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Consumer groups call for telemarketing controls

CRTC Public Notice 2001-34: Telemarketing Rules

Comments of Action Réseau Consommateur, the Consumers’ Association of Canada, and Fédération des Associations Coopératifs d’économie familiale (“ARC et al”)

1. The following comments are submitted on behalf of Action Réseau Consommateur, Fédération des associations coopératives d’économie familiale du Québec, and the Public Interest Advocacy Centre (“ARC et al”) on the issues in the above-mentioned public notice, taking into account the submissions and interrogatory responses filed by other parties.

Introduction

2. The record of this proceeding is clear that telemarketing has become a serious annoyance for Canadians. The record also makes clear that more effective regulation is needed in order to better balance the rights of Canadians to freedom from such interference with their privacy, with the rights of businesses to use the public telecommunications network for private and commercial purposes. This proceeding is hence timely, and ARC et al are grateful for the opportunity to participate in the development of a more effective regulatory regime for telemarketing.

3. ARC et al have provided extensive comments already in this proceeding, by way of their initial submission and two sets of interrogatory responses. In addition, they filed two brief supplementary submissions, one providing the results of a nation-wide survey on point, and the other referencing recent statements by the Chair of the Federal Trade Commission in the USA on telemarketing. The Comments provided here are further to those submissions.

The need for a more effective regime

Canadians want the CRTC to act

4. There can be no doubt, based on the record of this proceeding, that the current regime governing telemarketing in Canada is not working. Not only has the CRTC received comments directly from the public and consumer advocates on this issue, it has also heard from Canadians across the country via a nation-wide survey conducted earlier this summer by Ekos Research for PIAC.

5. The Ekos survey probed public opinion on the issue of business use of customer data for marketing purposes, and in particular, on the question of how businesses should obtain customer consent to such marketing. As part of that survey, respondents were asked one question specifically on telemarketing. That question posed two opposite points of view regarding telemarketing, and asked respondents to choose the one that best reflected their views. Only 1% were unsure. 61% chose the statement:

“I would like to stop receiving all telemarketing calls to my household even if it means I may miss out on a really good opportunity”

while 38% chose:

“I don’t mind receiving telemarketing calls because I can always say no or not answer the phone”.

6. Clearly, a significant majority of Canadians are seriously annoyed by telemarketing, consider the current situation unsatisfactory, and would like to be able to stop unsolicited calls to their homes. This result was confirmed in focus groups, where most participants “expressed both concern and little usefulness for many of the calls they received”.

Telemarketing is a particularly intrusive form of marketing

7. In a submission dated Oct.1st, Telelink argues that there is no major difference between telemarketing and direct mail marketing from the perspective of the customer. ARC et al strongly disagree. While unsolicited direct advertising by mail is also of concern to consumers, it is distinct from telemarketing in a critical respect: unlike a telephone call, it does not involve an intrusion into one’s private space. Telephone calls interrupt the peaceful enjoyment of one’s private home and demand attention at the moment they are received. Mail does not. This is why telephone marketing evokes such negative reactions from so many consumers.

8. In addition, telephone marketing uses a finite resource: air time on a given telephone line. The Commission has a mandate to ensure that the public telephone network is used in a responsible manner, in the public interest. It is particularly annoying to consumers when they miss important calls due to unwanted solicitations occupying their line. Canadians rely upon the telephone network for emergency purposes, social interaction, personal health, employment and business dealings, civic engagement, etc. These important social and economic uses of the public network should not be compromised by irresponsible, unnecessary and excessive use by commercial entities for their own gain.

Scope of the Regime

9. ARC et al submit that a more rigorous regulatory regime is needed with respect to telemarketing through all three media through which it is currently conducted: telephone, facsimile, and electronic mail.

10. ARC et al further submit that the regime should cover all sources of unwanted unsolicited calls: for-profit solicitations, non-profit fundraising, and market research.

11. To the extent feasible, the regime should offer consumers the ability to opt-out selectively from these different media and sources of telemarketing. However, a basic opt-out regime should not be delayed for this purpose; greater selectivity can be added-on to the regime over time, as it proves feasible.

