Letter to Rep. Moran on telemarketing issue, 9/30/2003


Rep Moran:

 

I have recently relocated back to Arlington from Minnesota for family reasons.


 While in Minneapolis I worked part time for about a year in telefunding for the Minnesota Orchestra. I had "retired" from a corporate career after downsizing.


The Denver judge (Edward Nottingham, Mainstream Marketing Services Inc. v. Federal Trade Commission) would imply that if a do-not-call list is to be applied, it should apply to all entities, commercial or not. It seems to me that the best way to draw the line is to allow calls to individuals who have somehow expressed an interest in the organization that is calling them. Going to the opera would then allow an arts organization to make one unsolicited call to a prospect for contributions (and once or twice a year afterwards for renewals). Supporting political organizations (which I do) would allow fundraisers to call within reason. However, no entity should call an individual blind, when there is no basis for believing that the individual or family would have any interest. For example, I get calls from debt consolidation services even though I do not have overdue credit card balances. This is offensive.


I am certainly concerned about the effect of this controversy on employment. Telemarketing sometimes appeals to people as a way into the job market, and has been used (as in
Wisconsin) in welfare-to-work programs. The current controversy could stigmatize individuals who have "depended" upon this industry for income and employment, even interfering with their employment in other areas.

Thank you for your attention.

Bill Boushka

 

Notes:

 

The insult to telemarketing workers and to the industry arguably results from the public abuses by some but not all companies. Generally, most charities had restricted their calling to persons that have somehow indicated some at least distant interest in the issue at hand. The enforcement of do-not-call is now in a confused status because of the Notitngham ruling; the reader may follow this day-to-day at major news sites. (On Oct 7, 2003 the 10th Circuit Court of Appeals stayed Nottingham’s order and allowed the commercial do-not-call list (differentially not applying to charities, political causes and most non-profits) to go through. The Tenth Circuit heard arguments on Nov. 10, 2003.

 

Nottingham’s argument parallels a related issue in Internet censorship litigation (COPA). As a sub-litigant, I had suggested that COPA might be differentially interpreted as restricting the speech of individuals or commercial media companies who present adult (but non-obscene and non-pornographic) materials in areas where children inadvertently find them, in the hope of future commercial gain. The courts have generally said that parties may not be prohibited or “chilled” from delivering their speech just because these parties may profit financially from their speech. Speech from “organized” non-profit interest cannot get a preference from government per se. Of course, there is a major difference between the commercial aspect of direct marketing and speech like mine. I may get a future gain from a small number of large sales to media intermediaries, whereas direct marketing is predicated on financial gain from transaction volume. From a constitutional point of view, speech that, while associated with a commercial activity like occasional sale of content, offers a large substance of content not predicated on sales may be more protected from “public policy” constraint (whether protection of privacy or protection of minors) than commercial speech that is closely connected to making a specific sale to a specific consumer with a specific contact.

 

However, parties may be prohibited within reason from delivering their speech to unwilling or possibly vulnerable recipients. The extent to which technology makes this possible is still a subject of COPA litigation. And so it may be with telemarketing. The underlying question, apart from the content of the speech (commercial or not), is the accountability of the speaker for monitoring, auditing or authenticating how it is delivered and whom it reaches.

 

The logical conclusion is that a “do not” call list purchase and use could be required of all telemarketers and all telefunders. This might harm the telemarketing industry and harm persons employed in the direct marketing business, even those raising funds for arts or for charities and individually conducting their work responsibly. So, one asks, should organizations that can show that they do not “cold call” unwilling recipients be excused from using the “do not call” lists? If so, the public credibility of direct marketing as a business (and of its employees) might be restored, although a somewhat lower levels of business and employment.  The relevant concept is called target marketing. But technology has, in different areas, encouraged low-cost gang marketing even when the sales percentage or “conversion rate” is very low. Jonathan Krim provides a good overview in the Oct. 9 2003 Washington Post, Business, “An Ongoing Battle of Pitches vs. Privacy; High-Tech Age Inherits Door-to-Door Issues.”  Direct marketing has always been an important source of jobs (especially for persons not successful in content-creation businesses) and has always been at odds with the public as being perceived as intrusive and sometimes unwelcome.

 

How could this targeting be done? For one thing, even smaller in-house calling operations might have to be heavily automated and consolidated for compliance audits. (Most larger operations are heavily automated with dialers already.) Another measure would be to require calling operations to achieve reasonable conversion ratios: say 5% for new acquisitions and 60% for renewals. Such requirements could be applied to individual employees. Such measures would tend to show that direct telephone marketing or fund-raising operations are not calling disinterested persons excessively or abusing the public. The conversion ratio rule might minimize the effect on employees, because typically employees in this industry only make enough to live reasonably on if they do close a sufficient percentage of their calls, according to different lead groups; success in this business tends to require a certain “naturalness” in connecting with people and a certain enthusiasm, and these are good work traits.  Actually, for the industry to hire and retain only people who maintain a certain level of sales performance (quotas and conversion ratios) and discipline (attendance, punctuality, regimentation) is a way to guarantee that the direct marketing activities are good-faith, legitimate and of value to the public rather than an annoyance or intrusion. Sales culture has its own norms of success, and these sometimes include notions like “transaction oriented rather than relationship oriented,” and one-call closing or one-contact closes. Within these parameters, “guerilla marketing” (or is it “gorilla marketing”) can make some sense.

