The Telemarketing Sales Rules (TSR)

Let’s start with the basics. What is the TSR anyway?

Telemarketing Sales Rules are a set of regulations promulgated and enforced by the Federal Trade Commission (FTC). The rules apply to telemarketing–defined broadly as any “means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call–and generally prohibit “abusive” tactics and “deceptive” tactics in marketing (although, as we shall see, the standards for violating the TSR are specific and not intuitive–i.e. you don’t have to really defraud or abuse anyone to violate the TSR).

Violating the TSR gives rise to penalties as high as $50,000 per violation. But there is a lot les news about the TSR than say, the TCPA, because the TSR CANNOT be privately enforced. It must be enforced only by the FTC –usually with help from the AGs, or DOJ–and traditionally, there has been very little enforcement of the TSR against traditional telemarketers who were not doing something really mean and nasty.

But that all changed two weeks ago… 

What Does the TSR Say About Marketing Calls and Consent?

Section 310.4(b)(1)(v) of the TSR bans the use of prerecorded calls by any seller or telemarketer unless “the seller has obtained from the recipient of the call an express agreement, in writing… [conspicuous and clear consent to receive calls.]”

The use of the phrase “the seller” has been commonly read by courts and industry lawyers to mean that the disclosure must mention the seller– but it had never been suggested that the phrase meant a consent disclosure could only name a single seller or that the seller had to obtain consent directly from the consumer.

Indeed, both 310.4(b)(1)(v)(i) and (ii) reference consent “obtained” by the seller–suggesting that consent might have been gathered by a third-party, consistent with common law agency principles.

What Has the FTC Been Saying/Doing on FTC TSR Consent?

In the lead up to its telemarketing sweep efforts the FTC has been publicly stating that consent must be “one to one”–i.e. that only a single seller can be named on a disclosure form if it is to be transferred as a lead. This has corollaries to an ongoing FCC proceeding–discussed below–although it is slightly different from the primary ask in that proceeding. It is deeply inconsistent, however, with the practice of the lead generation industry, which is to permit a consent to contain tens, hundreds, or even thousands of lead buyers/sellers on a single page.

The FTC has doubled down on this approach by bringing enforcement actions specifically referencing this theory:

Defendants’ websites do not evidence the willingness of the consumer to receive calls delivering prerecorded messages “by or on behalf of a specific seller,” as required by the TSR, 16 C.F.R. § 310.4(v)(A)(iii) (emphasis added), given the lists of numerous and varied entities presented on the websites.

But even these actions suggest that consent can still be transferred–it just has to be one to one. While extremely challenging, numerous large performance marketing players had already pivoted toward dynamic disclosures in the hopes of meeting the new one-to-one requirement.

Why Was the FTC’s New Position on TSR Consent–on LinkedIn–Different and Important?

Last Thursday the FTC–apparently–changed its position on TSR consent suddenly and without warning.

Instead of permitting one-to-one consent for prerecorded calls under the TSR, the FTC has now stated–unofficially but through a formal channel–that consent can only be obtained directly from a consumer and CANNOT be transferred:

This means that a direct to consumer marketer can no longer safely purchase a lead purporting to provide express written consent if the marketer intends to use prerecorded or artificial voice technology of any kind (including RVM, AI, voicemails, etc.) This is a direct change from the Commission’s earlier “one to one” position and takes away any ability of a lead seller to transfer a lead if the purpose is to permit “robocalls”–whatever that means.

Notably, however, the FTC fails to define “robocall” in its statement and also fails to link its statement to any specific provision of the TSR. It also fails to justify its statement with any case law, authority, or rationale. Presumably, however, the FTC is referencing back to 310.4(b)(1)(v) of the TSR governing use of “a prerecorded message.”

Why Does This Matter?

Well, effective immediately, callers who use prerecorded voice (and probably artificial voice) technology for marketing purposes can no longer safely buy leads. Period.

In the past the odds of FTC enforcement of a strange informal statement of this kind would have been very low. But following the announcement of the “sweep” everyone needs to be looking over their shoulder and acting conservatively.

Notably, this entire process is NOT the way things are supposed to work. The FTC is supposed to give due process and fair notice to industry on a position change by promulgating an NPRM. However as a short cut past all of that the FTC has simply started interpreting its own rules in a way that provide it the most power–yes, this is a power grab–to enforce the TSR.

IT IS UNCLEAR WHETHER ANY OF THIS HOLDS UP IN COURT–AND IT SHOULD NOT.

But… until it is struck down, companies need to assess their compliance strategies and tolerances in light of this latest FTC action.

How Does this Differ from the FCC’s NPRM on TCPA Consent?

Unlike the TSR, the TCPA can be privately enforced.

The TCPA is implemented through CFR sections by the comparatively rational FCC. But it applies to MORE calls than just prerecorded calls. It applies to calls made using an autodialer, calls made using artificial voice technologies, and also to ANY marketing calls made to a number on the national DNC.

The FCC has launched a Notice of Proposed Rulemaking–NPRM–proceeding in which it sought comment on whether or not to adopt a “one to one” or “only direct” consent position under the TCPA as well. That would mean that consent cannot be transferred if a caller intends to use any of the sorts of calls regulated by the TCPA.

R.E.A.C.H.–the primary industry trade group to have set standards in the space– submitted two major comments asking the FCC not to adopt such strict rules and to allow the industry to self-regulate. But 28 AGs and a host of other powerful groups have weighed in favor of tighter rules. Plus, the FCC traditionally likes to harmonize with the FTC on rulings–meaning that there is now a decent likelihood the FCC adopts the disastrous position of the FTC on consent as well.

So What Can Be Done?

If you are a direct to consumer marketing, performance marketer, or lead generator/seller you NEED counsel.

You should also be looking to join Responsible Enterprises Against Consumer Harassment–the only trade organization in the space to file reply comments in the FCC’s NPRM proceeding and the ONLY trade organization that was AHEAD of the FTC–with standards that already prevented the use of prerecorded calls as an initial contact strategy for purchased leads.

There is safety in numbers and R.E.A.C.H. members have already demonstrated to regulators that they are a reliable and thoughtful bunch willing to do what it takes to protect consumers. If industry is to survive this all-out-assault it needs REAL leadership and a safe space to operate and grow. Right now, that’s R.E.A.C.H.