Consumer Rights Regarding Direct Marketing - AgEBB

Consumer Rights Regarding Direct Marketing

By Kristie Bray
Undergraduate Student In Agricultural Economics 333, W96
And
By Deanne Hackman
Research Associate and Adjunct Instructor
Social Science Unit, College of Agriculture, Food, and Natural Resources
University of Missouri - Columbia

green line
May 9, 1996

CAUTION: Do not rely upon this information for legal advice. See an attorney for legal counseling tailored to your specific situation and needs.

Consumers are faced with direct marketing every day. Whether it is a piece of mail advertising a company's newest product, or a phone call from a business that is surveying its potential customers, consumers are at the mercy of direct marketing strategies.

In 1994 President Clinton approved the "Telemarketing Consumer Protection Act." This piece of legislation was established to strengthen the power of the Federal Trade Commission (FTC) when protecting consumers from direct marketing by telephone. The Act requires the FTC to perform three tasks if the Act is to be successful. The first is to institute guidelines regarding telemarketing practices. The FTC must also enhance the enforcement of the rules they have established and enhance the use of consumer fraud enforcement tools.

The Act requires the FTC must establish two rules prohibiting:
  1. unsolicited telemarketing calls made during certain hours of the day or night; and
  2. telemarketers from engaging in a pattern of unsolicited telephone calls which the reasonable consumer would consider coercive or abusive to the consumer's right to privacy.
Telemarketers found in violation of the guidelines set by the FTC will be subject to severe penalties. These guidelines are not only enforceable by the FTC itself, but also the state attorneys-general. The attorneys-general can also seek civil penalties that may be as high as $10,000 per violation per day. The Act enables injured persons to bring actions against the institutions if their damages meet or exceed $50,000.

After the Act has been implemented, it will be the duty of the FTC to evaluate the program at the end of five years. This evaluation will be submitted to Congress and will allow them to gage the effectiveness of the FTC practices.

The Telemarketing Consumer Protection Act guards against harassment and fraud via the telephone, but consumer privacy is still being threatened by customer mailing lists. The marketing strategy of direct mailing has proved to be very profitable for some businesses. The actions of these companies, however, are in direct violation of consumers constitutional right to privacy. When cases involving the right to privacy, the courts have held that those rights do not extend to the mailbox.

Marketers have gone to great lengths to obtain these valuable customer lists. They have even sought lists of the federal government through the Freedom of Information Act (FOIA). The government claims the files they possess require more protection than those a private business may occupy. In one case, a not for profit business had to promise that it would not allow the list to be used for profitable purposes before they were allowed to receive the list of retired Department of Defense officers.

The government has reacted to criticisms about the marketing of consumer lists. This is especially true in cases involving credit reporting agencies. These agencies were not derived for the sole purpose of selling the customer lists to other companies, but to check the customer credit, employment and insurance records. Some businesses have responded to these criticisms by discontinuing their sales of mailing lists obtained by credit agencies.

Amendments are being presented to Congress to amend the Fair Credit Reporting Act (enforced by the FTC). One proposed amendment would allow the customer to "opt out" of agency's mailing lists. Another amendment would limit customer information that would be included in the mailing lists. These amendments would provide greater protection for consumers and would increase the consumer awareness about the mailing list they are included on.

The FTC is taking action to reduce the sale and use of mailing lists, although the federal courts have ruled they do not invade the privacy of consumers. Investigation are primarily focused on finding businesses that are obtaining and using sensitive information without consumer consent. One of these such cases involved an infomercial producer who sold not only customer names and addresses, but credit card numbers as well.

The actions of the government and the Federal Trade Commission are moving more towards the protection of the consumer. In the future, many businesses will have to obtain their customers consent to be placed on the mailing list. By obtaining customer consent the business is less likely to come under scrutiny of the FTC. This may result in the loss of millions of dollars in potential profits from the use of the mailing lists. Consumers should recognize the acts taken by the FTC and revel in the fact that consumer privacy is being held supreme.

Sources:

"Privacy Concerns About Customer Mailing Lists" http://www.webcom.com/.../ article/custlist.html

"Telemarketing Consumer Protection Act of 1194" http://www.webcom.com/.../article/ telemkt2.html