Some types of businesses, individuals, and activities are outside the FTC’s jurisdiction, and therefore, not covered by the TSR. Certain calls or callers are exempt from the Rule, too. Moreover, some of the exemptions from the original Rule have been narrowed in the Amended Rule. As a result, some calls or callers may be completely exempt or they may be partially exempt—that is, they may have to comply with some of the Rule’s provisions. The following sections explain the coverage of the Rule and the exemptions. Be aware that the FCC also regulates telemarketing practices; its jurisdiction extends to some entities and activities that are not subject to regulation by the FTC. For more information about the FCC’s rules, visit www.fcc.gov.
Some Types of Businesses and Individuals
Some types of businesses are not covered by the Rule even though they conduct telemarketing campaigns that may involve some interstate telephone calls to sell goods or services. These three types of entities are not subject to the FTC’s jurisdiction, and not covered by the Rule:
- banks, federal credit unions, and federal savings and loans.
- common carriers—such as long-distance telephone companies and airlines—when they are engaging in common carrier activity.
- non-profit organizations—those entities that are not organized to carry on business for their own, or their members’, profit.
These types of entities are not covered by the Rule because they are specifically exempt from the FTC’s jurisdiction. Nevertheless, any other individual or company that contracts with one of these three types of entities to provide telemarketing services must comply with the Rule.
Examples:
- A nonbank company that contracts with a bank to provide telemarketing services on the bank’s behalf is covered.
- A non-airline company that contracts with an airline to provide telemarketing services on behalf of the airline is covered.
- A company that is acting for profit is covered by the Rule if it solicits charitable contributions on behalf of a non-profit organization.
Keep in mind that a company soliciting a charitable contribution is not required to comply with the Rule’s National Do Not Call Registry provisions.
Under the provisions of the Telemarketing Act, a number of entities and individuals associated with them that sell investments and are subject to the jurisdiction of the Securities and Exchange Commission or the Commodity Futures Trading Commission are not covered by the Rule, even if they engage in a plan, program, or campaign to sell through interstate telephone calls. These entities and individuals are covered by the FCC’s telemarketing rules. For more information, visit www.fcc.gov.
Coverage of the Business of Insurance Is Limited
The McCarran-Ferguson Act provides that the FTC Act, and by extension, the TSR, are applicable to the business of insurance to the extent that such business is not regulated by state law. Whether the McCarran-Ferguson exemption removes insurance-related telemarketing from coverage of the TSR depends on the extent to which state law regulates the telemarketing at issue and whether
enforcement of the TSR would conflict with, and effectively supersede, those state regulations. Unlike the jurisdictional exemptions for banks and non-profit organizations, which do not extend to third-party telemarketers making calls on their behalf, in the case of the telemarketing of insurance products and services, the TSR does not necessarily apply simply because the campaign is conducted by a third-party telemarketer.
Some Types of Calls
Some types of calls also are not covered by the Rule, regardless of whether the entity making or receiving the call is covered. These include:
- unsolicited calls from consumers.
- calls placed by consumers in response to a catalog.
- business-to-business calls that do not involve retail sales of nondurable office or cleaning supplies.
- calls made in response to general media advertising (with some important exceptions).
- calls made in response to direct mail advertising (with some important exceptions).
Exemptions Explained
Unsolicited Calls from Consumers
Any call from a consumer that is not placed in response to a solicitation by the seller, charitable organization, or telemarketer is exempt from coverage. Because the consumer initiates the call without any inducement from the seller or telemarketer, the call is not considered part of a telemarketing plan, program, or campaign conducted to sell goods or services or to induce a charitable contribution. Some examples include calls to:
- make hotel, airline, car rental, or similar reservations.
- place carry-out or restaurant delivery orders.
- contact a department store or charity without prompting from an advertisement or solicitation.
- obtain information or technical support.
Consumer calls in response to a recorded message: Calls are not considered “unsolicited” when placed by consumers in response to a recorded message—whether left on the consumer’s answering machine, or presented when the consumer answers under the call abandonment “safe harbor.”
Upsells: If a seller or telemarketer “upsells” a consumer during an unsolicited call initiated by the consumer, the upsell is covered by the Rule.
