In a Declaratory Ruling issued on May 9, 2013, the Federal Communications Commission (“FCC”) sought to clarify the extent to which the advertisers of commercial products and services (referred to as “sellers”) can be held liable for violations of the Telephone Consumer Protection Act (“TCPA”) by the third-party telemarketers that place telemarketing calls on their behalf. (This blog previously looked at strict liability issues for sellers under the TCPA here, as well as new TCPA rules here).
Rather than providing a bright-line rule, the FCC’s Ruling holds that sellers “may be held vicariously liable” for the actions of their third-party telemarketers if an agency relationship exists. While the Ruling does highlight certain factors to be considered when analyzing whether an agency relationship exists, such determinations will have to be made by the courts on a case-by-case basis.
All about the Agency
In a pair of recent cases, Charvat v. Echostar Satellite LLC, 676 F. Supp. 2d 668 (S.D. Ohio 2009), and United States v. Dish Network LLC, 667 F. Supp. 2d 952, 956 (C.D. Ill. 2009), the plaintiffs alleged that the underlying sellers were liable for violations of the TCPA engaged in by their telemarketers. The sellers countered that they did not “initiate” the subject calls as defined under the TCPA because the third-party telemarketing contractors were the initiators, and thus the sellers could not be held liable. Appellate courts in each case asked the FCC for a Declaratory Ruling on the potential liability of the seller.
The FCC ruled that, while the sellers did not “initiate” the calls as contemplated under the TCPA, they could be held liable where there is an “agency relationship.” Some of the factors that the FCC cited in determining whether an agency relationship exists include the following, as restated here:
- Evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including: access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information;
- Evidence that the outside sales entity has the ability to enter consumer information into the seller’s sales or customer systems, as well as the authority to use the seller’s trade name, trademark and service mark;
- Evidence that the seller approved, wrote or reviewed the outside entity’s telemarketing scripts; and
- Evidence that seller knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct.
Protecting Your Telemarketing Activities
By opening the door to the vicarious liability of sellers’ for the actions of their telemarketers, the FCC is, in part, attempting to create “appropriate incentives” for businesses “to monitor and police TCPA compliance by third-party telemarketers.” Sellers should take care to begin relationships with telemarketers through well-crafted agreements that seek to prevent the establishment of an agency relationship, using guidance provided by the FCC. In addition, these agreements should not only require that the telemarketers comply with the TCPA and other applicable law, but should allow for the seller to audit and monitor the telemarketers’ activities to ensure compliance with same.
Entities that fail to establish the proper relationships with their telemarketing partners and/or fail to adequately monitor those third-party telemarketing partners may find themselves facing regulatory action from the FCC and/or state regulatory bodies, as well as consumer class action litigation.
If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at firstname.lastname@example.org, 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.