The Commission should initiate a proceeding on the growing problem of unsolicited electronic mail

12. In ARC et al’s submission, telemarketing includes all forms of electronic marketing, both over the telephone network and over the Internet. As noted in their April 24th submission, unsolicited email marketing has become a serious problem for email users, and needs to be addressed via regulation. As with other forms of telemarketing, industry self-regulation has proven inadequate.

13. Unsolicited e-mail is similar to facsimile marketing in that it shifts the cost of marketing from the sender to the recipient, albeit via the Internet Service Provider. In this respect, “spam” is particularly repugnant. As communication by e-mail becomes more of a norm, legislators and regulators in other jurisdictions are recognizing the problem and responding in a number of ways, including legislated requirements and civil rights of action. It is time that the CRTC recognizes this growing problem and takes action on it.

14. Despite ARC et al’s initial submissions on this point, it appears from the Commission’s interrogatories and other submissions that this proceeding (PN 2001-34) is perceived to be limited in scope to facscimile and telephone marketing. In particular, the Commission has not taken the opportunity of this proceeding to explore the problem of unsolicited email and potential solutions thereto. Hence, a separate proceeding should be initiated to examine this particular form of telemarketing. ARC et al urge the Commission to initiate such a proceeding coincident with its decision in this proceeding.

Consumers should be able to opt out of market research calls

15. In their April 24th submission and subsequent interrogatory responses, ARC et al took the position that legitimate market research has a social benefit, is not as problematic for consumers as is telemarketing, and therefore need not be subject to a “do not call” regime. Upon further reflection, ARC et al have changed their view on this issue.

16. Market research calls, for many consumers, are as annoying, intrusive and unwanted as are telemarketing and fundraising calls. Many consumers refuse to respond to telephone surveys for this reason. To provide such consumers with a mechanism to prevent such calls would therefore be to the benefit of the survey companies by reducing the number of wasted calls. Non-responsive parties would be screened out, reducing cost as well as consumer annoyance.

17. Another concern of ARC et al’s is that while such surveying is often done by or on behalf of government agencies in the public interest, it is also used widely by commercial entities for no broader social purpose or benefit. To permit an exception from an opt-out regime for market research would open the door to abuse by marketers who cloak their solicitations in the guise of market research. It will be difficult, if not impossible, for the Commission to distinguish between legitimate research and telemarketing wrapped in the cloak of market research.

18. If a new opt-out regime for telemarketing includes market research, ARC et al propose that there be an exemption for official government surveying for public policy purposes (e.g., Statistics Canada).

19. Should market research be included in the regime, as proposed, ARC et al further submit that selectivity by subscribers becomes more desirable, so that those who want to screen out commercial offers but not market research, for example, can do so.

h3, The Need for New Rules

20. In their April 24th submission, ARC et al set out the specific areas in which new rules, or expanded scope of existing rules, are needed. ARC et al refer the Commission to that submission; below is a brief list of our specific recommendations, in addition to those set out above:

  1. Fax solicitations should be banned.
  2. The prohibition on ADADs should continue and should apply to messages left on voice mail as well, for the reasons set out in The Companies (CRTC)-1403. Under no circumstances should ADADs be permitted for marketing purposes.
  3. Time restrictions should be imposed on telephone marketing, as proposed by the Canadian Marketing Association.
  4. Telephone marketers should be required to identify themselves immediately upon reception of the call by the called party.
  5. The CRTC should impose a zero tolerance rule regarding “dead air” caused by improper use of predictive diallers. ADADs are not an appropriate solution to this problem, since they raise issues of their own. ARC et al note that even the CMA is not 100% supportive of using ADADs to fill in gaps caused by improper use of predictive diallers by overly- zealous telemarketers.
  6. There should be no automatic expiry of consumer registration on a company’s “do not call” list; such requests should be respected until they are withdrawn.
  7. “Do not call” requests made by consumers to individual companies or associations of companies should be acted upon within a period much shorter than the 30 days currently permitted.

21. Furthermore, ARC et al submit that the CRTC should use its powers under s.41 of the Telecommunications Act to impose obligations directly upon telemarketers, as opposed to merely through Canadian carriers. Parliament gave the CRTC express powers to impose such obligations for a reason. The time has come to use those powers in an effective manner.

