Tag: fcc

FCC Subjects Robocallers and Caller Identification Fraudsters to Increased Penalties and Broader Enforcement

On May 1, 2020, the Federal Communications Commission (FCC) adopted rules to strengthen protections against robocalls and the manipulation of caller identification information to misrepresent the true identity of the caller (known as caller ID spoofing).1 The FCC’s amended rules, which implement portions of the recently-enacted Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), streamline the procedure for commencing enforcement actions against violators and expand the statute of limitations applicable to FCC proceedings against robocallers and caller ID spoofers2 (see GT Alert, TRACED Act Subjects Robocallers to Increased Penalties, Outlines Regulatory and Reporting Requirements to Deter Violations).

The FCC’s changes to its rules include the following:

  • Eliminating the requirement that the FCC issue a citation to a person or entity that violates prohibitions against robocalling before issuing a notice of apparent liability if the person or entity does not hold a license, permit, or other authorization issued by the FCC. As noted by FCC Chairman Ajit Pai in the news release accompanying the FCC’s Order: “Robocall scam operators don’t need a warning these days to know what they are doing is illegal, and this FCC has long disliked the statutory requirement to grant them mulligans.” Caller ID spoofers are already subject to FCC enforcement actions without receiving a citation as a warning.3
  • Increasing the penalty amount to up to $10,000 for each intentional unlawful robocall in addition to the monetary forfeiture permitted under 47 U.S.C. § 503 (for persons or entities that are not FCC licensees or common carriers, the forfeiture penalty shall not exceed $20,489 for each violation and $153,669 for any continuing violation).4 Importantly, each unlawful robocall is considered to be a separate violation, so the potential forfeiture amounts could be very high.
  • Extending the statute of limitations applicable to FCC enforcement actions for intentional robocall violations and for caller ID spoofing violations to four years. Under the amended rule, the FCC may not impose a forfeiture penalty against a person for violations that occurred more than four years prior to the date a notice of apparent liability is issued. The statute of limitations had been one year for all robocall violations and two years for call ID spoofing violations. This change will significantly increase the timeframe of conduct subject to FCC enforcement and that can be included in a proposed forfeiture amount.

Conclusion

The FCC’s amended rules, consistent with the TRACED Act, are intended to discourage unlawful robocalling and caller ID spoofing by abolishing the “one free pass” formerly applicable to entities that do not hold FCC authorizations, increasing the penalties for intentional violations, and expanding the statute of limitations period. This is the FCC’s most recent action to implement the TRACED Act by strengthening protections against unlawful robocalls and caller ID spoofing. Other steps recently taken by the FCC include initiating a rulemaking proceeding to prevent one-ring scams (when a caller initiates a call and allows the call to ring for a short duration with the aim of prompting the called party to return the call and be subject to charges). Given the FCC’s significant focus on combatting illegal robocalling, it is important that companies that rely on robocalls to contact consumers understand the federal laws governing such calls implement procedures to ensure that they comply with those laws and regulations.

1 The Telephone Consumer Protection Act (TCPA) (which was amended by the TRACED Act) and the FCC’s implementing regulations generally prohibit the use of autodialed, prerecorded or artificial voice calls (commonly known as robocalls) to wireless telephone numbers and the use of prerecorded or artificial voice calls to residential telephone numbers unless the caller has received the prior express consent of the called party (certain calls, such as telemarketing calls, require prior express written consent) or is subject to specified exemptions. See 47 U.S.C. § 227; 47 C.F.R. § 64.1200.

2 The FCC issued these rules pursuant to an order, rather than utilizing notice and comment procedures, because the content of the rules did not require the exercise of administrative discretion. The rules will become effective 30 days after the date of publication in the Federal Register.

3 The FCC may issue a forfeiture order if it finds that the recipient of a notice of apparent liability has not adequately responded to the FCC’s allegations. The FCC may also seek to resolve the matter through a consent order which generally requires the alleged violator to make a voluntary payment, develop a compliance plan, and file compliance reports.

4 See 47 U.S.C. § 503(b)(2)(D) as adjusted for inflation. The FCC has authority to make upward or downward adjustments to forfeiture amounts based on several factors. See 47 C.F.R. § 1.80.

©2020 Greenberg Traurig, LLP. All rights reserved.

Limiting Junk Fax Class Actions: Online Fax Services Outside Scope of TCPA FCC Rules

 

On December 9, 2019, the Federal Communications Commission (“FCC”) issued a declaratory ruling In the Matter of Amerifactors Financial Group, LLC (“Amerifactors”) concluding that modern faxing technologies are not within the scope of the Telephone Consumer Protection Act (TCPA).  The Amerifactors ruling, which follows the express language of the TCPA, determines that faxes received via an online fax service as electronic messages are effectively email and therefore are not faxes received on a “telephone facsimile machine” under the statute. This narrows the scope of the TCPA to traditional fax machines and will make it more difficult for attorneys to certify classes of fax recipients under the TCPA, ideally curbing the plethora of TCPA Fax class action lawsuits.

Amerifactors Background

In 2017, Amerifactors filed a petition for an expedited declaratory ruling asking the FCC to “clarify that faxes sent by “online fax services” are not faxes sent to “telephone facsimile machines”[1] therefore, outside of the scope of the TCPA. While faxing has declined in usage significantly, many of those who still receive faxes do so through cloud-based services that send the document via an attachment to an email.  At the time of Amerifactors’ declaratory filing, they were defending a class action suit with claims that Amerifactors violated the TCPA by sending unsolicited fax messages, the bulk of which were sent to consumers from online fax services.

FCC Ruling and Logic

In the Amerifactors ruling, the FCC explained that faxes sent by online fax services do not lead to the “specific harms” Congress sought to address in the TCPA’s Junk Fax Protection Amendment and concluded that “a fax received by an online fax service as an electronic message is effectively an email.”

