The FTC’s Planned Fee Increase: A Modest Proposal

Though most of the teleservices industry still finds itself reeling from a bumpy 2003, the first few months of 2004 already have provided fodder for more regulatory headaches.

The most important change on the do-not-call front, however, came not from the Federal Trade Commission, the Federal Communications Commission or the state attorneys general. Rather, it came in the form of one sentence buried in a standard and, of course, ridiculously voluminous congressional appropriations bill.

Finding that it was critical to “improve responsiveness” by telemarketers to the mandates of the national DNC registry (launched a mere two months before), Congress required telemarketers to access national DNC numbers “once a month” rather than “every three months.”

Though no evidence was cited for this perceived lack of responsiveness, nor any indication that the FTC was interested in pursuing such a policy change, the teleservices industry nevertheless will be required to comply with this rule (fine-tuned by the FTC to every 31 days) starting Jan. 1, 2005.

Thanks to a simple flourish of a congressional pen, entities relying on standard database management techniques for DNC compliance soon will face 12 rounds of data processing yearly rather than four.

Costs inevitably will rise, as will campaign time pressures and the risk of DNC violations resulting from system and/or human error. Word of this substantial modification spread quickly to all quarters of the industry only after the appropriations bill was signed. It is raised here as a cautionary tale of how fast the rules can change and how costly these changes can be.

Case in point. The FTC recently proposed increasing the fees for accessing the national DNC registry. Specifically, it proposes raising the per-area-code fee from $25 to $45, or 80 percent, while the fee for buying the entire list would go from $7,375 to $12,375, about 70 percent more. For those keeping track, the smaller percentage increase for buying the entire list reflects the FTC’s realization that only 280 of the 317 area codes available are now in use.

The key phrase in the FTC’s notice is that this fee revision is “based on the assumption that approximately the same number of entities will access similar amounts of data from the national registry during their next annual period.”

In other words, entities that are complying with all facets of the rules, who registered and paid as appropriate for national registry access, who are doing everything in their power to be good corporate citizens, are just going to have to dig a little – OK, a lot – deeper to ensure the FTC has enough money to pay for the program.

To be fair, this proposed fee increase is tempered somewhat by the FTC’s willingness to review its prior determinations regarding free access for the first five area codes and for exempt entities.

The obvious question and one that surely will be raised repeatedly with the FTC pursuant to this rulemaking process is: What about the entities that aren’t, shall we say, doing everything they can to comply? Presumably, there must be some entities simply riding the coattails of the compliant, relying on others to foot the national registry bill. The FTC acknowledged this issue, and expressed much concern over it, in its original rulemaking regarding the DNC fees.

For example, in ruling that it was necessary for the FTC to collect proprietary information from each telemarketer regarding any seller(s) on whose behalf it accessed the list, the FTC stated: “this information is critical for effective … collection of the required fees. … Equally important, to ensure that all sellers pay their appropriate share of the registry fees, it is critical to know the identity of each seller that pays the fee, and on whose behalf each telemarketer or service provider is accessing the national registry.”

Similarly, the FTC ruled that the most effective way to ensure that all covered sellers pay their “fair share” was to impose direct liability upon both sellers and the telemarketers they hire. The FTC found that “[w]ithout such direct liability, the [FTC] remains concerned that not all entities that obtain information from the national registry will pay their fair share of the fees … resulting in increased fees for those entities that do pay.”

The above two statements portray an FTC willing to do whatever it takes, including collecting proprietary customer information and extending DNC liability over entities under no legal obligation to pay for the national list, to ensure that no registrant has to pay more than its fair share. For those entities seeking to comply, but unwilling to bear the brunt of their fellow telemarketer’s noncompliance, the FTC’s approach in its prior rulemaking must have been welcome news.

The FTC laid the groundwork in its prior rulemaking for the data collection necessary to enforce the DNC registration/access provisions. At the same time, the FTC was emphatic in asserting that there were 10,000 entities that would be required to pay for national registry access. Though stymied by the industry in its data collection efforts (“the very entities that have access to such information have rebuffed the agency at every stage”), the FTC said it had “scoured industry literature, reviewed and analyzed numerous rounds of comment and used its knowledge of the industry” to reach the 10,000 figure.

In its current rulemaking, however, the FTC states that only 6,000 entities have paid for registry access. This disparity begs the question: If based upon the best information available, the FTC determined that 10,000 entities would be required to register, where are the remaining 4,000?

This is especially relevant given that the FTC now has available to it some, perhaps most, of the information that the industry failed to provide pursuant to the original fee rulemaking, as well as the enforcement punch to make its collection efforts effective.

With a total registration list of more than 52,000 entities accessing all or part of the list, as well as a listing of all sellers on whose behalf many of those registrants make calls, the FTC has a wealth of information to begin identifying the “mystery 4,000.”

Rather than seek an immediate fee increase that would force complying entities to pay more than their fair share, many in teleservices think the FTC needs to at least try to enlarge the access fee pie by adding those entities that have yet to come forward.

Comments on this fee rulemaking by the FTC are due June 1. Interested parties should submit written comments referencing “TSR Fee Rule, Project No. P034305” to the following address: Federal Trade Commission, Office of the Secretary, Room H-159 (Annex K), 600 Pennsylvania Ave., NW, Washington, DC 20580. Electronic comments can be filed at

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