The Need for Effective Enforcement

22. The record is also clear that better rules won’t solve the problem alone. Effective enforcement of existing and new rules is badly needed. Already, there is widespread non-compliance with existing minimal rules. This needs to change, and can only do so under strong leadership by the CRTC. In the absence of a serious commitment to enforcement, the regulatory regime will provide no more than a façade of protection for consumers.

23. The CRTC has unused powers of enforcement which it can and should begin using. As noted in ARC/PIAC-1301, the CRTC can consent to a prosecution under s.73 of the Telecommunications Act, and it can issue mandatory orders under s.51, registering them with the Federal Court as appropriate. These activities should be undertaken by the CRTC and/or the Attorney General.

24. ARC et al submit that the primary mechanism for enforcement and deterrence should be monetary fines of a magnitude sufficient to constitute effective deterrence. In addition, individuals should have a statutory right of action for damages, with a minimum amount of damages for each instance of non-compliance. The CRTC should seek amendments to the Telecommunications Act as necessary to create these enforcement mechanisms.

25. Disconnection and other injunctive relief should also be available, but not relied upon as the primary enforcement mechanism. As the record shows, placing the onus on LECs to disconnect non-compliant telemarketers is ineffective for a number of reasons: it may be in the interests of the LEC to keep the telemarketer as a customer; it puts the LEC at risk of liability; and in any case, telemarketers can simply reconnect the following day and continue their business.

26. In order to make disconnection a more useful remedy, the CRTC should issue disconnection orders, thus removing liability from the LEC. Such orders should prohibit all LECs from reconnecting the telemarketer in question.

27. In response to CRTC interrogatory 1401, ARC et al have provided detailed procedural guidelines for enforcement under s.41 of the Act.

28. On the issue of enforcement procedures generally, ARC et al submit that:

  1. the Commission needs to respond more quickly and decisively to non-compliance by telemarketers with Commission regulations;
  2. there needs to be better and more formal co-ordination among LECs with respect to non-compliant telemarketers;
  3. the CMA’s role, if any, should be limited to the operation of a “do not call” list (assuming that the CMA wins the contract for this task through a public tender process), and dealing with complaints about its members;
  4. the CRTC and/or Attorney General should handle enforcement.

Proposal for Telemarketer Call Blocking mechanism

29. Parties have commented at some length about the desirability and feasibility of a technical mechanism by which subscribers could block telemarketing calls. ARC et al consider such a mechanism highly desirable insofar as it puts control in the hands of consumers. However, in order to be effective, such a mechanism would have to

  1. be easy to implement;
  2. be free of charge to consumers;
  3. not interfere with any other communications; and
  4. be effective in blocking telemarketing calls.

30. It is unclear to ARC et al from the record in this proceeding whether it is possible to construct a blocking mechanism that meets all of these criteria. A registration system for all telemarketers would have to be established, and non-compliant marketers pursued and punished.

31. It is essential, should this approach be pursued as the primary method of controlling unwanted telemarketing, that it not become a source of profit for LECs, and that consumers not be required to pay in order to protect their legitimate desire to prevent unwanted telemarketing.

Proposal for a national “Do Not Call” registry

A single national « Do Not Solicit » registry is needed

32. ARC et al submit that the record of this proceeding strongly supports the establishment of a single, national “do not solicit” (“DNS”) database, to which all telemarketers are required to subscribe. If effective, such a mechanism would respond to the demands of telecommunications users, as reflected in the results of the Ekos survey referred to above. It would go a long way toward meeting the policy objectives of privacy protection and responsiveness to the economic and social requirements of users, as set out in subs.7(h) and (i) of the Telecommunications Act respectively.

33. A mandatory, national « DNS » registry would benefit everyone. Consumers who do not want to receive unsolicited marketing would be able prevent it by means of a single request. Companies wishing to market to Canadians would be able to consult a single database in order to target their efforts toward receptive consumers, as well as to ensure that they are respecting the consumer’s wishes. Telecommunications service providers and regulators would have fewer complaints to deal with (assuming that the registry operates effectively).

