Topics • Perfect Storm on the Horizon: Reaching Consumers without violating expectations of privacy. • “Junk Fax” litigation: A cautionary tale for marketers • Adware • Privacy policies and data security • “Safer” marketing terrain, including Blogging and E-mail (yes, e-mail!) • Transferring risk the American Way: Blame someone else!
Cutting through the Clutter:Practical Challenges for Direct Marketers • U.S. companies sent 35 billion pieces of direct postal mail in 1980, 64 billion pieces in 1990, 90 billion pieces in 2000, and 100 billion pieces in 2005. That’s more than 300 pieces of bulk mail for every man, woman, and child! (U.S. Postal Service) • The average American is exposed to 247 commercial messages each day. (Consumer Reports) • Demonstrating return on investment through consumer response.
Increasing consumer response requires more and more information about the consumer: • Timing – Delivering an offer when the consumer is most likely to consummate a purchase • Relevance – Offer responds to unique need • Personalized – Offer targets recipient
Legal challenges in reaching consumers: • Do you market diaper coupons for families who just had a newborn? • Do you market adult diaper coupons to individuals who just had surgery on their colon? • Where do you draw the line?
Privacy: The next battleground • As technology improves at a rapid pace and more information is compiled and made available to businesses to improve consumer response and return on investment, the more businesses will become targets of lawsuits. • Like the word “freedom,” privacy means so many different things to so many different people and has become the underlying rationale for new laws and policies.
How the marketer and/or business owner sees it…. • A means of communicating good offers to valued customers. • Targeted marketing directed only to those who would be interested in offer or product. • Exciting and new advanced technology enabling quicker and cheaper marketing.
Fax advertisement verdicts: • AMF Bowling Centers settled for $1 million in cash and $1.5 million in coupons. • Hooters hit with $11.9 million verdict that was upheld on appeal. • Fax.com settles for $6 million • APO Health settles for $4.5 million
Ameriguard, Inc., v. Univ. of Kansas Med. Center Research Inst., Inc., 2007 TCPA Rep. 1532 (2007) (affirmed) • Altman v. Aqua Vie Beverage Corp., 2005 TCPA Rep. 1329 (2005) (order granting plaintiff MSJ) • Altman v. Inside Edge, Inc., 2004 TCPA Rep. 1291 (2004) (order denying def. MSJ, granting pltf. MSJ) • Americom Imaging Sys. Inc., v. Diamond Waste Ind. III, Inc., 2004 TCPA Rep. 1273 (2004) (order denying def. MTD.) • Americom Imaging Sys., Inc. v. Texas Computer Resale, LLC, 2003 TCPA Rep. 1184 (2003) (order denying def. MTD) • Americom Imaging Sys., Inc. v. Texas Computer Resale, LLC, 2004 TCPA Rep. 1367 (2004) (order denying def. MTD) • Americom Imaging Sys., Inc. v. Trash Taxi of St. Louis, LLC, 2004 TCPA Rep. 1272 (2004) (order denying def. MTD.) • Ameriguard, Inc., v. Univ of Kansas Ed. Ctr. Research Inst., Inc., 2006 TCPA Rep. 1491 (2006) (MTD granted)
