FCC Makes it Harder for Small Businesses to Find Customers 

By James Erwin

I remember well when I first needed to purchase car insurance for a vehicle I had bought off my father. After reviewing plans on a comparison website and selecting one I wanted to investigate further, I entered my phone number and consented to their proactive outreach, expecting a call. Within less than a minute, five different insurance companies were all calling me at once. This is the power of lead generation for sales-heavy industries and consumers, a power the FCC is threatening with a new rulemaking. 

Lead generation creates more than $200 million in value for the US economy annually. It is essential for a wide variety of businesses, especially small businesses, who rely on the nearly 1,900 leads generated each month to reach new customers. Everyone from national brands like the car insurance I was researching to young companies partnering with podcasters rely on leads to find their market. Consumers benefit by literally getting a direct line to sellers to compare products. 

Unfortunately, the FCC is moving to restrict the practice, harming sales-heavy businesses’ ability to reach willing customers. While consumers already must provide active consent to receive calls from sellers, this consent may be sold to different vendors on a secondary market. The result can be telemarketing calls for products and services unrelated to whatever the consumer originally signed up for. While I agree this is annoying, it is not a national emergency and is arguably not what the FCC should prioritize at the moment. 

Regardless, the FCC sees the resale of leads as a loophole for fraud and the harassment of consumers. The proposed rulemaking would prohibit the resale of leads to secondary vendors and require that each vendor secure individual consent from consumers for each lead generated. Rather than allow the market to register that a consumer is looking for something and signal all available vendors that someone might want their services, the FCC would crush this important sector. 

This is anti-competitive and unworkable. As with my car insurance example, most leads are purchased from the initial vendor by competitors, who swoop in to offer a better price. Lead generation has grown in size and sophistication to the point that it functions like an instantaneous reverse auction, with competing sellers bidding for the customer’s business. Moving forward with this rule will hurt consumers’ ability to comparison-shop different options for the products and services they desire. 

Indeed, the FCC acknowledged in the order that comparison websites, the primary collectors of consent for telemarketing, benefit consumers. Their suggested remedy is for such websites to offer a check box list that allows consumers to select which vendors can call them. This is a fine model, but it will not solve the problem of preventing competitors from flipping leads on the secondary market, and may also cause sectoral market concentration among comparison sites. However you slice it, competition will be harmed by this rule. 

The law firm Brownstein (et. al.), LLP issued a client alert that best summarized the unworkability of the rule: 

The rule increases TCPA risk for sellers that rely on lead generators or otherwise obtain consent through a third party. The FCC confirmed that the burden of proving consent lies with the caller or texter. Businesses that robocall or robotext consumers relying on consent from lead generators (consistent with single seller requirement) cannot rely on the lead generator to retain proof of consent. 

Sellers could face enforcement actions if they are unable to properly vet their lead generators. In addition to the cost this will impose on small businesses, the rule will be difficult for the FCC to enforce and will invite litigation between sellers and lead generators over who should have obtained proof of consent. It could prove impossible for sellers to defend themselves in court without records that lead generators are not required to provide them. Requiring this disclosure would compromise the proprietary data of lead generation companies, which may be why this was not included in the order. In general, the FCC will struggle to prove who is responsible for violations and the risk that small businesses facing fines for accidental violations will increase markedly. 

No one likes telemarketers, especially not when they cold-call you. It is also true that robocall traffic is rife with scams and fraud, which the FCC has struggled to curtail. In my own insurance experience, it was a bit annoying in the moment, but I ultimately appreciated the proactive outreach. I was able to compare rates and terms between competitors in far greater detail by speaking with the different salesmen. After picking one, the signal was sent back that I was off the market and I stopped receiving telemarketing calls within a few days. This is a powerful tool for consumers, and one they should not have ripped away just because telemarketers can sometimes be irritating.