Many cannabis dispensaries rely heavily on text messaging marketing programs to reach their customers and to create loyalty in an increasingly competitive market. While text messaging programs may be an effective marketing tool, they can lead to significant liability if your business does not carefully comply with the Telephone Consumer Protection Act (TCPA). Unfortunately, there have been a spate of TCPA class actions filed against cannabis dispensaries recently. Although the recent Supreme Court decision in Facebook, Inc. v. Duguid (Facebook) narrowed the scope of the statute and may make these cases easier to defend, it is likely that the cannabis industry will continue to be targeted with TCPA class actions.
Because the TCPA is a strict liability statute and provides for damages of $500 to $1,500 per violation, compliance must be taken seriously. Statutory damages add up quickly, particularly where a cannabis dispensary is sending marketing text messages to its customers multiple times a week. Despite the Facebook decision, you should still assume that the TCPA applies to your text message marketing program. To best mitigate your risk, it is important to obtain legal advice regarding the TCPA before you begin sending text messages to your customers.
What is the TCPA?
The TCPA regulates certain calls made to consumers. It prohibits all calls (and text messages) to cellular phones using an automatic telephone dialing system (an “autodialer”) unless the individual being called has provided express consent. For marketing calls made to cellular phones using an autodialer, express written consent is required.
An autodialer is defined as “equipment which has the capacity–
(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and
(B) to dial such numbers.”
This definition has generated significant confusion among both businesses trying to comply with the law and courts applying the law. Before the recent Facebook ruling, courts in many jurisdictions had ruled that any device with the capacity to store numbers to be dialed was an autodialer. In practice, this meant that businesses were almost always required to obtain an individual’s express written consent prior to calling or texting that individual for marketing purposes. Other courts took a narrower view and ruled that an autodialer must have the capacity to use a random or sequential number generator.
The Supreme Court’s decision in Facebook resolved this dispute and adopted the narrower interpretation of the statute. After Facebook, an autodialer is a device with the capacity to use a random or sequential number generator. But there is still significant uncertainty about what it means to have the “capacity” the use a random or sequential number generator. TCPA plaintiffs will argue that the term “capacity” should be read broadly. Some plaintiff’s attorneys have already argued that all computing systems and all databases have the capacity to generate random or sequential numbers, which means that nearly every dialing system is an autodialer. While no court has adopted such an expansive interpretation of “capacity,” a footnote in the Facebook decision left the door open to similar types of arguments about the meaning of capacity. Until lower courts clarify the meaning of “capacity,” you should continue to obtain express written consent prior to sending marketing text messages to your customers.
Importantly, other provisions of the TCPA were unaffected by the Facebook decision. Prerecorded voice calls, or true robocalls, are still prohibited under the TCPA. Businesses must still refrain from calling individuals on the National Do Not Call Registry unless they first obtain their express written consent or other (narrow) exceptions apply. Finally, businesses must still comply with the internal do not call list requirements contained in the TCPA’s implementing regulations, which require businesses to maintain an internal list of individuals who have requested not to receive marketing calls or text messages.
How can I protect my company from a TCPA lawsuit?
While no compliance program can eliminate the risk of a TCPA lawsuit, the following tips may lower your risk and may make it easier to obtain early settlement of a TCPA lawsuit:
- Review Your Practices for Obtaining Express Written Consent. If you already obtain express written consent, continue to do so. If you are not sure if your consent practices satisfy the standard for express written consent, obtain the advice of an attorney. Be aware that express written consent can be a difficult standard to meet. For example, just because an individual enters her phone number onto a web form or sheet of paper does not mean that the individual has provided express written consent to be called or texted.
- Implement Written Policies and Procedures. Review your TCPA policies and procedures to ensure that they are up to date with the most recent developments in the law.If you do not have written policies and procedures, consult with an attorney. Having adequate written policies and procedures, and incorporating such policies and procedures into your employee training program, is important for ensuring an effective compliance program and may also provide an affirmative defense to claims based on violations of the National Do Not Call Registry and the internal do not call list.
- Keep Records. Even if you are confident that you comply with the TCPA, you should verify that you have records that will allow you prove that every individual you call or send text messages to has provided the appropriate consent. Having complete records may help you a resolve a potential TCPA class action early.
- Confirm That Your Vendors Are Compliant. If you use a third-party vendor for text message marketing, do not assume that the third-party vendor complies with the TCPA. Have an attorney review the vendor’s policies and procedures related to the TCPA and investigate whether the vendor’s software has the capacity to use a random or sequential number generator.
- Adopt Best Practices. Make sure that customers can easily opt of out your text messaging program by texting “STOP,” and avoid sending customers text messages on a daily basis.
- Review Carrier Requirements. Confirm that you are complying with carrier requirements. For example, some carriers prohibit cannabis-related content or filter text messages that use certain words associated with cannabis.
- Hire an Attorney With TCPA Experience. TCPA litigation is complex, high stakes litigation. If you are sued under the TCPA, hire counsel experienced in defending TCPA class actions.
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