FCC Cancels Proposed Fine of Fax Broadcaster

Posted on December 10, 2010 by Steve Augustino

Complaints of unsolicited faxes (aka "junk faxes") persistently are the most common type of complaint that the FCC receives.  As a result, the FCC issues a steady stream of investigations, citations and proposed fines for junk faxes.  This week, the FCC released an order that we believe marks the first adjudication determining that a "fax broadcaster" is not liable for unsolicited faxes sent on behalf of others.  See below for the details. 

 

On December 8, the FCC released an order canceling a proposed fine against CyberData, Inc. The FCC concluded, based on the record before it, that CyberData presented a "reasonable case" that it was a fax broadcaster, not a sender under the FCC's junk fax rules. The Commission noted three factors that supported the conclusion that CyberData was not liable:

  1. The ads were for services that CyberData does not provide and appeared to be transmitted on behalf of third parties;
  2. No evidence contradicted CyberData's assertion that it did not have a "high degree of involvement" with the senders' transmissions. 
  3. CyberData took steps to prevent further transmission of unsolicited faxes. The FCC noted that CyberData maintained a do-not-fax database and that it terminated services to entities found by the FCC to have violated the junk fax rules. 
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FCC Imposes $3 Million in Fines in "Junk Fax" Cases

Posted on September 28, 2010 by Steve Augustino

In August, we warned that the FCC was preparing a series of major enforcement orders for the transmission of unsolicited faxes.  Today, the FCC released 9 forfeiture orders totaling $3.1 million in fines against senders of unsolicited faxes (aka "junk faxes").  With the two proposed fines released in early September and a $77,500 forfeiture ordered two weeks ago, the Commission looks to have completed this round of "junk fax" enforcement.

In a few days, the Commission will list the Forfeiture Orders here.  Notably, all but one of the alleged senders failed to respond to the FCC's Notices of Apparent Liability, and the FCC imposed the full forfeiture it had proposed. 

As expected, this wave of enforcement orders included some very large fines against repeat offenders.  The Hot Lead, Inc. received the largest fine, at $1.5 million.  SMC, LLC received a fine of $806,500, while the remaining entities received fines between $27,000 and $250,000.

The only entity to respond to the NAL, Sunstar Travel and Tours, raised a number of defenses that the FCC rejected as unsupported by any evidence.  However, the Commission concluded that Sunstar Travel lacked the "ability to pay" -- a statutory forfeiture criterion -- and reduced the proposed forfeiture from $305,500 to $50,000.  This amount was between 2 and 7.6 percent of Sunstar Travel's average gross revenues, which the Commission found to be reasonable.

Clean Credit, Inc. received a $139,500 fine today, and an additional proposed fine of $528,000 in early September.

With the exception of Clean Credit's $528,000 proposed forfeiture, each of the forfeitures were calculated using the base forfeiture used in other unsolicited fax cases:  $4,500 per unsolicited fax, with a base forfeiture of $10,000 if the customer had attempted to opt out of future faxes. 
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FCC Preparing Multiple "Junk Fax" Enforcement Actions

Posted on August 29, 2010 by Steve Augustino

There has not been an official announcement, but indications are strong that the FCC is planning soon to issue a number of forfeitures and proposed forfeitures for the sending of so-called "junk faxes."  Under the Telephone Consumers Protection Act of 1991 ("TCPA"), it is unlawful to send "unsolicited advertisements" via facsimile.  In the past two weeks, the Enforcement Bureau has begun "circulating" 11 new orders that appear to be junk fax enforcement orders.  (Circulation is the process of submitting an order for a vote by the Commission.) 

The Commission, rather than the Bureau, must vote on all proposed fines above $100,000, so one may presume that each item involves a significant fine.  Significant fines also are likely because several of the subjects of the draft enforcement orders have histories of prior FCC enforcement actions.  One company -- The Hot Lead LLC -- received a fine of $2.5 million in 2008 for junk faxes.  Pending against it are four proposed fines, of $739,500, $695,000, $47,000 and $51,500.  Another company -- Sunstar Travel and Tours -- received a fine of $169,500 in 2008 and has a proposed fine of $136,000 pending now.

In addition, one potential action appears to be against an alleged "fax broadcaster."  If issued, it would be the first proposed forfeiture issued under the Commission's "high degree of involvement" standard for fax broadcaster liability.

