Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Law enforcers describe challenge in tackling illegal robocalls in testimony before Senate subcommittee, (Jul 10, 2013)

By Tobias J. Gillett, J.D., LL.M.

In a hearing before the U.S. Senate Committee on Commerce, Science and Transportation Subcommittee on Consumer Protection, Product Safety, and Insurance, titled “Stopping Fraudulent Robocall Scams: Can More Be Done?,” representatives of the FTC and the Federal Communications Commission described their efforts to combat illegal robocalls and the challenges they face from advances in technology.

Subcommittee Chair Sen. Claire McCaskill opened the hearing by noting the extent of the problem. McCaskill observed that, although the federal Do Not Call Registry has prevented unwanted calls from legitimate telemarketers, fraudulent telemarketers have stepped in to fill the void. McCaskill noted law enforcement estimates that fraudulent telemarketing calls cost consumers $40 billion annually, and that the FTC receives 200,000 complaints about them each month. Despite winning more than $250 million in civil penalties against illegal robocalls, the FTC has only been able to collect $15 million due to the difficulty in locating the parties behind the robocalls.

Ranking Member Sen. Dean Heller agreed that the Do Not Call Registry has been a very successful and popular program, but also agreed that fraudulent robocalls are a significant and growing problem, and that the FTC and FCC face significant challenges in attempting to stem the tide.

Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices, delivering prepared testimony on behalf of the FTC, echoed the senators’ view that the Do Not Call Registry has been “highly effective.” She noted that the FTC has shut down operations responsible for placing billions of robocalls, and pursued enforcement actions against such operations that resulted in significant penalties, including a recent $7.5 million fine against Mortgage Investors Corporation.

The FTC has responded to the increased challenges in bringing enforcement actions against robocallers, particularly foreign operations, by increasing its collaboration with state, federal, and international law enforcement partners, according to the FTC. Although the FTC does not possess criminal enforcement authority, it has coordinated with state and federal law enforcement authorities to bring criminal actions against fraudulent telemarketers.

The FTC has also sought to eliminate robocall operations by targeting third parties that facilitate them. These efforts have included pursuing companies that provide equipment or software required to send the call in mass quantities, and actions against payment processors that provide robocall operations with access to the financial system.

However, advances in technology have made it much easier and cheaper for robocall operations to send the calls and to conceal their identity while doing so, according to the FTC. Instead of having to invest in specialized equipment and labor, the operations now only require a computer connected to the Internet, and can benefit from inexpensive long distance calling rates. Moreover, intermediate carriers are usually necessary to connect the telemarketer to the consumer, hampering the ability of law enforcement to track the calls. In addition, robocallers spoof the caller ID information that appears with incoming telephone calls, frequently change their telephone numbers, and often operate outside of the jurisdictions in which they would most likely face prosecution.

To respond to these technological concerns, the FTC announced a public Robocall Challenge with prizes for technological solutions that would enable consumers to block robocalls. The FTC announced three winning contestants in April 2013. The FTC has also disseminated consumer education messages to inform consumers about robocalls.

In his testimony, Eric Bash, Associate Bureau Chief of the FCC’s Enforcement Bureau, described the FCC’s enforcement efforts and capabilities with respect to robocallers. He noted the distinction between the outright ban on autodialed calls to mobile phones without the permission of the recipient, and the limited circumstances under which such calls may be placed to residential lines. He described the FCC’s enforcement capabilities under the Communications Act, including its ability to revoke licenses in “egregious cases” and the monetary penalties it more commonly assesses.

However, he also described the challenges the FCC faces in bringing enforcement actions, including the difficulty in identifying and locating perpetrators and the FCC’s inability to bring monetary penalties against robocallers directly, without first issuing a citation. He also referred to the FCC’s coordination with the FTC under the Do Not Call Implementation Act, including the agencies’ rules that will, by October 16, 2013, prohibit making prerecorded telemarketing calls, except with the prior express written consent of the called party. The agencies have also entered into a memorandum of understanding under which they have agreed to meet and coordinate their efforts regarding telemarketing.

In response to a question from Sen. McCaskill, Griesman and Bash stated that the statutes the FTC and FCC enforce do not provide for criminal enforcement. Greisman did note that some robocallers have been prosecuted through allegations of wire fraud. However, McCaskill suggested illegal robocallers are “not afraid” of the agencies, and called the current robocall situation a “criminal sandbox.”

Greisman also clarified the distinction between payment processors that know of the robocallers’ activities when they process their payments, and the FTC’s different treatment of them in their enforcement.

McCaskill also suggested that the entities that facilitate the robocallers’ spoofing of their caller ID information may require closer scrutiny. Bash suggested that some uses of spoofing can be legitimate, and provided the example of a call from a battered women’s shelter, but McCaskill stated her belief that “in the grand scheme of things, I can’t imagine that that is not just a tiny, infinitesimal number of these.” McCaskill suggested the agencies should look at how the laws can be strengthened to “go after” those entities.

The agency representatives also suggested the laws the agencies enforce in relation to robocallers may require updating to reflect the changing technological environment. Greisman contended that technological solutions may present possible solutions to the problems, and referred to the FTC’s recent challenge.

In response to a question from Sen. Heller regarding Greisman’s suggestion regarding eliminating the common carrier exemption, Greisman observed that common carriers could be more “proactive” in “flagging” traffic going across their transom, and that some activities by entities that purport to be common carriers “would do more than raise an eyebrow.”

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