Other jurisdictions have seen fit to establish such mechanisms

34. In the USA, numerous states have seen fit to establish centralized “DNS” registries. Unwanted calls have been identified as a major nuisance not only by those states that have developed their own “DNS” regimes, but also by the Federal Trade Commission. In a speech to the “Privacy 2001” Conference in Cleveland on October 4, 2001, FTC Chairman Timothy J. Muris indicated that his administration is recommending a “national, one-stop, “do not call” list”.

Individual telemarketers should still be required to maintain their own lists

35. The establishment of a national “do not solicit” database does not in any way eliminate the need for individual telemarketers to maintain their own, internal, « do not solicit » lists. In some cases, consumers will only want to screen out specific telemarketers. The national « DNS » list will not be sophisticated enough to accommodate such customized requests, hence these consumers will have to rely upon individual marketers respecting their wishes. For this reason, it is essential that the current requirement for each telemarketer to maintain and respect a « DNS » list should be maintained.

Key Principles for a National « Do Not Solicit » Registry

36. A national “do not solicit” registry should be based on the following principles:

  1. Comprehensive: subscription to the list should be mandatory on all telemarketers operating in Canada;
  2. Free: registering to the list should be free of charge to consumers;
  3. Convenient: registering should be convenient;
  4. Well-known: consumers should be aware of the existence of the registry, and how to get on it; and
  5. Effective:The registry should be effective in stopping unwanted calls.

1. Optimally, the « DNS » list should apply to all unwanted solicitations via telecommunications, including unsolicited e-mail. However, ARC et al recognize that e-mail may require a different approach. Hence, they propose a separate proceeding to examine the problem of unsolicited e-mail and potential solutions thereto.

All telemarketers, fundraisers, and market researchers should be required to use the list

2. It is notable that both telemarketers, through their representative body the CMA, and consumers, through ARC et al, are calling for a mandatory « DNS » registry, in recognition of the failure of voluntary efforts to deal adequately with unwanted telemarketing. Given that bona fide self-regulatory efforts in this area have proven insufficient, there is little point to the CRTC’s involvement if not to create a mandatory system.

Exemptions should be kept to a minimum

3. The CMA has proposed an exemption in cases where the organization has an “existing relationship” with the called party (CMA14Sep 01-1005). The CMA defines “existing relationship” as “when the consumer has purchased a product or service (or has made a donation) within the last six months or during a normal buying cycle”. ARC et al submit that such an exemption is neither necessary nor appropriate.

4. Many, possibly most, individuals who would take advantage of a « DNS » option want to be free of telemarketing from all organizations, including those from whom they have purchased or to whom they have donated. They do not necessarily distinguish among telemarketing on the basis of an « existing relationship » as the CMA suggests. These telecommunications subscribers should be able to achieve the level of privacy they desire through a national « DNS » registry.

5. At a minimum, any such exemption should only be adopted on the basis of firm empirical evidence showing that Canadian consumers want companies with whom they have recently done business (or organizations to whom they have recently donated) to be exempted from any « DNS » requests. Such evidence has not, so far, been forthcoming.

6. With respect to the issue of telemarketing to existing customers, ARC et al further note that companies can always obtain the customer’s explicit permission to such marketing, in which case it may not be considered unsolicited.

7. ARC et al submit that the only exemption to mandatory use of the « DNS » list should be for surveys conducted by or on behalf of Statistics Canada.

Opting-out should be costless to consumers

8. ARC et al submit that consumers should not have to pay to secure their privacy. As noted in ARC/PIAC14Sep01-1001, businesses and others who wish to use public communications systems for private gain via unsolicited calls should be required to ensure that such use takes place in a socially acceptable manner. It follows that they, not the objects of their telemarketing, should bear the costs associated with the creation and maintenance of a « DNS » list.

Opting-out should be convenient

9. In order to ensure that the regime achieves its goal of allowing all customers who want to stop telemarketing calls to their homes the same opportunity to do so, the regime must be convenient to users. In particular, customers should be able to register at any time by calling a toll free number, as well as by fax, mail or e-mail.

Consumers should be made aware of the opt-out regime

10. As noted in ARC et al(CRTC)14Sep01-1006, telemarketers should be required, when they receive an opt-out request from a consumer, to inform that consumer of the national opt-out registry. If the consumer wishes to be added to the national registry, the marketer should provide information to the consumer on how to do so. In any case, the telemarketer should continue to be obliged to honour the consumer’s request for no more marketing calls. If an opt-out request automatically expires after a given period of time (contrary to what ARC et al have proposed), the consumer should also be informed of this fact.

11. Consumer awareness should also be improved via notice in telephone directories, bill inserts, CRTC, industry association and individual company websites, and other relevant information channels.

12. In addition, the registry should be advertised in the general media. A portion of the budget for the national “DNS” service should thus be dedicated to advertising. The administrators of the list should evaluate the most efficient way to make the service known to the public and should include costs for that purpose in the yearly budget.

The opt-out service must be effective

13. There is little point in establishing a national “DNS” registry unless it promises to be effective in terms of stopping telemarketing calls to those customers who so request. Effectiveness requires not only that use of the service be mandatory on all telemarketers, and costless, convenient and known to customers, it also requires:

  1. that the opt-out requests be respected until withdrawn,
  2. that the “DNS” list be updated as frequently as possible, preferably weekly, and in any case no less then monthly; and
  3. that non-compliance be swiftly and effectively punished.

Opt-out requests should be respected until withdrawn

1. The CMA proposes that registration on a national « DNS » list automatically expire after three years. It is not clear to ARC et al what purpose automatic expiry of a customer’s « do not solicit » request serves, other than to open the door to more unwanted telemarketing. Once a consumer has chosen to be on the do not call list it is reasonable to assume that they wish to remain there unless they make an express decision otherwise. Unless the Commission is provided with clear empirical evidence supporting such an automatic expiry, registration on the list should be effective until withdrawn.

2. Requiring the consumer to renew every so often merely increases the burden on the consumer and complicates administration of the program. It is also likely to lead to consumer confusion and anger when be telemarketing recommences, after this arbitrary period.

Consumer « DNS » requests should be made effective as quickly as possible

3. It is in the interests of all to minimize the lag between the consumer’s opt-out request and communication of that request to all telemarketers. The more frequent the list updates, the more effective will be the regime in reducing consumer frustration and annoyance regarding unwanted calls. The Commission’s current telemarketing regulations require that opt-out requests be made effective within 30 days. In ARC et al’s view, this is longer than necessary for individual company « DNS » lists, and is a minimum standard on which a national « DNS » system should be based.

4. The CMA proposes that “Information would be distributed to subscribers on a quarterly or monthly basis according to their subscription profile (e.g. Internet vs. diskette or region) and ability to handle data.” ARC et al submit that this aspect of the CMA proposal is unacceptable. First, a delay of three months for activation of a customer’s opt-out request is inappropriate. Second, different frequencies of activation depending on the mode of communication used by the marketer would complicate enforcement. How is the consumer to know when his registration will come into effect if different subscribers to the list receive updates at different intervals? Such differences are not transparent and make no sense from the consumer’s perspective.

The regime should be vigilantly enforced

5. There is no point in establishing a regime which can be disrespected with impunity. Non-compliance must be deterred through effective sanctions which are imposed without undue delay on violators. In order to be effective, sanctions must be proportional to the gain that violators expect to achieve through their non-compliance. See above, under « The Need for Better Enforcement ».

Funding of a National “Do Not Solicit” Registry

6. Four sources of funding for a national “do not solicit” list have been identified in this proceeding: government funding, subscription fees for marketers, financial penalties levied on non-compliant marketers, and consumer user fees.

The national « DNS » registry should be funded by business subscription fees and financial penalties for non-compliance

7. ARC et al submit that neither taxpayers nor consumers should bear any burden of the cost of a « DNS » regime. The regime is necessitated by the desire of private parties to use the public telecommunications system for private gain. There is no justification for burdening consumers and/or taxpayers with the costs of a system designed to facilitate socially responsible private sector marketing.

8. In addition to annual subscription fees, financial penalties assessed on non-compliant marketers should be used to fund the program. ARC et al note that this approach might require legislation to allocate the penalty fees to support the cost of the do not call program. It might also require specialized ‘telemarketer tariffs’ which would bundle access to the PSTN with access to the do not call lists.

The CMA’s cost estimates are questionable and should be subject to further examination

9. The CMA has developed two proposals, both of which involve fees to both marketers and consumers. In presenting these proposals, the CMA argues that to place the entire funding burden on marketers would not be viable, given the CMA’s estimated cost of the system. ARC et al question the validity of the CMA’s cost estimates for this service, and submit that they should not be accepted without further scrutiny, and in particular without any comparative estimates from other list administrators.

10. It would be instructive in this respect to compare the CMA’s estimates with the budgets of similar services in the USA. Such information is not, unfortunately, on the record of this proceeding. However, information on fees charged to telemarketers for subscription to centralized « DNS » registries is readily available. Below is a table showing fees (in $US) charged to telemarketers for subscription to a central « Do Not Call » list in the states of Colorado, Florida, Idaho, Missouri, New York, Oregon and Tennessee.

State Annual Fee/Telemarketer Manager
Colorado 0$-500$ Consumer Protection
Florida $ 400.00 Florida Dpt of Agriculture & Consumer Services
Idaho $ 100.00 Attorney General’s Office
Missouri $ 100.00 Attorney General’s Office
New York $ 500.00 New York State Protection Board
Oregon $ 120.00 Private List Administrator
Tennessee $ 500.00 Tennessee Regulatory Authority

11. Clearly, further research is needed to determine what other sources of funding these systems rely upon, and indeed to compare their entire budgets with that proposed by the CMA. ARC et al encourage the CRTC to conduct such research.

12. In any case, ARC et al submit that fees to telemarketing companies for this service should not be considered an obstacle, as long as an effective enforcement regime exists. High fees may well deter companies from subscribing, but as long as similarly high penalties apply, non-compliance should not be a problem. If companies cannot afford to respect customer wishes regarding telemarketing, they should not be in the business of telemarketing.

13. ARC et al have concerns about the estimated costs of the CMA proposal. There appear to be a number of ways in which these costs can and should be significantly reduced. For instance, the CMA’s proposal involves live operators seven days a week. It is not clear why live operators are needed at all, let alone seven days a week. Surely, an automated registration system can be designed at far less cost.

14. The CMA’s proposal and budget estimates are also based on the use of an FTP server. The CMA describes exchange of the “DNS” list via FTP in these terms:

If a subscriber to the service has an FTP site, data is pushed to them at pre-determined intervals. An e-mail advises the subscriber that a data transfer has occurred, the number of records and the file layout. Those without an FTP site receive quarterly updates via CD-ROM.

15. The CMA’s proposed use of FTP technology is inefficient. There is no need for the agency managing the list to « push » the file to each of their subscribers’ FTP servers. Instead, the agency can simply post the updates to its own FTP server, and send a message to its subscribers informing them of the updated file. Using any browser commonly used to access web sites, marketers can then access the FTP site (using passwords) and download the available file.

Third party operation of a regulated « DNS » registry scheme should be based on competitive bids

16. Assuming that the Commission does not want to administer a national « DNS » list itself, it is essential that measures be taken to ensure that the system operates efficiently and at no higher cost than necessary to achieve its goals. This can and should be accomplished by putting the contract out to competitive tender. ARC et al believe that there are quite many possible operators of such a service across the country and that the opportunity to develop the system should be made widely available. Moreover the cost structure presented by the CMA should not be accepted. If the CMA wants to put up a proposal, it can present its proposals or new proposals that would be evaluated against other proposals.

17. The CMA proposes that any agreement between it and the CRTC for operation of a national « DNS » registry should be subject to a 5-year review. ARC et al submit that five years may be too long a period for the first contract to operate a national « DNS » registry. In any case, the contractual period should be no longer than five years.

Conclusion

18. For all these reasons, ARC et al submit that the record of this proceeding supports the imposition of new rules, mechanisms, and enforcement tools to control unwanted telemarketing in Canada. In particular, it supports the establishment of a national telemarketing opt-out mechanism for subscribers. It also supports much more active enforcement activity by the Commission or another governmental authority against non-compliant marketers. It is time for the Commission to act.

END OF DOCUMENT

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