Comprehensive Summary of FCC Declaratory Ruling

Last Friday evening, the Federal Communications Commission (FCC) released its anticipated Telephone Consumer Protection Act (TCPA) Declaratory Ruling.  The Ruling, which became effective immediately upon release, was approved by a 3-2 vote during last month’s highly contentious public meeting.

The document is full of rhetoric about protecting consumers from unwanted robocalls and texts.  In actuality, however, it limits legitimate business’ ability to contact their customers while providing little consumer protection benefits.  The real winners, as expected, are class action plaintiffs’ attorneys and professional litigants, who will find it easier than ever to file abusive class action lawsuits.

As pointed out by the dissenting commissioners, the Ruling dramatically—and impermissibly—expands the TCPA’s reach by broadening the statutory definition of automatic telephone dialing system (ATDS) and by adopting interpretations that create compliance impossibilities for well-intentioned businesses.  The following is a breakdown, by topic, of the Ruling and the dissenting statements authored by commissioners Pai and O’Rielly.

Definition of ATDS 

The TCPA’s express consent requirements for calls to cell phones only apply if the calls are made using an ATDS or prerecorded message.  The scope of the term ATDS has, therefore, become a critical issue for entities making outbound calls or texts to cell phones.

The term ATDS is defined as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”

Based on Congress’ inclusion of the word “capacity” in the definition, the FCC and some courts have held that the relevant inquiry is the system’s capacity, not how the system is actually used to make calls.  Neither the TCPA nor the FCC’s regulations, however, define the term capacity.  The Professional Association for Customer Engagement (PACE) and other petitioners, therefore, requested the FCC to confirm that a system’s “capacity” is limited to what it is capable of doing, without further modification, at the time the call is placed (i.e. adopt a “present capacity” standard).  This position is consistent with the statutory definition—which uses the present tense—and opinions issued by numerous district courts.

The Ruling rejects this common sense interpretation, holding that equipment can be an ATDS if it has the “potential capacity” to function as an ATDS.  According to the FCC:

  • “the TCPA’s use of ‘capacity’ does not exempt equipment that lacks the ‘present ability’ to dial randomly or sequentially”
  • “the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities” and
  • “a piece of equipment can possess the requisite ‘capacity’ to satisfy the statutory definition of ‘autodialer’ even if, for example, it requires the addition of software to actually perform the functions described in the definition.”

The Commissioner cites concerns that a “present capacity” standard would be difficult to enforce and render the statutory definition of ATDS largely meaningless because little or no modern dialing equipment would meet the definition.  It also brushed off the petitioners’ arguments that a broader interpretation would bring smartphones and other consumer devices within the definition of ATDS because they might be capable of functioning as an ATDS if certain software was downloaded.  According to the majority, this isn’t a concern because the record does not demonstrate that individuals are being sued for using such devices to call cell phones.

The FCC acknowledged that the definition of ATDS is not limitless, finding that “there must be more than a theoretical potential that the equipment could be modified to satisfy the ‘autodialer’ definition.”  Unfortunately, it provided very little guidance regarding the difference between potential capacity (which is factored into the ATDS determination) and theoretical capacity (which is not).  The only examples provided in the Ruling were: (1) a piece of equipment is an ATDS if downloading additional software would give it the requisite capacities; and (2) a rotary phone is not an ATDS merely because it could theoretically be modified to have the requisite capacities.  The Commission declined to “address the exact contours of the ‘autodialer’ definition” or “determine comprehensively each type of equipment that falls within that definition.”  In essence, the FCC adopted vague standards without providing any meaningful clarity on how such standards are to be applied.

