Richard Newman
On December 6, 2022, New York Governor Kathy Hochul signed legislation intended to crack down on unwanted telemarketing calls.
Legislation (S.8450-B/A.8319-C) requires telemarketers to give customers the option to automatically be added to the company’s do-not-call list at the beginning of certain telemarketing calls, right after the telemarketer’s name and solicitor’s name are provided, and before addressing the purpose of the call, etc.
Caveat, telemarketers that utilize pre-recorded messages must ensure that an automated means exists for consumers to have their telephone numbers suppressed. Consult with a state attorney general (AG) defense lawyer about the applicability of the new legislation, adjustment of scripts, and the implementation of appropriate disclosures and suppression protocols.
We are dialing up our efforts to give New Yorkers a break from unsolicited telemarketing calls,” Governor Hochul said. “For too long, New Yorkers have dealt with these nuisance calls, not knowing they can avoid these interactions by being added to a telemarketer’s do-not-call list. This new legislation will protect New Yorkers from receiving frustrating, unwanted calls by better providing information on do-not-call lists.”
Under existing law (Section 399-Z), telemarketers are required to inform individuals that they may request to be added to their company’s do-not-call list. However, not at the beginning. According to the NY Attornehy General’s office, consumers usually hang up before a telemarketer or recording has mentioned the do-not-call list, allowing telemarketers to continue calling them again and again.
The FTC continues to issue Notices of Penalty Offenses concerning FTC Endorsement Guide violations to digital advertisers and marketers, both alone and in conjunction with the issuance of FTC Civil Investigative Demands.
A Notice of Penalty Offenses is a document listing certain types of conduct that the FTC has determined, in one or more litigated administrative cases (not consent orders), to be unfair or deceptive in violation of the FTC Act. Civil penalties can help the Commission deter conduct that harms consumers. Because they can exceed what a wrongdoer earned through their misconduct, penalties are intended to send a message that preying on consumers will not be profitable.
Penalty Offense Authority is found in Section 5(m)(1)(B) of the FTC Act, 15 U.S.C. §45(m)(1)(B). Under this authority, the FTC can seek civil penalties if it proves that (i) the company knew the conduct was unfair or deceptive in violation of the FTC Act, and (ii) the FTC had already issued a written decision that such conduct is unfair or deceptive.
Companies that receive such Notice and nevertheless engage in prohibited practices can face civil penalties of more than $46,000 per violation.
Recent Notices concern, without limitation, endorsements. The FTC has issued and continues to issue Notices where it has determined that certain acts or practices in the use of endorsements and testimonials are deceptive or unfair and violate the FTC Act.
Per the FTC’s Notice of Penalty Offenses, “[i]t is an unfair or deceptive trade practice to fail to disclose a connection between an endorser and the seller of an advertised product or service,
According to the Telephone Consumer Protection Act, only “residential telephone subscribers” possess a right of action for violations of the Do-Not-Call registry.
Specifically, 47 U.S.C. § 227(c)(1) directs the FCC to promulgate DNC regulations to “protect residential telephone subscribers’ privacy rights to avoid receiving telephone solicitations to which they object.” 47 C.F.R. § 64.1200(c)(2) prohibits telephone solicitation calls to “[a] residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry.”
But what about numbers that are used for both residential and business purposes?
In Chennette v. Porch.com, Inc. (50 F.4th 1217 (9th Cir. 2022)), the Ninth Circuit recently held that a fact-specific inquiry into each separate telephone number is required in order to determine whether a mixed-use telephone line is “residential.”
Here, the plaintiffs were home improvement contractors that allegedly received unsolicited text messages from Porch.com and its subsidiary, GoSmith that offered leads. Numerous plaintiffs purportedly registered their telephone numbers on the national DNC registry but allegedly received over 2,000 text messages. As a result, the plaintiffs filed suit in federal court alleging violations of the TCPA based upon use of an automated telephone dialing system to send automated text messages and violations of the DNC registry prohibitions.
The defendants filed a motion dismiss. They argued that the plaintiffs lacked standing to sue under the TCPA because their telephone numbers are used for personal and business purposes.
The Ninth Circuit reversed the lower federal court ruling.
