Consumer Protection Newsletter
[1st Quarter, March 2004]
In recent years,
consumer protection issues in the communications and information
sectors have taken center stage among federal and state regulators
and legislators. New and significant legal and regulatory obligations
have been imposed – and millions of dollars in penalties assessed
– that make it more costly and complicated for service providers
and vendors (and those who rely on them) to conduct business, even
as these firms seek ways to cut costs on customer acquisition and
retention activities.
Davis Wright
Tremaine (DWT) is a national leader representing clients in the
treacherous and changing landscape of consumer protection law and
regulation. DWT lawyers have a wealth of experience in assisting
clients with the details and pitfalls of the key consumer protection
issues of the day, including: telemarketing, customer privacy, slamming,
cramming and truth-in-billing, anti-spam laws, post-detariffing
obligations, and quality of service.
In order to
help our clients and friends keep up with new developments in the
area, DWT is publishing a quarterly newsletter highlighting key
federal and state decisions and rulemakings, recent enforcement
actions and other items of interest. This is the inaugural issue.
If you have any questions or require assistance, please contact
one of the DWT lawyers listed below.
San
Francisco: Suzanne
Toller, (415) 276-6536
Washington, D.C.: James
M. Smith, (202) 508-6688; Ronald
London, (202) 508-6635
Federal
Do-Not-Call Rules Upheld
Two federal
courts denied challenges to the new federal “do-not-call”
rules by, respectively, commercial telemarketers and charitable
“telefunders.” In Mainstream Marketing Services
v. FTC, the United States Court of Appeals for the Tenth Circuit
in Denver considered challenges to rules adopted by the Federal
Trade Commission (FTC) and the Federal Communications Commission
(FCC) to create and enforce the new National Do-Not-Call Registry.
The Tenth Circuit reversed a decision by the United States District
Court for the District of Colorado that found the registry violated
the First Amendment to the U.S. Constitution. The District Court
had held the registry was an unconstitutional limit on commercial
speech because it prohibited telemarketing sales calls to consumers
who had enrolled, but allowed political, survey and charitable calls
even though all unsolicited calls intrude on consumer privacy. The
Court of Appeals held that the FTC and FCC had permissibly focused
on telemarketing sales calls given the lesser protection afforded
commercial speech, and that the government showed the registry would
advance consumer privacy notwithstanding exemptions for politicians,
charities and surveys, and for companies that have an established
business relationship with the called party.
Shortly thereafter,
the United States District Court in Maryland issued its decision
in National Federation of the Blind v. FTC, in which charities
that use for-profit telemarketers to raise funds (i.e.,
“telefunders”), had challenged the application of the
FTC’s entity-specific do-not-call rules and other regulations
to them while charities placing such calls themselves are not so
regulated. The FTC claimed that the Telemarketing and Consumer Fraud
and Protection Act and USA PATRIOT Act gave it jurisdiction only
over for-profit telemarketers, but not over charities themselves,
and therefore its decision to regulate to the extent of its authority
satisfied constitutional limits. The court agreed, holding that
the restrictions and duties applicable to telefunders but not charities
were fairly based on divergent incentives between the two groups,
and that the impact of the rules were nominal in any event.
The CAN-SPAM Act: Businesses Can Still Send
Spam If They Follow the Rules
The federal
anti-spam statute, known as the Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003 or CAN-SPAM Act of 2003 (Public
Law No. 108-187) became effective Jan. 1, 2004. The CAN-SPAM Act
does not prohibit the sending of unsolicited commercials emails
or “spam.” Rather than being a prohibitory law, the
CAN-SPAM Act is more akin to a labeling law.
To promote truth
in advertising, the sender of a commercial email must make
it “clear and conspicuous” that the primary purpose
of the email is to advertise a service or product. In addition to
ensuring the email advertisement is labeled as such, the Act also
prohibits (i) falsification of the email header information (requiring
all information that appears in the line identifying the sender
to be truthful); (ii) false or misleading subject headings, and
(iii) the false registration of email addresses in connection with
email advertising.
All commercial
emails must also include an opt-out option, by which the recipient
can request that the sender cease future email communications. The
most powerful provision of the Act may be its explicit preemption
clause, which effectively displaces the 36-state anti-spam laws
that currently exist, “except to the extent that any such
statute, regulation, or rule prohibits falsity or deception in any
portion of a commercial electronic mail message or information attached
thereto.” There is no exemption from the law for those senders
who have a preexisting or current business relationship with the
recipient. Instead of providing such an exception, the federal law
carves a narrower exception, one for those with transactional
or relationship messages.
