Squeezing Telemarketers
The Federal Trade Commission may issue amendments to the five-year-old Telemarketing Sales Rule this fall following June hearings on proposed changes. That’s likely to include a national do-not-call list (March PROMO).
Meanwhile, the FTC and Canadian law officials arrested 21 Canadian telemarketers (both individuals and corporations) that allegedly defrauded U.S. citizens. The June 12 sweep froze $6 million in assets that the FTC will target for consumer redress; cross-border scammers have already paid $19 million in fines and $769,000 in victim redress.
The FTC will spend the next several months deciding whether to revise or move forward on the proposed changes, says chairman Timothy Muris, who will make a formal recommendation to the commission late summer or early fall, per an FTC spokesperson. Industry executives expect new rules by October. “They seem pretty set on the overall plan, and are just dealing with details now,” says Dan Jaffe, executive vp for the Association of National Advertisers, Washington, DC. “There’s a lot of momentum behind this.”
Consumer telemarketing sales topped $661 million in 2001, per the Direct Marketing Association, New York City. The DMA leads the industry charge against the FTC’s three proposed changes: a national do-not-call list, a ban on sharing pre-acquired billing information, and a ban on blocking Caller ID.
Industry leaders say the FTC should help promote DMA’s 17-year-old Telephone Preference Service (with 4.5 million registrants and used by 5,000 DMA members) rather than impose government restrictions, which raise First Amendment free-speech issues. DMA and supporters say its service gives consumers more control to restrict all calls, including industries not under FTC jurisdiction such as financial services, phone companies, and airlines. DMA also opposes the proposal that telemarketers pay annual fees up to $3,500 each to fund the national list.
The FTC “didn’t embrace or dismiss” the idea of expanding DMA’s service, says DMA vp-government relations Jim Conway. “The hugest stumbling block” is that the FTC doesn’t have authority to supersede 20 existing state do-not-call lists, and can’t regulate intrastate calls, Conway adds. “This would just add another list” for marketers to comply with. The Federal Communications Commission could override state lists, but the FTC told workshop attendees it has no plans to work with the FCC. The FTC will consider letting businesses with a previous relationship call consumers who join a do-not-call list.
Industry groups could challenge new restrictions as unconstitutional under the First Amendment.
The FTC’s proposal drew more than 42,000 consumer and industry comments; most consumer comments support the changes. Privacy advocates including Consumers Union, Junkbusters Corp., and Consumer Federation of America support an opt-in system over an opt-out do-not-call list; advocate states’ rights to impose tighter restrictions; and want the FTC to work with the FCC to cover all industries.
RJR Raises More Hackles
A CALIFORNIA JUDGE FINED RJ Reynolds Tobacco Co. $20 million for placing ads in magazines popular with teens, including Sports Illustrated, Spin, Vibe, and Rolling Stone.
A June 6 ruling found that RJR violated the 1998 Master Settlement Agreement by running ads in magazines whose audience is 15 percent or more teens. San Diego Superior Court judge Ronald Prager said RJR didn’t change its ads, didn’t try to cut youth exposure to them, and didn’t track whether the company helped cut youth smoking. “RJR has exposed youth to its tobacco advertising at levels very similar to those of targeted adult smokers,” the judge wrote. In addition to the fine, the judge ordered the company to comply with those MSA requirements.
The ruling is “akin to censorship,” says RJR executive vp-external relations Tommy Payne. “The same magazines that are now ‘too youthful’ for Reynolds’ ads are still acceptable forums to advertise wine, beer, and liquor, violent movies, and other … cigarette brands.” RJR will appeal.
