Channel Partners

October 1, 2003

22 Min Read
Hold The Phone

Posted: 10/2003

Hold The Phone
Competing FTC, FCC and State Do-Not-Call Rules Create
By Joseph Sanscrainte

On July 29, the Federal Trade
Commission (FTC) released its final rules regarding the fees to be imposed on
entities accessing its do-not-call registry. This is the last piece of a complex
puzzle that began to be assembled in November 1999. Now, nearly four years later, this article attempts to provide
some insight into how the pieces of the puzzle fit (or in some cases, do not
fit) together.


In 1991, Congress gave the Federal Communications Commission
(FCC) the right to take a look at launching a national do-notcall program,
via the Telephone Consumer Protection Act (TCPA). The FCC chose not to move
forward with such a list, opting instead for the company-specific approach
wherein every company responsible for telemarketing calls must honor individual
consumers requests to not be called again. The rules the FCC promulgated in
1992 governed such company-specific lists, as well as faxes and calls made
by automatic telephone dialing systems. The FTCs telemarketing
regulations, the Telemarketing Sales Rule (TSR), went into effect as of Dec. 31,
1995. Like the FCC, the FTC adopted a company-specific donot- call regime,
along with a set of extensive regulations governing virtually every aspect of
the telemarketing process, including: disclosures; prohibitions against misrepresentations; rules regarding the
process of making a purchase; and certain rules governing specific types of
telemarketing campaigns.

In November of 1999, the FTC began a mandatory review of its
TSR rules, which culminated in the January 2002 Notice of Proposed Rulemaking
(NPRM) proposing to create a national do-not-call list, to amend its rules
regarding purchase and billing requirements, to add in provisions regarding
blocking of Caller ID and to amend the application of its rules to non-profit
calls. The FTC also requested comment on how best to regulate the use of
predictive dialers. After an extensive review and comment period that included a
public forum, the FTC released its amended TSR in December 2003.

As many in the telemarketing industry expected, the amended
TSR created a national do-not-call list managed by the FTC. The FTC also enacted a 3
percent abandonment rate for calls made by predictive dialers, required the
transmission of Caller ID information by telemarketers, enacted more extensive
rules governing purchases and collection of billing information, expanded
coverage of the rule to include upsells (sales made after an initial
telephonic transaction is completed) and extended coverage of many of the TSRs
rules to calls made on behalf of non-profits by forprofit call centers.

At the time of the release of the amended TSR, many questions
remained open with regard to the FTCs rules. Most importantly, the FTC lacked
jurisdiction over many major industries (including common carriers, banks,
credit unions, savings and loans, insurance companies and airlines); in
addition, the FTC lacked jurisdiction over intrastate call. Many of these
questions were answered on July 3, 2003, when the FCC released its new rules and
regulations implementing the Telephone Consumer Protection Act. Once again, as
expected by many in the telemarketing industry, the FCC enacted rules adopting
the FTCs do-not-call list as the official FCC do-not-call list. In addition,
the FCC promulgated rules mandating a 3 percent abandonment rate for predictive
dialer calls and requiring Caller ID transmission by telemarketers. Finally, the
FCC beefed up its existing regulations governing the use of autodialers and

Taking the above developments together with the FTCs recent
issuance of its do-notcall fee rules, it would appear that we now have one
cohesive set of do-not-call registry requirements, predictive dialer rules and
Caller ID provisions that govern the vast majority of all commercial
telemarketing calls made in the United States. However, as so often occurs when
dealing with governmental regulations, the devil is in the details.


The FCC was tasked by Congress with maximizing
consistency between its rules and the FTCs amended TSR. Although the FCC
accomplished this in large measure by adopting provisions of FTC do-not-call
rules, abandonment and Caller ID, there are still a number of significant
differences between these two regulatory schemes. (For a complete review, see
the side-by-side comparison chart below.)

As mentioned above, there are
differences between the industries and/or types of calls over which the FTC and
the FCC may assert jurisdiction. Any attempt by a telemarketer to determine what rules must be
complied with must start with a consideration of these jurisdictional questions.
In terms of substantive requirements, perhaps the most striking difference
between the FTCs and FCCs rules has to do with calls made by or on behalf
of charities. The FTC extended its jurisdiction to cover calls made by
for-profit call centers on behalf of charities; most importantly, these entities
must comply with inhouse requests by consumers. The FCC declined to extend coverage of
its rules to nonprofits and continues to completely exempt all non-profit calls
independent of source.