In doing so,
On November 2, 2022, the Pennsylvania Office of Attorney General filed a lawsuit in federal court alleging that a group of companies offering lead generation services violated the Telemarketing Sales Rule and Pennsylvania consumer protection law. Specifically, the OAG alleges two unlawful advertising practices.
The first unlawful ad practice allegation is that the defendants utilized deceptive online advertisements to direct consumers to websites where they would purportedly be tricked into providing contact information and survey responses. The second unlawful ad practice allegation claims that consumers’ contact information and responses were sold to telemarketers despite numbers being on state of national Do No Call registries.
As stated in the complaint, defendants operate “dozens of websites designed for lead generating” that advertise “gift cards to popular retailers and digital payments to mobile apps” for answering various survey questions. According to the OAG, the websites require visitors to provide personal contact information and click a box indicating consent to mouseprint disclosures stating that consumer will receive prerecorded calls and text messages from marketing partners (the names thereof are disclosed to by a hyperlinked list). According to the OAG, these sellers’ products and services are oftentimes not related to the promotional offerings whatsoever.
Here, according to the OAG’s complaint, the websites violate state consumer protection law because they “create[] a likelihood of confusion or of misunderstanding” by “failing to include clear and conspicuous disclosures advising consumers that by registering their contact information with defendants they are purportedly consenting to be contacted by multiple third party sellers,
“Ringless voicemails” are messages left in a consumer’s mailbox without ringing their cell phone.
The Telephone Consumer Protection Act protects consumers from unwanted robocalls. The TCPA, in pertinent part, prohibits making any non-emergency call using an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party.
On November 21, 2002 the Federal Communications Commission issued a unanimous Declaratory Ruling and Order finding that “ringless voicemails” to wireless telephones require consumer prior express consent because they are “calls” made using an artificial or prerecorded voice and therefore covered by the Telephone Consumer Protection Act. The FCC found that RVM are subject to robocalling restrictions. Regulated under the artificial or prerecorded voice prong of the TCPA, the issue of whether the technology used to send RVM is an automatic telephone dialing system may now be moot.
The FCC has clarified that RVM is a form of robocall and is illegal if the caller did not have the consumer’s prior express consent. Violations can be enforced by the FCC or the consumer can sue in court.
“Imagine finding robocallers leaving junk voicemails on your phone without it ever having rung. It’s annoying and it’s happening to too many of us. Today we’re taking action to ensure these deceptive practices don’t find a way around our robocall rules and into consumers’ inboxes,” said FCC Chairwoman Jessica Rosenworcel.
On October 20, 2022, the Federal Trade Commisison announced that the agency is exploring a potential rule to combat deceptive or unfair review and endorsement practices, such as using fake reviews, suppressing negative reviews, and paying for positive reviews.
The FTC’s Advance Notice of Proposed Rulemaking public comment on potential consumer harms arising from deceptive or unfair review and endorsement practices.
“Companies should know by now that fake reviews are illegal, but this scourge persists,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We’re exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses.”
According to the FTC, research shows that consumers rely on reviews when shopping for a product or service, and that bogus reviews drive sales and tend to be associated with low-quality products. The rapid growth of online marketplaces and platforms has made it easier than ever for some companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse, the FTC states in its recent announcement.
The Advance Notice of Proposed Rulemaking seeks comment on the costs and benefits of a potential rule, as well as the potential harms to consumers and competition from deceptive or unfair reviews and endorsement advertising practices, including:
- Fake reviews: Reviews and endorsements by people that do not exist, have not used the product or service,
The Federal Trade Commission has a long-standing practice of issuing policy statements and reports in an effort to put digital marketers on notice of CID investigation and enforcement priorities.
For example, in 2021, FTC attorneys warned marketers about the utilization of deceptive tactics in conjunction with automatically renewing subscription services. The agency policy statement, designed to place marketers on notice that sign-ups must be clear and fully consensual, material terms conspicuous presented, and cancellation mechanisms simple to effectuate, calls attention to a newly issued enforcement policy statement regarding negative option marketing that prohibits illegal “dark patterns” that trick consumers into subscription services.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Firms that deploy dark patterns and other dirty tricks should take notice.”
The FTC approved the issuance of the enforcement policy statement with a 3-1 vote, with Commissioner Christine S. Wilson voting no and issuing a dissenting statement. Commissioner Noah Joshua Phillips also issued a separate concurring statement.
