Antitrust Law Daily Wrap Up, PRIVACY—FCC: Scope of Sellers’ Liability for Actions of Third-Party Telemarketers Clarified, (May 15, 2013)

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

The Federal Communications Commission (FCC) has issued a declaratory ruling clarifying that, although a seller cannot be held liable as the initiator of telemarketing calls under the Telephone Consumer Protection Act (TCPA), a seller can be held vicariously liable under federal common law principles of agency, but not for calls made by telemarketers "simply to aid or benefit the seller" (In the Matter of the Joint Petition Filed by Dish Network, LLC, the United States of America, and the States of California, Illinois, North Carolina, and Ohio for Declaratory Ruling Concerning the Telephone Consumer Protection Act (TCPA) Rules, May 9, 2013, CG Docket No. 11-50).

Under TCPA § 227(b), a person or entity may bring an action based on the statute’s prohibition on "initiat[ing] any telephone call to any residential telephone line using an artificial or prerecorded voice without the prior express consent of the called party." In turn, TCPA § 227(c) permits persons to pursue actions if they have "received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of" the FCC’s regulations establishing the do-not-call registry.

The FCC addressed three related petitions filed by parties to litigation against Dish Network, LLC , seeking to hold Dish liable for the actions of its telemarketers. The telemarketers’ calls allegedly violated the TCPA’s ban on calls using "artificial or prerecorded voice[s]" and its do-not-call provisions.

Generally, sellers could not be held liable as the person or entity "initiat[ing]" a telemarketing call. "[T]he word ‘initiate’ suggests a far more direct connection between a person or entity and the making of a call." Therefore, the FCC found that "a person or entity ‘initiates’ a telephone call when it takes the steps necessary to physically place a telephone call," a definition that would usually exclude liability for retailers or other more remote entities, except when placing calls themselves.

However, the FCC found sellers could still be held vicariously liable for TCPA violations committed by third-party telemarketers. TCPA § 227(c)’s "on behalf of" language indicated that the TCPA’s do-not-call provisions recognized vicarious liability for third-party telemarketing calls. Although TCPA § 227(b) did not contain language either mandating or prohibiting vicarious liability, the Commission concluded that holding sellers vicariously liable would be consistent with the goals of the TCPA in deterring violations. The Commission found "it unreasonable to believe that Congress would have denied consumers such a remedy for unlawful calls," and that a seller "has the ability, through its authorization, to oversee the conduct of its telemarketers, even if that power to supervise is unexercised."

The FCC did reject contentions that TCPA § 227(c)’s "on behalf of" language extended beyond agency principles to subject sellers to liability "so long as the call is made simply to aid or benefit the seller." The Commission observed that its orders discussing "on behalf of" liability under Section 227(c) "appear[ed] to link that concept to agency principles," and that its regulations implementing both Sections 227(b) and 227(c) employed the "on behalf of" phrase. Therefore, reading "on behalf of" in Section 227(c) to extend liability beyond that under Section 227(b) would "implausibly require that phrase to have different meanings under our rules." Any attempt to extend liability beyond agency liability would thus require notice and comment rulemaking, in the Commission’s view.

Dissent. Commissioner Ajit Pai issued a statement approving the ruling in part and dissenting in part. Pai agreed that that a person or entity "initiates" a call only when physically placing it, and that a seller could be held vicariously liable for TCPA violations committed by third-party telemarketers. However, Pai believed that, although under Section 227(b) sellers should be vicariously liable under federal common law agency principles, sellers should be held liable under Section 227(c)’s "on behalf of" language "whenever a telemarketer initiates a call on a seller’s behalf, even if that telemarketer is not under the seller’s control."

Cases: Privacy