Film Companies Settle FTC Charges for Making Over 117 Million Illegal Telemarketing Calls

The FTC and three Utah-based film companies and their owner recently stipulated to the entry of a final order settling the FTC’s charges against them for making more than 117 million telemarketing calls in violation of the FTC Act and the Telemarketing Sales Rule (TSR).

In May 2011, the DOJ filed a complaint in federal district court at the FTC’s request, alleging that defendants violated the FTC Act and the TSR during multiple nationwide telemarketing campaigns by engaging in deceptive business practices and making calls to millions of consumers on the Do Not Call Registry.  In a campaign called “Kids First,” defendants offered consumers complimentary DVDs and asked for feedback on whether the DVDs should be added to a recommended movies list, but failed to disclose that participants would later receive calls to purchase DVDs.  In another campaign, defendants called millions of consumers on the Do Not Call Registry, encouraging DVD purchases by representing that “all of the proceeds” would be used to complete a recommended viewing list for the nonprofit Coalition for Quality Children’s Media.  Defendants, however, kept 93% of the proceeds.  In an additional campaign, defendants made more than 2.5 million calls to consumers on the Do Not Call Registry, urging them to purchase tickets to “The Velveteen Rabbit,” a film produced and released by the Utah-based film companies’ owner.  In yet other campaigns, defendants made millions of calls to consumers on the Do Not Call Registry to sell DVDs, and continued to make such calls after consumers asked them to stop.

In June 2016, following a trial limited to liability issues, a jury issued a verdict (the first-ever in an action enforcing the TSR and the Do Not Call Registry rules according to the FTC) including six TSR violations, based on findings that defendants had made over 117 million calls in violation of the TSR, including 99 million calls to consumers listed on the Do Not Call Registry and four million calls involving misleading statements to induce DVD purchases.  The jury also found that defendants had actual or implied knowledge of such violations, allowing for civil penalty assessments under the FTC Act.

On March 16, 2018, the parties stipulated to the entry of a final order in settlement of the violations.  The final order: (i) imposes over $45 million in civil penalties against defendants, jointly and severally (of which all but $487,735 is suspended barring a later court finding that defendants misrepresented their financial condition); (ii) prohibits defendants from engaging in future FTC Act and TSR violations; and (iii) requires defendants to implement training, monitoring, compliance reporting, and recordkeeping to prevent such future violations.  Entry of the final order is subject to court approval.

A copy of the final order, and related case documents, can be viewed here.