Company Settles With FTC Over Attempted Use of Sweepstakes Entry To Avoid Federal Do Not Call List Requirements

The FTC recently announced a settlement with Electric Mobility Corporation ("EMC"), the manufacturer of Rascal Scooters, and its owner, Michaels Flowers, regarding charges that EMC illegally called millions of consumers who had listed their phone numbers on the national Do Not Call Registry. The FTC alleged that EMC used phone numbers collected in connection with sweepstakes it sponsored to contact consumers whose numbers are on the Registry. The FTC's Telemarketing Sales Rule allows a company to call a consumer on the Do Not Call Registry for up to 18 months if it has an "established business relationship" with the consumer, provided the consumer has not opted out of receiving calls from the company. However, the FTC has indicated that a company may not rely on a sweepstakes entry to establish a business relationship with a consumer for purposes of the Telemarketing Sales Rule. The consent order imposes a civil penalty of $100,000 against Flowers and $2 million against EMC, which was suspended based on its inability to pay.

TIP: The fact that the consumer has entered a sweepstakes does not create an established business relationship for purposes of the Telemarketing Sales Rule. This means that if you intended to place telemarketing sales calls to phone numbers collected in connection with a sweepstakes, you must first scrub those numbers against the national Do Not Call Registry. In addition, you should not place telemarketing sales calls to any numbers collected in connection with a sweepstakes entry if you have represented that the information provided by the consumer will only be used for purposes of the sweepstakes. However, you may call the winners of a sweepstakes to notify them that they have won a prize.