FCC's extensive declaratory ruling on TCPA heightens risks and obligations for businesses



July 20, 2015

Privacy Alert

Author(s): Troy K. Lieberman, Dan Deane

The Federal Communication Commission’s July 10, 2015 omnibus Declaratory Ruling and Order on the Telephone Consumer Protection Act provides some clarification, but ultimately raises more questions than it answers. This alert explores three of the most important issues addressed in the Ruling.

On July 10, 2015, the Federal Communications Commission (“FCC”) released its much anticipated Declaratory Ruling and Order (the “Ruling”) providing clarification on numerous issues regarding the Telephone Consumer Protection Act (“TCPA”).

The Ruling, which was adopted by a 3-2 vote on June 18, addressed twenty-one (21) petitions or letters by companies and trade associations seeking relief under and/or clarification of the requirements of the TCPA. For months, industries affected by the TCPA have awaited this omnibus Ruling, with the hopes it would provide guidance regarding, among other things, the definition of an “automatic telephone dialing system” (an “autodialer”), the definition of who makes or initiates a telephone call for purposes of the TCPA and the right to revoke prior consent.

As foreshadowed in the introductory paragraphs, the Ruling largely comes down in favor of consumer interests and gives short shrift to business concerns. The Ruling will do little to damper the frenetic pace of TCPA litigation. To the contrary, the broad language employed by the FCC, in combination with the relative lack of concrete guideposts, will likely embolden plaintiffs’ lawyers to file more aggressive TCPA lawsuits in the future. 

Because of the vast scope of the Ruling, we focus in this alert on three of the most important issues addressed in the Ruling: the definition of an “autodialer,” the definition of the “maker” of a call, and the extent to which consumer consent can be revoked. Future alerts will address the other aspects of the Ruling.

Autodialers

The Ruling begins with perhaps the most anticipated issue—clarification of the scope of the term “autodialer.” The issue is important because many TCPA lawsuits arise from the provisions that forbid businesses from using autodialers to send mass-marketing phone calls or texts without first receiving the prior express consent of the called parties. The Ruling greatly expands the definition of what constitutes an autodialer under the TCPA and consequently increases the exposure of businesses that use telecommunications technologies to communicate with consumers.

The statute defines an autodialer as “equipment which has the capacity to (A) store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers”. The FCC was asked to limit the scope of the term “capacity” to only dialing equipment that has the present capacity to store or produce phone numbers using a random or sequential number generator. The FCC declined to endorse that limitation and also declined to establish a comprehensive list of the types of equipment that would fall within the definition of an autodialer. Instead, the FCC set out four broad principles to guide the determination of whether equipment falls within the autodialer definition.

First, the FCC adopted a broad interpretation of an autodialer, ruling the term “capacity” includes present and future potential capability of the dialing equipment. The two dissenting Commissioners argued that this inclusion of “future capacity” is contrary to the plain meaning of the TCPA. Nonetheless, the FCC adopted a broad interpretation, stating that the functional capacity of software-controlled equipment includes existing features “that can be activated or de-activated” and features “that can be added to the equipment’s overall functionality through software changes or updates.” That raises the spectre of liability to a broad range of equipment. In other words, software-based equipment with no present ability to function as an autodialer may still be considered an autodialer simply because the developer could potentially re-code the software to function as an autodialer. 

The FCC tried to alleviate some concerns about overbreadth by noting that the autodialer definition does not extend to all equipment that is potentially modifiable since the potential must be more than “theoretical.” But this vague limitation raises more questions than it answers as the Ruling fails to provide any concrete examples of what is or is not an autodialer (except for the unhelpful guidance that a rotary-dial phone that could theoretically be modified to function as an autodialer would not meet the definition). 

Second, the FCC held that a case-by-case determination is needed to decide whether dialing equipment that requires human intervention falls outside the scope of the TCPA. The Ruling clarifies two points: (1) mere speed-dialing capability does not by itself make equipment an autodialer; and (2) the basic function of an autodialer is to dial numbers without human intervention and to dial thousands of numbers in a short period of time. But the FCC noted these two points are not absolute and refused to give further guidance. Given the first principle discussed above concerning “capacity,” it is not clear whether equipment that requires some amount of human intervention is an autodialer if there is potential (though no intent at the time) for it to be reprogrammed to function as an autodialer. The FCC expressly rejected a petition to adopt a “human intervention” test to identify whether equipment constitutes an autodialer, ruling that such a test conflicts with the FCC’s focus on the “potential ability” of the equipment. Therefore, the FCC held that each determination of human intervention will be specific to each piece of equipment, made on a case-by-case basis. Again, the FCC Ruling offers no concrete guidance and seems to encourage private parties to develop the boundaries of the definition of “autodialer” through “case-by-case” litigation.

