May 16, 2017

District Court Hangs Up on Call to Strike Down FTC's Guidance on Soundboard Technology

Seller Beware: Consumer Protection Insights for Industry

A federal district court sustained the validity of the FTC's informal opinion letter that brings telemarketing calls that utilize soundboard technology within the purview of the Telemarketing Sales Rules (TSR) and rejected a First Amendment challenge to the TSR on summary judgment.

The TSR prohibits telemarketing calls that deliver prerecorded messages, commonly referred to as "robocalls," without the call recipient's prior written consent. As we previously reported, the FTC issued a Staff Opinion Letter in November 2016 in which the FTC determined that telemarketing calls that use soundboard technology are akin to robocalls and therefore are subject to the TSR. This was a reversal from the FTC's prior determination in 2009 that telemarketing calls utilizing soundboard technology were outside the scope of the TSR. The FTC's new guidance on soundboard technology went into effect on May 12, 2017.

In January 2017, the Soundboard Association, a trade group representing companies that manufacture and use soundboard technology, sued to block the implementation of the November 2016 letter. The Soundboard Association made two primary arguments against the FTC's soundboard technology guidance. First, the Soundboard Association argued that the November 2016 letter constituted a change to the statutory or regulatory scheme applicable to telemarketers and therefore the FTC was required under the Administrative Procedure Act to provide notice and receive comments from the public before issuing the letter. The district court rejected this argument, finding that the November 2016 letter was an interpretive rule not subject to notice-and-comment rulemaking because it merely "communicates to the telemarketing industry the agency's view that an existing regulation now applies to a particular form of telemarketing technology as currently used by the industry."

Second, the Soundboard Association argued that the November 2016 letter violated the First Amendment because the TSR contains an exception in which a call recipient's prior written consent is not required for robocalls soliciting donations from a prior donor or member of a charity, but prior written consent is required if the call recipient is a non-member and has not previously donated to that charity. This distinction, according to the Soundboard Association, constitutes an impermissible regulation on the content of speech. The district court rejected this argument reasoning that the prior written consent exception was not a regulation on the content of speech, but rather a regulation dependent on the relationship between the caller and the recipient to which intermediate scrutiny applies. The court found that the November 2016 letter satisfies intermediate scrutiny because it advances the government's interest in protecting privacy while allowing charities to freely make robocalls to those who have effectively indicated their consent to receive such calls (i.e., their members and past donors) and leaving charities alternative means for contacting first-time donors (e.g., advertising, direct mail, in-person solicitations, etc.).

The Soundboard Association has appealed the district court's decision, which means the fight over the validity of the FTC's November 2016 letter is not over yet. But for now, the FTC's guidance on soundboard technology remains effective pending the appeal, and telemarketers using soundboard technology should align their practices with the FTC's new guidance.

© Arnold & Porter Kaye Scholer LLP 2017 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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