customer having to buy any magazines. While at first blush this sounds remarkably dissimilar from the earlier Sponsor Program, some of these differences are hollow.
For example, it is true that SOMI initially received 100% of each magazine sale under the program to be deposited in a SOMI bank account. However, all proceeds were then forwarded to DialAmerica’s headquarters “for processing.” Subsequently, DialAmerica would remit to SOMI any direct donations and 12.5% of magazine proceeds. The rest remained with DialAmerica. The Wengle decision signals that businesses concerned about the recent tightening of TCPA regulations can feel a little more at ease knowing that so long as they use the right language in their contracts and the charities see the money before anybody else, these businesses can continue to contact National Do Not Call Registry subscribers to sell their products (albeit using less lucrative techniques than ADTS and prerecorded messages).
