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Proposed changes to telemarketing rule spark heated debate

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The Federal Trade Commission has proposed changing its Telemarketing Sales Rule (TSR) to include under its "do-not-call" provision companies that telemarket Internet services—a move that could sever a major sales pipeline for b-to-b marketers.

The "do not call" rule, which was created in 1996 to protect individuals from fraudulent telemarketers, allows consumers to stop telemarketing calls from individual companies under the FTC’s jurisdiction. B-to-b companies have generally been exempt from the law, except for those that telemarket cleaning supplies and non-durable goods.

The latest proposals—now the subject of heated debate in Washington—would enable consumers to stop calls from all companies within the FTC’s jurisdiction by registering with a central do-not-call list maintained by the agency. Perhaps more important for b-to-b players, though, is the provision that the do-not-call rule would be expanded to include b-to-b companies marketing Internet services.

High incidence of fraud

"We think that b-to-b companies should still be generally exempt from the regulation. But what we’ve learned in the last five years is there’s been a particularly high incidence of fraud among companies [that telemarket] Web services and Internet services," said Catherine Harrington-McBride, a staff attorney with the FTC, who is reviewing the proposed TSR changes. "There’s been an explosion among small businesses in the number of complaints about all the scams set up, particularly [from] those companies that don’t fully understand the Web."

The proposed TSR changes have provoked a backlash from some business groups. "We want to make sure certain businesses aren’t being singled out and that small businesses are able to comply [with any new regulations]," said Laura Pemberton, manager of Senate legislative affairs for the National Federation of Independent Businesses, which represents 600,000 small businesses nationwide.

No implementation plan

In a recent letter to the FTC, the NFIB said the proposal "provides no prescription for its implementation" and fails to address how companies that receive updated lists from the FTC should "scrub" their own lists.

McBride said companies would be required to download the FTC’s updated do-not-call list once a month, via computer, to scrub their own lists. However, the NFIB letter points out that 16% of small businesses do not use a computer in their business-related activities.

Jim Conway, VP-government relations for the Direct Marketing Association, said that b-to-b companies should be concerned that the proposed telemarketing regulations don’t provide an exception for existing business relationships. "If Internet company A is doing telemarketing with Internet company B and one of them got on the FTC ‘do not call’ list, that’s it. No more calls. It’s absolute."

The DMA has come out against all of the proposed TSR changes, firing off a recent letter to the FTC saying the regulations would have an adverse effect on the nation’s economy and would cost jobs in telemarketing. The DMA supports self-regulation through its Telephone Preference Service, or TPS, a voluntary registry in operation since 1985.

McBride said the proposed FTC regulations provide the legislative teeth the TPS lacks.

The FTC is to hold public hearings on the proposed changes June 5-7 in Washington.

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