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Telemarketers Beware: The EBR Exemption Is Narrower Than You Think

9 May, 2011 By: Linda A. Goldstein


Direct response marketers are continually looking for ways to take advantage of the Existing Business Relationship (EBR) afforded under the Telemarketing Sales Rule (TSR) to avoid having to scrub lists of potential customers against the National and State Do-Not-Call Lists. A recent enforcement action announced by the Federal Trade Commission (FTC) this month illustrates just how narrowly the FTC defines this exemption.

The FTC action was brought against Electric Mobility Corp., the makers of a scooter utilized by those with impaired mobility, and its owner, Michael Flowers. According to the FTC complaint, the company allegedly relied on telephone numbers obtained on sweepstakes entry forms as a basis for making calls to those consumers. The company solicited entries into its sweepstakes through television, direct mail and print advertisements.

Underneath the portion of the entry form on which the telephone number was sought, the company included a disclaimer indicating that that the person’s telephone number was needed so that they could be contacted if they were a winner. The company then proceeded to make outbound calls to all consumers who provided a telephone number without scrubbing against the Do-Not-Call List on the basis that an EBR had been formed. Under the TSR, an EBR exists if the consumer has either made a purchase from the company within the last 18 months or an inquiry within the last 90 days. Electric Mobility viewed the sweepstakes entry as an “inquiry.”

In its press release, the FTC stated emphatically that a company cannot rely on a sweepstakes entry to establish an existing business relationship. While this case involved the use of a sweepstakes entry to obtain an EBR, the implications of this case are much broader and illustrative of a growing trend by the FTC and the states, which also participated in this action, to take a narrow view of the EBR exemption.

Based on this and other enforcement actions, marketers should be wary of relying upon an EBR exemption on the basis of an “inquiry” unless it is clear that the consumer has in fact made an inquiry about the marketer’s products or services.

For example, if a consumer abandons a call to a company, even if the company has captured the consumer’s telephone number through the ANI, unless there has been some level of conversation with the consumer sufficient to demonstrate a bona fide inquiry, it is unlikely that the FTC would view the contact as sufficient to establish an EBR. Similarly, if a consumer responds to a free gift or other incentive offer but never indicates an interest in the underlying product, the fact that a consumer has provided a phone number in order to receive the incentive may not be sufficient to establish the EBR.

In determining whether an “inquiry” is sufficient to give rise to an EBR exemption, the FTC is likely to look at what the consumer expectation is likely to be and at whether the nature of the consumer’s “inquiry” was sufficient to indicate an interest in the marketer’s product or service. In many cases this analysis may not be subject to bright line distinctions, and as marketers become increasingly creative in structuring their marketing campaigns, determining whether the EBR exemption applies may become increasingly difficult. When in doubt, however, the more prudent approach would be to scrub.

Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips, LLP, based in the firm’s New York office. She can be reached at lgoldstein@manatt.com.


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