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Hang-up: FTC regulations disconnecting telemarketers

Jan 6, 2003  •  Post A Comment

Telemarketers are bracing for the ultimate hang-up.

The Federal Trade Commission’s (FTC) decision last month to create a national do-not-call list for telemarketers means that consumers, with just a few keystrokes or button pushes, can block out sales calls once and for all.

For telemarketing firms, which rely on phone pitches to ring up sales, the list means they will be left with far fewer potential customers-and employees.

Though they were prepared for the worst from the FTC-which is what they got-area firms say they can’t tinker with their business models enough to compensate for the anticipated lost revenues. Layoffs, in an industry that employed 6 million people nationwide in 2001, are inevitable. (Statistics on industry employment in Illinois aren’t available.)

Twenty-seven states, including Illinois, already had adopted do-not-call lists. Illinois was relatively late to the party: Its restricted call registry was enacted only last summer and doesn’t take effect until July. Now that a federal regulation is in place, it’s not yet clear whether national or state agencies will control the process.

In either case, “It’s a sad day for telemarketing,” says Sandra Pernick, owner of S. Pernick & Associates, a Wilmette company that manages outsourced telemarketing programs for Fortune 500 companies. “Outbound consumer calling as we know it is going to change dramatically.”

The long-awaited federal ruling, in development for almost a year, enables consumers, via a toll-free number or the Internet, to put their phone numbers on a list that most telemarketers won’t be able to call. Politicians, charities, phone carriers and financial institutions are exempt from the FTC rule, but if a for-profit telemarketer makes a call on behalf of a bank or non-profit agency, the call can be blocked.

If the Federal Communications Commission (FCC), which is considering a similar rule change, follows suit, the calls of banks and phone companies could be added to the restricted registry.

`Effective and inexpensive’

Relief from dinnertime phone calls won’t be immediate. The FTC needs congressional approval to collect and spend $16 million in fees that would be charged telemarketers to set up, maintain and provide access to the list. The registry would be phased in gradually across the country about seven months after congressional approval.

And the new rules also face what could be a formidable legal challenge from the telemarketing industry’s two key trade groups, the Washington, D.C.-based American Teleservices Assn. and the Direct Marketing Assn. in New York.

FTC Chairman Timothy Muris estimates that if the FCC adopts a similar measure, consumers could screen out 80% of telemarketing calls. “We’re not banning telemarketing sales calls,” Mr. Muris says. “We’re giving consumers the option of protecting the privacy in their own home.”

Opponents of the measure say that unscrupulous firms and well-publicized telemarketing scams sullied the industry and prompted the crackdown. But they maintain that phone soliciting remains an effective marketing tool.

In 2001, telemarketing generated $275 million in business-to-consumer sales, an 8% increase over the prior year, according to the American Teleservices Assn. “The industry is exploding, and the reason why is that it works,” says G. M. “Matt” Mattingley, the group’s director of government affairs. “If America really doesn’t want to have telemarketing, they don’t need these do-not-call lists and other regulations. All they need to do is stop buying.”

Says Mary Shanley, president of Chicago-based TTC Marketing Solutions, “Telemarketing is effective and inexpensive. When consumers are approached by people or companies they are interested in, they see it as customer service.”

But a universal list that would block many telemarketing calls doesn’t enable consumers to choose which sales pitches to hear, she says. As a result, Ms. Shanley sees the company she started 19 years ago with her sister-which now employs 600 people in call centers in Chicago and Evanston-facing one of its biggest challenges.

“We’ll lose some business, we know that,” says Ms. Shanley, who adds that her firm is pursuing alternative e-mail and direct-marketing campaigns for clients. “We’ll lose employees. There are so many people involved in customer service and telemarketing, so many small businesses that rely on outbound calls to generate their business.”

Among the telemarketers’ concerns is what they call the massive burden of following a national list, a separate roster maintained by the Direct Marketing Assn. as well as lists maintained by individual states. Mr. Muris said last month a national list would not pre-empt state lists, which cover intrastate calls. A spokeswoman for the Illinois Commerce Commission said the agency is keeping track of national efforts but is proceeding with its own initiative.

That, telemarketers say, is part of the problem.

“Which rules do you follow, state or federal?” wonders Gabriel Mitchell, owner of Angel Flight Marketing Services Inc. in Chicago. “Do you get penalized if someone’s on one list and not the other?”

With 40% of his business in outbound calls to consumers, Mr. Mitchell worries about having to lay off some of his 10 employees, and about his firm slipping into the red. Still, he notes that response rates could improve: “The people who just hate telemarketing, they’ll be eliminated (by) the list.”

Preparing for the worst

Another exception in the rule allows telemarketers to contact consumers who have bought or rented goods or services from that company within the previous 18 months.

That time limit would pose a problem for Aon Innovative Solutions Inc., a unit of Chicago’s Aon Corp. that is a telemarketer for retailers’ and manufacturers’ extended service plans. Because service plan contracts can last several years, Aon Innovative-which employs 650 people in call centers in St. Louis and Golden, Colo.-might be prohibited from calling those customers.

Company President Tom Love says the new rule could affect up to 30% of the division’s volume, which would in turn endanger jobs.

Having seen more than 900,000 people sign up for Colorado’s do-not-call list within a year, Mr. Love is preparing for the worst. “I think the people who don’t sign up (for the national registry) are just lethargic,” he says. “Let’s put it this way: If you had to opt in to be called, do you think there would be very many people who would?”