Duane Morris TechLaw

By: Sheila Raftery Wiggins

The Federal Trade Commission (“FTC”) announced that it is exploring rules to address commercial surveillance and lax data security. The FTC seeks public comment on the harms stemming from commercial surveillance and whether new rules are needed to protect people’s privacy and information.

Commercial surveillance is the business of collecting, analyzing, and profiting from information about people. The business of commercial surveillance can prompt companies to collect large quantities of consumer information, even though consumers only proactively share a small amount of this information. For example, companies reportedly surveil consumers while they are connected to the internet, including obtaining access to many aspects of the consumer’s online activities and physical movements/location.

The FTC’s concerns about commercial surveillance include:

• Children: Some surveillance-based services may be addictive to children and lead to a wide variety of mental health and social harms.
• Discrimination: There are concerns that the algorithms that underlie commercial surveillance may be prone to errors or bias which results in discrimination against consumers based on legally protected characteristics like race, gender, religion, and age, harming their ability to obtain housing, credit, employment, or other critical needs.
• Condition for service: Some companies require consumers to sign up for surveillance as a condition for service. After consumers sign up, some companies change their privacy terms going forward to allow for more expansive surveillance.

For nearly 20 years, the FTC used its existing authority to bring many enforcement acts against companies for privacy and data security violations. The FTC is now exploring rules to: (1) establish clear privacy and data security requirements and (2) grant the FTC with authority to seek financial penalties for first-time violations.

The public will also have an opportunity to share their input on these topics, including during a virtual public forum on September 8, 2022.

The Second Circuit ruled that an unsolicited faxed invitation to participate in a market research survey in exchange for money does not constitute an “unsolicited advertisement” under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”).  Bruce Katz, M.D., P.C. v. Focus Forward, LLC, No. 21-1224 (2^nd Cir. Jan. 6, 2022).

Plaintiff is a professional corporation that provides medical services.  Defendant is a market research company.  In 2019, Defendant sent Plaintiff two unsolicited faxes, addressed to the “Nurses” and “Practitioners,” seeking participants in “market research surveys” and offering $150 to participate in a “telephone interview.”

Plaintiff filed a putative class action alleging violations of the TCPA.  The TCPA prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.”  An “unsolicited advertisement” is defined by the statute as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.”

The regulations of the Federal Communications Commission (“FCC”), implementing the TCPA, contain an identical definition of “unsolicited advertisement.”  In 2006, the FCC promulgated a rule that construes the TCPA as specifically proscribing any faxed surveys that “serve as a pretext to an advertisement.”

In Katz, the Second Circuit reasoned that: (1) the two faxes “plainly do not advertise the availability of any property, goods, or services” and therefore “cannot reasonably be construed” as unlawful advertisements and (2) the word “property” does not appear to include money, as the word is used in the TCPA.

The Second Circuit noted that its holding may not necessarily extend to all communications, including faxed surveys, offering the recipient both money and services because such communications could incur liability under the TCPA depending on the specific content of the communication.

The Second Circuit declined to adopt the reasoning of the Third Circuit in Fischbein v. Olson Research Group, 959 F.3d 559 (3d Cir. 2020), which ruled that such faxes are advertisements because the “offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is an advertisement under the TCPA.”  Thus, the Second Circuit held that – based on the statutory text, legislative history, and FCC implementation of the TCPA – an invitation to participate in a survey, without more, is not an unsolicited advertisement under the TCPA.

Lesson:  An invitation to participate in a survey should be drafted to avoid offering “property, goods, or services” which may fall within the meaning of a “unsolicited advertisement” under the TCPA.