FTC Enforcement Action Reminds That Sweepstakes Entries Are Not Express Permission or EBR for Telemarketing Calls

By David Silverman The FTC entered a stipulated judgment and order with a company that sells power wheelchairs and electric scooters, to settle charges that Electric Mobility Corporation violated the Telemarketing Sales Rule’s “(“TSR”) “do not call” restrictions by placing marketing calls to consumers who submitted sweepstakes entries that included their phone numbers. The FTC’s complaint, the settlement, and the monetary penalty paid under it, reinforce prior guidance that mere provision of a phone number on such entries or similar forms is not, under the TSR, “consent” to sales calls to households on the National Do-Not-Call Registry, nor does it create an “established business relationship (or “EBR”) that allows such telemarketing. Electric Mobility made telemarketing calls to three million names on the National Do-Not-Call Registry, nearly two million of which arose from sweepstakes entries in which the prize was a mobility scooter made by Electric Mobility. The sweepstakes forms requested entrants to provide telephone numbers so that Electric Mobility could call them "if they win." The FTC claimed this entry form "did not advise consumers clearly and conspicuously that supplying a telephone number on the entry form would authorize Electric Mobility to use that telephone number for telemarketing purposes." More significantly, the FTC alleged that these sweepstakes entry forms also "did not constitute consumer inquiries or application[s] regarding a product or service offered by the seller." The latter would have allowed telemarketing calls to be made for three months thereafter absent an entity-specific do-not-call request by the consumer. It appears that Electric Mobility could have included language in the sweepstakes entry form "clearly and conspicuously" advising consumers that completion and submission would be an inquiry about mobility scooters authorizing a follow-up telephone call. But its failure to do so cost the company – the FTC imposed a $2 million fine, though it has been suspended due to the company's inability to pay, as well as a $100,000 individual fine against the company's president that was paid as part of the consent judgment to which the company agreed. The consent judgment is valid for ten years and requires the company to report any change in its status that would allow it to pay the $2 million penalty, and further requires the company's president to personally report any new business or employment involving sales or telemarketing activities. The consent judgment is subject to court approval.