The FTC is charged
with several compliance action items including (i) establishing
a list of criteria to help determine whether the “primary
purpose” of an email is commercial; (ii) to modify the definition
for “transactional or relationship messages; (iii) to establish
and implement a “do not email” registry; and (iv) to
work with the FCC to promulgate rules to protect wireless consumers
from receiving unwanted mobile service commercial messages.
FCC Proposes Measures Against Unsolicited Text,
Voice Messages to Wireless Phones
The Federal
Communications Commission (FCC) issued a combined Notice of Proposed
Rulemaking (NPRM), opening a new docket under the Controlling the
Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM
Act”), and a Further Notice of Proposed Rulemaking (FNPRM)
in its telemarketing docket under the Telephone Consumer Protection
Act (TCPA) to consider rule changes to protect consumers from unwanted
text and voice messages sent to wireless phones. The CAN-SPAM Act
NPRM seeks input on issues involving the extent to which industry
will be able to limit or avoid sending text messages to cellular,
PCS and other wireless devices. Specifically, the Commission seeks
comment on (i) the ability of senders to determine whether a message
will go to a mobile phone and the methods available to make such
determinations; (ii) how to enable subscribers to avoid such messages;
(iii) whether wireless providers should be exempt from whatever
rules evolve for messages sent to their own customers; and (iv)
whether senders will be able to comply with the Act given “unique
technical limitations” of wireless, in particular message
length limitations, and the “commercial email” designation
the CAN-SPAM Act requires. Comments and Reply Comments are due on
April 30 and May 17, 2004, respectively. Contact a DWT attorney
listed above for further information.
The TCPA FNPRM
seeks comment on application of statutory and regulatory restrictions
against auto-dialer calls to wireless phones in a wireless local
number portability environment where consumers can “port”
wireline numbers to wireless phones, and vice versa, but where there
is no presently available database to track such changes. Specifically,
the Commission seeks comment on the potential adoption of a limited
“safe harbor” for telemarketers that call wireless numbers
recently ported from wireline service. The Commission also is taking
the opportunity presented by the issuance of an FNPRM on wireless
portability and safe harbor issues to consider whether to amend
its National Do-Not-Call Registry rules to require companies to
download the registry every thirty (30) days as opposed to the existing
quarterly requirement. The FCC inquiry tracks a recent change raised
in a rulemaking by the Federal Trade Commission, which is required
by the 2004 Appropriations Act to replace its quarterly requirement
with a one-a-month rule. Comments and Reply Comments are due on
April 15 and April 26, 2004, respectively. Contact a DWT attorney
listed above for further information.
CPUC Revises Proposed Consumer Protection
Rules (R.00-02-004)
On March 2,
2004, the California Public Utilities Commission (CPUC) released
a revised Draft Decision regarding its proposed consumer protection
rules and a modified version of the rules. These materials are available
at http://www.cpuc.ca.gov/static/industry/telco/consumer+information/billofrights/index.htm.
After several years of effort, the CPUC appears prepared to take
action on some form of the current iteration of the proposed provisions.
The rules, which
would apply to both wireless and wireline carriers, would introduce
numerous burdensome requirements affecting virtually every aspect
of the carrier-customer relationship. For example, the rules would
mandate that carriers provide 14-day advance notice of material
changes to term contracts and would provide that subscribers could
terminate the contract anytime thereafter without penalty.
They also include extensive new privacy provisions which in most
instances would require “opt in” consent for the use
of subscriber information.
The comment
period for the revised rules concludes on April 6, 2004. The timing
for final action on the rules is uncertain and subject to various
factors, including the possible development of an alternate set
of rules by one of the CPUC Commissioners. The rules currently provide
that carriers would be required to bring their operations into compliance
within 120 days from the date any final rules are mailed to carriers.
The FCC and
its Enforcement Bureau announced these consumer protection-related
actions during 1Q 2004:
Commissioner
Copps' Speech to Consumer Federation Calls for New Consumer Initiatives
for Telephone Bills, Wireless Service and Cable Rates
Ronald London, Washington, D.C., (202) 508-6635, ronnielondon@dwt.com
James
M. Smith, Washington, D.C., (202) 508-6688, jamesmsmith@dwt.com
Suzanne
Toller, San Francisco, (415) 276-6536, suzannetoller@dwt.com
This Consumer Protection Newsletter is a
publication of the Telecommunications Department of Davis Wright
Tremaine LLP. Our purpose in publishing this Newsletter is to inform
our clients and friends of recent developments in the telecom industry.
It is not intended, nor should it be used, as a substitute for specific
legal advice as legal counsel may only be given in response to inquiries
regarding particular situations.
Copyright © 2004, Davis Wright Tremaine
LLP.
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