Third, the FCC ruled that predictive dialers, even if not labelled as such, satisfy the definition of an autodialer so long as they have the required capacity as previously described. The FCC noted again that the mere ability to speed dial does not convert equipment into an autodialer under the TCPA. Again, the FCC circled back to the first principle of “capacity,” holding that this principle “focuses on whether equipment has the requisite ‘capacity,’ and therefore is not limited to any specific piece of equipment and is without regard to the name given the equipment for marketing purposes.”

Fourth, the FCC held that an autodialer can include equipment that is separately owned and operated if it is integrated to perform a dialing campaign. This ruling clarifies that parties cannot circumvent the TCPA by dividing ownership of dialing equipment and responsibilities among multiple entities.

While the Ruling clearly expands the definition of an autodialer, the lack of concrete examples only adds to uncertainty about how far the definition sweeps. By declining to give real-world examples, the FCC appears to be encouraging the development and refinement of this critical question through future litigation. Hence, the Ruling provides little comfort for businesses that wish to avoid litigation.

Maker of a call

The Ruling next considered the extent to which a third-party application provider is liable under the TCPA. The FCC ruled that the determination of whether a calling or texting application may face primary liability under the TCPA is made on a case-by-case basis with the analysis focusing on whether the entity “takes steps necessary to physically place the telephone call” or is so involved in placing the call to be deemed to initiate it, as opposed to an entity “that might merely have some role, however minor, in the causal chain that results in the making of a telephone call.” Factors to be considered in this case-by-case determination include whether the application aids telemarketers in blocking caller-ID information or knowingly allows its clients to use the application for unlawful purposes.

While the Ruling again encourages case-by-case development of this issue, the FCC at least provided some concrete guidance by ruling on three specific circumstances:

First, the FCC ruled that a software application that sends an automatic text composed and controlled by the user back to a caller that had previously left a voicemail on the user’s phone does not make or initiate a call (the TCPA treats text messages as phone calls). The FCC held that the service “exercises no discernible involvement in deciding whether, when, or to whom an auto-reply is sent, or what such an auto-reply says, nor does it perform related functions, such as pre-setting options in the app, that physically cause auto-replies to be sent.” In other words, in this situation, the user, not the application, is primarily in control of sending the message.

Second, the FCC ruled that an application that allows a user to send invitational texts (composed by the application) to contacts in the user’s phone address book does not make or initiate a call under the TCPA. The application in this example still did not make or initiate the call based on the number of steps the user had to take to use the invitation process. Therefore, the user “is so involved in the making of the call as to be deemed the initiator of the call.” The FCC noted, however, that to the extent an application controls the content of the text and that content constitutes a commercial advertisement for the application, the service could be liable under the TCPA.

In the third case, however, the FCC ruled that invitational texts automatically sent by an application to all of a user’s contacts with little to no control by the user made the third party application the initiator of the call. The FCC found that the third-party application “makes or initiates the invitational text message, or at a minimum, is so involved in doing so as to be deemed to have made or initiated them.”

Consent and Called Party

One important exception to liability under the TCPA is where the called party has given “prior express consent” to receive calls from the entity making the call (some provisions require written consent while oral consent may be sufficient in some situations). The FCC Ruling clarifies that a called party that has given consent may revoke that consent at any time and through any reasonable means, and callers may not limit the manner in which revocation may occur. If any question arises as to whether “prior express consent” was provided by the called party, the burden of proof is on the caller.

The Ruling lists three examples of reasonable means for revocation: (1) through a consumer-initiated call; (2) through a response to a caller-initiated call; or (3) at an in-store bill payment location. The FCC held that it will look to the “totality of the facts and circumstances” to determine whether a particular method is reasonable. The Ruling also held that a caller cannot limit a consumer’s ability to revoke consent by designating certain means by which revocation must occur as the exclusive means. As a result, businesses are cautioned to maintain business records that properly track consent and revocation, in order to remain TCPA-compliant.

Conclusion

The FCC Ruling likely increases the risk for businesses that operate under the TCPA. Despite purporting to offer clarification on a number of issues, including those discussed above, the Ruling leaves businesses with substantial uncertainty. Most noticeably, the expansive scope of what constitutes an “autodialer” will likely cause plaintiffs’ lawyers to take aggressive positions in lawsuits asserting that equipment that is not being used as an autodialer nevertheless meets the definition because it has the potential capacity to be used as an autodialer.

Nixon Peabody will continue to review the Ruling and subsequent regulatory and court orders and will provide guidance to businesses and industries affected.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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