Points For Privacy: The Cost of Customer Reward Programs

Alexandra Soisson, Associate Member, University of Cincinnati Law Review

Today it is difficult to make a purchase at a grocery store or gas station without being asked to join a rewards program or customer club. Cashiers highlight the extensive benefits and rewards of membership while being sure to emphasize that it is completely “free.” Though it is often the case it may not cost any money to join these programs, these reward programs do come at the expense of revealing your personal information. Joining these groups almost always requires providing a phone number, address, or email. It may seem identification is the primary purpose for the information, but the company can use the information however they please. In most cases, companies use this information for advertising. Because of the growing number of social media outlets and virtual identities available, that can mean extensive ways to connect to a new customer. The question then becomes whether the company has permission to contact the customer in the first place and what specific information they can send the new consumer. This question is being addressed in San Pedro-Salcedo v. Häagen-Dazs Shoppe Co, where the court is analyzing major issues surrounding reward programs and privacy. The central issues addressed here are: (1) what constitutes an advertisement and (2) what level of consent should be required to send any sort of communication to a member of a business rewards program.

The Telephone Consumer Protection Act of 1991

The Telephone Consumer Protection Act (TCPA) was ratified in 1991 as an amendment to the 1934 Communications Act. The TCPA was enacted in response to evolving technology and the growing concern over the vast increase of telemarketing in American homes.[1] In 1990 it was estimated more than 300,000 telemarketers contacted over 18 million Americans every day.[2] This enormous volume of calls was made possible by the invention of autodialers, or robocalls, which would use machines to automatically dial phone numbers and deliver messages to consumers.[3] Though this invention revolutionized the industry, it led to a significant increase in the number of telemarketing calls reaching American homes each day. In response, the legislature created the Telephone Consumer Protection Act which placed significant restrictions on the use of the autodialers and telemarketing generally.[4] Specifically, the Act explicitly prohibited the use of any automatic telephone dialing system to contact any telephone number assigned to a cell phone.[5]

Naturally, there are exceptions to this rule. Though the Act does specifically bar the use of autodialers to contact cellular phones, there are exceptions that remove a call from the scope of the provision.[6] One exception allows for autodials to be used if the receiver gives consent. The level of consent required to remove the call from the restrictions of the provision and allow an autodialer to be used depends on the type of call.[7] A text or call that includes or introduces an advertisements or constitutes telemarketing may only be sent with the consumer’s express written consent.[8] In contrast, a text or call that does not include or introduce an advertisement and does not constitute telemarketing may be sent with any prior consent.[9]

San Pedro-Salcedo v. Häagen-Dazs Shoppe Co.

In April of 2017, the Plaintiff patronized a Häagen-Dazs store where she was asked if she would like to enroll in the Häagen-Dazs customer rewards program.[10] The Plaintiff provided her phone number to enroll and later that day she received a text message from the Defendant reading “Thank you for joining Häagen-Dazs Rewards! Download our app here.”[11] Plaintiff alleged the text constituted a telemarketing or advertising message in violation of the TCPA.[12] Whether the communication is a violation of the TCPA falls on whether or not it should be categorized as an “advertisement.”[13] Because it is clear that the Plaintiff did not give written consent to the defendant, which would allow the defendant to send advertisements, any message deemed to be an advertisement or telemarketing communication would be a violation.[14]

The TCPA defines “advertisement” as “any material advertising the commercial availability or quality of any product, goods, or services” and defines “telemarketing” as “the initiation of a message for the purposes of encourages the purchase or rental of, or investment in, property, goods, or services.”[15] The Plaintiff  was able to survive a Fed. R. Civ. P. 12(b)(6) motion to dismiss and is now tasked with proving that the message constituted an advertisement or telemarketing communication and violated the TCPA.[16]

The Text is an Advertisement

The court should find the text message sent from the Defendant to the Plaintiff constituted an advertisement. Relying on the definition from the Telephone Consumer Protection Act and the delivery restrictions applied to that act, the invitation to download the Defendant’s mobile application should be considered an advertisement and thus a violation of the TCPA.

The words “download our app here” included in the text message from the Defendant to the Plaintiff are, at a minimum, an introduction to an advertisement. The message invites the consumer to download the Defendant’s mobile application (“app”) where he or she can access discounts, sales, and descriptions of the Defendant’s product. Though this information may not be included in the text message itself, the link to the mobile app where this information can be found and the invitation to download the app constitutes an introduction to an advertisement. Under Section 47 C.F.R. § 64.1200(a)(2), a text or call that includes or introduces an advertisement…may only be sent with the consumer’s express written consent.[17] The text message to the Plaintiff introduced the Defendant’s mobile app, where information about the Defendant’s product can be found. Therefore, if the Defendant’s mobile app is considered an advertisement, the message was a violation.

The question then falls on whether the Defendant’s mobile app should be considered an advertisement. The Defendant’s argument focused on the text message sent to the Defendant, but failed to address the mobile app the text introduced. The Defendant argued that the text message itself does not fall under the TCPA definition of the word “advertisement,” which is likely true. However, that defense ignores the fact that because the text message introduces the Defendant’s mobile application to the recipient, the qualification of the mobile app as an advertisement is equally important. To determine if the mobile app is an advertisement within the TCPA, it is most appropriate to look at the definition within the Act. The TCPA defines an advertisement as “any material advertising the commercial availability or quality of any product, goods, or services.”[18] The Defendant’s mobile app includes maps to nearby Häagen-Dazs stores, lists of the products offered, and a description of the quality of the products made by the Defendant.[19] These features of the mobile app fall under the TCPA definition of advertisement.

The defense could argue that their message is not a violation of the TCPA because the Plaintiff gave her implicit consent when she offered the cashier her phone number. However, this argument overlooks an important part of the consent exception built into the act. To obtain consent to send a message or call to a cell phone, the sender only needs to get verbal or implicit consent, but to send a message that constitutes an advertisement, the sender must have explicit written consent from the recipient.[20] Since the message received by the Plaintiff should advertisement under the TCPA and since she clearly did not give written consent, the consent exception does not apply. If the Defendant wanted to send a message that introduced an advertisement to the Plaintiff, they should have obtained explicit written consent either through an initial text seeking consent to advertise or a written contract signed when the cahier took the Plaintiff’s phone number. If, however, the court rules that the mobile application does not constitute an advertisement, then the Plaintiff’s implicit verbal consent is enough for the defense to have sent the text message.

Though the court will likely find that the Defendant violated the TCPA, what is the harm? The Plaintiff received one text message. Who cares? It is easy to take this approach and see this case as one small incident with little to no damage. However, the greater importance of the case is the slippery slope that can develop if small exceptions, like one text message, are ignored. If courts begin to set precedent that allows businesses to freely use private contact information, it can quickly lead to an avalanche of unwanted advertising or pseudo-advertising to consumers. Once one text message is allowed, there is nothing to stop businesses from sending unlimited messages to consumers.

Conclusion

As reward programs such as the one created by the Defendant become more and more popular and technology develops to support them, there are an increasing number of ways consumers can be reached and targeted by advertisements. There are clear benefits to these programs and many consumers enjoy the ability to build up points and earn rewards for their spending. However, at the same time it is important for the courts, legislature, and consumers to continue to address the relevant communication restrictions that should come with these programs. Consumers must also be aware of exactly what they are agreeing to when they join these programs and businesses should be clear about how they are going to use the consumer’s contact information. This clarity can be achieved through express agreements and written consent. Customers interested in receiving information and advertisements from the businesses like Häagen-Dazs should be offered the opportunity to do so. Meanwhile, consumers who are not interested in exposing themselves to the hidden costs of the reward programs should be able to easily and explicitly refuse consent.

[1] See Spencer Weber Waller, The Telephone Consumer Protection Act of 1991: Adapting Consumer Protection to Changing Technology, 26 Loyola Consumer L. Rev. 343, 352 (2014).

[2] See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 F.C.C. Rcd. 14014 (July 3, 2003).

[3] Spencer Weber Waller, supra at 353.

[4] Id.

[5] San Pedro-Salcedo v. Haagen-Dazs Shoppe Co., LEXIS 168532 1,4 (U.S. Dist. 2017).

[6] Id.; When the act refers to a call, this includes any communication to the device including a telephone call or text message.

[7] Id. citing Daniel v. Five Stars Loyalty, Inc., 2015 U.S. Dist. LEXIS 159007, 2015 WL 7454260

[8] San Pedro-Salcedo, LEXIS 168532 at 4.; (emphasis added).

[9] Id. (emphasis added).

[10] San Pedro-Salcedo, LEXIS 168532 at 2.

[11] Id.

[12] Id. at 3.

[13] Id. at 5.

[14] Id. at 7.; The issue of whether an autodialer was used will also be relevant to the analysis at trial, but that information is not currently known as discovery as not yet taken place. However, that information is not relevant for the purposes of the question posed here.

[15] San Pedro-Salcedo, LEXIS 168532 at 5.

[16] Id. at 9.

[17] Id. at 4.; (emphasis added).

[18] San Pedro-Salcedo, LEXIS 168532 at 5.

[19] Information obtained by downloading the Häagen-Dazs mobile application.

[20] San Pedro-Salcedo, LEXIS 168532 at 4.; (emphasis added).

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s