Court orders $280 million from Dish Network, largest ever Do Not Call penalty

It’s a record-setting win for America’s consumers and a resounding affirmation that the Do Not Call Registry means DO NOT CALL. Eight years of tenacious litigation by the Department of Justice, the FTC, and the Attorneys General of California, Illinois, North Carolina, and Ohio has resulted in a $280 million civil penalty against Colorado-based satellite TV provider Dish Network. The ruling imposes additional remedies that emphasize just how seriously companies should take Telemarketing Sales Rule compliance.

Dish marketed its services directly through its own telemarketers and vendors, and through authorized dealers and retailers – what it called its Order Entry Program. Those companies pitched Dish programming to consumers, with Dish completing the sale.

Among other things, the lawsuit alleged that Dish initiated or caused others to initiate calls to numbers on the Do Not Call Registry. Dish vigorously defended its conduct in court, but after hearing the evidence, a federal judge ruled that Dish was liable for more than 66 million calls that violated the Do Not Call, entity-specific, and abandoned call provisions of the FTC’s Telemarketing Sales Rule. The Court also held that Dish violated the Telephone Consumer Protection Act and multiple state laws.

Although “Dish has minimized the significance of its own errors in direct telemarketing and steadfastly denied any responsibility for the actions of its Order Entry Retailers,” the Court found Dish culpable both for its direct calls and for illegal calls made through its dealers. As the Court held, “Dish initially hired Order Entry Retailers based on one factor, the ability to generate activations. Dish cared about very little else. As a result, Dish created a situation in which unscrupulous sales persons used illegal practices to sell Dish Network programming any way they could.”

In explaining the $280 million civil penalty, the Court ruled that “the injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility require a significant and substantial monetary award.” In response to the company’s objection to the dollar amount, the Court concluded that “Dish’s plea of poverty borders on the preposterous.”

The Court expressed particular concern about the company’s attitude toward people who complained about unwanted calls: “Dish’s denial of responsibility and lack of regard for consumers are deeply disturbing and support the inference that it is reasonably likely that Dish will allow future illegal calls absent government pressure.”

“[T]o keep Dish’s marketing personnel from reverting to their practice of trying to get around the rules,” the Court imposed four notable injunctive provisions – and they come with teeth:

• Dish will have to demonstrate that the company and its “primary retailers” – the order defines that term – are complying with the Safe Harbor Provisions of the TSR and have made no pre-recorded calls during the five years preceding the order’s effective date. “If Dish fails to prove that it meets this requirement, it will be barred from conducting any outbound telemarketing for two years, and if Dish fails to prove that the Primary Retailers meet this requirement, Dish shall be barred from accepting orders from such Primary Retailer for two years.”
• Dish must hire a telemarketing compliance expert to prepare a plan to ensure that the company and its primary retailers are honoring telemarketing laws and the Court’s order.
• The federal and state plaintiffs can ask the Court to approve unannounced inspections of the facilities and records of Dish or its primary retailers. In addition, for a ten-year period, twice a year Dish must send telemarketing compliance material to the federal and state plaintiffs, including all outbound telemarketing call records.
• Whether acting directly or through authorized telemarketers or retailers, Dish is prohibited from violating the TSR.

An injunction applies just to the company in question, of course, but businesses can glean compliance tips from the Dish litigation.

Keep your own house in order and watch what others are doing.  The scope of the Telemarketing Sales Rule is broad. If you don’t want to be called to answer for TSR violations, establish effective monitoring and compliance programs that apply in-house and to people or companies that market your products.

Take consumer complaints seriously.  Dish received so many complaints about one company that its Legal Department prepared a standard letter that conveyed, in the words of the Court, “go away, it’s not our problem, go after Satellite Systems.” When people are riled enough to contact you directly with a complaint, evaluate what they have to say and adjust your practices accordingly.

Courts are free to impose remedies that exceed what parties may agree to in a settlement.  Dish argued that civil penalties were lower in some recent TSR settlements, but the Court rejected that apples-to-oranges comparison: “These settlements are worth little or no consideration in the calculations of civil penalties in this case. Parties who settle negotiate a settlement sum to avoid the time and costs of litigation. The parties also negotiate a settlement to avoid the risk of a judgment in a fully litigated matter.”

State and federal law enforcers are united – and dogged – in the fight against illegal telemarketing.  Litigation is rarely the first choice of government agencies, but if companies prefer to go to trial, consumer protectors will see them in court. What’s more, we’re united in our commitment to effective Do Not Call enforcement. In its findings, the Court concluded “that at least some in Dish management do not believe that Dish really did anything wrong or harmed anyone with these millions and millions of illegal calls.” Federal and state law enforcers disagree – and we think the people who placed 226 million numbers on the National Do Not Call Registry are on our side.