Unlike printed fax messages that require the recipient to supply paper and ink, the FCC concluded consumers can manage faxes sent by online fax services the same way they manage their email by blocking senders or deleting incoming messages without printing them, short-circuiting many of the specific harms envisioned by the original legislation.  With online fax services, there is no phone-line that is occupied and therefore unavailable for other purposes, and no paper or ink used that must be supplied by the recipient.  Clarifying legislative intent, the FCC stated:

“The House Report on the TCPA makes clear that the facsimile provisions of the statute were intended to curb two specific harms: “First, [a fax advertisement] shifts some of the costs of advertising from the sender to the recipient. Second, it occupies the recipient’s facsimile machine so that it is unavailable for legitimate business messages while processing and printing the junk fax.”

In many ways, the FCC ruling in Amerifactors demonstrates FCC recognition of the changes in faxing technology.  Steven Augustino of KelleyDrye[2], one of the attorneys who represented Amerifactors,  points out that the language we use now does not match the technology that has largely replaced traditional faxing technology, instead offering a short-hand that has roots in an earlier era—and that references dead technologies.  Augustino says:

“Amerifactors argued that the term “faxing” has outlived the actual technology of faxing, much in the same way that we still dial a telephone even though no one has a rotary telephone, or we “cc” people on emails but we aren’t using carbon copies.  In many ways, saying ‘I sent a fax’ is similar to that, the term has outlived the technology that has supported it.”

There is reason to believe that this is the first of many declaratory rulings on fax matters under the TCPA.  As of November 2019, there are thirty-six petitions in front of the FCC, and six of those petitions specifically address “junk” faxing rules.  These petitions represent a variety of faxing issues, such as consent and the definition of an advertisement.   The declaratory ruling in Amerifactors and the FCC’s reasoning related to technological changes will likely impact the FCC’s rule-making on similar issues.

Implications for Future TCPA Fax Class Action Lawsuits

According to Douglas B. Brown of RumbergerKirk, one of the attorneys who represented Amerifactors in the FCC’s declaratory ruling:

“While the traditional fax machine has faded out of today’s business communications, online fax services provide secure communications that are critical to providing consumers with secure information about their finances, health and other important matters. The FCC’s ruling allows for these communications to continue without interference from debilitating class-action lawsuits.”

Per Samantha Duke of RumbergerKirk who also represented Amerifactors:

“First, according to the Hobbs Act, federal district courts are bound to enforce the FCC’s rules, regulations, and orders relating to the TCPA. Thus, this declaratory ruling may impact all fax class actions filed in the district courts in the country.”

The Amerifactors ruling requires a closer look at how faxes are being received complicating how class actions are certified under the TCPA.  Per Duke:

“The Amerifactors ruling now makes the method by which the fax was received key to determining whether any particular unsolicited facsimile violates the TCPA. This individualized determination will most certainly complicate any attempt to certify a TCPA-fax class action as the question of whether the facsimile was sent to an online fax service will predominate over any common issue.”

In short, unless a fax comes through an old-school fax machine, it’s outside the reach of the TCPA per the FCC’s Amerifactors ruling.

[1] See Petition for Expedited Declaratory Ruling of Amerifactors Financial Group, LLC, CG Docket Nos. 02-278, 05-338, at 2 (filed July 13, 2017) (Petition).

[2] Amerifactors Financial Group, LLC was represented by Rumberger, Kirk & Caldwell, PA attorneys Douglas B. Brown and Samantha Duke, along with attorney Steven A. Augustino of Kelley Drye & Warren LLP.

Copyright ©2019 National Law Forum, LLC

For more on the TCPA and FCC Regulations, see the National Law Review Communications, Media & Internet law section.

DOJ Seeking to End Movie Studio and Theater Antitrust Decrees amidst Streaming Competition – A New Opportunity in Theatrical Distribution?

For the film and media distribution industries, this year has been action-packed.  Production budgets are skyrocketing and new digital services have been announced or are launching with each passing month. The streaming wars are upon us. Moreover, the FCC recently voted to treat streaming services as “effective competition” to traditional cable providers (or MVPDs), thereby triggering basic cable rate de-regulation in parts of Hawaii and Massachusetts.

The distribution landscape took yet another unexpected legal twist this week. On November 18, Assistant Attorney General Makan Delrahim announced that the Antitrust Division of the Department of Justice would ask a federal court to terminate the “Paramount Consent Decrees” (the “Decrees”), which have prohibited movie studios from engaging in certain distribution practices with movie theaters since the 1940s. The DOJ filed a motion to terminate the Decrees in federal court in the Southern District of New York on November 22, 2019.  Notably, the DOJ cites streaming services and new technology as a few of the many reasons that the Decrees may no longer be necessary in what the DOJ official sees as today’s highly competitive, consumer-driven content market. Given the volatility of the content licensing space, film licensors and licensees will have to carefully consider how the DOJ’s actions will affect their content rights and options going forward.

By way of background, the Decrees emerged out of the landmark 1948 Supreme Court antitrust case, United States v. Paramount Pictures, Inc. Prior to the case, top Hollywood studios frequently owned movie theaters (thus, owning both the means of production and distribution). This vertical integration led to lower distribution costs for the studios and gave them pricing power and the ability to discriminate about which theaters distributed their films. Not surprisingly, smaller, independent theaters struggled to survive.  The problem was exacerbated by studios engaging in practices such as “block-booking” (requiring theaters to distribute all or none of the studio’s slate of films) and overbroad “clearances” (restrictions on the time which must elapse between particular runs of a film), as well as alleged horizontal conspiracies between the studios and theaters on matters like minimum ticket pricing. As part of the Decrees, the defendant studios were restricted or prohibited from engaging in these practices and were required to divest certain interests in their theaters.

