Legislature(2003 - 2004)

04/06/2004 02:04 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
       CSHB  15(FIN)am-SOLICITATIONS/CONSUMER PROTECTION                                                                    
CHAIR CON  BUNDE announced HB 15  to be up for  consideration. He                                                               
noted  that Mr.  Robert  Flint expressed  concerns from  magazine                                                               
MR.  JIM  POUND,  staff to  Representative  Hugh  Fate,  sponsor,                                                               
responded  that  the  Department  of   Law  said  a  lot  of  the                                                               
complaints it receives  come from those types  of businesses. Mr.                                                               
Flint admitted there are about 2,300 of them in the country.                                                                    
MR.  ROBERT  FLINT,  Hartig  Rhodes   Hoge  &  Lekisch,  said  he                                                               
represents  the Direct  Marketing  Association  and the  Magazine                                                               
Publishers of America  on the portion of HB 15,  which relates to                                                               
the proposed amendments  to the Telemarketing Act.  He listed his                                                               
points as follows:                                                                                                              
     As I  mentioned before,  this statute, which  is common                                                                    
     to about  two dozen  states, was aimed  at fly-by-night                                                                    
     operators  and, therefore,  was deliberately  made very                                                                    
     burdensome.   As  an   example,  the   application  for                                                                    
     registration is 20 questions long  and you have to list                                                                    
     all your sales people.  The regulations also require if                                                                    
     the sales  people change within  90 days -  either they                                                                    
     leave  or you  add on  sales people  - you're  going to                                                                    
     have  to  file the  new  sales  people, which  includes                                                                    
     listing their home address.                                                                                                
     Moreover, every mistake  you make is a  class C felony,                                                                    
     which is a  $50,000 fine; for your first  offense - one                                                                    
     year in jail all the way up to five years.                                                                                 
     To put  the magazine  publishers and book  people under                                                                    
     this is a radical change  from the original purpose and                                                                    
     the  scope.   Right  now  there  are   eight  companies                                                                    
     registered  under the  Alaska  Telemarketing Act.  This                                                                    
     business  is  a  huge   national  business.  The  2,300                                                                    
     magazine and newsletters  are that only -  I don't know                                                                    
     the number of CDs, videos and booksellers.                                                                                 
     The fiscal  note here estimates  that maybe  30 instead                                                                    
     of eight  will register under the  Telemarketing Act if                                                                    
     these  amendments are  passed. If  anybody wants  to do                                                                    
     business  in  Alaska  among   those  2,300  people  for                                                                    
     magazines alone,  it will be  far higher than  that. If                                                                    
     those don't  register, then the enforcement  problem is                                                                    
     going to be a mess. At  a minimum, you're going to have                                                                    
     a constant  stream of paperwork  and bear in  mind that                                                                    
     this  business, which  has millions  of transactions  a                                                                    
     day  nationwide, these  callers are  from all  over the                                                                    
     country and,  indeed, outside  the country.  So, you're                                                                    
     going to  get the  list of  people from  Bangladesh and                                                                    
     India and South  Dakota filling up the  cabinets of the                                                                    
     Department of Law on a constant daily basis.                                                                               
     I think  one of the  elements here, if you  go forward,                                                                    
     the  committee  is entitled  to  a  fiscal note,  which                                                                    
     addresses   the   reality.   The   administrative   and                                                                    
     enforcement costs of  this - trying to  regulate a very                                                                    
     large national industry are going to be very high.                                                                         
     Now, the regulations in the  statute are still going to                                                                    
     interfere  with the  business. One  of the  things that                                                                    
     the regulations do not cover  is mail to an individual.                                                                    
     So, if  you get a card  or an ad from  Time Magazine in                                                                    
     your  mailbox and  inviting you  to  subscribe to  this                                                                    
     publication,  and  it says  you  can  either do  so  by                                                                    
     returning this card  or you can call an  800 number and                                                                    
     order it  over the  phone. Under  this bill,  you would                                                                    
     have  to  do  mail  only;  you  cannot  call  over  the                                                                    
     It  also excludes  existing customers.  That  is, if  a                                                                    
     company  has  an  existing   customer  they  have  done                                                                    
     business with,  they would also  run into this  act. We                                                                    
     have all  agreed... that cold-call marketing  - the guy                                                                    
     who  calls  you at  your  dinner  table, is  absolutely                                                                    
     dead. We  have a  vast number of  people who  signed up                                                                    
     for the Do  Not Call list. According to  all reports we                                                                    
     get from  the Federal Trade Commission,  it is working.                                                                    
     So,  I   think  that  problem  is   solved  in  another                                                                    
     direction,  which my  clients have  no objection  to at                                                                    
     all. We have had no evidence of need presented to us.                                                                      
     As   I  mentioned   before,  I   filed  a   Freedom  of                                                                    
     Information  Act request  with  the Attorney  General's                                                                    
     Office. You  know, we hear anecdotes  about problems in                                                                    
     an area,  but we cannot  get the statistics.  It's over                                                                    
     three weeks  and I've had  no response to  that Freedom                                                                    
