FTC CONDUCTS REVIEW OF 900-NUMBER RULE; SEEKS COMMENT ON WHETHER TO BROADEN TO CURB EMERGING SCAMS

The Federal Trade Commission is conducting a review of its 900-Number Rule to determine whether it has been effective in curbing abuses associated with 900-number services. The Commission also is seeking comments on whether to expand the scope of the rule to cover audio information and entertainment services accessed by dialing telephone numbers that begin with numbers other than "900." As a result, many of the rule’s requirements -- which include cost disclosures in advertisements for 900-number services, cost and other important disclosures in a free introductory preamble to 900-number services, and consumer rights to dispute charges for calls -- could apply to pay-per-call services involving the use of telephone numbers with international area codes such as "809."

The FTC recently brought several enforcement actions against alleged international pay- per-call schemes, and has issued several consumer alerts warning of the potential costs and risks of calling international pay-per-call services. Just last month in a case involving the Internet, the FTC obtained a temporary restraining order to halt a scheme by Audiotex Connection (FTC v. Audiotex Connection). The complaint alleged that Audiotex and others distributed a sophisticated computer program that, unbeknownst to consumers, caused their modems to disconnect from their local Internet service provider and dial an international pay-per-call number to Moldova. According to the FTC, consumers were never informed that they would be billed for calls to Moldova or that, to terminate the connection, they had to turn off their computers. In another case (FTC v. Daniel Lubell), the FTC charged the defendants with running a fraudulent scheme to lure consumers into placing costly calls, unknowingly, to the Caribbean or to Guyana in order to enter a purported free vacation sweepstakes and receive free travel tips. The FTC alleged that the defendants misrepresented that they did not charge consumers for the information when, in fact, they received a portion of the revenues made by the foreign telephone company.

While the FTC can obtain federal court injunctions and redress for consumers under Section 5 of the FTC Act (which is the remedy it is seeking in these two cases), violations of the agency’s 900-Number Rule can also subject defendants to civil penalties of up to $11,000 per violation.

It was fraudulent practices like those alleged by the FTC in the Lubell and Audiotex Connection matters that prompted Congress to include a provision in the Telecommunications Act of 1996 authorizing the Commission to extend the definition of "pay-per-call services" contained within the 900-Number Rule to cover other similar audio information and enter tainment services not accessed by dialing "900," if they also are "susceptible to the unfair and deceptive practices" prohibited by the 900-Number Rule. The FTC promulgated its 900-Number Rule pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992, and it went into effect on Nov. 1, 1993.

A notice to be published in tomorrow’s Federal Register initiates a review of the overall effectiveness of the 900-Number Rule, which the agency is required to begin within four years of its effective date. The same notice discusses the impetus for the proposed amendments and lists a number of questions on which the FTC is seeking comment. Comments on both are being accepted for 60 days, until May 12. Thereafter, the Commission will hold a public workshop- conference on June 19 and 20, where participants will discuss issues raised by the comments. Commenters who wish to participate in the workshop-conference should notify Commission staff by May 12 of their interest by following the steps outlined in the notice.

Questions associated with the rule review seek information about its overall costs and benefits, its impact on consumers and industry, and any other changes that may need to be made to improve its benefits to consumers or reduce its burden on industry. In particular, the FTC is asking for comments on whether the definition of "service bureau" should continue to exclude common carriers, and whether presubscription arrangements should be required to be in writing.

Presubscription arrangements are agreements between the pay-per-call service provider and the caller for the provision of pay-per-call services via an 800 number. The service must disclose the cost and other key information to the consumer and require the consumer to use an identification number or some other effective means to prevent charges for calls they did not authorize from their phone. Currently, consumers can enter into a presubscription agreement verbally by calling an 800 number, but the FTC has found that unscrupulous information providers have used 800 numbers to create sham presubscription agreements. The FTC also is interested in comments on the effectiveness of the free preamble requirement generally, and how it should be applied to pay-per-call services that offer free listening time.

Among the specific questions on which the FTC is seeking comments in connection with its authority under the Telecommunications Act are the following:

1. Are there audiotext services not covered by the current rule that are susceptible to the same unfair and deceptive practices it prohibits? Should the rule be changed to cover them?
2. How can a definition of "pay-per-call service" be crafted so that audiotext services not susceptible to unfair and deceptive practices are not swept into the rule?
3. Are there technological differences between 900-number and non-900-number audiotext services that would make it difficult to implement the rule as it currently exists to cover those services?
4. Are there any audiotext services currently being provided over the Internet or commercial online services? What are the costs and benefits of including them within the scope of the rule?
5. Is call blocking of international audiotext calls possible without requiring the consumer to block access to all international numbers?

Again, comments on the rule must be received by May 12, and should be addressed to the FTC, Office of the Secretary, Room 159, 6th Street and Pennsylvania Avenue N.W., Washington, D.C. 20580. They should be captioned "900-Number Rule Review -- Comment. FTC File No. R611016." The Commission vote to publish the 900-Number Rule notice in the Federal Register was 5-0.

In August 1996, the FTC offered comments to the Federal Communications Commission on that agency’s proposals to amend its rules governing pay-per-call services pursuant to the Telecommunications Act of 1996.

Copies of those comments, a news release on the FTC’s 809-number case referenced above, and the FTC’s Federal Register notice are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Media Contact:

Bonnie Jansen
Office of Public Affairs
202-326-2161 or 202-326-2180

Staff Contact:

Eileen Harrington
Bureau of Consumer Protection
202-326-3127

(FTC File No. R611016)