Ask Our Experts 10/27/19: TCPA Lawsuit Warns Marketers to Mind Their Ps and Qs
Q: With recent news about Tilt Holdings being the subject of a TCPA lawsuit, what is the upshot and what are broader implications for other cannabis businesses (like mine)?
By New Frontier Data
A: In 1991, the Telephone Consumer Protection Act (TCPA) became law in response to increasing amounts of telemarketing calls being made to consumers’ homes. Among other things, the TCPA specifically prohibits using an automatic telephone dialing system (ATDS) to call consumers without their prior expressed consent. Regardless that the TCPA was enacted when most consumers still relied on landlines, over the intervening 30 years the law has also been applied to calls made to cell phones, or via text messaging.
The TCPA also outlines statutory damages for violations. Specifically, it allows for $500 per violation, and treble damages (3x) if the violations are intentional. Given that, damages for TCPA violations regularly amount to $1,500 per infraction. The Institute for Legal Reform reports that the average settlement for a TCPA class action suit is $6.6 million. TCPA lawsuits are also not uncommon; there were more than 3,800 such filings in 2018.
Tilt Holdings, and its subsidiary Baker Technologies, provide technological solutions including marketing and communications for cannabis businesses. Both companies were named in a lawsuit alleging the sending (or facilitating the sending) of text messages to consumers’ cell phones using an ATDS without the consumers’ express consent. The numbers were allegedly collected by Baker Technologies and distributed to its cannabis dispensary clients. In order to be TCPA-compliant, consent must be had from every consumer receiving a text message or call.
The scenario can be instructive for cannabis businesses. The generally broad restrictions on advertising for cannabis businesses require creative methods of consumer outreach. Alternative approaches (such as social media) can be unpredictable, since different platforms have demonstrated various and inconsistent levels of openness to hosting cannabis-related content. Direct consumer outreach via calls or texts might seem like a relatively easy and efficient approach, but — as illustrated in the Tilt case — it requires strict adherence to telecommunications regulations.
Furthermore, with increased attention from both Congress and the FCC about robocalls, including aggressive blocking of robocalls and fines for spoofing numbers (i.e., altering a caller ID to appear local to the consumer), cannabis businesses interested in direct consumer outreach must exercise caution and diligence to assure that they are compliant with all applicable regulations.
Given the complex and varied compliance landscape of the cannabis industry, it is easy to become overwhelmed while simply staying up-to-date and compliant with industry regulations. Nevertheless, it is imperative to maintain awareness of, and compliance with, the range of regulatory frameworks that impact all aspects of one’s business. Otherwise, business owners risk exposing themselves to costly and avoidable sanctions.