The FTC will continue to take aggressive investigative and civil penalty enforcement action against marketers that utilize deceptive automatic renewal subscriptions, continuity plans and free-trial conversion plans.
Without limitation, all material terms of the product or service, including how much it costs,
The Federal Trade Commission aggressively enforces the Restore Online Shoppers’ Confidence Act (“ROSCA”) against online marketers that offer Internet-based automatic renewals and subscriptions. Basically, ROSCA requires the clear and conspicuous disclosure of material terms, affirmative consent to certain cancellation requirements in online transactions.
The FTC has the ability to seek monetary relief, in addition to injunctive relief, for ROSCA violations. A violation of ROSCA is considered an unfair deceptive act or practice which subjects sellers to civil monetary penalties. State attorneys general may also have a cause of action.
What are the Bascis of a ROSCA Violation?
Some rather obvious components of a ROSCA violation include, but not are not limited to, a misleading “risk-free” trial offer, an undisclosed charge if consumers do not quickly cancel the “risk-free” trial, an undisclosed automatic shipment program that sends consumers unordered merchandise, difficult to follow upsells that add another layer of confusion, unlawful charges to consumers’ credit or debit cards, difficult cancellation procedures, straw owners that conceal operators’ activities and/or conceal operations from payment processing entities and banks.
Do Individual States Have Their own Automatic Renewal Laws?
Automatic renewal and subscription laws (ARLs) are in place in a number of states. Many have even recently amended and bolstered their ARLs. Failure to comply can result in private plaintiff actions, class action lawsuits and regulatory action.
At the state level, approximately two-dozen states have implemented ARL legislation. Some states impose additional consent and disclosure requirements if the subscription begins with a free trial.
The Federal Trade Commission (FTC) recently requested comments on potential updates to its 2013 FTC Dot Com Disclosure Guidance: How to Make Effective Disclosures in Digital Advertising. Generally speaking, the purposes of the Guidance is to provide information to digital advertisers in order to comply with the law.
The FTC Act’s prohibition on “unfair or deceptive acts or practices” encompasses online advertising, marketing, and sales. In addition, many FTC rules and Guides are not limited to any particular medium used to disseminate claims or advertising, and therefore.
The Guidance sets forth instructions on avoiding express and implied deceptive statements. It also provides guidance regarding disclosures, including what to incorporate into the underlying claim, ensuring that disclosures are “clear and conspicuous,” what to consider with video and audio disclosures, taking account of the various devices and platforms consumers may use to view advertising, how to approach space-constrained ads, what constitutes permissible use of hyperlinks, evaluating technological limitations or unique characteristics of communications methods,
The FTC plans to increase investigation and enforcement within the digital marketing industry. The agency is also seeking input on “dark pattern” tactics and advertising used to deceive consumers, as well as automatic renewal subscriptions and free trials, social media advertising, online marketplaces and lead generation referrals.
“We know that some companies are wrongly citing our current guides to justify dark patterns and other forms of digital deception,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
“Up to” representations in promotional materials often draw regulatory and private plaintiff scrutiny insofar as whether such claims are truthful and can be properly substantiated. Which begs the question … how can an advertiser lawfully substantiate “up to” claims?
The answer?
It may depend upon various factors, including, but not limited to, the context in which the “up to” claim is made, whether the claim is unqualified, and whether applicable conditions, limitations, exclusions and restrictions have been appropriately disclosed. It may also depend upon whether the matter involves the Federal Trade Commission, state attorneys general or a private plaintiff false advertising lawsuit. And/or, upon the forum in which the legal or regulatory matter has been initiated, such as state court, federal court or the National Advertising Division. Consumer perception testing prior to disseminating such claims can also be a useful tool when combating false advertising claims.
For example, at least one federal court has appeared to apply a “ceiling” test. Would reasonable consumers understand such language to be a floor rather than a ceiling that can be achieved under limited circumstances? Do the claims expressly or implied promise the best, maximum result? Is it implausible that reasonable consumers would be deceived? Would reasonable consumers understand such language to be a guarantee? Would reasonable consumers understand such language to be a promise?
Now, consider the National Advertising Division.
The NAD often considers whether an “appreciable number” of consumers actually achieve the top range of the claimed benefit under circumstances normally and expectably encountered by consumers.
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About This Blog and Hinch Newman’s Advertising + Marketing Practice
Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.