A D.C. federal district court has rejected a trade group’s attempt to invalidate a November 2016 FTC opinion in which the agency concluded that outbound telemarketing calls made using soundboard technology are subject to the prior written consent requirement for robocalls in the FTC’s Telemarketing Sales Rule (TSR).
The TSR’s robocall written consent requirement applies to “any outbound telephone call that delivers a prerecorded message.” The FTC’s 2016 opinion revoked a 2009 opinion in which it had concluded that because soundboard technology allows the caller and recipient to have a two-way conversation, such calls were not subject to the TSR’s robocall consent requirement. (In calls using soundboard technology, the caller can play pre-recorded audio clips in response to the call recipient’s statements and break in to the call when needed to speak directly to the recipient.) The FTC changed its position in response to an increasing number of consumer complaints that consumers were not receiving appropriate responses to their questions and comments and live operators were not intervening in the calls as well as evidence that callers using soundboard technology were handing more than one call at a time. In its 2016 opinion, the FTC made the revocation of its 2009 opinion effective on May 12, 2017 so that industry would have time to make the changes necessary to bring itself into compliance.
In reaching its decision, the district court first determined that the FTC’s 2016 opinion was a reviewable “final agency action” because it took a “definitive position that telemarketing calls deployed with soundboard technology are subject to the robocall regulation.” More specifically, “telemarketing companies must either undertake the expense of coming into compliance with the agency’s new position or risk enforcement action.”
It then rejected the trade group’s claim that the FTC’s action violated the Administrative Procedure Act (APA) because the FTC did not follow the notice and comment process. According to the court, because the 2009 opinion revoked by the 2016 opinion was clearly an “interpretive rule” rather than a “legislative rule,” the FTC’s “decision to rescind that opinion did not change the fundamental character of the agency’s action and transform an interpretive rule into a legislative one.” As a result, the FTC was not required to follow the APA notice and comment procedures before issuing the 2016 opinion.
The district court also rejected the trade group’s claim that subjecting soundboard technology to the TSR robocall written consent requirement violated the First Amendment because it constituted an impermissible content-based restriction on the speech of the trade group’s members engaged in charitable fundraising. According to the trade group, the TSR robocall consent requirement represented a content-based regulation because it applied to calls soliciting donations from new donors but did not apply to calls soliciting donations from prior donors or members of the non-profit on whose behalf the call is made. The trade group argued that the carve-out for solicitation calls to prior donors and members constituted a content-based restriction on speech because the FTC must look at what is said in the call (i.e. whether the caller requests a first-time donation or a repeated donation) to determine if the written consent requirement applies.
The court concluded that the distinction between existing and other donors was relationship-based and not content-based. As a result, it was only subject to intermediate scrutiny under the First Amendment. The court found that the distinction satisfied such scrutiny because it was narrowly tailored to serve a significant governmental interest (namely, “protecting against unwarranted intrusions into a person’s home or pocket”) and left open ample alternative channels of communication (such as media advertising, mailing, and use of live callers instead of pre-recorded messages).