Siding with the Federal Trade Commission, a federal jury determined that three Utah-based companies and their owner engaged in deceptive and unlawful telemarketing campaigns that included more than 117 million illegal calls to consumers in violation of the Telemarketing Sales Rule (TSR).
The decision is the FTC's first jury verdict ever in an action to enforce the TSR and the Do Not Call Registry rules, with relief to be decided by the court at a later date.
According to the complaint filed by the Department of Justice on behalf of the FTC, Forrest S. Baker III and three companies he controlled operated a nationwide calling campaign where telemarketers offered to send two complimentary DVDs and requested feedback on whether the movies should be on the company's recommended list.
Consumers were not informed that if they acquiesced, they would later receive calls pitching other DVDs to buy. Although telemarketers informed consumers that "all of the proceeds" from sales would benefit a nonprofit organization, the FTC presented evidence at trial that the company retained 93 percent of the sales. In 2009, the defendants made another round of calls to promote a film produced by Baker. No effort was made to avoid calling more than 2.5 million consumers on the Do Not Call Registry, the agency told jurors during the eight-day trial.
Consumers who received telemarketing calls testified that even after informing the defendants not to call them, they were contacted again. Records were introduced to back up the FTC's claims that "tens of millions" of consumers made such requests that were not honored.
Jurors found the defendants responsible for a total of 117 million violations of six different provisions of the TSR, including 99 million illegal calls to numbers listed on the Registry and more than 4 million calls where telemarketers made misleading statements to induce DVD sales. They also found that defendants failed to comply with FTC regulations requiring telemarketers to use caller identification names that tell consumers what seller is calling, and failed to connect consumers to a sales representative within two seconds of the consumer's greeting.
In addition, the unanimous Utah jury determined that the defendants had actual or implied knowledge of the violations, leaving open the possibility of civil penalties of up to $16,000 per violation.
To read the jury verdict form in U.S. v. Corporations for Character, click here.
Why it matters: The FTC's first jury verdict in an action to enforce the TSR and DNC Registry rules could prompt the court to proscribe sizable penalties of up to $16,000 per violation, based on the jury's finding that the defendants had actual or implied knowledge of the violations. Companies that engage in telemarketing should ensure that they are complying with the TSR or risk facing enormous potential fines.