Telemarketing

Although telemarketing is often narrowly defined as marketing by telephone, it is used here in a broader context to include any form of unsolicited selling message targeted at individual consumers from a distance. Telemarketing includes direct mail, telephone marketing, commercial electronic mail (i.e., “spam”), and messages sent to cellular telephones, facsimile machines, and computer screens. It does not include mass media advertising or passive marketing messages, such as billboards and Internet sites, nor does it include personal selling.
Telemarketing raises two major privacy concerns. The first involves the collection and sale of personally identifiable information to make targeting individual consumers possible. The second concerns the intrusive nature of telemarketing. Unlike passive marketing messages, which are relatively easy for consumers to ignore, telemarketing requires consumers to deal, in some manner, with each message. Telephone marketing causes the telephone to ring, and today often requires that the consumer delete any message from voicemail or an answering machine. Unwanted e-mail and messages to cell phones must be deleted, and direct mail and fax messages must be thrown away. Thus, telemarketing imposes higher costs in terms of consumer time and, sometimes, financial disposal costs than passive marketing. Only personal selling, with the salesperson’s proverbial foot in the door, is more intrusive for consumers. However, some consumers find telemarketing to be a convenient form of purchasing, and marketers use it because they hope it is more engaging than passive marketing.
Telemarketing began with direct-mail advertising in the nineteenth century. At first, the mailed circulars were of poor print quality, but improved printing technology made catalogs and other more attractive solicitations possible. Consumers also complained of receiving duplicate mailings. This led to the refinement of mailing lists of potential consumers. By 1900, mailing lists were being compiled from directories, newspaper clipping services, and other public sources and sold by categories, such as address or occupation. “Addressing companies” were available to perform direct-mail campaigns, including printing and addressing the advertising material. The U.S. Postal Service encouraged the growth of direct mail by offering lower postal rates. Even the mandate to use ZIP codes in 1967, initially opposed by marketers, proved to be an important market segmentation tool. Today about 40 percent of all mail is direct-mail advertising. It is estimated that half of direct mail is never even opened by recipients.
There is virtually no regulation of direct mail in the United States despite the cost of disposal and the fact that consumers spend about eight months of their life-times disposing of direct mail. Customers may refuse delivery of materials they declare to be obscene and require such mailers to stop mailing such materials to them (39 U.S.C. §3008-12). It also is illegal to send unsolicited merchandise through the mail and then request payment (39 U.S.C. §3009). Consumers may treat such merchandise as a gift. Consumers do not have to pay to return the item but may bear the costs of disposing of it.
Direct mail is relatively easy to ignore, but for many consumers a ringing telephone is not. In 1991, when enacting the federal Telephone Consumer Protection Act (TCPA), Congress heard evidence that more than 300,000 telephone solicitors contacted more than 18 million Americans every day. In 1998, the Direct Marketing Association estimated that U.S. marketers spent $62 billion in telephone marketing. Others estimate that telephone marketers must make 50 or more calls to make a sale, but sales from such calls amount to roughly 30 percent of all telephone purchases, or about $100 billion in 2002. A 2004 survey by the Ponemon Institute found that 60 percent of consumers find telemarketing annoying.
Under federal law, telephone solicitations may occur only between the hours of 8:00 a.m. and 9:00 p.m. for the recipient of the call. Telephone marketers may not harass consumers by repeatedly calling or using obscene or intimidating language. They also must identify themselves as sellers and explain that they are making a sales call before beginning their sales pitch (16 C.F.R. §310). This rule was amended in 2003 to establish the federal Do-Not-Call Registry. By March 2005, some 84 million phone numbers had been registered to prevent unsolicited calls from for-profit marketers, including those that solicit charitable contributions. While this list does not preempt the do-not-call lists that 27 states had previously established, several states are consolidating their lists with the federal registry. New amendments also require the transmission of caller identification by the telemarketer and regulate call abandonment, which occurs when a consumer answers the telephone but there is no marketer on the line.