The Ruling’s inconsistent discussion regarding “human intervention” is similarly problematic.  In its petition, PACE requested clarification that equipment cannot be an ATDS unless it has the capacity to, among other things, dial without human intervention.  In one portion of the Ruling, the FCC reiterated that “the basic functions of an [ATDS] are to ‘dial numbers without human intervention’ and to ‘dial thousands of numbers in a short period of time.'”  This statement seems to support PACE’s position.  Later, however, the FCC rejected the notion that equipment must have the capacity to dial numbers without human intervention to be an ATDS, holding that the equipment’s potential ability must be factored in.

As expected, Commissioners Pai and O’Rielly issued strongly worded dissenting opinions.  Both commissioners stated that the Ruling dramatically expands the scope of the TCPA to cover calls made by equipment that does not meet the statutory definition of ATDS.  They believe that, for equipment to be an ATDS, it must have the present capacity, without any modification, to: (a) store or produce telephone numbers to be called, using a random or sequential number generator; and (b) dial such numbers.  In support of a present capacity standard, the commissioners cite the statutory definition, which uses the present tense, and ordinary usage of the term “capacity.”  Commissioner Pai gave two apt analogies, stating that it would be absurd to argue that a one gallon bucket has the capacity to hold or store two gallons of water or that an 80,000 seat stadium has the capacity to seat 104,000 people.

In addition to challenging the FCC’s authority to expand the statutory definition and “make up the law as it goes,” the dissenting commissioners argued that the Ruling conflicts with prior FCC interpretations and court opinions, which limited the inquiry to equipment’s present capacity.

Similarly, Commissioner Pai was concerned that, under the Ruling, “each and every smartphone, tablet, VoIP phone, calling app, texting app—pretty much any calling device or software-enabled feature that’s not a ‘rotary-dial phone’ is [an ATDS].”  He took little solace in the majority’s comment that no one has been sued for using a smartphone to call a cell phone, stating that no one previously believed a smartphone was an ATDS.  Now that the FCC has expanded the definition, he expects the lawsuits to follow.  Accordingly, he argued that the Ruling violates the First Amendment by chilling the speech of every American that owns a phone.

Re-Assigned Numbers and Wrong Number Calls

The TCPA exempts calls made to cell phones using an ATDS or prerecorded message if the “called party” provided prior express (written) consent for such calls.  Determining who is the called party in situations where the caller intends to call one person but unintentionally reaches another has been the subject of significant debate.  This situation occurs, for example, when a number has been reassigned without the caller’s knowledge, an employee accidentally dials the wrong number or a consumer provides an incorrect phone number on a consent form.

Businesses argue that the term called party means the “intended recipient” of the call.  Conversely, plaintiffs argue that it means the current subscriber of the number dialed or, in some cases, its customary user.  Although courts have reached different conclusions on this issue, both the Seventh and Eleventh Circuits have held that called party means the current subscriber.  Under this interpretation, an entity that reasonably believes it has consent to call a cell phone number is liable if the current subscriber turns out to be someone other than the intended recipient of the call.

Several petitions were filed with the FCC seeking clarity that the term “called party” means the intended recipient or, in the alternative, a safe harbor to protect businesses from unknowingly violating the TCPA.  One of the primary rationales cited for the requested safe harbor is the lack of an authoritative database of reassigned numbers.

In the Ruling, the FCC rejected the notion that called party means intended recipient—finding that it refers to the current subscriber or customary user of the phone number—and provided an illusory one call “safe harbor” for callers who “make calls without knowledge of reassignment and with a reasonable basis to believe that they have valid consent to make the call.”  Under the Ruling, liability attaches to the second call made to a reassigned number because, even if the call does not yield actual notice of the reassignment, the caller is deemed to have “constructive knowledge” of such.  The FCC goes on to hold that call recipients have no affirmative duty to inform callers that the number has been reassigned.  This means they can sit back and let the calls add up to increase the statutory damages.

