FTC Issues Multiple Warnings Relating to Telemarketing Sales Rule Enforcement Actions

The Federal Trade Commission (FTC) sent letters on March 27, 2020, and April 3, 2020, to several Voice over Internet Protocol (VoIP) service providers warning them that routing and transmitting illegal robocalls, including coronavirus-related scam calls, is illegal and may lead to FTC enforcement actions. The FTC's coronavirus robocall warning letters, now 13 in total, make clear that "[c]ombatting illegal robocalls is a top priority for the FTC, with a particular focus on robocalls involving Coronavirus/COVID-19." In the wake of these warning letters, VoIP and other service providers involved in the routing or transmitting of potentially illegal robocalls should understand 1) how their actions can violate the law, and 2) how serious federal law enforcement officials are about pursuing those who enable illegal robocalls.

How Service Providers' Actions Can Violate the Law

Under the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310, it is unlawful for any person or entity "to provide substantial assistance or support to a seller or telemarketer when that person [or entity] knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a), (c) or (d), or § 310.4 of th[e] [TSR]." 16 C.F.R. § 310.3(b). Sections 310.3(a), (c) and (d), and Section 310.4 of the TSR, among other conduct, prohibit the following:

• "Misrepresenting, directly or by implication, in the sale of goods or services . . . [a] seller's or telemarketer's affiliation with, or endorsement or sponsorship by, any person or government entity" 16 C.F.R. § 310.3(a)(2)(vii)
• "Making a false or misleading statement to induce any person to pay for goods or services or to induce a charitable contribution" 16 C.F.R. § 310.3(a)(4)
• "Failing to transmit or cause to be transmitted the telephone number, and, when made available by the telemarketer's carrier, the name of the telemarketer, to any caller identification service in use by a recipient of a telemarketing call" 16 C.F.R. § 310.4(a)(8)
• "Initiating any outbound telephone call that delivers a prerecorded message . . . unless . . . the seller has obtained from the recipient of the call an express agreement, in writing" 16 C.F.R. § 310.4(b)(1)(v)(A)
• "Initiating any outbound telephone call to a person when . . . [t]hat person's telephone number is on the 'do-not-call' registry. . . unless the seller or telemarketer . . . [c]an demonstrate that the seller has obtained the express agreement, in writing, of such person to place calls to that person." 16 C.F.R. § 310.4(b)(1)(iii)(B)

"Assisting or facilitating" a telemarketer whom a service provider knows or, had the service provider not indulged in willful blindness, would have known to be engaged in any of the aforementioned conduct is a violation of the TSR and can result in an FTC enforcement action. If the FTC chooses to pursue an enforcement action for violations of the TSR, it can obtain civil monetary penalties of up to $43,280 per illegal call. 16 C.F.R. § 1.98(d). And, because violations of the TSR are also violations of the Section 5 of the FTC Act, 15 U.S.C. § 45, the FTC can seek preliminary and permanent injunctive relief, 15 U.S.C. § 53(b), as well as refunds and damages, 15 U.S.C. § 57b(b), to address violations of the TSR.

How Serious Federal Law Enforcement Officials Are About Pursuing Those Who Enable Illegal Robocalls

Service providers should heed the FTC's recent warnings about the possibility of federal law enforcement actions because the FTC and other federal law enforcement agencies are actively pursuing individuals and entities who enable illegal robocalls. For example, on May 31, 2018, the FTC filed a TSR complaint in FTC v. James B. Christiano against technology companies that knowingly provided servers and software used by illegal robocallers. On Sept. 18, 2018, the FTC obtained an order permanently enjoining the illegal activities outlined in the complaint and subjecting one of the companies identified in the complaint to a suspended $1 million civil monetary penalty. More recently, the FTC, on Dec. 3, 2019, filed another complaint in FTC v. Educare alleging that a service provider assisted and facilitated telemarketers that it knew, or consciously avoiding knowing, were violating the TSR. The FTC has already obtained an order preliminarily enjoining the service provider from violating the TSR and continues to pursue refunds, restitution and disgorgement.

The FTC, however, is not the only federal law enforcement agency with which entities potentially assisting and facilitating illegal robocalls should be concerned. On Jan. 28, 2020, the U.S. Department of Justice (DOJ) filed two complaints, one in United States v. Kahen and another in United States v. Palumbo, against VoIP service providers alleging that they committed and were conspiring to commit wire fraud by knowingly transmitting robocalls impersonating federal government agencies. In United States v. Palumbo, the DOJ has already obtained an order preliminarily enjoining the defendants from transmitting any VoIP calls to phone lines in the United States or providing any United States telephone numbers to anyone during the pendency of the case. And, in United States v. Kahen, the DOJ has obtained a consent decree and final judgement permanently barring some of the defendants from using the United States telephone system to 1) deliver prerecorded messages through automatic means, 2) transmit calls to the United States from abroad, or 3) provide calling services for calls originating in the United States. The FTC, the DOJ and other federal regulatory agencies have clearly made it a priority to pursue those individuals and entities who enable illegal robocalls and all those potentially involved in such conduct should take notice.

How Holland & Knight Can Help

Although the FTC provides basic educational materials to assist businesses in complying with the TSR, if you have questions about how to best ensure compliance with the law and avoid law enforcement actions, Holland & Knight's Consumer Protection Defense and Compliance Team and White Collar Defense and Investigations Team can provide additional information. The teams are comprised of individuals with extensive experience handling FTC, DOJ and other federal regulatory investigations, and can provide advice on how to best navigate those investigations in an ever-evolving regulatory environment. Please contact the authors with any questions.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the authors of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.