Another key difference between the two regulatory schemes has
to do with abandonment-rate rules the FTC requires record keeping on a per-day
per-calling campaign basis, while the FCC only requires record keeping on a
30-day basis. In addition, the FTC considers any call delivering a pre-recorded
message to be an abandoned call in that the consumer contacted is not connected with a
live sales representative within the mandatory time frame. In contrast, the FCC
does not consider pre-recorded messages delivered either with consent or
pursuant to an established business relationship to be abandoned.

The caller ID and company-specific do-notcall provisions also
provide some significant differences that must be taken into account. The FTCs
caller ID transmission rule is more generic than the FCCs rule; it merely
requires telemarketers to transmit certain caller ID information without going
into specifics as to transmission criteria. The FCCs rule specifically states a preference for one
transmission method of caller ID information, calling party number (CPN) over
another automated number identification (ANI), and also expressly prohibits the
blocking of caller ID information. The FTC rules for companyspecific do-not-call
requests state no time limit for either how long until the request must be
honored, or how long the request itself is honored; the FCC rules are 30-days
and five years, respectively.

Finally, there are a number of areas where one agency has a
set of rules that are entirely absent from the other agencys rules, including
billing requirements (FTC only), upsells (FTC only), and prohibitions
against unsolicited advertisements to facsimile machines (FCC only).


From the time the FTC began to consider creating a national
do-not-call program, the preemption question has been front and center for
all telemarketers as well as for state-level do-notcall enforcement agencies.
Although a free nationwide do-not-call registry posed significant challenges to
the industry, many teleservices professionals said a one-stop shop at the
national level would help alleviate at least some of the frustrations associated
with multiple state-level do-notcall programs. At the same time, however, the
majority of state attorneys general, although supporting the creation of a
nationwide registry in concept, made it clear that any such program should not
pre-empt existing state do-not-call systems. (Note that although the pre-emption question usually is raised
in association with do-notcall programs, this question applies across the full
range of telemarketing regulations developed at the federal level.)

Simmering in
the background of the FTCs (and in turn, the FCCs) efforts was the
fundamental issue of the states ability to assert jurisdiction over
interstate calls. Starting with Florida in 1989, all states operating
do-not-call programs had consistently asserted jurisdiction over interstate
calls via so-called long-arm statutes. Although never successfully tested in court, the ability of
states to assert donot- call enforcement powers over purely interstate calling
was (and is) potentially in conflict with the federal governments exclusive
jurisdiction over interstate commerce. (Conversely, the ability of the federal government to assert
jurisdiction over purely intrastate calls can arguably be called into question
as well.) It was up to the FTC and the FCC to navigate through these competing,
and highly volatile, concerns.

The FTC, handicapped by its highly limited jurisdictional
reach, essentially sidestepped the issue of preemption. In its Statement of
Basis and Purpose for the TSR amendments, the FTC indicated that its
do-not-call registry would not preempt the state programs, but that it would
work with the states to create a single donot- call registry system with a
single set of compliance obligations.

The FCC, with its broader jurisdiction, was nonetheless facing
its own preemption hurdles. The TCPA, the FCCs enabling statute for its telemarketing
regulations, specifically provides that in most instances, state law [is] not
preempted. In other words, the FCC was not given the authority to occupy
the field of do-not-call law; instead, Congress gave the FCC, at most, the
right to promulgate a set of rules that create a regulatory floor of
protection for consumers. The states are still entirely free to develop their own
separate rules; however, as the FCC states, telemarketers must comply with
the federal [do-not-call] rules even if the state in which they are
telemarketing has adopted an otherwise applicable exemption. Accordingly,
across the board, whether interstate or intrastate, the FCC has determined that
any less restrictive state rules are preempted.

There still remains, however, the question of state
regulations that are more restrictive (and/or different) than the FCCs
rules. Factoring in the wording of the TCPA (which refers only to more
restrictive intrastate rules developed by states), the FCC concluded any
state rule governing purely intrastate calling that is more restrictive
than an FCC rule will not be preempted; and, . . . any state regulation of interstate telemarketing calls
that differs from our rules almost certainly would conflict with and frustrate
the federal scheme and almost certainly would be preempted. When it comes to interstate enforcement of state rules, the
FCC will consider any alleged conflicts between state and federal
requirements and the need for preemption on a case-by-case basis.

Confused? Youre not alone. One thing is clear: the FCC has
indicated that states have the ability to develop more restrictive intrastate
rules, completely unfettered by federal intervention.

