March 16, 2017
This Monday, the Federal Trade Commission (the “FTC” or “Commission”) announced that a slew of Arizona State companies and their owners have agreed to pay $25 million to settle a lawsuit filed in connection with the defendants’ telemarketing practices, reinforcing the importance of consulting an attorney experienced in telemarketing law before launching any telemarketing or text messaging campaign.
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Defendants’ Telemarketing Enterprise and FTC Lawsuit
According to the FTC, from 2011 to 2016, a network of six Arizona State corporations and LLCs owned and operated by three Arizona residents made telephone calls and delivered direct mail brochures offering consumers across the country the opportunity to purchase or invest in e-commerce websites. The Commission alleges that, during the course of numerous inbound and outbound telemarketing calls, the defendants described the subject promotion as “risk-free” and offered a “100% money back guarantee.” However, the FTC claims that consumers who made payments to the defendants typically did not receive the promised returns or any refunds.
In October 2016, the Commission sued the three individuals and their six companies in U.S. District Court for the District of Arizona (Case No. 16-cv-3353), alleging that the defendants’ telemarketing practices violated both the federal FTC Act and the Commission’s Telemarketing Sales Rule (“TSR”).
Defendants Settle FTC Claims
On March 8, 2017, the aforementioned defendants and the FTC reached an agreement settling the Commission’s FTC Act and TSR claims. Under the terms of the agreement, the defendants are permanently barred from engaging in future telemarketing activities or otherwise promoting any investment opportunity.
Additionally, the settlement agreement requires the defendants to pay approximately $7.5 million to redress consumer injuries and to surrender all of the corporate defendants’ assets to the Commission for liquidation. In the event that the defendants misstated or failed to disclose any material financial assets to the FTC, an avalanche clause will be triggered and the amount due will balloon to $25 million.
How a Telemarketing Lawyer Can Help
The above-referenced case illustrates the importance of complying with applicable state and federal laws, rules and regulations when conducting a telemarketing or text message marketing campaign. Many telemarketing-related legal risks can be minimized or eliminated entirely by working with an experienced telemarketing lawyer before issues arise. A well-planned calling or text messaging strategy can help protect sellers and their affiliate marketers from substantial liability. Further, a telemarketing lawyer can help to carefully review opt-in language, telemarketing scripts and text message flows to minimize the risk of unwelcome legal surprises in the future.
If you are interested in learning more about this topic, need to review your telemarketing practices, or are being investigated or sued by the FTC or other regulatory agency, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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