The DOJ’s November 22nd motion may not come as a surprise, as the DOJ first announced that the Decrees were under review in August 2018, after which several industry players, including the National Association of Theatre Owners (NATO), submitted comments. In particular, NATO argued, despite how streaming and technology might increase competition, that block-billing would still adversely impact independent or local chains that exhibit fewer films and may not be able to afford larger blocks of films.

Delrahim summed up the DOJ’s position, stating, “the [D]ecrees, as they are, no longer serve the public interest, because the horizontal conspiracy – the original violation animating the decrees – has been stopped. […] Changes over the course of more than half a century also have made it unlikely that the remaining defendants can reinstate their cartel.” In particular, the DOJ argued that the competitive concerns of the 1940s no longer exist because the movie marketplace has changed so drastically, citing how film distributors have become less reliant on theatrical distribution with the advent of streaming. According to the DOJ, colluding to limit theatrical film distribution in today’s market “would make no economic sense.”  In addition to streaming services, Delrahim also cited new theatrical release business models (such as flat-fee multi-ticket pricing) as increasing competition and innovation in film distribution.

The DOJ acknowledged NATO’s concerns in part and asked the court to implement a two-year sunset on block-booking and circuit dealing (licensing to all theaters under common ownership, as opposed to on a theater-by-theater basis). Whether terminating the Decrees would decrease innovation, neither the motion papers nor Delrahim venture to guess. Delrahim noted that antitrust enforcers need not predict the future but need only recognize that changes are occurring. He added that practices covered by the Decrees would not become per se lawful, but would rather be subject to review under the rule of reason standard.

Commentators are split on whether termination of the Decrees that have shaped Hollywood for decades will lead to any significant change for the movie business. One thing that is important to note is that the Decrees did not outright prohibit vertical integration of studios and theaters – the defendant studios could (and did) acquire theaters after proving that such acquisitions would not unreasonably restrain trade. Further, only those studios party to the Decrees remain subject to their restrictions, meaning many of today’s top studios (that now typically own a vast portfolio of traditional and digital entertainment properties) were non-existent or much smaller in the 1940s and have not been subject to the Decrees.

While it remains to be seen how this development will play out, it is noteworthy for digital providers because it may breathe extra life back into the theatrical release window. With mammoth streaming deals inked every week, the value of the theatrical release window was seemingly diminishing for some films. But now that many studios are forgoing third-party licensing fees and instead retaining their content for their own streaming platforms, studios may begin to ask whether added revenues from ownership of a theater chain could be a potential new source of revenue and a way to gain additional control of the theatrical window. Meanwhile, the effect of lifting the Decrees may not necessarily lead to a flurry of acquisitions, as other studios involved in direct-to-consumer streaming campaigns may not have the capital or desire to exploit the termination of the Decrees. Major theater chains will likely seek to strengthen relationships with studios, while independent theaters will look for ways to succeed despite potentially rising costs.

With all of these developments, studios and media platforms will also need to carefully consider how to protect their interests when handling their licensing arrangements, given the volatility in this space and keeping in mind the two-year sunset (assuming the DOJ succeeds) on block-booking and circuit dealing. While some distributors may be looking for long-term, exclusive content deals as they roll-out their streaming services, studios and content providers may seek flexibility as their distribution options are changing day-to-day.

© 2019 Proskauer Rose LLP.

More on entertainment distribution on the National Law Review Entertainment, Art & Sports law page.

Save the Internet Act of 2019 Introduced

On 6 March 2019, Democrats in the House and Senate introduced the “Save the Internet Act of 2019.” The three-page bill (1) repeals the FCC’s Restoring Internet Freedom Order released in early 2018, as adopted by the Republican-led FCC under Chairman Ajit Pai; (2) prohibits the FCC from reissuing the RIF Order or adopting rules substantively similar to those adopted in the RIF Order; and (3) restores the Open Internet Order released in 2015, as adopted by the Democratic-led FCC under Chairman Tom Wheeler.

Major Impacts:

  • Broadband Internet Access Service (BIAS) is reclassified as a “telecommunications service,” potentially subject to all provisions in Title II of the Communications Act.

  • The three bright line rules of the Open Internet Order are restored: (1) no blocking of access to lawful content, (2) no throttling of Internet speeds, exclusive of reasonable network management practices, and (3) no paid prioritization.

  • Reinstates FCC oversight of Internet exchange traffic (transit and peering), the General Conduct Rule that authorizes the FCC to address anti-competitive practices of broadband providers, and the FCC’s primary enforcement authority over the Open Internet Order’s rules and policies.

  • Per the Open Internet Order, BIAS and all highspeed Internet access services remain subject to the FCC’s exclusive jurisdiction and the revenues derived from these services remain exempt from USF contribution obligations.

  • The prescriptive service disclosure and marketing rules of the Open Internet Order, subject to the small service provider exemption, would apply in lieu of the Transparency Rule adopted in the RIF Order.

FCC Chairman Pai promptly issued a statement strongly defending the merits and benefits of the RIF Order.

KH Assessment

  • From a political perspective, Save the Internet Act of 2019 garners support from many individuals and major edge providers committed to net neutrality principles but faces challenges in the Republican-controlled Senate.

  • In comments filed in the proceeding culminating in the RIF Order, the major wireline and wireless broadband providers supported a legislative solution that codified the no blocking and no throttling principles but not the no-paid prioritization prohibition or classifying BIAS as a telecommunications service.

It is highly unlikely that the legislation will be enacted as introduced. Though still unlikely, there is a better chance that a legislative compromise may be reached.

 

© 2019 Keller and Heckman LLP.

Now I Get It!: Using the FCC’s Order Keeping Text Messages as “Information Services” to Better Understand the Communications Act

Little known fact: the TCPA is just a tiny little part of something much bigger and more complex called the Communications Act of 1934, as amended by Telecom Act of 1996 (which the FCC loves to just call the “Communications Act.”) And yes, I know the TCPA was enacted in 1991 but trust me it is still part of the Communications Act of 1934.