Although the FCC acknowledged that there is no authoritative database to determine if a number has been reassigned, it held that available databases, along with certain best practices, provide sufficient protection for businesses.  For example, the caller might learn of the reassignment by hearing a disconnected tone or new voicemail greeting.  The FCC also stated that calls could be manually dialed to determine whether the number has been reassigned.  This, of course, ignores the incredibly broad interpretation of ATDS adopted in the same Ruling.  Perhaps the most outrageous statement issued by the FCC is their suggestion that companies can protect their interests by contractually requiring customers to provide notice when they relinquish their phone number and, if necessary, seek legal recourse against customers that break the agreement.  That’s right, the Ruling, which has been hailed as a consumer protection measure, suggests that businesses should sue their own customers!

The FCC also declined to provide any safe harbor—illusory or otherwise—for calls accidentally made to a wrong number or calls made where no subscriber ever consented to receive calls (e.g. when a wrong number is entered into a consent form).

Not surprisingly, commissioners Pai and O’Rielly issued strong dissenting statements on the reassigned number issue as well.  They took issue with:  (1) the lack of an authoritative database for reassigned numbers; (2) any statutory interpretation that demands the impossible; (3) the lack of a “bad faith” defense when plaintiffs intentionally let the calls add up before bringing suit; (4) the impracticability of manually dialing numbers in light of the majority’s ATDS interpretation; and (5) the hypocrisy of suggesting that businesses should sue their customers.

In addition to public policy arguments, Commissioner Pai argued that “interpreting the term ‘called party’ to mean the expected recipient—that is the party expected to answer the call—is by far the best reading of the statute” and best accomplishes Congress’ intent to “balance the privacy rights of the individual and the commercial speech rights of the telemarketer.”  Commissioner Pai further argued that a contrary interpretation raises a multitude of constitutional issues, including violations of the First Amendment.

The dissenting commissioners also sharply criticized the unworkable nature of the one call safe harbor.  Commissioner O’Rielly summed it up best by stating that the Ruling “offers companies fake relief instead of a solution.”

Revocation of Consent

Another important component of the Ruling relates to a person’s right to revoke consent to be called on their cell phone.  The FCC affirmed that consent may be revoked “using any reasonable method including orally or in writing.”  For example, the FCC stated that consent may be revoked during an inbound or outbound call or “at an in-store bill payment location,” among other possibilities.  No guidance was provided as to what would be an unreasonable method of revoking consent.  Additionally, the Ruling states that callers may not control consumers’ ability to revoke consent by, for example, designating a specific method or medium for them to do so.

Commissioner Pai supported the idea that a person should be able to revoke prior consent, but took issue with the compliance challenges created by allowing consent to be revoked in any manner.  Commissioner O’Rielly went a step further by opining that consent for non-telemarketing calls cannot be revoked because the TCPA is intentionally silent on this issue.

Text Messages

The Ruling reiterates prior FCC interpretations that a text message is considered a call under the TCPA.  The FCC also held, for the first time, that the TCPA applies to Internet-to-phone text messages.  These messages are typically sent from a web portal directly to the person’s wireless number or to an e-mail address containing the person’s phone number (e.g. 5555551111@sprint.messaging.net).  The FCC deemed each scenario to be the equivalent of “dialing” a phone number and justified its holding by stating that Congress gave it the authority to apply TCPA protections to technologies that did not exist when the TCPA was enacted.

One of the only positive clarifications made in the Ruling relates to one-time on demand text messages sent in response to a consumer’s inbound text.  For example, a consumer might text “discount” to a designated number to receive a coupon from a retailer.  The FCC opined that these texts do not violate the TCPA—because they are fulfillment, not telemarketing, texts—so long as the following criteria are met: (1) the text was requested by the consumer; (2) the text must be a one-time message sent immediately in response to the consumer’s request; and (3) the text only contains the information requested by the consumer (no other marketing or advertising information is allowed).

Maker of a Call

As part of the Ruling, the FCC reiterates standards it adopted in prior rulings regarding who “initiates” or “makes” a call under the TCPA.  A person initiates a call by physically placing the call or if they are “so involved in the placing of a specific telephone call” as to be deemed to have initiated it.