 

It may be reasonable, given the nature of a specific line of business, to require that the operation only call persons whose actions have indicated a reasonable likelihood of interest. So an orchestra could reasonably consider anyone who has attended at least three concerts as a legitimate prospect for donations (only one call per year). Maybe a long distance telecommunications company or ISP could consider anyone with cable, high-speed Internet, or a wireless phone as a legitimate prospect for one call per year. But should anyone with a credit card get a call from any other company wanting to sell its own Visa card? I doubt it.  In any case, we have a case not so much for a “do not call” list as for a Fair Direct Marketing Practices Act, as much as I hate to admit the need for regulation.

 

Marketing services may well turn more attention to inbound call center telemarketing, such as when a travel reservations agent sells packages on inbound calls or a computer company sells maintenance plans. These would not have any real public objection.

 

Also, around Feb 1 2004 telemarketing companies (either companies making sales or companies calling for them) must be identified on caller-id, along with an 800 number to call for “do not call” purposes. This would seem to apply if third parties call for non-profits soliciting donations or subscription sales.

 

This particular application of Free Speech must, of course, be balanced against the “fundamental right” of people to be left alone in their own homes (most of the time, at least); plenty of commentators discuss this. And it is also interesting to compare the First Amendment arguments here with those in the campaign finance reform laws and litigations.

 

There is a telling story on telemarketing as a job in The Washington Post Magazine, Jan. 25, 2003.[1]

 

Persons and businesses involved in telemarketing and telefunding would do well to review a few of the FTC documents relating to the issue. For example:

· Telemarketing Sales Rule from the Federal Register  (PDF)

· Complying with the Telemarketing Sales Rule

· Simplified discussion of Telemarketing Sales Rule for consumers

· Simplified discussion of national Do Not Call List (Q&A) for businesses

· Simplified discussion of national Do Not Call List (Q&A) for consumers

 

A few potential controversies in the rules need to be addressed. First, any for-profit business engaged anyway in making unsolicited sales telephone calls must purchase and use the national registry (which could be very expensive for a small service business); however a business that does not make unsolicited calls at all (mine does not) apparently need not purchase it (although small portions of it are free or inexpensive; see the FTC quote below).

 

 

There is some controversy over non-profits. Non-profit organizations that do their own marketing are not covered by FTC rules at all, although they are covered by FCC rules. This generally means “common sense” and maintaining their own do not call lists but exemption from the national ones. When for-profit companies call in their behalf, however, all of the rules apply except that for-profit companies need not use the registry when calling for donations for non-profits, charities, political organizations, etc although they must honor specific do-not-call requests for these, must use the national list when actually making sales calls (as opposed to contributions rewarded by complimentary gifts) and must follow all other rules (such as the 8 Am9 PM time slot rule and rules regarding properly introducing sales calls as such). Normally large direct marketing companies will be able to maintain just one national list for all of their clients, so complying when selling services or products (like orchestra or opera subscriptions) should not be a burden given their economies of scale. Given the social and legal objections to overuse of telemarketing, individuals employed in telemarketing should make sure they understand the rules and that the organizations that they work for comply, and should not remain employed in an operation where they cannot be reasonably and consistently effective in actually closing sales or contributions.

 

Here is an important quote: (from the second link above):

 

“Some types of businesses are not covered by the (Telemarketing Sales) 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:

1.                         banks, federal credit unions, and federal savings and loans.

2.                         common carriers – such as long-distance telephone companies and airlines – when they are engaging in common carrier activity.

3.                         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:

1.                         A nonbank company that contracts with a bank to provide telemarketing services on the bank’s behalf is covered.

2.                         A non-airline company that contracts with an airline to provide telemarketing services on behalf of the airline is covered.

3.                         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.”

 (however the third party for-profit marketing company would be required with these registry provisions  if selling a product or service having commercial value for the charitable organization, whereas the non-profit would not be held to the DNC registry even when making sales calls if it made them in-house; a third-party also  might be exempt if itself had non-profit status – interpretation mine)

 

Here is the comment by the FTC from that file on how home-based businesses may or may not be affected:

 

“How does the National Registry impact small, home-based direct sellers? FTC staff does not contemplate enforcing the National Do Not Call Registry provisions against individuals who make a sales calls out of their own homes to personal friends, family members, or small numbers of personal referrals. In fact, most of the calls made by such small direct sellers probably would be local or “intrastate” calls, and therefore not covered by the TSR. The TSR applies to telemarketing campaigns that involve more than one interstate call.

“Nevertheless, small home-based direct sellers should be aware that the Do Not Call regulations of the Federal Communications Commission (FCC) cover intrastate calls. The FCC regulations exempt "personal relationship” calls – where the party called is a family member, friend, or acquaintance of the telemarketer making the call.

”As a matter of good will, small direct sellers may want to avoid contacting a person whose number is on the Registry. The National Do Not Call Registry has a free, single number lookup feature to enable small direct sellers to verify whether an individual number is in the Registry database.”

Up to five areas codes from the DNC registry may be accessed for free, with $25 per area code thereafter.

The Wall Street Journal published an article, “Brokers Put Freeze on Cold Calls, Use Shoe Leather to Add Clients,” by Lingling Wei, May 11, 2005, in which financial advisers and perhaps life insurance agents replace cold calls with “cold walks” for prospecting. “You have to like to meet people.”

 

ãCopyright 2003 by Bill Boushka. All rights reserved subject to fair use. All views expressed here are those of the copyright owner and do not necessarily reflect the views of any other organization or entity. 

 

Related blog entry on Internet “do not track” proposal.

 

For comments, email me at Jboushka@aol.com and indicate if I may post your comment.

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[1] Wells Tower, “Making the Call: It’s not as if their lifelong ambition is to irritate us at dinnertine,” The Washington Post Magazine, Jan. 25, 2004. One manager told an employee, “If you call somebody and he’s already pissed off, then try to make him happy.” That is, the industry sees this as an adversarial game to be gotten away with, at least at times.