The Communications Act divides communications services into two mutually exclusive types: highly regulated “telecommunications services” and lightly regulated “information services.”

So let’s look at some definitions:

A “telecommunications service” is a common carrier service that requires “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available to the public, regardless of the facilities used.”

“Telecommunications” is “the transmission, between or among points specified by the end user, of information of the user’s choosing without change in the form or content of the information as sent and received.”

By contrast, an “information service” is “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.”

Make sense so far? Basically a telecommunications service is something that telecommunications companies–who are common carriers– can’t tinker with and have to automatically connect without modifying. For instance, if I want to call my friends from law school and wish them well Verizon can’t say–wait a minute, Eric doesn’t have any friends from law school and refuse to connect the call. Verizon must just connect the call. It doesn’t matter who I am calling, how long the call will be, or why I’m making the call, the call must connect. The end.

Information services are totally different animals. Carriers can offer or not offer and tinker and manipulate such messages all they want–see also net neutrality.

So if text messages are a telecommunication then they must be connected without question. But if text messages are an information service then carriers can decide which messages get through and which don’t.

It might seem like you’d want text messages to be information services–after all why would we want the carriers determining how and when we can text each other? Well the FCC has an answer– automatic spam texts.

If text messages are subject to common carrier rules then people can blast your phone with spam text messages and the carriers can’t stop them. True the TCPA exists so you can sue the texter but–as we know–the vast majority of spammers are shady fly-by-nights or off-shore knuckleheads that you can’t find. So the FCC believes that keeping text messages categorized as “information services”–as they are currently defined–will keep spammers away from your SMS inbox. It issued a big order today accomplishing just that. 

And to be sure, the carriers are monitoring and block spam texts as we speak. As the FCC finds: “wireless messaging providers apply filtering to prevent large volumes of unwanted messaging traffic or to identify potentially harmful texts.”  The FCC credits these carrier efforts with keeping text messages relatively spam free:

For example, the spam rate for SMS is estimated at 2.8% whereas the spam rate for email is estimated at over 50%.  Wireless messaging is therefore a trusted and reliable form of communication for many Americans. Indeed, consumers open a far larger percentage of wireless messages than email and open such messages much more quickly.

So from a policy perspective keeping text messages as information services probably makes sense, but let’s review those definitions again.

A telecommunication service is essentially the transmission of information of the user’s choosing.

An information service is “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.”

So is a text message the transmission of information of my choosing or is it the use of Verizon’s ability to store and retrieve information I am sending? (And is there really even a difference?)

Well the FCC says texts are absolutely information services and here’s why:

  • SMS and MMS wireless messaging services provide the capability for “storing”
    and “retrieving” information. When a user sends a message, the message is routed through servers on mobile networks. When a recipient device is unavailable to receive the message because it is turned off, the message will be stored at a messaging center in the provider’s network until the recipient device is able to receive it.

  • SMS and MMS wireless messaging services also involve the capability for “acquiring” and “utilizing” information. As CTIA explains, a wireless subscriber can “ask for and receive content, such as weather, sports, or stock information, from a third party that has stored that information on its servers. SMS subscribers can ‘pull’ this information from the servers by making specific requests, or they can signal their intent to have such information regularly ‘pushed’ to their mobile phone.

  • SMS and MMS wireless messaging services involve “transforming” and
    “processing” capabilities. Messaging providers, for example, may change the form of transmitted information by breaking it into smaller segments before delivery to the recipient in order to conform to the character limits of SMS.

Yeah…I guess. But realistically when I send a text I just want it to get there there the way I sent it. Maybe there’s some storing and utilizing and processing or whatever but not very much.

And that was Twilio’s point. It asserted:  “the only offering that wireless carriers make to the public, with respect to messaging, is the ability of consumers to send and receive messages of the consumers’ design and choosing.” That sounds right.

Well the FCC disagrees: “These arguments are unpersuasive.”

The FCC’s point is that “what matters are the capabilities offered by the service, and as we explain above, wireless messaging services feature storage, retrieval, and other information-processing capabilities.”

Hmmm. ok. I guess I’m ok with that if you are.

But let’s get to the good stuff from a TCPA perspective. Recall that a text message is a “call” for purposes of the TCPA. Well if a text isn’t even a telecommunication how can it be a call? Asks Twilio.

Yeah, FCC, how can it be a call? Asks the Czar.

The Commission answers:

the Commission’s decision merely clarified the meaning of the undefined term “call” in order to address the obligations that apply to telemarketers and other callers under the TCPA. That decision neither prohibits us from finding that wireless messaging service is an information service, nor compels us to conclude that messaging is a telecommunications service.

Ok. Well. Why not?

The Commission answers further:

The TCPA provision itself generally prohibits the use of a facsimile machine to send
unsolicited advertisements, but that does not constitute a determination that an individual’s sending of a fax is a telecommunications service, just as the application to an individual’s making “text calls” does not reflect a determination that wireless messaging is a telecommunications service. In any event, for purposes of regulatory treatment, there is a significant difference between being subject to Commission regulation and being subject to per se common carrier regulation. Only the latter requires classification as a telecommunications service. We clarify herein that SMS and MMS wireless messaging are Title I services, and thus, will not be subject to per se common carrier regulation.

Umm FCC, no disrespect intended, but I kind of feel like that doesn’t really answer the question.

But in any event, the FCC plainly believes that text messages are a “call” for purposes of the TCPA but are not a “telecommunication” for purposes of common carrier regulation.

From a policy perspective I’m fine with the conclusion the Commission reached–it makes sense to keep text messages free from spam. But we have to be honest with ourselves here, the Commission just did legal somersaults to get there. Maybe its time for Congress to take another look at the Communications Act hmmm?

In any event, now you get it!

 

Copyright © 2018 Womble Bond Dickinson (US) LLP All Rights Reserved.
This post was written by Eric Troutman of Womble Bond Dickinson (US) LLP.
Read more news about the TCPA at the National Law Review.

