New Federal Rules Curb Telemarketing
In 2003, the federal government launched the national Do Not Call Registry. By the end of the year, U.S. consumers had placed nearly 56 million home and cellular telephone numbers on the Registry, including 7.2 million California numbers. Federal law prohibits most telemarketing calls to numbers listed on the Registry. The U.S. Court of Appeals recently upheld the validity of the Registry, overruling lower courts, so the Registry is here to stay.

The Federal Trade Commission stated in February that compliance with the Registry has been exceptionally high–fewer than 45 companies have had 100 or more complaints filed against them. A recent survey by Harris Interactive® confirms the Registry’s impact. Over 57 percent of U.S. adults polled in January said they had signed up for the Registry. Of those who signed up, 25 percent reported receiving no telemarketing calls and 53 percent reported receiving some calls but far fewer than before.

Companies that make covered calls to numbers listed on the Registry face serious liability. In January, California Attorney General Bill Lockyer filed suit in federal court in Sacramento against Florida-based L.M.A. Marketing, Inc., doing business as Mortgage Concepts. Lockyer alleged that L.M.A. placed automated calls to consumers under the guise of conducting a survey regarding refinancing. Then, depending on the consumer’s response, a company representative would call the consumer back to pitch the company’s refinancing service. Lockyer stated that more than 250 Californians had lodged complaints against L.M.A. The suit is Lockyer’s second effort to enforce the Registry–last November he sued Hayward-based American Home Craft, Inc.

Marketers Look to FTC to Clarify CAN-SPAM Act
The federal CAN-SPAM Act of 2003 took effect January 1. While unsolicited commercial e-mail continues to clog inboxes, scrupulous marketers are struggling to understand and comply with the new law.

A common misperception is that the law covers only pill pushers and others who send out e-mail in bulk. In fact, with few exceptions, the law covers any e-mail, sent to one or more recipients, “the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” This definition creates a substantial gray area. For example, does it encompass a newsletter that a business sends out to prospective customers? By the end of 2004 the FTC will issue regulations to flesh out the scope of the law.

Despite the lingering ambiguities, businesses that market through e-mail should (1) evaluate how the law impacts their external communications, (2) adopt procedures that include a standard template for outgoing e-mail and a method to handle opt out requests, and (3) train staff to ensure that their e-mail use conforms with the new law.

Business Groups Ask Voters to Stop “Shakedown Lawsuits”
California’s unfair competition law (Business & Professions Code section 17200) allows anyone to file suit against any business for any deceptive or unfair act or practice, including misleading advertising. In 2003, after hundreds of small businesses were sued by plaintiffs’ lawyers, it appeared that the Legislature might limit the scope of the law. By the end of the year, however, the reform efforts had stalled in the Legislature.

The California business community is now taking its concerns to the voters. “Californians to Stop Shakedown Lawsuits,” a coalition that includes the California Chamber of Commerce, is collecting signatures to qualify an initiative for the November 2004 election. If adopted, the initiative would limit private suits to cases where consumers have lost money or property and would require more court oversight when plaintiffs seek to recover money for other consumers. (For details, see stopshakedownlawsuits.com.) Meanwhile, consumer advocates and plaintiffs’ attorneys may sponsor initiatives of their own to increase the exposure of businesses to unfair competition claims.

California Consumers Receive $92 Million in Refunds
In December, the California AG announced that Household Finance would mail refund checks totaling $92 million to nearly 65,000 Californians. The payments were part of a nationwide settlement. State regulators alleged that Household and its affiliates had misrepresented loan terms, deceived consumers about credit insurance, charged exorbitant loan origination fees, and imposed excessive penalties on consumers who paid off their loans early.

A Missing Half Pound of Fertilizer Costs $2 Million
A fertilizer distributor, Hydro Agri North America, Inc., agreed to pay over $2 million to settle a consumer protection lawsuit brought by the Sonoma County District Attorney along with six other local prosecutors. The government charged that bags of fertilizer were advertised to weigh 50 pounds, but in fact fell about half a pound short. Under the settlement, announced by the Sonoma DA in December, most of the money will be paid to the government as a civil penalty.

FTC Sues Debt Negotiation Service
In February, the Federal Trade Commission charged two debt negotiation companies and their principals with deceptively claiming, in radio spots and through Internet advertising, that they could “drastically” reduce consumers’ debt by negotiating with their creditors. According to the FTC’s suit, filed in federal court in Los Angeles, the defendants usually were unable to negotiate any substantial reductions, and consumers who followed defendants’ instructions to stop making payments typically suffered additional charges and damage to their credit reports.