FTC telemarketing

FTC Telemarketing Crackdown Sends Major Warning to Industry

On July 18, 2023 the Federal Trade Commission (“FTC” or the “Commission”) announced that it has been working with more than 100 federal and state law enforcement partners to crack down on widespread deceptive telemarketing practices. The joint initiative, known as “Operation Stop Spam Calls,” has already resulted in lawsuits against companies that place prerecorded calls, so-called “consent farms” that sell consumer information to said telemarketing companies, and Voice over Internet Protocol (“VOIP”) providers that, it alleges, help facilitate illegal robocalls. The lawsuits brought as part of the Operation allege various violations of the Telemarketing Sales Rule (“TSR”). Joining the FTC in “Operation Stop Spam Calls” are the Federal Communications Commission (“FCC”), the Department of Justice (“DOJ”), Attorneys General from all fifty states, as well as the District of Columbia.

Dating back to the enactment of the TSR, the FTC has filed a total of 167 cases alleging illegal telemarketing practices, resulting in over $2 billion in court-ordered judgments. Under the newly-launched “Operation Stop Spam Calls,” the FTC has filed complaints against five companies that it alleges are giants in the illegal telemarketing space. The FTC has already settled four of these lawsuits through consent decrees that include a total of roughly $18.2 million in civil penalties and various injunctive measures. Of significant note, the Operation has effectively outlawed pre-recorded calls and the use of marketing partners lists in telemarketing consent language. Companies involved in the lead generation business will want to pay particular attention to the FTC’s telemarketing lawsuit against Viceroy Media Solutions, LLC (“Viceroy”). A common part of the telemarketing chain, companies selling consumer lead data en masse are a priority target under the new FTC-lead initiative.   

The FTC Telemarketing Complaint Against Viceroy

The FTC’s complaint against Viceroy alleges that, together with its sister company and two principals, it operated a “consent farm” enterprise. According to the complaint, Viceroy “us[ed] websites to deceptively collect and aggregate ‘leads’ consisting of consumers’ personal information and purported consent to receive telemarketing robocalls. In turn, Defendants sold these leads to telemarketing clients, who relied on consumers’ purported consent to justify robocalling customers.” Viceroy’s illegal operations, the FTC alleges, resulted in the sale of at least 46,562,557 leads to 37 clients and eventually lead to tens of millions of unwanted robocalls to United States consumers.

In its Complaint, the FTC alleges that Viceroy was engaged in deceptive telemarketing practices because:

1) Viceroy mislead consumers regarding their consent to receive robocalls; and

2) Under the TSR, the seller itself must consent to place robocalls – not an unrelated third-party lead generator like Viceroy.

How Did Viceroy Mislead Consumers?

Viceroy owned, operated, and controlled the domains quick-jobs.com and localjobsindex.com (the “Websites”). Like many lead generating landing pages, the Websites appeared to connect consumers with certain opportunities. In this case, the Websites were designed in a manner to lead consumers to believe that they would find job openings. The FTC alleged that rampant use of “dark patterns” was evident throughout the Websites. Dark patterns, as our readers are aware, are user interfaces that have been carefully crafted to trick users into taking certain actions. In this case, according to the FTC, the Websites’ sequential pop-up windows were designed to mislead consumers into providing lead information and agreeing to receive autodialed calls/texts from third parties under the guise of proceeding to available job listings.

Whether Viceroy sold consumer data to a telemarketer or a lead broker intermediary, the FTC alleged that it was a critical part in the chain of entities involved in illegal telemarketing. By unknowingly providing consent to this “consent farm” in the hopes of obtaining a job opportunity, the FTC alleged, customers eventually received solicitations from life insurance companies, cruise lines, and disability insurance providers. Pursuant to the associated consent decree, the parties settled the Viceroy Complaint for a $913,636 civil penalty, the defendants agreed to refrain from any future practices to help companies place unsolicited telemarketing calls, and various other compliance measures. 

Why is the FTC’s Illegal Telemarketing Initiative Important to your Business?

If your company is in the telemarketing industry, “Operation Stop Spam Calls” has major implications for your business. As stated above, the newly-minted initiative has already resulted in the FTC commencing actions against five major players in the telemarketing industry. Whether your company is in the business of acquiring and selling lead information or placing telemarketing calls, you can now assume that it may come under regulatory scrutiny. As such, businesses should retain telemarketing law attorneys that are experienced in advising companies on compliance with various state and federal telemarketing regulations, including the TSR.

If you require assistance with preventing your business from becoming a defendant in an FTC investigation, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for information 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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Photo by Giorgio Trovato on Unsplash

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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