Federal Communications Commission Tackles the “Reassigned Number Problem”

Reassigned numbers have been at the center of the surge in litigation under the Telephone Consumer Protection Act (“TCPA”) during the last few years.  By now the story is well known to businesses that actively communicate with their customers: the customer consents to receive telemarketing and/or informational robocalls[1] at a wireless telephone number, but months or years later the customer changes his or her wireless telephone number and—unbeknownst to the business—the telephone number is reassigned to a different person.  When the recipient of the reassigned number starts receiving calls or messages from the business, a lawsuit often ensues under the TCPA because that party has not consented to receive such calls.  The FCC adopted on July 13 a Second Notice of Inquiry (“Second NOI”) that promises to address this problem in a meaningful way.  Specifically, the Second NOI focuses on the feasibility of “using numbering information to create a comprehensive resource that businesses can use to identify telephone numbers that have been reassigned from a consumer who has consented to receiving calls to a consumer who has not.”

Background on the Reassigned Number Problem

Under the current regime, the North American Numbering Plan (NANP) Administrator generally provides telephone numbers to voice service providers—including those who supply interconnected voice—in blocks of 1000.  The voice service providers recycle those numbers in and out of service, such that, after a number has been dropped, the number goes into a pool for a short period and then is brought out of the pool and reassigned to a different consumer.

The “reassigned number problem” occurs when a consumer consents to receive robocalls (telemarketing and/or informational), but then terminates service to the relevant wireless number without informing the businesses the consumer previously gave consent to make the robocalls.  Businesses that find themselves making robocalls to numbers that (unbeknownst to them) had been reassigned to a different consumer increasingly find themselves subject to lawsuits under the TCPA—this even though it has been widely acknowledged that (1) customers often switch telephone numbers without providing notice to businesses and (2) there is no public directory of reassigned wireless numbers that businesses can rely on to identify and scrub reassigned numbers.  When various industry groups and business entities asked the FCC to intervene, the FCC clarified that businesses making robocalls needed the consent of “the actual party who receives a call,” not of the intended recipient of the robocall.  FCC created a so-called “safe harbor” that afforded little protection in practice: a business could make a single call to a reassigned number without triggering liability under the TCPA, but the business would then be imputed with “constructive” knowledge that the number had been reassigned even if the single call did not yield actual confirmation that the number had been reassigned. The FCC did so even as it admitted that the tools available to identify reassigned numbers “will not in every case identify numbers that have been reassigned” and that the steps it was taking “may not solve the problem in its entirety” even “where the caller is taking ongoing steps reasonably designed to discover reassignments and to cease calls.”

The Second NOI

The Second NOI promises to more meaningfully address the reassigned number problem by suggesting the creation of a reliable, complete list of reassigned numbers that service providers would be required to update.  In pertinent part, the Second NOI addresses a number of other topics, including, but not limited to, possible reporting alternatives, compensation schemes, frequency of updates, and fees and eligibility requirements for accessing reassigned number data.  It also asks a number of logistical questions, including, but not limited to:

(1) What are the ways in which voice service providers could report the information in an accurate and timely way?

(2) Would the reporting—into a database or other platform—“substantially improve robocallers’ ability to identify reassigned numbers?”

(3) What information should voice service providers report?

(4) In what ways might the information reported raise concerns regarding the disclosure of private, proprietary, or commercially sensitive information?

(5) Should reassignment of toll-free numbers also be reported?

(6) What is the quantity of numbers reassigned and the benefits of reducing unwanted calls to these numbers?

(7) Should there be a safe harbor from TCPA violations for robocallers who use the new reassigned number resource?  What would be the advantages and disadvantages?

(8) How can the FCC incentivize robocallers to use the reassigned number resource?

In addition, the Second NOI seeks comment on whether the notification requirement should apply to all voice service providers or just providers of wireless services, and how to “balance the reporting burden placed on voice service providers against consumers’ privacy interests and robocallers’ interest in learning of reassignments.”   The item also seeks comment on which entity should be responsible for notification in circumstances when a voice service provider does not receive numbers directly from NANP, but instead obtains numbers “indirectly” from carrier partners.

The Commission claims it has the authority under Sections 227(b) and 251(e) of the Communications Act of 1934, as amended—which give the FCC control over the US portion of NANP and incorporate the TCPA—to require entities that obtain numbers from NANP to also report reassignments.  In fact, the Commission claims that doing so may further the statutory goals underlying the TCPA, which generally prohibits unwanted robocalls.

Although many details remain to be discussed and addressed by the FCC, the creation of the list that the FCC is proposing would address one of the main challenges faced by businesses that want to comply with the TCPA: how to gather reliable and complete information regarding which wireless telephone numbers have been reassigned.  The possibility of such a list working similar to that available to identify telephone numbers in the Do Not Call List is particularly promising, especially if it comes accompanied by safe harbor provisions similar to those attached to the Do Not Call List obligations in the FCC’s rules.

Comments are due August 28, 2017 and Reply Comments September 26, 2017.

[1] For purposes of this post “robocalls” refers to both calls made using an automatic telephone dialing system or using an artificial voice or pre-recorded message.

This post was contributed by Eduardo R. Guzmán  Paul C. Besozzi  and Koyulyn K. Miller of   Squire Patton Boggs (US) LLP
For more legal analysis check out the National Law Review.

FCC Slams Serial Robocaller With $120 Million Proposed Fine for “Spoofing” Numbers

We all get them.  Repeated marketing calls to our mobile and home phones with the incoming phone number altered to make it appear that it’s a local call, when in fact, the call is from a robo-scammer using IP technology to “spoof” the phone number.  As it turns out, there’s a federal law that makes such spoofing illegal, the Truth in Caller ID Act of 2009 (“TICIDA”), and in its first enforcement action under TICIDA, the FCC hit an alleged serial robocaller, Adrian Abramovich and his companies (together, Abramovich) with a whopping $120 million Notice of Apparent Liability for allegedly originating nearly 100 million such calls.