Most Calls Made in Response to a Catalog
Generally, the Rule does not apply to calls placed by consumers in response to a mailed catalog if the catalog:
- contains a written description or illustration of the goods or services offered for sale;
- includes the business address of the seller;
- includes multiple pages of written material or illustrations;
- has been issued at least once a year; and
- the catalog seller doesn’t solicit consumers by telephone, but only receives calls initiated by consumers in response to the catalog, and during the calls, only accepts orders without additional solicitation. The catalog seller may provide the consumer with information about—or attempt to sell the consumer— other items in the same catalog that prompted the consumer’s call or in a similar catalog.
If a telemarketer offers goods or services that are not in the catalog that prompted the consumer’s call—or in a substantially similar catalog—the sales transaction is covered by the Rule. Regardless of the TSR’s application to a particular sale, catalog merchandise sales also are covered by the FTC’s Mail or Telephone Order Merchandise Rule (16 C.F.R. Part 435). |
Business-to-Business Calls, Unless They Involve the Sale of Nondurable Office or Cleaning Supplies
Most phone calls between a telemarketer and a business are exempt from the Rule. But business-to-business calls to induce the retail sale of nondurable office or cleaning supplies are covered. Examples of nondurable office or cleaning supplies include paper, pencils, solvents, copying machine toner, and ink—in short, anything that, when used, is depleted, and must be replaced. Such goods as software, computer disks, copiers, computers, mops, and buckets are considered durable because they can be used again.
Although sellers and telemarketers involved in telemarketing sales to businesses of nondurable office or cleaning supplies must comply with the Rule’s requirements and prohibitions, the Rule specifically exempts them from the recordkeeping requirements and from the National Do Not Call Registry provisions. These sellers and telemarketers do not have to create or keep any particular records, or purge numbers on the National Do Not Call Registry from their call lists to comply with the Rule.
Most Calls Responding to General Media Advertising
The Rule generally does not apply to consumer calls made in response to general media advertising, including: television commercials; infomercials; home shopping programs; print advertisements in magazines, newspapers, the Yellow Pages, or similar general directories; radio ads; banner ads on the Internet; and other forms of mass media advertising and solicitation. Nevertheless, if a seller or telemarketer “upsells” a consumer during a call initiated by the consumer, the upsell is covered by the Rule. In addition, the Rule does cover calls from consumers in response to general media advertisements relating to business opportunities not covered by the Franchise Rule, credit card loss protection, credit repair, recovery services, advance-fee loans, or investment opportunities.
Some Calls Responding to Direct Mail Advertising Are Exempt
Direct mail advertising includes, but is not limited to, postcards, flyers, door hangers, brochures, “certificates,” letters, email, facsimile transmissions, or similar methods of delivery sent to someone urging a call to a specified telephone number regarding an offer of some sort. For purposes of the Rule, “direct mail” is not limited to messages sent via conventional mail delivery or private couriers. The exemption for calls responding to direct mail advertising that meets the Rule’s requirements is available both to telemarketers soliciting sales of goods or services and to telefunders soliciting charitable contributions.
Sales solicitations: Generally, consumer calls in response to a direct mail solicitation that clearly, conspicuously, and truthfully makes the disclosures required by the Rule are exempt from the Rule. These disclosures are: cost and quantity; material restrictions, limitations or conditions; any “no-refund” policy; and, if the offer includes a prize promotion, credit card loss protection, or a negative option feature, the information about any of those elements of the offer required by the Rule. If you are a seller or telemarketer who uses direct mail, you may use this exemption only if your direct mail solicitation messages make the disclosures required by Section 310.3(a)(1) of the Rule clearly, conspicuously, and truthfully.
Charitable solicitations: Consumer calls in response to direct mail messages that solicit charitable contributions benefit from the limited direct mail exemption, provided they contain no material misrepresentation about the nature, purpose, or mission of the entity on whose behalf the contribution is requested; the tax deductibility of any contribution; the purpose for which the contribution will be used; the percentage or amount of the contribution that will go to a charitable organization or program; any material aspect of a prize promotion; or a charitable organization or telemarketer’s affiliations, endorsements, or sponsorships.
The exemption is for sales calls elicited by direct mail advertising that truthfully provides a consumer with the specific information required under the Rule. In the case of charitable solicitation calls elicited by direct mail advertising, the exemption applies to direct mail advertising that conscientiously avoids the prohibited misrepresentations.
There is no exemption for calls responding to any direct mail advertising that relates to credit card loss protection, credit repair, recovery services, advance-fee loans, investment opportunities, prize promotions, or business opportunities other than those covered by the Franchise Rule. This is regardless of whether the advertisement makes the disclosures required by the Rule and contains no misrepresentations.
Also, any instances of upselling following an exempt transaction are covered by the Rule.