On the interstate side, things are a little murkier. Although
the FCC clearly states that the same floor it has laid down for intrastate
calls applies interstate as well, and that more restrictive and/or different
interstate rules will almost certainly be preempted, it will be up to
individual, case-by-case analysis by the FCC to determine what this actually
means. The number of potential conflicts between state and FCC telemarketing
regulations is extensive, however, and the ends desired by the FCC (one set of
regulations for all interstate calls) may require a correspondingly extensive
number of rulings.

How individual states will react to this approach remains to
be seen; the FCC, however, seemingly leaves the door open for denying states the
ability to enforce their telemarketing laws across state lines altogether. The
FCC finds states traditionally have had jurisdiction only over intrastate
calls…. and only goes so far as to state that interstate enforcement by
states via long-arm statutes may be protected by the language of the TCPA.
One possible implication of the FCCs carefully worded admonition to states to
avoid subjecting telemarketers to inconsistent state rules is that
attempts by states to enforce telemarketing regulations different than the FCCs
across state lines may be met with an FCC determination that states may only
enforce their rules intrastate.

Of immediate concern for telemarketers is what happens now to
all of the state do-not-call exemptions that are in addition to, and/or
different than, the FCCs rules? The answer is, to the extent any such rule is
less restrictive than the FCCs rules, it has been eliminated. Any such
exemption would take a state do-not-call program below the floor
established by the FCC, and thus, that exemption is now preempted. Any state
exemption in addition to the FCCs exemptions (e.g., face-to-face sales,
newspapers or financial institutions) no longer is in force; any state exemption that
differs from the FCC rules in a less restrictive manner (e.g., an established
business relationship exemption that offers a 24-month window) is similarly
unenforceable. States still have the right to enact and enforce laws more
restrictive than the FCCs rules with regard to intrastate calls, but almost
certainly not for interstate calls. Last, but not least, according to the
terms of the TCPA as interpreted by the FCC, all states must include in
their do-not-call databases the part of the federal do-not-call list that
relates to that state.


With enforcement of the FTC/FCC federallevel do-not-call set
for Oct. 1, 2003, there is still much to be determined with regard to state
donot- call programs. As of late August, 39 states have enacted some form of
do-not-call legislation; there are 25 live do-not-call programs up and running
right now, and 14 that are pending. In terms of the FTCs plans to work
with the states to harmonize their respective do-not-call programs, only two of
the live states, New York and Kansas, have indicated they will discontinue
donot- call programs in favor of the federal regime. Many of the states with live lists have indicated they will
share data to some extent with the federal program, and the FTC has reported 13
states already have added their do-not-call numbers to the federal list.

Of the 14 pending state lists, four Montana,
Mississippi, New Jersey, and Utah plan to create separate state do-not-call
programs. Another state, Nevada, has given its attorney general
authority to review the efficacy of the federal list and decide whether to
officially adopt it or create a separate state-run list. The remaining nine
states Arizona, California, Illinois, Michigan, New Hampshire, New Mexico,
North Dakota and South Dakota have opted to simply make use of the federal

In the meantime, there appears to be the beginning of a
backlash of sorts against the FCCs preemption plans. Richard Maloney,
director of trade practices for the Connecticut Department of Consumer
Protection, has been quoted in several sources indicating Connecticut will keep
its own registry rules intact because the states rules are stricter, and that
both intrastate and interstate calls must adhere to Connecticuts rules.
Wisconsin state Sen. John Erpenbach, author of Wisconsins No Call bill,
is reportedly urging the Wisconsin attorney general and governor to mount a
legal challenge against the FCCs new rules, stating: I would assume that
if we have to go by the FCC rules, Wisconsin would fight to the death on this
one. Erpenbach and the Wisconsin Attorney Generals office are reportedly
talking to other states that operate do-not-call lists to gauge their interest
in joining the fight. Nielsen Cochran, a commissioner of the Mississippi Public
Service Commission, which launched a state-run do-notcall list on July 1, 2003,
was quoted saying: Since . . . the FCC exerted its authority to join the FTC
on [a national do-not-call list], weve been doing nothing but trying to
figure out what it means to existing states that are implementing our own
nocalls lists. And I still dont know. Adding in prior pronouncements of
state attorneys general on this topic, it would appear this will be a recurring
issue for the FCC over the coming months.


