Advertising Law Blog

On May 9, 2013, the FCC clarified the extent to which sellers can be held liable for robo-calls and texts sent by third-party marketers on their behalf. Although it did not take the broadest definition of these terms possible, the FCC nonetheless broadened liability beyond the literal terms of the TCPA. The matter had been pending before the FCC for more than two years.

At issue was the extent of vicarious liability under the TCPA for the acts of third-party marketers. One part of the TCPA allows people on the Do-Not-Call List the right to sue if they have received more than one call "by or on behalf of" the same entity in a twelve month period. Another section of the statute gives people the right to sue anyone who "initiates" robo-calls or unsolicited texts without prior consent. The TCPA does not define "initiates" or "on behalf of" and the robo-call/text section does even not contain the phrase "on behalf of" so for years, sellers had argued with varying degrees of success that they could not be held responsible for third parties acting on their behalf. In 2011 the FCC was tasked with sorting out this issue by two federal courts that referred lawsuits to the federal agency.

The FCC concluded that a person or entity only "initiates" a call when it "takes the steps necessary to physically place a telephone call, and generally does not include persons or entities, such as third-party retailers, that might merely have some role, however minor, in the causal chain that results in the making of a telephone call."

If the FCC stopped there, sellers could escape the TCPA by hiring someone else to initiate the calls or texts for them. However, the FCC ruled that sellers are vicariously liable for calls and texts made by third-party marketers if the third party is the seller's agent. By ruling this way, the FCC went beyond the literal language of the statute which requires a seller to "make" or initiate" a call in order to violate the robo-calling provisions. An agency relationship should be judged, according to the FCC "under a broad range of agency principles, including not only formal agency, but also principles of apparent authority and ratification." A seller may also be liable for the acts of another under traditional agency principles if it ratifies those acts by knowingly accepting their benefits. Do-not-call violations will be judged under the same standards because "on behalf of" will be interpreted under the identical agency principals.

The FCC provided the following examples where a seller could be held responsible for the acts of its marketer: the seller allows the outside sales entity access to information and systems that normally would be within the seller's exclusive control, including access to detailed information regarding the nature and pricing of the seller's products and services or to the seller's customer information; the ability by the outside sales entity to enter consumer information into the seller's sales or customer systems, as well as the authority to use the seller's trade name, trademark and service mark licensing may also be relevant; where the seller approved, wrote or reviewed the outside entity's telemarketing scripts; and finally, a seller would be responsible under the TCPA for the unauthorized conduct of a third-party telemarketer that is otherwise authorized to market on the seller's behalf if the seller knew (or reasonably should have known) that the telemarketer was violating the TCPA and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct.