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New TCPA Rules for Mobile Communications Marketing: Strategies to Avoid Penalties and Lawsuits Implementing Effective TCPA Compliance Guidelines, Navigating Grey Areas With Express Written Consent Requirement

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WEDNESDAY, AUGUST 6, 2014

Presenting a live 90-minute webinar with interactive Q&A

Christine M. Reilly, Partner, Loeb & Loeb, Los Angeles

Veronique Tu, Corporate Counsel, Lowe Campbell Ewald, Detroit

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© 2014 LOEB & LOEB LLP

Christine M. Reilly Partner, Loeb & Loeb LLP Veronique Tu Corporate Counsel, Lowe Campbell Ewald

New TCPA Rules for Mobile Communications Marketing: Strategies to Avoid Penalties and Lawsuits

August 6, 2014

6 © 2014 LOEB & LOEB LLP

Today’s Discussion Leaders

Christine M. Reilly is a partner in Loeb & Loeb’s Consumer Class Action and Regulatory Department in Los Angeles. She represents clients in consumer protection class actions, including those alleging violations of the Telephone Consumer Protection Act, as well as in investigations and proceedings initiated by the Federal Trade Commission, Federal Communications Commission, and other federal and state regulatory agencies. Ms. Reilly regularly counsels clients on compliance issues and hosts the TCPA Defense Forum on LinkedIn. www.loeb.com/tcpa-defense-forum/ Veronique Tu has 15 years of experience at Lowe Campbell Ewald, a full-service and fully-integrated advertising and marketing communications agency with offices in New York, Detroit, Los Angeles and San Antonio. As corporate counsel, she is responsible for a wide variety of legal matters, including celebrity contracts, advertising review and substantiation, social media law, advertising agency agreements, third-party intellectual property agreements/licenses and corporate matters.


Tread Carefully, Piranhas Ahead!


Today’s Mobile Society

• Technology and the rise of the mobile society • Approx. 4 billion mobile phones in use in the world • More than 3 billion are SMS text message enabled • Mobile is primary means of contact for many consumers • Companies are embracing mobile marketing • Mobile is immediate, effective and fairly inexpensive • 95-98% of text messages are opened within minutes

• Privacy is a hot topic

• President Obama and Congress’ agenda includes privacy • FTC has made consumer privacy a focus • FCC strengthened TCPA opt-out and consent requirements

applicable to telemarketing


The Telephone Consumer Protection Act

• Regulates and restricts the use of automated technology to initiate outbound telephone calls

• Automated technology includes: artificial voices, prerecorded voice messages and autodialers

• Applies to voice calls, voice messages, SMS text messages, and faxes

• Provides for national and internal Do-Not-Call lists • The Federal Communications Commission (FCC)

has authority to regulate under the TCPA • Sources of Authority

• 47 U.S.C. § 227 • 47 C.F.R. § 64.1200 et seq.


Popularity of TCPA Class Actions

• Businesses increasingly turning to mobile for their marketing efforts • Text messaging began after the statute was enacted • TCPA class action complaints are easy and inexpensive to file

• Boilerplate templates • Fairly short (usually about 10 pages)

• Limited defenses to TCPA claims, especially mobile claims • Cases often settle in the multi-million dollar range


Popularity of TCPA Class Actions

• Statutory Damages: $500 per call or actual damages, whichever is greater.

• Up to $1,500 per call for willful or knowing violations.

• Potential for significant damages. • 1,000 x $500 = $500,000 • 10,000 x $500 = $5 million • 50,000 x $500 = $25 million • 100,000 x $500 = $50 million • 500,000 x $500 = $250 million • 1,000,000 x $500 = $500 million


TCPA Overview


What Does the TCPA Cover?

• Residential • Only covers telephone calls that are initiated using

an artificial voice or prerecorded voice message • Can initiate calls using live operators or autodialers

without triggering the TCPA

• Mobile—covers telephone calls that are initiated using an artificial voice or prerecorded voice message OR an “automatic telephone dialing system” (i.e., autodialer)

Note: Do-Not-Call requirements apply to both mobile and residential phone calls regardless of method of initiation!


What is an Autodialer?

“Automatic telephone dialing system” means equipment that has the capacity:

(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.


The FCC says…

The “basic function” of an autodialer is the “capacity to dial numbers without human intervention.”

An ATDS encompasses hardware that “when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.”

Recently, the FCC “emphasized that this [ATDS] definition covers any equipment that has the specified capacity to generate numbers and dial them without human intervention regardless of whether the numbers called are randomly or sequentially generated or come from calling lists.


The ATDS Defense

Dominguez v. Yahoo, Inc., 2014 U.S. Dist. LEXIS 36542 (E.D. Pa. March 20, 2014)

• Prior mobile subscriber had signed up to receive mobile alerts alerting user that email received to Yahoo account.

• In granting motion for summary judgment in favor of Yahoo, court held there was no ATDS because service did not randomly or sequentially generate numbers, but only sent messages using a queue system when a user received a Yahoo email.

• Since statutory definition was clear, court refused to rely on broader interpretation of ATDS by FCC (i.e., calling telephone numbers from a calling list is sufficient for ATDS purposes).


The ATDS Defense

Sherman v. Yahoo, Inc., 2014 U.S. District LEXIS 13286 (S.D. Cal. Feb. 3, 2014)

• Plaintiff received notification from Yahoo on his mobile phone that a third party was sending him an instant message via Yahoo’s Messenger service.

• Yahoo argued that its equipment did not have the capacity to send messages to random or sequential numbers.

• Plaintiff argued that the system could dial all phone numbers by writing new software code, and therefore had the capacity to dial telephone numbers sequentially from a list of numbers.

• Yahoo’s motion for summary judgment denied due to genuine issue of material fact.


Are all mobile marketing text messages delivered by companies en masse sent using an ATDS?


TCPA Requirements for Mobile Marketers


Consent for Mobile Calls

Customer service/ informational calls: • Prior express consent required

Debt collection calls: • Prior express consent required

Marketing calls: • Prior express written consent

required (effective October 16, 2013)

You ALWAYS need some kind of consent when dialing mobile phones using an autodialer, artificial voices or prerecorded voice messages!


Summary Chart for Mobile

Non-Telemarketing

Telemarketing

Autodialer (ATDS)

Verbal or written consent

Written consent

Artificial Voice/ Prerecorded Message

Verbal or written consent

Written consent


The “TCPA Wireless Cliff” – October 16, 2013

Game changer for mobile marketing! The FCC changed the rules. As of October 16, 2013, verbal consent to initiate mobile telemarketing telephone calls (including text messages) through automated technology (prerecorded voices or autodialers) is no longer sufficient. “Prior express written consent” is now required prior to initiating such calls.


Prior Express Written Consent

Identify each specific seller to whom consent is being provided Identify the consumer ’s phone number Indicate an affirmative agreement (i.e., I agree/ consent) Disclose that the consumer is authorizing the seller to engage in

advertising or telemarketing (i.e., offers for products/services) Disclose that the calls will be made using automated technology Disclose that the consumer is not required to provide consent as

a condition of purchasing goods or services Obtain a written signature from the consumer (either

electronically through E-SIGN or handwritten)

For Telemarketing Calls Only:


What is Telemarketing?

• “Advertisement” means any material advertising the commercial availability or quality of any property, goods or services.

• “Telemarketing” means the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.

• As a general rule, calls that are not purely informational in purpose and message constitute telemarketing.

• Dual-purpose calls (calls that have both an informational and a telemarketing purpose) are considered telemarketing.


What is Telemarketing?

• Telemarketing does not include: • Debt collection calls • Calls for political purposes • Calls made by loan servicers regarding the

servicing of a consumer loan, home loan modification

• Airline notification calls • Bank and credit card balance and fraud

alerts • School and university notifications • Research or survey calls • Package deliveries • Wireless usage notifications


The “TCPA Wireless Cliff” – The Aftermath

• What about legacy or existing customer lists prior to October 16, 2013? Do they need to comply with the new requirements?

• Are some of the new disclosure requirements merely “technical” in nature?

• Is the “consent not required for purchase”

disclosure required in all cases? • Who is a “specific seller” that must be named in

a disclosure?

• What do these changes mean for lead generation or affiliate marketing?


Other TCPA Requirements for Mobile Marketers


Other Telemarketing Requirements

Interactive Opt-Out Mechanism (effective January 14, 2013): • Any artificial or prerecorded message that could be answered

by the consumer must provide an interactive opt-out mechanism announced at the outset and available throughout the call.

• If the consumer opts out, the number must be automatically added to the company’s Do-Not-Call list and the call must immediately disconnect.

• If the call could be answered by voicemail or an answering machine, the message must include a toll-free number that will allow consumers to call and opt out.

Abandoned Calls (effective November 15, 2012):

• Number of dropped or abandoned calls must be no more than 3% of calls per campaign measured over a 30-day period.


Do Not Call Rules

• DNC rules prohibit telemarketing calls or telephone solicitations to telephone numbers registered with the National DNC registry.

• DNC Rules do not apply to informational or non-telemarketing calls. • Both residential and mobile phone numbers can be registered on the

National DNC Registry. • Business telephone numbers cannot be registered.


Do Not Call Rules

• Do Not Call Lists: • FTC National Registry • State registries • Company-specific

• DNC violations require a minimum of two calls within a 12-month period. • Several exemptions may apply:

• Written signed agreement • Established business relationship

(transactional or inquiry-based) • Safe harbor

• Time of day restrictions (8am-9pm) • State telemarketing restrictions


Special Issues


Revocation of Consent

Diamonds are forever, but is consent?


Revocation of Consent

Gager v. Dell Financial Services LLC, 2013 U.S. App. LEXIS 17579 (3rd Cir. Aug. 22, 2013)

• Plaintiff provided cell number on application for credit to purchase computer equipment. Dell left prerecorded collection messages on her cell phone, continuing to call after plaintiff sent a letter requesting that the calls stop.

• In a case of first impression for a federal appellate court, the Third Circuit held that consumers have the right to revoke consent and that there is no temporal restriction on that right.

• Third Circuit reasoned: • Consent can be revoked under common law. • Any ambiguity should be resolved in favor of the consumer. • FCC’s Soundbite advisory ruling suggests that consent under the

TCPA can be revoked.


Reassigned Mobile Numbers

• Consent of prior subscriber does not serve as “the prior express consent of the called party” required by the TCPA for autodialed calls to cell phone numbers. “Consent to call a given number must come from its current subscriber.”

• Court ruling: • Language of the statute: “called party” means current subscriber • “The phrase ‘intended recipient’ does not appear anywhere in

Section 227, so what justification could there be for equating ‘called party’ with ‘intended recipient of the call’?”

• Rejects argument that consent for telephone number is effective until revoked

Soppet v. Enhanced Recovery Systems, 2012 U.S. App. LEXIS 9560 (7th Cir. May 11, 2012); see also Osorio v. State Farm Bank, F.S.B., 2014 U.S. App. LEXIS 5709 (11th Cir. March 28, 2014)


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Vicarious Liability

• Sellers can be held liable for TCPA violations committed by third-party telemarketers making calls on the seller’s behalf.

• Two theories of liability: • Direct liability—seller has “initiated” the

call given its very direct involvement (e.g., giving the third party specific and comprehensive instructions as to timing and manner of the calls) or

• Vicarious liability—seller may be held vicariously liable for the acts of third party telemarketers under federal common law principles of agency (agency, apparent authority and ratification).

DISH Network Petition, FCC Declaratory Ruling issued on May 9, 2013.


Vicarious Liability

• Plaintiff brought suit against Taco Bell alleging that text message marketing campaign by group of Chicago-area Taco Bell franchise owners violated the TCPA.

• Actual sender of the message was a third-party service provider, which acted at the direction of the Chicago owners’ advertising agency. Court found no evidence that Taco Bell controlled or had the right to control the company or the manner and means of the text message campaign, and therefore the third-party agency was not an agent of Taco Bell.

Thomas v. Taco Bell Corp., 2014 U.S. App. LEXIS 12547 (9th Cir. July 2, 2014) (unpublished)


User-Initiated Texts


Business-to-Business Marketing

• When it comes to the mobile provisions, there is no distinction between business to consumer calls and B2B calls.

• But many reasons why B2B calls should not be required to comply:

• Possible statutory argument. • TCPA not designed to protect these types of calls. • Businesses more savvy and sophisticated. • Businesses are increasingly going mobile. • Businesses are typically unaware that the business

line they are calling is mobile. • Businesses hold the number out as a business line

and invite the contact. • There is no compelling reason to distinguish between

business landlines and business mobile phones.


