Header graphic for print
Inside Privacy Updates on Developments in Global Privacy & Data Security from Covington & Burling LLP

FCC Confirms That Sellers Can Be Liable for Telemarketer TCPA Violations

Posted in Advertising & Marketing, Federal Communications Commission, Litigation, Mobile, United States

A seller who authorizes a third-party telemarketer to market the seller’s goods or services may be held vicariously liable if the telemarketer violates the Telephone Consumer Protection Act (TCPA), the Federal Communications Commission held in a May 9 declaratory ruling.

The FCC’s ruling interprets two subsections of the TCPA. The first subsection — 47 U.S.C. § 227(b) — includes several restrictions, including a general prohibition on making calls to landline or mobile telephones using a prerecorded message without  the recipient’s prior express consent. Section 227(b)(3) allows individuals or companies to bring private lawsuits “based on a violation of this subsection” or the FCC’s implementing regulations.

A separate portion of the TCPA — 47 U.S.C. § 227(c) — authorizes the FCC to set up a national Do Not Call registry, which the FCC did in coordination with the Federal Trade Commission several years ago. Section 227(c)(5) authorizes private lawsuits by individuals who receive “more than one telephone call within any 12-month period by or on behalf of the same entity” in violation of the Do Not Call rules.

Last week’s declaratory ruling came in response to questions referred to the FCC by two federal courts in two separate TCPA-based lawsuits.

In one suit, filed against EchoStar Satellite LLC in  an Ohio federal court in 2007, a consumer alleged that telemarketers selling subscriptions to EchoStar’s satellite TV service — now provided by the DISH Network — made 30 calls to the plaintiff in violation of the TCPA. In the other suit, filed in an Illinois federal court in 2009, several state attorneys general alleged that DISH, through its authorized dealers, had violated the TCPA’s restrictions on prerecorded calls and calls made to numbers on the Do Not Call registry.

In accordance with the federal courts’ referrals, the parties in both cases petitioned the FCC to interpret the relevant TCPA provisions and regulations and determine whether sellers like DISH could be liable for unlawful telemarketing calls made by dealers or other third parties.

The FCC concluded that a seller is not always liable for calls made by third parties for the seller’s benefit, but that sellers may be held vicariously liable for the conduct of third-party telemarketers in some circumstances. Specifically, the FCC concluded that, at a minimum, federal common law principles of agency law allow a seller to be held vicariously liable under either statutory provision if the telemarketer acts as the seller’s agent or has “apparent authority” to do so, or if the seller ratifies the telemarketer’s conduct.

The FCC provided “illustrative examples” of situations in which sellers might be vicariously liable for telemarketers’ conduct, such as situations in which:

  • the seller approves, writes, or reviews telemarketing scripts;
  • the seller gives telemarketers access to customer information or the seller’s internal systems;
  • the seller authorizes telemarketers to use the seller’s trade name, trademark and service mark;
  • the seller “knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its  power to force the telemarketer to cease that conduct.”

In a partial dissent, Commissioner Ajit Pai argued that the majority incorrectly interpreted the two TCPA provisions at issue to incorporate the same standard of vicarious liability, even though the provisions’ language differs. Pai argued that, given the language of the TCPA’s do-not-call provision, “the Commission should give meaning to [the words] ‘on behalf of’ and impose third-party liability for do-not-call violations whenever a telemarketer initiates a call on a seller’s behalf, even if that telemarketer is not under the seller’s control.”

The majority decision left open the possibility that the FCC could in the future interpret the TCPA to allow “a broader standard of vicarious liability for do-not-call violations,” but said the agency could not establish such a broad standard in a declaratory ruling, given the FCC’s existing precedent.

The FCC also recently released a Small Entity Compliance Guide outlining changes to the TCPA rules that were adopted by the FCC in early 2012 and that began taking effect last fall. Among other changes, the revised rules require all prerecorded telemarketing calls to include an automated, interactive opt-out mechanism throughout the duration of the call, as well as a toll-free telephone number that can be contacted to opt out when a prerecorded telemarketing message is left on voicemail. That rule took effect in January. As of October 16, 2013, prior express written consent will be required to transmit prerecorded or autodialed telemarketing calls to wireless numbers, and the established business relationship exception will no longer apply to prerecorded telemarketing calls to residential lines.