Caveat:  Circulation of an item does not necessarily indicate impending action by the FCC.  Four apparent "junk fax" orders began circulating in June 2009.  14 months later, those orders remain under consideration.

UPDATE 9/3/10:  The FCC is beginning to release the orders.  On Thursday, it released a Notice of Apparent Liability against Clean Credit, Inc. in the amount of $528,000.  The Commission imposed the statutory maximum penalty of $16,000 per violation because

"Clean Credit has exhibited a flagrant disregard for the TCPA and the Commission’s rules and orders, with a lengthy history of violations, and an ongoing pattern of violations extending to as recently as a few months ago."

If the Commission similarly applies the $16,000 maximum forfeiture to the remaining investigations, multi-million dollar forfeitures are on the way.

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Calls to Current Customers are not "Telephone Solicitations" under the TCPA, FCC Says

Posted on April 19, 2010 by Steve Augustino

Even though this blog covers telecom litigation and enforcement, this is the first post about a formal complaint brought before the FCC. Among the reasons are that the FCC does not handle many formal complaints these days (it had only 10 docketed cases in all of 2009), and decisions on the merits are few and far between. But a decision issued last week caught our attention. In the decision, the FCC's Enforcement Bureau took a narrow view of the Telephone Consumers Protection Act (“TCPA”).

The Enforcement Bureau held that unsolicited calls to a consumer were not TCPA violations because the messages were intended for current customers, not as solicitations to obtain new customers. Moreover, the telemarketer’s mistake in directing the calls to a non-customer did not make the calls actionable. This decision will make it harder for a consumer to prove a violation when communications are intended for current customers.


In the case, Consumer.net, LLC v. Verizon Communications, Inc., a consumer contended that Verizon’s long distance and wireless entities made unlawful telephone solicitations to him on at least three occasions. It was uncontested that three unsolicited calls were made to the consumer.  With respect to all three calls, the FCC concluded that the consumer failed to show that the content of the calls violated the Act.  The decision turned on whether the calls were “telephone solicitations” under the TCPA. 

Section 227 defines a “telephone solicitation” as the initiation of a telephone call “for the purpose of encouraging the purchase or rental of, or investment in, property, goods or services.” (Calls with the customer’s permission or calls where an established business arrangement exists are exempted). It is not enough to show that a call was unsolicited; the complainant also must show that the purpose was to encourage a purchase of goods or services.

Two of the calls in the case were “special reminders” to Verizon Long Distance customers about free long distance calling available on upcoming holidays. The calls stated that the recipient “will receive 60 free domestic long distance minutes” during an upcoming holiday, stating that the free minutes “will automatically [be] applied to your account.” The Complainant, however, was not a Verizon Long Distance customer at the time he received the calls. The FCC excused Verizon from liability, finding that the calls were not telephone solicitations under the Act.  Instead, the calls were “good will” calls intended to be sent only to current Verizon customers “rather than the general public or potential new customers.” The Bureau also excused Verizon’s error in contacting the consumer, finding that the evidence was more consistent with a mistake than an attempt to solicit a new customer. In other words, Verizon mistakenly called the consumer – twice, and five months apart. But because the content of the message did not ask the consumer to purchase anything, this mistake was not a “solicitation” in violation of the Act.

The third call began “This is Verizon Select …” but was then cut off. The FCC concluded that the consumer failed to meet his burden of proof, because he could not identify the purpose of the call or whether a product or service was being advertised. 

 
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Text Messaging Petition Draws Little Comment

Posted on December 7, 2009 by Steve Augustino

Initial comments were filed last week on Club Texting's request for a declaratory ruling regarding the use of text broadcasting for marketing purposes.  Club Texting, a provider of mass texting services to marketers and other customers, asked the FCC to rule that text broadcasters enjoy the same protection from liability under the TCPA that applies to fax broadcasters.  Under this standard, a text broadcaster would not be considered a "sender' of the message unless it has a "high degree of involvement" in an illegal message or had actual notice that the transmission is illegal and failed to take steps to prevent the transmission. 

The FCC sought public comment on Club Texting's petition, but the only comment was filed by another text broadcaster.  Not surprisingly, the commenter also supported a ruling that the FCC will apply the same standard to text broadcasters that it applies to fax broadcasting.  No consumers, class action plaintiffs or public interest groups filed in response to the petition.

With such little comment, it is unlikely the FCC will rule on the petition any time soon, if at all.  This issue most likely will be addressed initially in litigation challenging a mobile marketing campaign.

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