The Commission also issued a Citation and Order to Abramovich for alleged violations of the Telephone Consumer Protection Act (“TCPA”) for making unauthorized prerecorded telemarketing calls to emergency phone lines, wireless phones and residential phones without obtaining the required prior express written consent from the called party.  While TICIDA allows the Commission to directly fine first-time violators through its NAL authority, which it did here, in TCPA FCC enforcement actions involving entities and individuals that do not hold Commission authorizations, the Commission must first issue a citation, and then can only proceed with a fine if the recipient repeats the violation.  That still leaves Abramovich open to potentially monumental TCPA class action exposure.   The Citation and Order also notified Abromovich that he had violated the federal wire fraud statute by transmitting or causing to be transmitted, by means of wire, misleading or false statements with the intent to perpetrate a fraud.

According to the Commission, Abramovich ran a scheme where his spoofed calls appeared to originate from local numbers and offered, via a pre-recorded message, holiday vacations and cruises claiming to be associated with well-known American travel and hospitality companies.  The pre-recorded messages would prompt customers to “press 1” to secure their reservation.  Once a customer pressed “1”, the customer was transferred to a call center where live operators pushed vacation packages typically involving timeshare presentations, that were not affiliated with the well-known brands used in the recorded messages.  The Commission characterized Abramovich’s schemes as “one of the largest – and most dangerous – illegal robocalling campaigns the Commission has ever investigated.”  According to the Commission, in addition to defrauding consumers, the robocalling campaign also caused disruptions to an emergency medical paging service, which provides paging services for emergency room doctors, nurses, emergency medical technicians, and other first responders.

While significant in absolute terms, the $120 million proposed fine, according to the Commission, was significantly below the penalty that could have been proposed in the NAL.  Rather than fine the statutory maximum of $11,052 for each spoofing violation, or three times that amount for each day of a continuing violation, the Commission calculated the base forfeiture amount at $1,000 per unlawful spoofed call, since this was the first time the Commission used its TICIDA forfeiture authority.

Mr. Abromovitz now has an opportunity to respond to both the NAL and Citation.  Stopping illegal robocalling has been a key priority for Chairman Pai, and no doubt the Commission is expecting that the threat of huge monetary forfeiture penalties against the industry will provide a powerful incentive for roboscammers to look for other ways to make a buck.  Given the Commission’s struggle with fashioning tools to go after serial robocallers that do not have the effect of increasing TCPA exposure for established companies engaging in legitimate customer communications, we do not expect the Commission to back down from its proposed penalty, and expect this to be the start of a new enforcement initiative using TICIDA and its direct penalty provisions.

This post was written byRebecca E. Jacobs,  Martin L. Stern and  Douglas G. Bonner of Womble Carlyle Sandridge & Rice, PLLC.

The FCC Responds to Comcast’s Negative Option

FCC ComcastOn Tuesday, October 11, the Federal Communications Commission (“FCC” or “Commission”) announced the release of an Order and Consent Decree with cable behemoth Comcast Corporation (“Comcast”) in which the company agreed to pay US$2.3M to settle an FCC investigation into whether Comcast employed negative option billing to wrongfully charge for services and equipment customers never authorized.  The settlement also requires Comcast—by some accounts the largest cable company in the country with 22.3M subscribers—to adopt a sweeping, highly detailed five-year compliance plan designed to force the company to obtain customers’ affirmative informed consent prior to adding charges to their bills.  According to the FCC’s press release, the settlement amount is the largest civil penalty the agency has ever assessed against a cable operator.

What is Negative Option Billing and How Does the FCC Regulate It?

“Negative option billing” is a practice similar to “cramming” in the telecommunications context, wherein a company places unauthorized charges on a consumer’s bill, requiring subscribers to pay for services or equipment they did not affirmatively request.  In addition to the obvious nuisance of unknowingly paying for unauthorized services and equipment, the FCC’s action is also aimed at protecting consumers from “spend[ing] significant time and effort in seeking redress for any unwanted service or equipment, which is often manifested in long telephone wait times, unreturned phone calls from customer service, unmet promises of refunds, and hours of effort wasted while pursuing corrections.”  For these and other consumer protection reasons, negative option billing is illegal; it violates both Section 623(f) of the Communications Act of 1934, as amended (the Act), and Section 76.981(a) of the Commission’s rules.  Specifically, 47 U.S.C. § 543(f) explicitly prohibits negative billing options, noting also that a failure to refuse an offer is not the equivalent of accepting the offer.

As the FCC clarified in a 2011 Declaratory Ruling, while a customer does not have to know and recite specific names of equipment or service in the course of ordering those products, the cable operator must have “adequately explained and identified” the products in order for a subscriber to “knowingly accept[] the offered services and equipment by affirmative statements or actions.”

Section 76.981(b) explains that the negative billing option does not prevent a cable operator from making certain changes without consumer consent, such as modifying the mix of channels offered in a certain tier, or increasing the rate of a particular tier (unless more substantive changes are made, such as adding a tier, which then increases the price of service).

The FCC appears to have found only one violation of the negative option billing prohibition previously, and in that context, the Commission used its discretion to refrain from imposing a penalty.  More than 20 years ago, in 1995, the Commission acted on a complaint and investigated Monmouth Cablevision for allegations that the company—which had previously rented remote controls to their subscribers—violated FCC rules when it removed the leasing fee on subscriber bills and instead included a $5 sale price for the remotes. In that case, the Commission explained that, while “in a literal sense, this is the same equipment that the customer previously rented, we cannot find that these customers affirmatively requested to purchase these remotes rather than renting them.”  The Commission went on to explain that “changing the way in which existing service and equipment is offered, e.g., from leasing to selling,” did, in fact, violate the Commission’s negative option billing prohibition.  However, due to the “de minimis difference between the $ 5.00 purchase price and the total rental price” and because of the “large number of regulatory requirements that became effective on September 1, 1993, and the associated compliance difficulties,” the then Cable Services Bureau chose not to impose a penalty.  Because state governments have concurrent jurisdiction over negative billing practices, cable companies have faced court action for these and similar allegations for decades.