“Upselling” is not exempt. Upselling occurs when a seller or telemarketer tries to sell additional goods or services during a single phone call, after an initial transaction.
Upsell transactions are covered by the TSR. Even if the initial transaction is exempt because it is an unsolicited call from a consumer, a response to a general media advertisement or certain direct mail solicitations, or an outbound non-sales call (say, a customer service call), any upsell following the initial transaction is subject to all relevant provisions of the Rule.
Examples:
A consumer calls a department store to inquire about the price of a microwave oven. Because the call is not the result of a solicitation by the seller, the initial inquiry is exempt from the Rule. If the seller tries to upsell a refrigerator during the same call, the upsell transaction is subject to the Rule.
A consumer calls in response to an infomercial advertising a home gym product for sale. If the home gym product is the only item offered during the call, the call is exempt. But if the telemarketer offers a free-trial offer to a cookbook series after the sales pitch for the home gym, the cookbook offer constitutes a separate transaction and is an upsell covered by the TSR. If both the home gym product and the cookbook series are prominently featured in the general media advertisement, transactions involving either or both products fall within the general media exemption. But if the cookbook is visible on the set of the infomercial, mentioned only in passing, or mentioned as an afterthought, pitching the cookbook during the a consumer’s call about the home gym product is considered an upsell and is not exempt from the Rule.
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Partial Exemptions
Some calls are exempt from most provisions of the TSR, but not all. These include:
- calls relating to the sale of 900-Number pay-per-call services.
- calls relating to the sale of franchises or certain business opportunities.
- calls that are part of a transaction that involves a face-to-face sales presentation.
Calls Relating to the Sale of 900-Number Services
The sale of 900-Number pay-per-call services, which is subject to the FTC’s 900-Number Rule, is exempt from most provisions of the TSR. Still, to comply with the TSR, sellers of pay-per-call services must not:
- call any number on the National Do Not Call Registry or on that seller’s Do Not Call list.
- deny or interfere with a person’s right to be placed on any Do Not Call Registry.
- call outside permissible calling hours.
- abandon calls.
- fail to transmit Caller ID information.
- threaten or intimidate a consumer or use obscene language.
- cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.
Partial coverage under the TSR does not affect the obligation of sellers and providers of 900-Number Services to comply with the
900-Number Rule (16 C.F. R. Part 308).
Calls Relating to the Sale of Franchises or Business Opportunities
Calls relating to the sale of franchises or business opportunities that are covered by the FTC’s Franchise Rule (16 C.F.R. Part 436) are exempt from most provisions of the TSR. To comply with the TSR, sellers and telemarketers selling franchise or business opportunities subject to the Franchise Rule must not:
- call numbers that are on the National Do Not Call Registry or on that seller’s Do Not Call list.
- deny or interfere with a person’s right to be placed on any Do Not Call Registry.
- call outside permissible calling hours.
- abandon calls.
- fail to transmit Caller ID information.
- threaten or intimidate a consumer or use obscene language.
- cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.
Partial coverage under the TSR does not affect the obligation of franchisors to comply with the Franchise Rule.
Calls that are Part of a Transaction Involving a Face-to-Face Sales Presentation
The TSR generally does not cover telephone transactions where the sale of goods or services or a charitable contribution is not completed until after a face-to-face presentation by the seller or charitable organization, and the consumer is not required to pay or authorize payment until then. This exemption is for transactions that begin with a face-to-face sales presentation and are completed in a telephone call, as well as those that begin with a telephone call and are completed in a face-to-face sales presentation.
The key to the face-to-face exemption is the direct and personal contact between the buyer and seller. The goal of the Rule is to protect consumers against deceptive or abusive practices that can arise when a consumer has no direct contact with an invisible and anonymous seller other than the telephone sales call. A face-to-face meeting provides the consumer with more information about—and direct contact with— the seller, and helps limit potential problems the Rule is designed to remedy.
Nevertheless, even in transactions where there is a face-to-face meeting, telemarketers must not:
- call numbers on the National Do Not Call Registry or on that seller’s Do Not Call list.
- deny or interfere with a person’s right to be placed on any Do Not Call Registry.
- call outside permissible calling hours.
- abandon calls.
- fail to transmit Caller ID information.
- threaten or intimidate a consumer or use obscene language.
- cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.
If the transaction is completed in a face-to-face meeting at the consumer’s home or away from the seller’s place of business, the seller must comply with the FTC’s Cooling Off Rule (16 C.F.R. Part 429).
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