BMR Ind., Inc. v. Central Missouri Pizza, Inc., 2002 TCPA Rep. 1077 (2002) (injunction to preserve records) • Brentwood Travel Serv., Inc. v. Ewing d/b/a Carousel fo Stitches, 2002 TCPA Rep. 1063 (2002) (order denying def. MTD) • Brentwood Travel v. Dana Capital Group, Inc., 2007 TCPA Rep. 1536 (2007) (Order denying PO) • Brentwood Travel, Inc. v. Annex Computers, Inc., 2001 TCPA Rep. 1046 (2001) (order granting Pl. MSJ and injunction issued) • Brentwood Travel, Inc. v. Lancer, Ltd., 2001 TCPA Rep. 1018 (2001) (order den. Def. mtn. to dismiss) • Brentwood Travel, Inc. v. Lancer, Ltd., 2001 TCPA Rep. 1019 (2001) (order granting Pl. MSJ) • Brodeur v. Lou Fusz Automotive Network, Inc., 2005 TCPA Rep. 1412 (2005) (Order denyiong def. MSJ) • Brodeur v. Swan Fin. Corp., 2006 TCPA Rep. 1437 (2006) (order finding duty to defend)
CBI.COM, Inc., v. Gross, 2005 TCPA Rep. 1372 (2005) (order denying def. MTD) • Clean Carton Co. v. 24 Hour Fitness USA, Inc., 2003 TCPA Rep. 1305 (2003) (order denying class cert.) • Clean Carton Co. v. Prime TV, LLC, 2004 TCPA Rep. 1294 (2004) (order granting class cert.) • Clean Carton Co., Inc. v. Constellation 3D, Inc., 2002 TCPA Rep. 1055 (2002) (order denying Def. mtn. to dismiss re First Amendment) • Clean Carton Co., Inc. v. Constellation 3D, Inc., 2002 TCPA Rep. 1056 (2002) (order denying MTD on third party acts) • Clean Carton Co., Inc. v. Robert Reason, 2002 TCPA Rep. 1102 (2002) (order and judgment granting pltf. MSJ) • Coleman v. Am. Blast Fax, Inc., 2001 TCPA Rep. 1021 (2001) (order and judgment) • Coleman v. Am. Blast Fax, Inc., 2000 TCPA Rep. 1022 (2000) (order denying Def. JOP.) • Coleman v. Real Estate Depot, Inc., 2001 TCPA Rep. 1026 (2001) (order granting Pl. MSJ) • Coleman v. Varone, 2001 TCPA Rep. 1030 (2001) (order denying Def. mtn to dismiss.) • Colt Ind., Inc. v. Ernie Patti Pontiac-GMC, Inc., 2002 TCPA Rep. 1097 (2002) (order denying def. MTD on 1st amendment grounds and denying stay)
Davis, Keller, Wiggins, LLC. v. JTH Tax, Inc., 2001 TCPA Rep. 1040 (2001) (order denying Def. mt. to dismiss) • Franklin County Express, LLC v. Global Comm., Inc., 2002 TCPA Rep. 1099 (2002) (order denying def. MTD) • Fun Svcs. of Missouri, Inc. v. Drury Inns, Inc., 2003 TCPA Rep. 1095 (2003) (order denying costs on remand motion) • Fun Svcs. of Missouri, Inc. v. Drury Inns, Inc., 2002 TCPA Rep. 1098 (2002) (order remanding to state court) • Gans, v. Leiserv, Inc. d/b/a Brunswick Four Seasons Bowl, 2003 TCPA Rep. 1092 (2003) (order granting pl. mtn. to remand) • Gans, v. Leiserv, Inc. d/b/a Brunswick Four Seasons Bowl, 2004 TCPA Rep. 1354 (2004) (Final judgment and class certification) • Harjoe v. Colonial Life & Accident Ins. Co., 2002 TCPA Rep. 1064 (2002) (order granting Pl. MSJ) • Harjoe v. Colonial Life & Accident Ins. Co., 2002 TCPA Rep. 1065 (2002) (trial de novo order granting Pl. MSJ)