     of  Information request  at  all.  There are,  however,                                                                    
     national statistics....                                                                                                    
     The  proposed regulators  have never  discussed in  any                                                                    
     detail or any  generality how this is  supposed to work                                                                    
     with this industry,  which I think, is sort  of a base-                                                                    
     line   before  you   want  to   go   and  create   this                                                                    
     administrative cost....                                                                                                    
     So,  I  would  summarize, the  amendments  don't  work.                                                                    
     They're unworkable  from the industry  standpoint, from                                                                    
     an  administrative standpoint  and from  an enforcement                                                                    
     standpoint.   They   are   consumer   prevention,   not                                                                    
     consumer protection.... I do  believe my principal, Ann                                                                    
     Darr, is on the phone,  who has been involved with this                                                                    
     for 30  years... I believe  she may have  some valuable                                                                    
     information for  the committee if she  may be permitted                                                                    
     to make some comments.                                                                                                     
MR.  DAN   SMITH  said  he   works  with  the   Direct  Marketing                                                               
Association and that Ann  Darr is on at the same  time if that is                                                               
acceptable to the chair who indicated it was.                                                                                   
MS.  ANN   DARR,  Magazine  Publishers  of   America,  said  that                                                               
telephone fraud in  the 80s was a terrible  problem that extended                                                               
into the  90s. Industry,  the Federal  Trade Commission,  the FBI                                                               
and the  State Attorneys General  all banded together to  do what                                                               
they could about  it. Telephone registration helped  and was most                                                               
effective  in  the southern  states  -  Florida, Arizona,  Orange                                                               
County, California and Las Vegas.                                                                                               
     Every state  that enacted a telephone  registration law                                                                    
     exempted  identifiable  substantial  sellers  that  the                                                                    
     Attorney General knew how to  locate should they have a                                                                    
     problem with  their marketing. No other  state includes                                                                    
     magazine  or books  or  recordings  in their  telephone                                                                    
     registration requirements.                                                                                                 
     We think  that telephone  fraud has largely  been taken                                                                    
     care of. The Federal Trade  Commission does not list it                                                                    
     as   one  of   its  chief   complaints.  The   Consumer                                                                    
     Federation  of American  - its  last  list of  consumer                                                                    
     complaints did  not, even in  their 12  complaints, did                                                                    
     not include  telephone marketing or magazines.  I think                                                                    
     the  Federal Trade  Commission  list included  magazine                                                                    
     complaints  as  one  percent.  When  you  consider  the                                                                    
     millions of  transactions we do every  year, there are,                                                                    
     of  course, going  to be  complaints. The  question is,                                                                    
     are  they unfair,  misleading and  deceptive practices.                                                                    
     Even  if it  were an  unfair, misleading  and deceptive                                                                    
     practice, to require every publisher  in the country to                                                                    
     go  through this  very  extensive registration  process                                                                    
     when  you think  of  putting down  the information  for                                                                    
     each officer, director,  trustee, general partner, etc.                                                                    
     etc. of  a company  such as Time  Warner, a  listing of                                                                    
     all telephone numbers used to  call consumers when they                                                                    
     have a  nationwide operation,  this would  be extremely                                                                    
     burdensome. We don't think it  would be helpful to have                                                                    
     companies have to  go through this process.  It is true                                                                    
     that if they  receive a mail solicitation,  and this is                                                                    
     the common way that we  solicit people, and invite them                                                                    
     to call a telephone number  to subscribe, then we would                                                                    
     be  required  to  register.  This  would  be  extremely                                                                    
     burdensome. Many  companies couldn't afford to  do it -                                                                    
     especially the smaller publications.                                                                                       
     The  general  intent  of  HB  15  was  to  make  Alaska                                                                    
     consistent  with the  Federal Trade  Commission Do  Not                                                                    
     Call list. The DMA certainly  has its members adhere to                                                                    
     that; 52.8  million American  consumers have  signed up                                                                    
     for the list. The FTC  says it's working and there were                                                                    
     a couple  of industry  groups, which included  the DMA,                                                                    
     who  were challenging  the law  in court;  the DMA  has                                                                    
     withdrawn its challenge....                                                                                                
     So, we have  no trouble with HB 15  as introduced. It's                                                                    
     what was amended into the  bill to delete the exemption                                                                    
     from  registration. Twenty-four  states have  telephone                                                                    
     registration laws  similar to  Alaska and none  of them                                                                    
     require  registration of  magazine sellers  or book  or                                                                    
     recording  companies.  One   state,  Arizona,  requires                                                                    
     companies to do a  one-page on-line simple registration                                                                    
CHAIR  BUNDE noted  that  Ms. Darr  had  raised some  interesting                                                               
questions and asked  the sponsor to work with her,  Mr. Flint and                                                               
Ms. Drinkwater to resolve them.                                                                                                 

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