Federal regulation of telemarketing invites internal government conflict, as two agencies—the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC)—separately regulate one common area: commercial solicitations delivered via interstate phone calls. In August, the FTC adopted a rule tightening its regulation of prerecorded commercial messages (a type of commercial call) and in the process, greatly restricted certain practices that are allowed under the FCC rules.

Each federal agency acts under its own delegation of authority from Congress, and both have adopted extensive telemarketing rules. Outright conflicts, or even divergences between the two regimes, threatened to generate such uncertainties for legitimate telemarketers that in 2003, Congress instructed the agencies to consult with each other to "maximize consistency." Yet, in its 2006 notice of proposed rulemaking concerning prerecorded messages, the FTC said "regulatory uniformity" is a "laudable goal" but not a "sufficient basis" for regulatory forbearance. The new final rule reflects that view.

Prerecorded Solicitation Calls to Customers

Many businesses telemarket to their customers using prerecorded voice messages, which can deliver a simple alert more cheaply than can a bank of live operators. The FTC's new rule may effectively shut down this type of marketing, although in form the rule actually addresses only a consequence of using predictive dialers known as "call abandonment." Telemarketers commonly use predictive dialers to place more calls than they have available human operators, betting that a substantial portion of these calls will not successfully reach a person. Used responsibly, predictive dialers markedly increase the efficiency of telemarketing campaigns. But dialers also can annoy or frighten consumers, because, if an operator is not available when an individual picks up the phone, the individual could hear only silence. Such a call is said to be "abandoned." Since 2003, both the FTC and the FCC have required telemarketers to set predictive dialers such that operators are available for 97% of calls that reach a live person and only 3% of calls are "abandoned."

Yet, in 2003, the FCC was careful to create an exception that preserved business' ability to send prerecorded solicitation messages to their existing customers. In other words, a marketing campaign to customers would require no human operators, and consumers would hear only the prerecorded solicitation. Notably, the FTC never adopted such an exception. But until now, the agency has refrained from enforcing its call abandonment rules in contravention of the FCC's more tolerant stance.

The Final FTC Rule

In its 2008 final rule, the FTC determined that a prerecorded message campaign to existing customers violates the call abandonment rules, because, by definition, none of these calls would be answered by a live operator and all would be "abandoned." With few exceptions, prerecorded solicitations will be permissible only with prior signed consent from call recipients, including a business' established customers. Further, a consumer's purchase cannot be conditioned on the seller receiving consent to transmit prerecorded ads. These requirements come into effect on September 1, 2009.

Diverging further from FCC regulations, the new FTC rules require all prerecorded solicitation campaigns—including those to existing customers—to provide an "opt-out" opportunity during the call itself. For example, recipients of prerecorded messages must be informed that they can opt out by hitting a button or saying something like "no more calls" during the message. Similarly, if a call reaches a voice mail box, the campaign must leave a toll-free number where a consumer may make a "no call" request. These rules apply starting December 1, 2008.

In support of its final rule, the FTC points to thousands of comments from consumers who complain about prerecorded messages. Although the agency acknowledges inconsistencies with FCC regulations, it sees no outright conflict because complying with FTC rules does not require a business to violate FCC rules. FTC rules merely impose restrictions in addition to the FCC's requirements, according to the agency. Such inconsistencies between the two federal regulatory regimes are not clear violations of prior Congressional mandates to these agencies.

Businesses probably should consider abandoning prerecorded solicitations, even to their established customers, if the calls cross state lines. The difficulties of obtaining signed, written consent from individuals to receive these calls, plus the ease with which a call recipient could opt-out from further calls, suggests that this mode of telemarketing may no longer be practical.