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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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