DirecTV Hit With $5.35M Fine for Affiliate DNC Violations

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The Federal Trade Commission sent a strong message yesterday to businesses using third-party telemarketers to sell their wares: Sellers are on the hook for calls placed on their behalf.


The agency settled do-not-call charges against satellite TV provider DirecTV with a $5.35 million fine, the largest civil penalty it has ever levied in a case enforcing any consumer protection law.


"The core of this case is a signal that a merchant who is selling goods cannot hide behind the telemarketers," FTC chairwoman Deborah Platt Majoras said during a press conference. "You will be responsible for your affiliate marketers behavior if they are violating the do-not-call list. That is what the law requires, and we are going to enforce it on that basis."


This was the second allegation of wrongdoing DirecTV settled this week. On Monday, in an unrelated case, the company agreed to reimburse customers and to make its advertised offers clearer, according to a settlement reached with 22 states over deceptive marketing complaints. The company admitted no wrongdoing in agreeing to repay the states $5 million for the costs of a task force that had tracked consumer complaints about DirecTV contract fees and small print provisions since 2000.


The FTC complaint alleged that telemarketers calling on behalf of DirecTV contacted consumers on the DNC registry. One telemarketer, Global Satellite, directly or through another entity, also was accused of abandoning calls to consumers by failing to put a live sales representative on the line within two seconds after consumers completed their greeting.


"The fact of the matter is DirecTV knew that they were getting some complaints that this was going on and rather than go out … to these telemarketers and say, 'Hey you work for me and we require compliance with this law' they were -- for some period of time -- we think rather ignoring it," Majoras said.


The FTC filed complaints against DirecTV, five companies that marketed on its behalf and six principals of those firms.


The penalty requires DirecTV to pay $5.355 million in civil penalties, and the settlement agreement prohibits it either directly or through any authorized telemarketer from violating the Telemarketing Sales Rule. The settlement tracks relevant TSR provisions, prohibits calls to consumers on the DNC registry, calls to consumers who asked not to receive calls on behalf of a particular seller and abandoned calls. The settlement also requires DirecTV to terminate any marketer of its products who the company knows or should know is making cold calls to consumers without its authorization.


The settlement against Communication Concepts and American Communications require the companies to pay civil penalties of $25,000 and $50,000 respectively and bars the companies and its principals from future violations of the TSR and DNC rule. The orders contain judgments of $205,000 against Communications Concepts and $746,300 against American Communications, both which have been suspended based on those companies' inability to pay.


"I think that the telemarketers did not scrub their lists against the do-not-call registry in the way they are required to do," Majoras said. "Most of these violations were very basic and very simple."


The FTC said a high number of complaints about DirecTV began appearing in October 2003.


"DirecTV has already put into place internal measures to more closely monitor the situation with its telemarketers," Majoras said.


In a statement, DirecTV said the majority of complaints to the FTC were related to calls placed by a small number of former independent retailers who ignored the company's policies prohibiting unauthorized telemarketing.


"DirecTV wholly supports the national do-not-call registry, and our agreement with the FTC reflects our commitment to prevent unwanted and unlawful telemarketing calls," the company said. "DirecTV has agreed to continue to closely monitor independent retailers to ensure that their telemarketing practices comply with the law and DirecTV's polices."


Stipulated final judgments are for settlement purposes only and don't necessarily constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge.


The FTC penalty is the largest civil one since a 1999 case against Mazda, Majoras said. It also dwarfs the largest DNC penalty, which was $500,000 against a company called Flagship, she said. So far, the FTC has levied more than $6 million in DNC fines and penalties including the DirecTV case.


Majoras said the FTC is looking at other companies that may have violated the DNC but she would not get into specifics because of ongoing investigations. She also said that compliance with the DNC list has been good thus far considering the number of complaints versus the 110 million numbers on the registry.


Patrick Patullo is the DMNews.com Web Editor.


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