The FCC applied this standard to various scenarios presented by petitioners, holding as follows:

  • YouMail does not initiate auto-reply texts where the user sets up the auto-response feature and is entirely in control of the content.
  • Glides does not initiate “invitation” texts sent by users (by clicking an invitation button), even if suggested language is provided by Glide.
  • Glide initiates texts when it automatically sends invitations to phone numbers listed in a user’s contact list.

The Commission also discussed scenarios under which a service provider may be deemed liable for TCPA violations committed by their customers.  According to the FCC:

  • “The extent to which a person willfully enables fraudulent spoofing of telephone numbers or assists telemarketers block Caller ID, by offering either functionality to clients, can be relevant in determining liability for TCPA violations;” and
  • “Whether a person who offers a calling platform service for the use of others has knowingly allowed its client(s) to use that platform for unlawful purposes may also be a factor in determining whether the provider is [liable for the calls].”

These statements highlight the importance of conducting due diligence on the businesses you do business with.

Prior Express Written Consent

In 2012, the FCC adopted amended regulations, which require prior express written consent (PEWC) to using an ATDS or prerecorded message to call consumers’ cell phones.  To get PEWC under the amended regulations, you must disclose that the telemarketing calls will be made with an ATDS and that consent is not a condition of purchase.  Those rules went into effect on October 16, 2013.

A handful of petitioners requested clarification that any written consent received prior to October 16, 2013 remains valid even if the mandatory disclosures were not provided when the consent was obtained.  Although the FCC denied this request, it granted the petitioners and their represented members:  (1) a retroactive waiver from October 16, 2013 to the date of the Ruling (July 10, 2015); and (2) a waiver for 89 days following the release of the Ruling.  After that date, any call made without PEWC—as defined in the amended regulations—will be deemed a TCPA violation.

No waiver was provided for entities that did not petition the FCC on this issue (except to the extent that such entities were members of a petitioning association on the date the Ruling was released).

Limited Exemption for Financial and Healthcare Calls

As part of the Ruling, the FCC exempted certain time-sensitive financial and healthcare calls from the purview of the TCPA.  To qualify for an exemption, the following requirements must be met:

  • The call must be free to the end user;
  • The call must be made to a cell phone number provided by the customer;
  • The call must include the name and contact info of the caller;
  • The call must be limited to specific purposes (example financial calls:  fraud and breach alerts; example healthcare calls:  appointment reminders, wellness checkups, pre-registration instructions and prescription notices);
  • The call must be concise (1 minute or less for calls and 160 characters or less for texts);
  • The number of calls must be limited as outlined in the Ruling;
  • The call must include an easy method to opt-out (automated opt-out mechanism for calls and ability to reply ‘STOP’ for texts); and
  • Callers must honor opt-out requests immediately.

Other Rulings

In addition to the topics discussed above, notable components of the Ruling include:

  • Non-Telemarketing Calls.  The FCC denied a petitioner’s request for clarification that the ATDS rules do not apply to non-telemarketing calls made using a predictive dialer.
  • Prior Express Consent.  The FCC reaffirmed its previous rulings that: (1) providing a phone number constitutes “prior express consent” to receive non-telemarketing calls at that number unless contrary instructions are given; and (2) the scope of consent provided by a consumer must be determined by facts of situation.
  • Call Blocking Technology.  Acting to bring its call blocking policy in line with petitions filed by state attorneys general, the FCC declared that call blocking technology can be implemented by telephone companies and VoIP providers.  While end-user capabilities previously existed, the national consumer networks had not maintained a comprehensive call blocking program that would allow their subscribers to opt in.  Confusion as to call blocking prohibitions by prior FCC mandates caused telecommunication firms to avoid such systems.  The Ruling makes it clear that call blocking features are accessible to consumers and businesses at the subscriber level.