Federal Court Approves Robocall Restrictions on Soundboard Technology

The D.C. District Court recently upheld the Federal Trade Commission’s (“FTC’s”) decision to extend robocalling restrictions under the Telemarketing Sales Rule (“TSR”) to telemarketing calls that use soundboard technology. The court rejected a trade group’s challenge that the FTC’s soundboard technology decision, made in a 2016 Staff Opinion Letter, violated the Administrative Procedure Act’s notice and comment requirements, finding that the letter is merely an “interpretive rule,” rather than a “legislative rule.” The court also rejected the group’s First Amendment challenge to the TSR restrictions on the use of prerecorded messages to solicit new donors for charitable organizations on the basis that such restrictions were valid time, place and manner restrictions, not content-based discrimination.

Effective May 19, 2017, the 2016 Staff Opinion Letter will apply the TSR’s requirement that telemarketers cannot make robocalls without first obtaining a written agreement from the consumer to the use of soundboard technology.

Unlike traditional robocalls which consist of a one-way telemarketing message that involves no live sales agent, soundboard technology can involve two-way communication between a sales agent and consumer.  The sales agent plays pre-recorded audio clips in response to consumer statements and questions, but may personally break into the call when required.  For example, using soundboard technology, if a consumer asks for additional information about a service or product, the sales agent will first attempt to respond with a pre-recorded response.  If the automatic response is not sufficient, the sales agent can reveal themselves to the consumer and provide a direct response.

The 2016 Staff Opinion Letter deviates significantly from the FTC’s prior position in effect since 2009.  At that time, soundboard technology was exempt from the general prohibition placed on robocalls, because such technology theoretically permits the recipient to have a two-way conversation with a live sales agent. The FTC reversed its earlier position after determining that soundboard technology was not operating in a way that properly facilitated a two-way conversation as intended. Specifically, the FTC found that consumers were not receiving appropriate responses to their questions and comments and live sales agents were not intervening in the calls.  As a result,

the 2016 Staff Opinion Letter stated that such practices do not provide consumers the benefits upon which the original robocall regulation exception was based.

The full text of the decision is available here: https://www.ftc.gov/system/files/documents/cases/soundboard_assoc_vftc_opinion.pdf.