The FCC Investigation

Based on “numerous” consumer complaints, the FCC’s Enforcement Bureau opened an investigation in December of 2014 into whether Comcast engaged in negative option billing.  In the course of its investigation, the FCC determined that customers were billed for “unordered services or products, such as premium channels, set-top boxes, or digital video recorders (DVRs).”  Beyond not authorizing these products, in some cases the FCC claims that subscribers specifically declined additional services or upgrades, only to be billed anyway.  In fact, the Order—which is part of the settlement but generally not subject to the non-government party’s review prior to release—details numerous complainants that claim to have been given the runaround by Comcast customer service representatives, with one customer (Subscriber A) claiming that, after three hours on the phone and multiple transfers, she was ultimately transferred to a fax machine.  Another complainant (Subscriber B) asserted that he determined Comcast had wrongfully billed him for approximately 18 months for an extra cable box he never ordered, and that he spent another year calling to request (unsuccessfully) that the company remove the charge.

The Settlement

The Order and Consent Decree are striking in terms of the level of transparency exhibited throughout.  Unlike most FCC settlements, in which facts and legal arguments are closely guarded and held confidential, this Order reads more like a Notice of Apparent Liability for Forfeiture, where the FCC explains the underlying facts and legal theories in substantially more detail.  Especially noteworthy here, is that unlike majority of the other settlements released by the FCC’s Enforcement Bureau since Travis LeBlanc took the helm, neither the Order nor the Consent Decree include a statement admitting liability.  Rather than an admission of liability by Comcast, the Consent Decree includes a lengthy discussion of the perspectives of both Comcast and the Commission.  Besides arguing that most of the services were authorized and that unauthorized services inadvertently added to consumer bills were removed, Comcast—represented by FCC regular and first Enforcement Bureau Chief David Solomon—argued that the Commission itself “has cautioned against an expansive application of the Negative Option Billing Laws, stating that a broad reading of the rule could lead to harmful consequences.”  Moreover, Comcast asserted that “the Negative Option Billing Laws are not per se prohibitions, but instead are targeted only at affirmatively deceptive conduct on the part of cable operators, and Commission enforcement requires a demonstrated pattern of violation,” rather than an erroneous charge “occasioned by employee error” that does not involve deceit or intent.  For its part, the Commission asserted that it believes “the Customer Complaints and other facts adduced during the Investigation are evidence of violations of Section 623(f) of the Act and Section 76.981 of the Commission’s Rules.”

Moreover, the settlement requires that Comcast be required to comply with the terms of the Order and Consent Decree for an uncharacteristically long term—i.e., five years instead of the three years the Bureau has normally insisted upon.

In addition to the US$2.3M civil penalty, Comcast must implement a highly detailed compliance plan.  Although in many instances, Comcast is given until July 2017 to create and implement requisite processes, the level of detail applied to the cable company’s alleged transgressions is similar to that found in certain cramming and slamming settlements.  In those instances, however, the Commission is usually acting against less sophisticated targets with decidedly fewer resources that cannot retain compliance personnel with the expertise to design, develop, and implement their own expansive compliance plans.  Among other things, and as explained in five pages of detail in the Consent Decree, the company is required to:

obtain customers’ affirmative informed consent prior to charging them for new services or equipment; send customers an order confirmation, separate from any other bill, that clearly and conspicuously describes newly added services and equipment and their associated charges; offer mechanisms to customers that, at no cost, enable them to block the addition of new services or equipment to their accounts; implement a detailed program for redressing disputed charges in a standardized and expedient fashion; limit adverse actions (such as referring an account to collections or suspending service) while a disputed charge is being investigated; designate a senior corporate manager as a compliance officer; and implement a training program to ensure customer service personnel resolve customer complaints about unauthorized charges.

Going forward, it appears that the Commission will have a substantial amount of insight into the way the company conducts its business vis-à-vis its customer service responsibilities, in the form of annual reports and extended document retention requirements.

Lessons from the Settlement

Over the past two and a half years, it has become more apparent that the FCC is willing to apply old rules in new ways, and to continue to be an aggressive enforcer of the rules in general, but particularly when it comes to protecting consumers.  Although the Commission has issued Enforcement Advisories in the past, alerting companies that it is on the lookout for noncompliance in certain areas, this US$2M+ action is proof that regulatees should not wait for FCC warnings before ensuring they are compliant with the rules.  Companies should take heed and adopt a proactive approach to understanding the rules applicable to them based on their business operations.

ARTICLE BY Koyulyn K. Miller of Squire Patton Boggs (US) LLP

© Copyright 2016 Squire Patton Boggs (US) LLP

FCC’s Enforcement Bureau Commends PayPal for Modifying its User Agreement

We previously advised that the FCC’s Enforcement Bureau, in an unusual move, on June 11 published a letter it sent to PayPal warning that PayPal’s proposed changes to its User Agreement that contained robocall contact provisions might violate the TCPA.

FCC_LogoThese proposed revisions conveyed user consent for PayPal to contact its users via “autodialed or prerecorded calls and text messages … at any telephone number provided … or otherwise obtained” to notify consumers about their accounts, to troubleshoot problems, resolve disputes, collect debts, and poll for opinions, among other things. The Bureau’s letter highlighted concerns with the broad consent specified for the receipt of autodialed or prerecorded telemarketing messages and the apparent lack of notice as to a consumer’s right to refuse to provide consent to receive these types of calls.

