The Growing Risks in Cross-Border Telemarketing

By Joshua Briones, Harrison Brown, and Crystal Lopez

In 1997, President Bill Clinton and Prime Minister Jean Chrétien established a US-Canada Working Group on Telemarketing Fraud and directed it to report on ways to counter what it considered deceptive cross-border telemarketing. The Telemarketing Fraud Working Group’s Report to the Commission, now considered a blueprint for coordinated binational actions against telemarketing fraud, recommended expanded cooperation and information sharing between the countries in an effort to avoid duplication of effort by law enforcement agencies and to expedite identification and prosecution of fraud.

The report also recognized that different legal standards may interfere with effective cross-border law enforcement. As a result of the report, the countries have harmonized their efforts and cracked down on illegal marketing. This effort continues today, nearly twenty years later, with the recent signing of a Memorandum of Understanding (MOU) between the two nations. As a result, legitimate telemarketers face increased compliance risks.

Cross-border telemarketing is still a useful and valid business process, particularly in the business-to-business sector. Trained outbound sales reps can gather and warm up leads to pass on to outside sales personnel. Problems arise, however, when companies deliberately cut corners or operate out of ignorance of the law. In those circumstances, telemarketing can become a costly mistake.

American and Canadian Enforcement Activities: The Federal Communications Commission (FCC) and Federal Trade Commission (FTC) jointly regulate telemarketing in the United States and maintain strict rules for the circumstances in which companies can place outbound telephone calls to customers and prospects. The agencies have handed out many fines, some quite hefty, to players who violate the rules.

In Canada, the Canadian Radio-Television and Telecommunications Commission (CRTC) is responsible for enforcing telemarketing rules and regulations. Fines levied on violators by the CRTC have recently spiked. For example, the commission recently handed out fines to Thrift Magic ($250,000), Québec Loisirs ($200,000), Telelisting ($260,000), Florida-based Consolidated Travel Holdings ($200,000), and Metroland, one of Canada’s largest media outlets ($240,000). Additionally, other companies were hit with smaller fines: AcademyOne Learning Ltd., a company offering educational tutoring ($25,000); Eagle Water of Ontario, a water treatment company ($32,500); Outsource 3000 Inc., a telemarketer offering calling services for telemarketing ($15,000); Scentral Cleaning Services, a residential and commercial cleaning company ($20,000); and Ontario Eco Energy Inc. ($30,000).

Altogether, the CRTC has issued thirty-two notices of violation (totaling over $2 million in monetary penalties), sixteen warning letters, and five citations. In most cases, the fines were levied for failing to comply with national Do Not Call (DNC) list regulations, which were established in Canada in 2008. Canadian consumers have registered 12.8 million numbers on the national DNC list to date, and any businesses engaged in outbound telemarketing are required to remain up-to-date with the lists and scrub any numbers that appear on the list from outbound calling schedules.

Memorandum of Understanding: The FTC and CRTC signed an MOU on March 24 encouraging cross-border cooperation in DNC and anti-spam enforcement. Canada’s Anti-Spam Law (CASL), which the CRTC enforces, authorizes Canadian authorities to provide investigative assistance to foreign enforcement agencies, including the FTC. In turn, the US SAFE WEB Act allows the FTC to help the CRTC in its investigations. The announcement follows a speech by CRTC Chairman Jean-Pierre Blais to the Canadian Marketing Association, in which he pledged that the country’s antispam legislation would only get tougher. Blais urged the group to empower its members with the information and insight required to comply with its rules and laws.

The laws administered by the agencies – the FTC Act and CASL, respectively – both contemplate sharing information with foreign enforcement agencies under certain conditions. The new MOU recognizes that it is in the FTC’s and the CRTC’s “common public interest” to extend support across the border where the agencies will assist each other in investigation and enforcement efforts, including:

  • cooperating with respect to the enforcement of telemarketing fraud, including sharing complaints and other relevant information and providing investigative assistance;
  • facilitating research and education related to unauthorized telemarketing and unauthorized telephone calls;
  • facilitating mutual exchange of knowledge and expertise through training programs and staff exchanges;
  • promoting a better understanding by each country of economic and legal conditions and theories relevant to the enforcement of the other’s laws; and
  • informing each other of developments in their respective countries that relate to this MOU in a timely fashion.

Accordingly, the FTC and CRTC will share information, provide investigative assistance, and coordinate enforcement against cross-border violations that both sides agree are priority cases.

Ramifications: The CRTC had a banner 2014–2015 year for fines against telemarketing violators. The association said the fines were the result of investigations and collaboration with domestic and international partners. With a formal MOU in place, companies can expect an even further uptick in investigations and fines. For this reason, companies engaged in cross-border telemarking activities would do well to familiarize themselves with the rules and comply with them.

Joshua Briones, Harrison Brown, and Crystal Lopez are from the law firm Blank Rome. Joshua Briones is a partner in Blank Rome’s Los Angeles office. He focuses his national practice on bet-the-company class actions and has participated in the defense of dozens of class actions in state and federal courts across the country. He can be reached at JBriones@BlankRome.com. Harrison Brown is an attorney in Blank Rome’s Los Angeles office. His practice encompasses a wide range of business litigation and class action defense, with an emphasis on consumer fraud and privacy claims. He can be reached at HBrown@BlankRome.com. Crystal Lopez is an attorney in Blank Rome’s Los Angeles office. She focuses her practice on class action defense, with an emphasis on consumer fraud and privacy claims. She can be reached at ECLopez@BlankRome.com.

[From Connection MagazineJuly/August 2016]

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About Peter DeHaan

Wordsmith Peter DeHaan shares his passion for life and faith through words. Peter DeHaan’s website (http://peterdehaan.com) contains information and links to his blogs, newsletter, and social media pages. Peter DeHaan is the president of Peter DeHaan Publishing, Inc., (http://peterdehaanpublishing.com) the publisher and editor of Connections Magazine and AnswerStat, and editor of Article Weekly.