Advisories
Communications

Consumer Protection Newsletter: 1st Quarter

March 2004
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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.

 CONTACTS

San Francisco: Suzanne Toller, (415) 276-6536

DEVELOPMENTS

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. 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.

FCC ENFORCEMENT CENTER

 The FCC and its Enforcement Bureau announced these consumer protection-related actions during 1Q 2004:

EVENTS & SPEECHES

Commissioner Copps' Speech to Consumer Federation Calls for New Consumer Initiatives for Telephone Bills, Wireless Service and Cable Rates

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