On June 29, prior to the revisions coming into effect, PayPal posted a notice on its blog stating: “In sending our customers a notice about upcoming changes to our User Agreement we used language that did not clearly communicate how we intend to contact them.” PayPal clarified that it would modify its User Agreement to specify the circumstances under which it would make robocalls to its users, including for important non-marketing reasons relating to misuse of an account, as well as to specify that continued use of PayPal products and services would not require users to consent to receive robocalls.

The FCC’s Enforcement Bureau immediately put out a statement commending PayPal for its decision to modify its proposed contact language, noting that these changes to the User Agreement represented “significant and welcome improvements.” The Bureau’s very public actions on this matter signal to businesses everywhere of the need to review existing “consent to contact” policies. Certainly the FCC’s yet to be released Declaratory Ruling on TCPA matters that was voted on during a contentious FCC Open Meeting on June 18 may also invite that opportunity.

ARTICLE BY Laura H. Phillips of Drinker Biddle & Reath LLP

©2015 Drinker Biddle & Reath LLP. All Rights Reserved

FCC Chairman Proposes New TCPA Rules

The FCC is ready to rule on long-standing petitions seeking clarifications of the Telephone Consumer Protection Act and related FCC regulations. On May 27, 2015, FCC Chairman Tom Wheeler circulated a proposed regulatory ruling to fellow commissioners, which would address issues raised in more than 20 pending petitions. The fact sheet summarizing the chairman’s proposal foreshadows bad news for legitimate businesses using automatic telephone dialing technology.

FCC_Logo

The fact sheet lumps scammer calls like those from perky “Rachel” of the mysterious and ambiguous “Cardholder Services” with those from legitimate businesses. The fact sheet cites the 214,000 consumer complaints about robocalls. No breakdown is given as to how many of these complaints involved con artists and how many related to businesses calling, for example, to collect debt. The tone of the fact sheet provides no comfort. Its preamble states the plan is to “close loopholes and strengthen consumer protections.”

The FCC will vote on the new proposal during its Open Commission Meeting scheduled for June 18, 2015. In the meantime, companies using automatic telephone dialing technology should plan to take action to comply with whatever comes from the FCC. There will be no notice and comment period and whatever passes at the Open Commission Meeting will become effective immediately upon release.

New Provisions

If Chairman Wheeler’s proposals are adopted without changes, the new rules will provide:

  • Wireless and wired telephone consumers will have the right to revoke their consent to receive calls and text messages sent from autodialers in any reasonable way at any time. Many courts have concluded that consumers have a right to revoke consent. Some have said that revocation must be in writing. Some have said consent, once given, cannot be taken back. If this proposal passes, all courts likely will hold that consent may be revoked in any reasonable way at any time. This rule will have consequences beyond TCPA exposure. For example, it is likely to increase the cost of credit because creditors and debt collectors will have to employ more people to manually dial debtors who have failed to meet their obligations and utter the words, “Stop calling me!”

  • To prevent “inheriting” consent for unwanted calls from a previous subscriber, callers will be required to stop calling reassigned wireless and wired telephone numbers after a single request. It is not clear from the fact sheet what the individual on the other end of the line must say to notify the caller that they are not the person they seek to reach.

  • The TCPA currently prohibits the use of automatic telephone dialing systems to call wireless phones and to leave prerecorded telemarketing messages on landlines without consent. The current definition of an “automatic telephone dialing system” under the TCPA is “equipment which has the capacity to (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” A 2003 FCC ruling focused on the use of the word “capacity” in the definition and broadly extended the definition to cover autodialers used to dial specific numbers. This ruling has resulted in inconsistent court decisions over whether a dialer must have a present capacity to so dial or whether a future capacity is sufficient for to trigger TCPA coverage. The new proposal appears to attempt to resolve the ambiguity by amending the definition of an “automatic telephone dialing system” to mean “any technology with the capacity to dial random or sequential numbers.” That is not much help. The industry needs an answer on the present versus future capacity issue. As it stands now, a court could conclude that a smartphone is an automatic telephone dialing system. The tone of the fact sheet suggests that this problem is not going to be solved in a way that is favorable to industry.

Existing Provisions Under TCPA

Chairman Wheeler’s proposal also provides for some very limited and specific exceptions for “urgent circumstances,” which may include free calls or text messages to wireless devices that alert consumers of potential fraud or that remind them of urgent medication refills. Consumers will still have an opportunity to opt-out of these types of calls and texts.

  • The new proposal will also leave many of the existing provisions of the TCPA intact:

  • The FTC will continue to administer the National Do-Not-Call Registry to prevent unwanted telemarketing calls

  • Wireless and home phone subscribers can continue to prevent telemarketing robocalls made without prior written consent

  • Autodialed and prerecorded telemarketing and information calls and text messages to mobile phones will still require prior consent

  • Political calls will still be subject to restrictions on prerecorded, artificial voice, and autodialed calls to wireless phones, but will continue to not be subject to the National Do-Not-Call Registry because they do not contain telephone solicitations as defined by FCC regulations

  • Consumers will still have a private right of action for violations of the TCPA along with statutory penalties

Implications

If adopted, the new regulations may significantly restrict the use of autodialing technologies by business. However, the devil will be in the details. Organizations should review the owners’ manual that came with their dialer. What can it actually do? In other words, what is its present and future capacity? Have those answers ready so you can act when the FCC rules. Companies should also have proper processes and systems in place to meet the consumer opt-out requirements of any new regulations. Policies should address steps to take when a called party claims that the number called no longer belongs to your intended recipient.

One thing is certain about these new rules, they will not stop scammers who use spoofed caller IDs and originate calls from outside of the United States and, therefore, outside of the jurisdiction of the FCC and/or FTC. They will just make to harder and more expensive for legitimate businesses to reach their customers.

ARTICLE BY Chanley T. Howell, Michael C. Lueder & Steven Millendorf of Foley & Lardner LLP

© 2015 Foley & Lardner LLP