I Dream Solns., Inc. v. Ellsworth, Inc., 2002 TCPA Rep. 1071 (2002) (order denying Def. mtn. to dismiss) • Information Mgmt. Solns., Inc. v. Data Support. Sys., Inc., 2003 TCPA Rep. 1330 (2003) (order denying def. MTD) • J.C. Corporate Management, Inc. v. Resource Bank, 2005 TCPA Rep. 1384 (2005) (order granting remand) • Joseph-Cowan v. Royal Gate Dodge, Inc., 2006 TCPA Rep. 1540 (2006) (Class final judgment) • Lander and Berkowitz, P.C., v. Transfirst Health Svsc., Inc., 2005 TCPA Rep. 1366 (2005) (order granting remand) • Little v. Brinker Missouri, Inc., 2005 TCPA Rep. 1382 (2005) (order granting class cert.) • Little v. Drury Inns, Inc., 2005 TCPA Rep. 1421 (2005) (Order denying MTD re SOL.) • Margulis v. 1-800-GOT-JUNK?, LLC, 2006 TCPA Rep. 1470 (2006) (Order deny MTD class action) • Margulis v. Benson, d/b/a/ Nat'l Assoc. of Ind. Landlords, Inc., 2004 TCPA Rep. 1306 (2004) (order denying def. MTD) • Margulis v. Fairfield Resorts, Inc., 2004 TCPA Rep. 1292 (2004) (order denying def. motion to compel) • Margulis v. P&M Consulting, Inc., 2003 TCPA Rep. 1094 (2003
Margulis v. P&M Consulting, Inc.,, 2003 TCPA Rep. 1248 (2003) (order affirming trial decision) • Margulis v. VoicePower Telecom., Inc., 2001 TCPA Rep. 1023 (2001) (order denying Def. mtn. to dismiss) • Marquis Fin. Corp. v. Salter, 2004 TCPA Rep. 1332 (2004) (order debying def. MTD) • Micro Eng. v. St. Louis Ass'n of Credit Mgmt., Inc., 2002 TCPA Rep. 1080 (2002) (order denting Def. mtn. to dismiss) • Micro Eng. v. St. Louis Ass’n of Credit Mgmt., Inc., 2002 TCPA Rep. 1081 (2002) (order denying Def. mtn. to sever) • Micro Eng., Inc., v. Hotel Reservations Network, Inc., 2003 TCPA Rep. 1091 (2003) (order allowing motion to intervene) • Nat'l Ed. Acceptance, Inc. v. Community Lending Svc., Inc., 2002 TCPA Rep. 1101 (2002) (form order denying def. MTD) • Nat'l Ed. Acceptance, Inc. v. Expiry Corp., 2002 TCPA Rep. 1096 (2002) (order denying def. MTD) • Nat'l Ed. Acceptance, Inc. v. Smartforce, Inc., 2002 TCPA Rep. 1057 (2002) (order and judgment)
Nat'l Ed. Acceptance, Inc. v. The Mars Corp. d/b/a Heavenly Ham, 2003 TCPA Rep. 1089 (2003) (order granting pl. MSJ.) • Onsite Computer Consulting Svcs., Inc. v. Jansen, 2006 TCPA Rep. 1518 (2006) (order granting ptf. MSJ) • Onsite Computer Consulting Svcs., Inc., v. Dartek Compter Supply Corp., 2006 TCPA Rep. 1452 (2006) (order denying MTD) • Platke & Berkowitz, LLP v. IhireInc.Com, Inc., 2005 TCPA Rep. 1090 (2005) (Ptf. MSJ granted) • Psych. Assoc., v. Whittemore Corp., 2005 TCPA Rep. 1371 (2005) (order denying Def. MTD.) • Psychological Associates, Inc. v. Advanced Tracking Tech., Inc., d/b/a Glaco, 2004 TCPA Rep. 1316 (2004) (order denying def. MTD) • R.F. Schraut Heating & Cooling, Inc. v. Maio Success Sys., Inc., 2001 TCPA Rep. 1038 (2001) (order denying Def. Mtn. to dismiss) • Reynolds v. Diamond Foods & Poultry, Inc., 2002 TCPA Rep. 1048 (2002) (appeal reversing trial court dismissal based on opt-in argument) • Reynolds v. Diamond Foods & Poultry, Inc., 2002 TCPA Rep. 1175 (2002) (affirming court of appeals holding that no "opt-in" is needed) • Rhone v. Olympic Comm., Inc., 2002 TCPA Rep. 1060 (2002) (order granting Pl. MSJ) • Schraut v. Rocky Mtn. Reclamation, 2001 TCPA Rep. 1182 (2001) (Order denying def. MTD) • Schumacher Fin. Svcs., Inc. v. Allianz Life Ins. Co. of North Am., 2002 TCPA Rep. 1100 (2002) (form order denying def. MSJ.)
Schumacher Fin. Svcs., Inc. v. Metropark Comm., 2003 TCPA Rep. 1093 (2003) (order granting pl. MSJ) • Schumacher Fin. Svcs., Inc. v. Nat'l Fed'n of Ind. Bus., 2003 TCPA Rep. 1088 (2003) (order granting pl. MSJ) • Schumacher Fin. Svcs., Inc. v. Sorkins' Directories, Inc., 2004 TCPA Rep. 1264 (2004) (order denying def. MSJ and granting ptf's. MSJ.) • Schumacher Fin. Svcs., Inc. v. Steckleberg, 2003 TCPA Rep. 1236 (2003) (order denying def. MTD) • State ex rel Nixon v. E. Dish Direct, 2006 TCPA Rep. 1539 (2006) (TRO granted) • State ex rel Nixon v. Progressive Bus. Pubs., Inc., 2007 TCPA Rep. 1538 (2007) (MTD granted) • State ex rel. Coffman Group v. Sweeney, 2005 TCPA Rep. 1391 (2005) (Preliminary order made permanent in part and dissolved in part.) • State of Missouri ex rel JD&T Enterprises, d/b/a Travel To Go, 2004 TCPA Rep. 1310 (2004) (writ of prohibition denied) • State of Missouri v. Am. Blast Fax, Inc., 2003 TCPA Rep. 1188 (2003) (order upholding constitutinality and reversing trial court) • State of Missouri v. Am. Blast Fax, Inc., 2002 TCPA Rep. 1196 (2002) (order gtanting def. MTD on first amendment grounds) • State of Missouri v. Am. Blast Fax, Inc., 2001 TCPA Rep. 1228 (2001) (order denying discovery)
Purported purpose of enacting TCPA: • Congress found: • (5) Unrestricted telemarketing … can be an intrusive invasion of privacy … • (7) Over half the States now have statutes restricting various uses of the telephone for marketing, but telemarketers can evade their prohibitions through interstate operations; therefore, Federal law is needed to control residential telemarketing practices.… • (9) Individuals' privacy rights, public safety interests, and commercial freedoms of speech and trade must be balanced in a way that protects the privacy of individuals and permits legitimate telemarketing practices. • (10) Evidence compiled by the Congress indicates that residential telephone subscribers consider automated or prerecorded telephone calls, regardless of the content or the initiator of the message, to be a nuisance and an invasion of privacy. (12) Banning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call or when such calls are necessary in an emergency situation affecting the health and safety of the consumer, is the only effective means of protecting telephone consumers from this nuisance and privacy invasion. Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, §2, 105 Stat. 2394.
In 1999, FCC brings its first enforcement action under TCPA: • FCC levies $5.38 million fine against Fax.com • TCPA prohibits: • Prohibits sending unsolicited advertising via fax. • Statute provides for $500 per violation and up to $1500 in treble damages, if conduct willful.
Fax Fiasco as a Framework for the Future • An inexpensive and exciting new marketing practice becomes abused or overused. • Public outcry about invasion of privacy resulting in government intervention and fines. • Legitimate companies caught in the crossfire either by relationship with perpetrator or their own lack of understanding of the laws.
Fax Fiasco as a Framework for the Future • Plaintiffs’ lawyers employ class actions to exponentially increase potential damages. • Defense costs to defend individual claims cost prohibitive.
Compiling and storing customer/client information • Adware • Text message marketing
FTC estimated that identity theft costs Americans $50 billion per year and opined that lack of controls on consumer privacy data contributed to increase in identity thefts. • DSW Shoe Warehouse– 1.4 million names and credit card numbers stolen. Thus far, paid up to $10 million in reimbursment to consumers who incurred expenses (closed accounts, new checks etc..)
