What is an Advertisement? How Much Deference Should Courts Give FCC Orders?

One of the most hotly contested issues in TCPA litigation is whether a communication qualifies as an advertisement. For faxes, the determination impacts whether the TCPA applies at all. For calls made and texts sent to cell phones using an autodialer, the determination dictates the necessary level of consent. Case law on the issue is inconsistent at best. Recent decisions by the Third Circuit, in Fischbein v. Olson Research Group, and the Eastern District of Pennsylvania, in Mauthe v. Millennium Health further muddy the water. Both relate to faxes, but the holdings have broader implications because courts often look to fax opinions to analyze whether a call or text qualifies as an advertisement. Mauthe also includes an important discussion on the proper level of deference given to the FCC’s TCPA orders.

The TCPA defines an “advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services.” The Third Circuit’s split opinion in Fischbein is an example of how broadly some courts interpret this term. According to the majority opinion, a fax offering to pay the recipient to participate in a market research survey qualifies as an advertisement because it promotes goods or services to be bought or sold, and it has profit as an aim. In contrast, a fax requesting the recipient to participate in an unpaid survey is not an advertisement. The dissent takes issue with this expansive interpretation, arguing that an offer to purchase something, while commercial, does not advertise the availability or quality of goods or services. It also criticizes the majority for considering the recipient’s subjective perceptions of whether the communication is an advertisement and misapplying prior Third Circuit precedent. We view the dissenting opinion as more persuasive; however, the majority opinion highlights the risk of broad TCPA interpretations.

In Mauthe, the Eastern District of Pennsylvania held that a fax offering a free webinar is not an advertisement under the TCPA because it does not promote any commercially available product. On the surface, this holding seems uncontroversial. After all, the definition of advertisement requires the material to promote the commercial availability or quality of goods or services. Commercial implies an exchange of consideration, typically money. The significance of the opinion stems primarily from the court’s failure to follow the FCC’s 2006 Fax Order, which held that faxes offering free goods/services are advertisements because they are often pretexts used as part of a larger marketing campaign.

Ordinarily, district courts blindly defer to FCC orders pursuant to something called the Hobbs Act. Last year, in PDR Network, L.L.C. v. Carlton & Harris Chiropractic, Inc., the Supreme Court of the United States considered whether this amount of deference is proper. Rather than answer the question, the court remanded the case to the Fourth Circuit to determine whether the FCC Order is a legislative rule (has the force of law) or an interpretive rule (merely advises the public on its interpretation). The implication is that courts have more leeway to ignore interpretive orders than orders that equate to legislative rules. While the Fourth Circuit has not yet opined on this issue, the Mauthe court found the FCC’s 2006 Fax Order to be interpretive in nature. It further held that the Order is not entitled to deference because it is contrary to the plain language of the TCPA.

Collectively, PDR Network and district court opinions such as Mauthe open the door for plaintiffs and defendants to challenge FCC orders they do not like. This includes non-fax orders. For example, we anticipate plaintiffs will use these opinions to challenge the FCC’s express consent interpretation (giving a cell phone number to a business provides the business with express consent to make autodialed calls and send autodialed texts to that number). To get ahead of this, companies should analyze which FCC orders are most susceptible to attack and how such attacks may impact their risk profile.

* Shuqing Li contributed to this post.