Markets Wired

Women’s clothing retailer Talbots and its California marketing company have agreed to pay penalties totaling $161,000 to settle Federal Trade Commission charges that they illegally delivered prerecorded “robocalls” that failed to give consumers proper notice of their right to opt out of receiving telemarketing calls. Talbots operates stores in 587 locations in 47 states, the District of Columbia, and Canada. It markets clothing under the Talbots brand, and prior to July 2009, also marketed clothing under the J. Jill brand.

Talbots and its telemarketer, SmartReply, Inc., have both agreed to orders that prohibit them from violating the FTC’s Telemarketing Sales Rule in the future. Among other requirements, when using prerecorded telemarketing messages, the companies must:

• Tell consumers how to opt out of receiving telemarketing calls from the seller before delivering the seller’s sales pitch;
• Immediately disconnect consumers who indicate that they do not want to receive such calls; and
• Inform consumers listening to the message that they can make a do-not-call request at any time during a call.

According to the FTC, Talbots and SmartReply violated the prerecorded message requirements in the Telemarketing Sales Rule during seven advertising campaigns conducted between February and July 2009 to promote Talbots and J. Jill. SmartReply’s telemarketing campaigns delivered 40- to 60-second recordings that advertised special sales and offers to consumers who had bought merchandise from Talbots’ companies during the previous year. The messages in these campaigns were drafted by SmartReply and then approved by Talbots. During the seven campaigns, SmartReply made at least 3.4 million robocalls to consumers.

The FTC’s complaint details how the companies’ robocall campaigns failed to comply with the Telemarketing Sales Rule. First, the Rule requires that telemarketers give consumers a way to “opt out” of future calls immediately after the message states who the seller is, what they are selling, and the purpose of the call. SmartReply’s robocalls, however, required consumers to listen to almost all of the prerecorded sales pitch for Talbots or J. Jill before informing them that they could interrupt the call. Some messages contained no instructions on how consumers could be added to the do-not-call list and, instead, stated that pressing the prompt would ensure that the consumer would continue to receive prerecorded telemarketing messages.

Second, the Telemarketing Sales Rule requires telemarketers to disconnect a call immediately when a consumer chooses an opt-out mechanism. But when consumers tried to use their telephone keypad to be placed on Talbots’ do-not-call list, they were instead connected to another recorded ad, before they were asked to press another prompt to get on the company’s do-not-call list.

Third, when a robocall message is played to a live person, rather than to an answering machine, the Telemarketing Sales Rule requires that the message inform the person listening to the message that he or she can request to be placed on a company’s do-not-call list at any time during the call. Instead, SmartReply’s messages for Talbots did not inform consumers that they could opt out until the end of the ad pitch.

Under the orders settling the FTC’s charges, Talbots and SmartReply are both subject to a $112,000 civil penalty. Talbots will pay the full penalty and SmartReply will pay $49,000, with the remainder of the penalty stayed due to its inability to pay.

The Commission vote approving the complaints and orders was 4-0. The proposed orders require approval by the courts. The complaint and proposed final settlement order regarding Talbots were filed in the U.S. District Court for the District of Massachusetts, and the complaint and proposed final settlement order regarding SmartReply was filed in Central District of California. The Department of Justice filed both actions on the FTC’s behalf on April 26, 2010.

Although delivering prerecorded phone messages without consumers’ written authorization is now prohibited under FTC restrictions that became effective September 1, 2009, prior to this date the FTC allowed prerecorded calls to recent customers if the messages met certain requirements that are designed to ensure that consumers are able to make do-not-call requests during both automated and live calls.

Today’s cases continue the FTC’s work to enforce rules related to robocalls. In the past year, the agency has brought cases against robocallers pitching fraudulent auto warranties and credit card interest-rate reduction plans.

NOTE: The Commission issues or files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law. These stipulated final orders are for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated final orders require approval by the court and have the force of law when signed by the judge.

Copies of the complaints and proposed stipulated final orders are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

(The Talbots.wpd)
(FTC File No. 092-3172;
Civ. Nos. 10-03087 – Smart Reply; 10-cv-10698 – Talbots)