Choicepoint – 163,000 consumers credit histories and personal information provided to identity thefts. Fined $10 million by FTC. • TJMax – Hackers stole consumer credit card and debit card information (January 2007)
Adware: • Defined: Software that facilitates pop up ads, re-direction of search requests, and more. • Example: Mr. Smith downloads free software and unknowingly downloaded the adware, which thereafter monitors Mr. Smith’s online activities and uses this information to direct certain ads to him while he surfs the web. • Problem: Lack of disclosure and difficulty of removing
FTC v. Direct Revenue LLC • In March of 2007, FTC collected $1.5 million fine from Direct Revenue LLC, a major online ad company, for acting deceptively by failing to disclose to consumers that downloading the free software would result in installation of adware and cause pop up ads. • Also, the FTC found that Direct Revenue acted unfairly by failing to provide consumers a reasonable and effective means to identify, locate and remove adware.
Think again….. • In conjunction with the FTC investigation of Direct Revenue, the New York Attorney General settled its cases against the companies who contracted with Direct Revenue. • Priceline.com and Travelocity.com agreed to pay fines between $30,000 to $35,000 and change their advertising policies. • None of these companies knew, or even were alleged to have known, about Direct Revenue’s deceptive practices.
“Companies will now be held responsible when their ads end up on consumers’ computers without full notice and consent….[and cannot] insulate themselves from liability by turning a blind eye to how their advertisements are delivered by placing their ads through intermediaries.” New York Attorney General, Andrew Cuomo
Texting as a marketing tool • According to a recent article in the Journal of Advertising Research, as a direct marketing tool, texting could surpass internet-based advertising before the end of 2006. Randolph J. Trappey Iii and Arch G. Woodside, Journal of Advertising Research, Vol. 45, No. 4, Dec 2005, pp.382-401
Texting and the law • CAN-SPAM Act – forbids sending unsolicited commercial emails to mobile devices without express prior authorization of the recipient • Do-Not-Call Implementation Act - prohibits interstate telemarketing call to wireline and wireless numbers on the National Do-Not-Call Registry (with certain exemptions) • FTC’s Telemarketing Sales Rule – which imposes regulations on telemarketing • Various State statutes regulating marketing and promotions
From plaintiff’s law firm site: • Verdicts: • Claim was asserted under the Telephone Consumer Protection Act that prohibits sending unsolicited fax advertisements. Certified Class of claimants consisted of 1,321 businesses and individuals who received unwanted fax advertisements over a six (6) week period. Jury trial resulted in $11.9 Million Judgment. • Updates: March 2006 • Sending text messages may constitute violations of the Telephone Consumer Protection Act. The firm is now looking at filing cases involving the improper transmission of text messages to cellular telephones in violation of the Telephone Consumer Protection Act.
So what do you do? Stop advertising? Stop direct marketing? Stop using new technology?
Tips and Tools to prevent future loss by avoiding legal quagmires • Implement policies and procedures to comply with the law and that are consumer/customer friendly. • Employ less risky marketing tools with less government regulatory oversight. • Transfer risk • Respond to claims in the correct way.
So what does a higher privacy trust rating mean for my bottom line? • The study also found that organizations that achieve higher privacy trust ratings experience tangible positive outcomes, such as: • Higher consumer data accuracy • Higher customer participation in online activities • Higher product or brand loyalty Ponemon Institute Study, 2004.
Loss control measures in online advertising • If using adware, be sure your policies (or those of the adware company you are contracting with) clearly include disclosures to the consumers upon downloading of adware. • Remove onerous obstacles to deleting adware. • Bind advertising partners by contract to consumer-friendly practices. • Regularly monitor advertising partners’ practices and policies. • Contract with well-established companies to provide online ad services.
Utilize less risky marketing techniques • Blogging • E-mail
Blogging: • One commentator described blogs as “rocket-fuel publicity. Mentions on popular blogs can result in an intense amount of activity over a short period of time.” • Your new best friend: Section 230 of the Communications Decency Act of 1996.