Because consumers pay for fax paper and often pay for incoming cell phone calls, the TCPA also prohibits solicitations to telephone fax machines without prior consent of the receiver and solicitations made to cell phones by automatic dialing devices without prior consent (47 C.F.R. 64). The Junk Fax Prevention Act of 2005 (47 U.S.C. §227) requires commercial faxes to properly identify the sending company and its phone number as well as provide a notice on how to opt-out of future faxes from that firm. It does allow companies to fax customers with whom they have an existing business relationship.
The latest effort to impose marketing costs on consumers without procuring their consent is through e-mail and the Internet. The federal Can Spam Act of 2003 (15 U.S.C. §7701) explicitly preempted tougher state laws to authorize the sending of commercial e-mail as long as the header and subject lines are not misleading and the message discloses the identity of the seller and the fact that it is an advertise-ment and gives recipients a method of opting out of receiving future e-mails from that marketer. A list of one million e-mail addresses costs as little as $7, making this a very low-cost marketing medium. Studies show that roughly half of all email traffic is spam, and it costs U.S. business about $10 billion each year to deal with spam. The Federal Trade Commission has opposed establishing a Do-Not-Spam registry because it believes it would be ineffective, but case law does allow Internet Service Providers to offer spam filters.
As noted previously, marketing calls to cell phones made by an automatic dialing device are illegal without prior permission of the recipient. The question arises whether this also includes text messages, which also cause cell phones to ring. In September 2005, the Arizona Court of Appeals held that computer programs that send text messages by generating a list of text addresses are automatic dialing devices under the TCPA, making the practice illegal. The court further noted that the Can Spam Act prohibits unsolicited commercial messages to mobile service devices.
Finally, Internet users can receive targeted pop-up advertising messages when “surfing” the web. This usually occurs when the consumer’s computer contains “adware” that may simply send advertisements periodically. Some “adware,” how-ever, follows the consumer’s search patterns and attempts to send advertising of interest to the consumer. Furthermore, some search engines sell search terms to advertisers and then display the advertisers’ ads either as a pop-up ad during the search or as a “sponsored result.” The legality of these practices is being considered on two fronts. First, the FTC has pursued firms that do not clearly disclose they are loading “adware” onto consumers’ computers or mislead consumers about the characteristics of the software they are receiving. Second, trademark owners are suing firms that offer their trademarks for sale to other advertisers. Only a few conflicting judicial decisions have been issued thus far on these practices.
Marketers typically have challenged these regulations as violating their free speech rights under the First Amendment. However, courts have found consumer intrusion to be a significant regulatory interest and held that the regulations enacted to date are constitutional. The courts typically examine whether the regulations are narrowly tailored to achieve the regulatory interest and whether alternative channels for the speech are still available.
The first privacy concern listed previously, the collection of personal information in order to target messages, has received relatively little legal attention in the United States. Specific federal laws have been enacted to regulate privacy for websites that seek personal information from children and to protect financial and health care personal information. In addition, the FTC and other agencies pursue cases where firms release or sell personal data in violation of their stated privacy policy. However, no overall privacy protection for personal information exists at the federal level. The U.S. approach is in contrast with that of the European Union. The European Data Protection Directive on the Legal Protection of Databases (96/9/EC), adopted in 1996, instructed member states to enact legislation requiring that consumers be informed and consent before companies may collect personal information about them for a database. They must be informed of the database, have the right to correct or delete inaccurate data, and have the right to object to its use for marketing purposes. Europe also has rejected the U.S. piecemeal approach to dealing with intrusion. The 2005 Directive Concerning Unfair Business-to-Con-sumer Commercial Practices (2005/29/EC) requires member states to enact laws by early 2008 that will prohibit persistent and unwanted solicitations by any remote media without prior consent or the ability to object easily and without cost to stop future solicitations.