Advertising Law Blog

The Federal Trade Commission announced that it will continue past January 2, 2007 its policy of forbearing enforcement of the prerecorded voice messaging policy under certain limited conditions. 

FTC and FCC Rules on Use of Prerecorded Messages

Congress has authorized two agencies - the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) - to regulate telemarketing. Those agencies have adopted telemarketing rules that are consistent in most, but not all, respects. One of the most important differences between the two agencies' rules involves the use of prerecorded messages to deliver advertisements and promotions to telephone subscribers. In short, the FCC (which has broader jurisdiction over telemarketing permits such calls where there is an established business relationship), but the FTC (which regulates most, but not all telemarketing calls), takes the position that such calls would be in violation of its call abandonment provisions. Because both laws would apply to solicitations to consumers, the FTC's current interpretation would preclude the use of pre-recorded voice using autodialers, although the FTC has announced that it will hold off enforcing its prohibition for a limited period of time - i.e., until the call abandonment proceedings are concluded.

The agencies' rules deal differently, however, with calls that deliver prerecorded sales messages. The FCC rules expressly state that a call placed to someone with whom the caller has an EBR is not "abandoned" when it connects to a prerecorded sales message rather than a live representative, so long as the recording begins within two seconds of the called party's greeting. The FTC's rules, however, do not contain this qualification. As a result, the FTC has now taken the position that a call that does not connect to a live representative within two seconds, even where that call delivers a prerecorded sales message within two seconds of a greeting from a person with whom the caller has an EBR, is an abandoned call.

The FTC and the FCC each recognized that their rules on prerecorded calls were in conflict. In November 2003, Voice Mail Broadcasting Corporation (VMBC) asked the FTC to resolve the conflict by confirming that delivery of a prerecorded message to a residential telephone subscriber with whom the caller has an EBR is permitted under the TSR. VMBC argued that by granting its petition, the FTC would conform its rules to those of the FCC without inviting the "dead air" and call hang-up problems that were the source of the call abandonment restrictions. VMBC also argued that callers are unlikely to abuse existing customers by using prerecorded messages excessively.

The Commission asked for comments on the proposal and announced that until the proceeding was concluded, it would "forbear" from enforcement actions against marketers who delivered prerecorded messages to persons with whom they had an EBR.

The FTC appears to be unwilling to reconcile its rules with those of the FCC. In an Order dated October 4, 2006 the FTC concluded that permitting EBR based prerecorded calls would have "potential hazards that prerecorded messages may pose for their health and safety when home telephone lines cannot be released in emergencies" and stated that the abandonment provisions would essentially ban such calls by treating each call as abandoned, and set January 2, 2007 as the expiration date on its forbearance policy.

On December 18, 2006, however, the FTC issued a notice stating that it would continue its previously announced policy of forbearing from enforcing the prohibition of prerecorded calls in the TSR's call abandonment provisions, until the conclusion of the prerecorded call amendment proceeding.

It is not clear when this process will conclude. Therefore the FTC's current enforcement of prerecorded calls has not significantly changed. However, it is worth noting, the notice reiterates the requirements of the safe harbor, and emphasizes that the forbearance policy applies only to prerecorded telemarketing calls that comply completely with the safe harbor requirements. Telemarketers must conduct all activity in conformity with the following terms:

1. The seller or telemarketer, for each such telemarketing call placed, allows the telephone to ring for at least fifteen (15) seconds or four (4) rings before disconnecting an unanswered call;
2. Within two (2) seconds after the person's completed greeting, the seller or telemarketer promptly plays a prerecorded message that:

1. Presents an opportunity to assert an entity-specific Do Not Call request at the outset of the message, with only the prompt disclosures required by § 310.4(d) or (e) preceding such opportunity; and
2. Complies with all other requirements of the TSR and other applicable federal and state laws.

The FTC reiterated its position that, as the foregoing criteria indicates, "an interactive feature (pressing a button during the message to connect to a sales representative or an automated system to make a Do Not Call request) would be ideal . . .to protect consumers' Do Not Call rights under the TSR.

Where will this end up? Stay tuned. Plainly, those utilizing this technology must be prepared to demonstrate a legitimate EBR. Moreover, given the FTC's express limitation on the scope of the safe harbor, those relying on it should be prepared to demonstrate compliance. Finally, this matter needs to be watched closely as the FTC's forbearance policy could expire in short order.