Best Practices


Best Practices

• Vendor Agreements • Supplier Terms & Conditions/

Indemnification • Brokered Lists • TCPA Disclosures • Scrubbing and Opt-Outs • Recordkeeping • TCPA For Your Business


Vendor Agreements

• Have the vendor sign your Company’s Supplier Terms & Conditions. • Vendor Agreements are always one-sided in favor of the vendor. • Vendor will try to cap liability to the total value of the purchase

order or the total fees paid by Company for the preceding 12 months.

• Indemnification is practically non-existent for the Company.

• Client MSA makes the Company responsible for suppliers and subcontractors.

• TCPA claims are not generally covered by insurance, so companies

need to obtain as much protection as possible, thus the need for the Vendor to sign the Company Terms & Conditions.


Supplier Terms and Conditions

INDEMNIFICATION

Supplier agrees to indemnify and hold harmless Agency, Client, and their respective assigns and licensees from and against all claims, demands, liabilities, damages, losses, allegations, causes of action and lawsuits (including, but not limited to, court costs and attorney’s fees), that Agency, Client and their respective assigns and licensees may suffer as a result of (a) any breach or alleged breach of the foregoing warranties, (b) claims or actions of any kind or nature resulting from the use in any manner of the Deliverables or Services furnished by Supplier hereunder or (c) Supplier's negligence.


Brokered Lists

“Let’s buy a list!” • Common practice in the advertising and marketing industry

• Demand proof from vendor of consumer opt-ins/consent

• How was the mobile phone number obtained?

• Business Reply Card

• Telephone

• Application

• Online registration

• Was there a TCPA compliant disclosure?

• Double-opt ins are preferred – must be reliable

• If a lawsuit is filed, will the vendor provide you with a list of numbers and documentation regarding how consent was obtained?

.


Brokered Lists

"Companies that use lead generators must exercise due diligence when they buy lists of phone numbers or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough." Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.


TCPA Disclosures

Paper Form

Website

Telephone

Text Message

Email

U.S. Mail

Mobile App


TCPA Disclosures

Website Sign-Up Consent: By checking this box and clicking the “I agree”

button below, I verify this is my mobile number and consent to receive text messages via automated technology to this number regarding product offers by or on behalf of [name of seller(s)]. I understand that consent is not required to make a purchase. I also agree to the Terms and Conditions and the Privacy Policy. Message and Data rates may apply.


TCPA Disclosures

Signage SIGN UP FOR OFFERS! Interested in receiving offers via text message to your mobile phone? Text “Join” to 78391 to sign up today! By texting “Join” from your mobile number, you agree to receive marketing messages generated by an automated dialer from ABC Company to your mobile number. Consent not required to make a purchase. Limit 5 txts/mth. Message and Data rates may apply. Text Message [Company Name]: U r signing up 4 mobile offers via automated technology. Reply YES to confirm, NO to stop. Confirmatory Text Message [Company Name]: Congrats! U r now signed up 4 mobile txt offers! Reply STOP to cancel, reply HELP for help.


Scrubbing and Opt-Outs

• Opt-Outs: Honor opt-outs immediately,

whether verbal or in writing. • DNC: Have a DNC policy, which includes

regularly scrubbing phone numbers against the federal DNC, state and internal DNC lists.

• Suppression Policy: Have a suppression

policy and procedure in place, which includes immediately blacklisting and/or blocking phone numbers that complain about the receipt of unauthorized calls.


Recordkeeping

• Maintain consent records for 4 years • Carefully document the date and substance of changes, such as

changes to any registration or opt-in process • Maintain organized and detailed records so you can easily

access, search, and retrieve relevant data • Document the process and technology used to send text

messages and/or make calls • Create snapshots of information at static points in time

• Use Camtasia to record registration or opt-in processes • Use templates to populate data


TCPA For Your Business

• Compliance Readiness Program

• Understand the law as applied to your business • Prepare appropriate policies and procedures • Train your employees • Create a consumer complaint “feedback loop” • Maintain good records • Monitor and test your policies

LOWE CAMPBELL EWALD Veronique Tu Corporate Counsel 2000 Brush Street, Suite 601 Detroit, MI 48226 (586) 753-8414 [email protected]

© 2014 LOEB & LOEB LLP

Christine M. Reilly Partner Loeb & Loeb LLP [email protected] 310.282.2361

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