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Legal Review: The Rise of Opt-In Laws

1 Sep, 2008 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Ellen T. Berge Response

Opt-in laws are riding a strong wave on the regulatory waters. With increasing frequency, federal and state authorities are focusing their consumer protection missions on permission-based measures that could force marketers to rethink the way they share customer data, generate leads and contact prospects.

 Jeffrey D. Knowles
Jeffrey D. Knowles

Most recently, the Federal Trade Commission (FTC) announced that, beginning in September 2009, telephone sellers will be prohibited from delivering prerecorded message calls to any consumer without the consumer's signed, written agreement. The agreement must be preceded by a clear and conspicuous disclosure that the purpose of the agreement is to authorize a seller to place prerecorded calls to the consumer, and it must evidence the consumer's willingness to receive prerecorded message calls on behalf of a specific seller. The seller is prohibited from directly or indirectly requiring that the agreement be executed as a condition of purchasing any goods or services.

The new rule marks a significant shift in the FTC's prior position of allowing prerecorded message calls to existing customers under certain circumstances. The burden of obtaining written consent to send prerecorded messages, even to existing customers, may push some businesses out of the market. The alternatives for those businesses — direct mail, live calls and E-mail — are likely to involve additional costs that will be passed on to consumers.

Ellen T. Berge
Ellen T. Berge

Current Opt-Outs

The requirement to obtain signed, written consent prior to placing a prerecorded message call is reminiscent of the FTC rule specifying that signed, written consent may trump a consumer's listing on the national Do-Not-Call list. However, even Do-Not-Call rules are fundamentally based on an opt-out system. Sellers may call any consumer who has not opted-out of receiving telemarketing calls by registering with a federal or state Do-Not-Call list or making a specific Do-Not-Call request to the seller.

Similarly, under the CAN-SPAM Act of 2003, marketers can send a commercial E-mail message to any person unless and until the person opts-out. Notably, the CAN-SPAM Act became effective just in time to preempt a California anti-spam law that would have required opt-in consent before sending E-mail messages to California consumers.

Protecting Privacy

Today, a new batch of bills pending in state legislatures threatens the ability of marketers to collect and share consumer information. While marketers have faced challenges like these for years, technological advancements in the classic strategy of target marketing have attracted new attention to consumer privacy issues.

Behavioral advertising — the practice of tracking and analyzing the consumer's online movements in order to deliver targeted promotional messages — is at the center of the current privacy debates. In New York, a proposed "Online Consumer Protection Act" would prohibit any Web site operator or online advertising network from collecting personally identifiable information (such as name, address and telephone number) for the purpose of online preference marketing unless the consumer first provides consent.

State lawmakers have also added opt-in requirements to otherwise un-noteworthy bills. California is presently considering a bill to bring "no-purchase-necessary" and other sweepstakes disclosure requirements in line with existing laws in other states. But the bill also states: anyone who operates a sweepstakes in California would be prohibited from selling the names or addresses of those who participate in the sweepstakes without their prior express consent.

The effects of a state opt-in law on precedent would be far reaching, particularly if the law originates in California or New York and involves online marketing. A law could become a de facto national standard, as compliance would inevitably impact transactions with residents of other states.

There are many important questions looming over the concept of opt-in consent. Is a written agreement or signature required? Can the consumer consent to have their information shared with a category of advertisers as opposed to a specific advertiser? What steps should marketers take to ensure that disclosures about the consumer's agreement to be contacted are clear and conspicuous? As these discussions continue, marketers will need to ensure they stay up to speed with changes in the regulatory landscape.

Jeffrey D. Knowles leads the Advertising, Marketing and New Media practice at Washington, D.C.-based Venable LLP. Ellen T. Berge is an attorney in Venable's Advertising, Marketing and New Media practice. They can be reached at (202) 344-4000.

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