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Home | BakerHostetler

Randal Shaheen Quoted in National Law Journal on FTC’s Regulatory Approach

Peter Roskam Comments on Political Climate in National Law Journal

ADventures in Law

Dark Patterns Go International: FTC and International Consumer Protection Networks Conduct Sweep of ‘Deceptive Design Practices’ Related to Subscription Services, Privacy

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<figure class="wp-block-image alignright size-large is-resized"><img decoding="async" src="https://www.adventures-in-law.com/wp-content/uploads/sites/33/2021/12/magnifying-glass-rules-iStock_000076746085_Large-650x433.jpg" alt="" class="wp-image-5598" width="428"/></figure>



At last week’s <a href="https://www.adventures-in-law.com/ftc/the-11th-public-commission-meeting-talking-about-telemarketing-amg-and-yes-dream-incubation/">public Federal Trade Commission (FTC) meeting</a>, the commissioners unanimously voted for possible changes to the Telemarketing Sales Rule (TSR). Given the <a href="https://www.adventures-in-law.com/ftc/you-do-have-time-for-this-the-new-wave-of-ftc-rulemaking/">intense interest in FTC rulemaking</a> and the important role the TSR plays in <a href="https://www.ftc.gov/news-events/topics/do-not-call-registry/enforcement">FTC enforcement</a>, we thought this warranted a closer look.



 First off, this is a very different rulemaking process than what we have been discussing recently. In the past few months, the agency initiated two Mag-Moss rulemakings, one on <a href="https://www.ftc.gov/news-events/news/press-releases/2021/12/ftc-launches-rulemaking-combat-sharp-spike-impersonation-fraud">imposter fraud</a> and one on <a href="https://www.ftc.gov/news-events/news/press-releases/2022/02/ftc-takes-action-combat-bogus-money-making-claims-used-lure-people-dead-end-debt-traps">earnings claims</a>. And all signs indicate that the agency will initiate rulemaking on some as-yet-undefined privacy issues once (and if) Alvaro Bedoya gets confirmed as the fifth commissioner. Those three rulemakings utilize Mag-Moss rulemaking procedures that are quite cumbersome. It is the default rulemaking process that the FTC must use in the absence of other congressional authority.



The TSR rulemaking, however, is premised on a specific act of Congress, the Telemarketing and Consumer Fraud and Abuse Prevention Act, which allows the agency to use far less cumbersome rulemaking. Now, generally, that means that the TSR rulemaking can happen at a far quicker pace than rulemakings done using the Mag-Moss procedures. That said, this specific TSR rulemaking <a href="https://www.ftc.gov/news-events/news/press-releases/2014/07/ftc-seeks-public-comment-its-telemarketing-sales-rule">actually started eight years ago</a>, which is also the year that Kim and (the then) Kanye got married. So I guess the moral of this story is that rulemaking can be unpredictable – and you may think something has been put on the shelf only for it to suddenly reemerge. With that, we turn to the TSR.



The FTC voted out two documents that discuss the 114 comments that were filed back in 2014 when the rulemaking was initiated. The first document voted out was a <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/TSR%20NPRM%20v32.pdf">notice of proposed rulemaking</a> (NPRM), and with this document, the agency has proposed specific language to amend the rule and is seeking comment on the wisdom of these proposed changes. The changes fall into three buckets: additional recordkeeping provisions, tailored changes to the current business-to-business (B2B) exemption in the TSR and changes to certain definitions for clarification purposes.



The NPRM explains that the proposed additional recordkeeping obligations are in response to technological changes and other changes in the TSR and, most notably, to address challenges that the FTC and other enforcers have faced when investigating potential TSR violations. In particular, the proliferation of spoofed caller IDs has exacerbated this challenge and emphasizes the need for records that link call records with records that identify the specific telemarketing campaign at issue.



B2B calls are mostly exempted from the TSR. The FTC proposes to apply certain additional TSR provisions to B2B calls, specifically the prohibitions against making false or misleading calls. Part of the rationale is that such calls would violate Section 5 of the FTC Act, and therefore this change would not increase the burden on industry. The third change would fix a definition relating to charitable donation issues and make a few clerical fixes.



But there are additional things the FTC wants to consider, and thus we also have an advance notice of proposed rulemaking (ANPR). Unlike the NPRM, the ANPR does not provide any proposed language for new rule amendments. Instead, we are at the stage when there are some issues on which the FTC is generally seeking more information. Now, given the fact that this rulemaking started in 2014, it’s perhaps not shocking that the FTC reviewed the record and realized, yeah, we need some more information in part to deal with the huge changes that have occurred in the past eight years.



One of the issues the FTC wants to explore is how to deal with subscriptions and negative options that are marketed via telemarketing. You may recall that last fall the agency issued a policy statement on negative option marketing tactics that surprisingly called them out as <a href="https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-ramp-enforcement-against-illegal-dark-patterns-trick-or-trap-consumers-subscriptions">“dark patterns” in the press release</a> but didn’t use that term in the <a href="https://www.ftc.gov/system/files/documents/public_statements/1598063/negative_option_policy_statement-10-22-2021-tobureau.pdf">actual policy document</a>. But the ANPR asks whether the TSR should deal with this issue and perhaps require sellers or telemarketers “to provide consumers with reminders of negative option programs and simple cancelation mechanisms [as] an effective way of reducing consumer harm without overburdening industry.” The ANPR seeks comment on this and asks questions about matters such as the prevalence of such programs being sold through telemarketing, which cancellation methods are currently used and how notice is generally provided to consumers of such programs. Given the FTC’s strong interest in negative options, I would certainly keep a close eye on this proposal.



The second issue that is part of the ANPR is whether to get rid of the B2B exemption. The ANPR explains that since the exemption was established, the agency has seen a lot of deceptive B2B telemarketing as well as changes in how people work, particularly with the unprecedented number of people working from home since March 2020. Given these societal changes, the ANPR suggests that it is more likely that B2B calls may “impinge the privacy of a consumer’s home.”



And finally, the ANPR proposes an addition to the TSR’s coverage of inbound telemarketing calls. The TSR generally covers outbound calls but does cover a few categories of inbound calls that are made in response to advertising for, among other things, investment opportunities and debt relief services. The ANPR asks questions about whether inbound telemarketing of tech support services should also be covered, particularly given the increase in complaints directed to law enforcement about such services.



The FTC is accepting comments on the ANPR and the NPRM for the next 60 days or so. (Technically, the 60-day period starts when the documents are published in the Federal Register, and that has not happened yet, so the clock has not started ticking.) Interested parties should think about submitting comments. I would imagine the agency will act a bit more quickly for this round, but we will see what transpires. If not, we will see you in 2030 when we’ll all have flying cars.

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Daniel Kaufman

Advertising, Marketing and Digital Media

Digital Assets and Data Management

A Deeper Dive into the FTC’s Proposed Changes to the Telemarketing Sales Rule and the Continued Interest in Negative Option Programs

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