Any entity that either directly engages in telemarketing or
outsources calling to third-party call centers must immediately address the
question of how to apply all of the new federal rules to its calling campaigns.
Every element of the FTC and FCC rules has a corresponding record-keeping
requirement. Should an entity be investigated, it will have to produce
records of sufficient detail to establish that it is in compliance with the
rules (and, as necessary, to maneuver within safe harbor provisions.)

immediate concern is determining the method by which the seller/telemarketer
will be accessing the federal do-not-call list, and, more importantly, how it
will achieve compliance. Under the FTCs do-not-call fee rules, sellers must
register and pay $25 per area code, per year (the first five are free, however.)
This fee is capped at $7,375 per year. The FTC requires separate divisions,
subsidiaries or affiliates of the seller to pay a separate annual fee when: the
entity is separately incorporated or, for a noncorporate entity such as a
partnership, is a similarly distinct legal entity; and the entity has or markets
under a different name.

Telemarketers and/or service providers hired by sellers may
access the list information for free by making use of the unique account number
of the seller on whose behalf they are providing services. Such entities may also independently and voluntarily access
the information on their own, paying the appropriate fees. All entities
accessing the list must provide certifications regarding use of the list in
conformance with the FTCs regulations. Telemarketers and/or service providers, when accessing the
list via seller-clients account numbers, must provide these account numbers,
and also identify each seller-client, to the FTC.

Given this framework, it is now up to sellers, telemarketers
and third-party vendors to determine the policies and procedures to be used in
accessing this information, and in certifying to the FTC that these policies and
procedures are in fact in compliance with the FTCs regulations. Since information is provided to individual sellers by area
code, telemarketers and third-party vendors will need to track the area codes
purchased by their seller clients to ensure that sellers are not inadvertently
given access to area codes not specifically purchased. The new federal donot-
call fee rules should also require some changes to existing contractual language
between the various parties involved.

Of even greater importance is the question of how to assure
that do-not-call numbers are not being called. Across the teleservices industry,
many experts are realizing that traditional database scrubbing techniques,
although sufficient for performance-management and efficiency purposes, are
ill-suited to handle the harsh realities of risk management for purposes of
do-not-call compliance. As the risks associated with do-not-call liability increase,
teleservices professionals will increasingly turn their attention to blocking
technologies that offer greater centralization opportunities,
and the highest level of do-not-call compliance technologically possible.

Although the new FTC and FCC enactments have answered a number
of questions, many in the teleservices industry feel that many more questions
have been raised. Given the FCCs stance on preemption, is the process of
integrating state and federal do-not-call and related regulations now underway,
or has the FCC in essence issued an invitation to states to become more creative
in promulgating ever more restrictive telemarketing regulations? Virtually every element of telemarketing law, from do-not-call
exemptions, to registration/ bonding requirements, to disclosures and billing
rules, is open for further restrictions. To the extent these rules are more
restrictive than federal rules, the FCC has indicated (at least for intrastate
calls) these rules can be enforced by the states. An additional question was
raised by the FCCs seeming unwillingness to concede states have the right to
enforce telemarketing regulations across state lines. Should the FCC make this
determination, uniformity of these rules will be that much easier to attain;
however, this would certainly be met with vigorous opposition from the states.

When it comes to do-not-call rules and harmonization of
federal and state rules, it is an open question as to the extent to which states
will participate with the federal program. Both the FTC and the FCC foresee an
18-month transition period. Logic says the more recent the do-not-call
legislation, the greater the likelihood the state in question simply opts for
using the federal list. However, since the time the FTC announced its amended
TSR at the end of 2002, the number of state-run do-not-call programs (either
implemented or planned) has actually increased from 25 to 28. For those
in the teleservices industry who saw in a federal list the prospect of one-stop
shopping for do-notcall data, this number is clearly moving in the wrong

Finally, there is the wild card presented by the
challenges filed by the American Teleservices Association (ATA) against both the
FTC and the FCC rules. Many industry experts point to a number of excellent
arguments raised by the ATA concerning overreaching by the FTC and the FCC, as
well as a long line of supportive commercial free-speech cases. Still others
raise the hurdles presented by recent decisions at the federal and state levels
regarding the constitutionality of the TCPAs facsimile rules, as well as the
sheer popularity of the do-not-call rules. Although prediction of an outcome
here would be merely conjecture, the ATAs $2 million war chest speaks volumes
about the desire and will of the teleservices industry to protect its interests.

Joseph Sanscrainte is director of regulatory affairs and
general counsel for Call Compliance Inc.

A Comparison of the FTC and FCC Do-Not-Call Rules




No coverage ofintrastate callsInterstate calls (unless otherwiseexempted; see below)No coverage of common carriers,banks, credit unions,savings and loans, companies engaged in the business of insurance, and airlinesInbound and outbound calls

Intrastate callsInterstate callsAll industries (insurance on case by case basis)Only outbound calls

RulesRegarding Charities

TSR extends many of its rulesto calls made by for-profit entities onbehalf of non-profits

Non-profits (including calls made on their behalf) completely exempt from all rules


FTC administers the federal list (thelist is maintained by AT&T Government Solutions

5-year registrationaccessible on ongoing basis totelemarketers

as per FTC rulesas per FTC rulesas per FTC rules

Do-Not-Call RegistryExemptions

Express consentEstablished business relationship (18 months for transaction based; 3 months for inquiry based)Calls by or on behalf of non-profitsDefinition/jurisdiction basedexemptionsNo comparableprovision

Express consentEstablished businessrelationship (18 months for transaction based;3 months for inquiry based)

Calls by or on behalf of non-profitsDefinition/jurisdiction based exemptionspersonal relationship calls

Do-Not-CallRegistry Fees

$29 per area code$7,350 capSellers must purchaseTelemarketers/third-party vendors may purchase or usesellers account numbers

as per FTCrulesas per FTC rulesas per FTC rulesas per FTC rules

Preemptionof StateDo-Not-Call Programs

No preemption

No preemptionNopreemptionNo preemption

No comparable provision

Less restrictiveintrastate rules preemptedMore restrictive intrastate rules not preemptedLess restrictive interstate rules preempted

More restrictive/different interstate rules almost certainly preemptedStates must include Federal level Do-Not-Call listinformation in their do-not-call lists

PredictiveDialer Rules

3 percent abandonment rate4-ring/15-second connect rulePre-recorded message consisting of name and telephone number mustbe delivered for all abandoned callsAbandonment rate measured per day per calling campaignAnyinterstate call answered by a consumer delivering a pre-recorded message consideredde facto abandoned under TSRNo comparable provision

3percent abandonment rate4-ring/15-secondconnect rulePre-recordedmessage consisting of name, telephone number and that call is for telemarketing purposes must bedelivered for all abandoned calls

30-day abandonment rate measurement periodLegal pre-recorded calls (withconsent or with existing businessrelationship) not considered abandonedPredictive dialer = automatic telephone dialing system

Caller ID

Telemarketers musttransmit number (no specifics)Telemarketers must transmit name (when made available by carrier)Substitution of ultimate sellers information allowedNo comparableprovisionNumber transmitted mustpermit consumer to make a do-not-call request during regular business hours

Telemarketers must transmit number (via CPNor ANI; CPN preferred)Telemarketersmust transmit name (when made available bycarrier)

Substitution of ultimate sellers information allowedBlocking specifically prohibitedTelemarketer number transmitted must be one thatallows consumers to identifythe caller; if ultimate seller number substituted, it must be answered duringnormal business hours

Autodialer/ Pre-recordedMessage Rules

Blanket prohibitions against abandoning ANY outbound call(seepredictive dialer rules, above)No comparable provisions

  Existing rulesregarding: autodialers extended to include calls made by predictive dialers (i.e.,no autodial calls to emergency numbers, hospitals, or cell phone/wirelessservices)Extensive rules regarding delivery ofpre-recorded or artificial voice messages


Following information must bedisclosed promptly:No comparable provision

Identity of the sellerNo comparable provisionPurpose of the call is to sell goods and/orservicesNature of goods or services beingofferedPrize promotion disclosures

Following info must be disclosed at some pointduring the call:Name of individual callerName of person/entity on whose behalf call is madeTelephone number or address at whichperson/entity may be contactedNo comparable provisionNo comparable provisionNocomparable provision


Extensive regulations governing all phone transactions; additional regulations for demand draft and pre-acquiredaccount transactions

Nocomparable provisions

Company-specific Do-Not-Call Rules

Requests not to be called must be honoredNo time frame for how long a request must be honoredNo time frame for how long until arequest is honoredFor-profit entities making calls on behalf of non-profits must honor in-housedo-not-call requests

Requests not to be called must behonoredRequestsmust be honored for a period of 5 yearsRequests must be honored within 30 days from date ofrequest

Calls made by or on behalf of non-profits completely exempt


Newly defined term in TSR; many provisions of TSR apply to attempts to make a sale after an initial transaction over the phone

No comparableprovisions


No comparable provisions

Extensive rulesregarding delivery of unsolicited advertisements to fax machines


Call Compliance Inc.

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