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Another Court Rejects “Commercial Pretext” Theory for TCPA Violations

Invites to free webinars are not unsolicited advertisements, says Maryland federal court

The Telephone Consumer Protection Act (TCPA) prohibits sending an “unsolicited advertisement” to a fax machine, absent certain conditions. An “unsolicited advertisement” is “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person” without prior permission.

On its face, the TCPA’s definition seemingly would not include invitations to free seminars or webinars.  However, in 2006 the Federal Communications Commission (FCC) issued an order (2006 FCC Order) interpreting “unsolicited advertisement” to include “facsimile messages that promote goods or services even at no cost . . . .” The FCC’s interpretation took direct aim at free seminars, noting that “[i]n many instances, ‘free’ seminars serve as a pretext to advertise commercial products and services.” Thus spawned the “commercial pretext” theory, which the plaintiff’s bar used to frame promotions for free seminars, products, and services as TCPA violations.

Not all district courts agreed with the FCC’s interpretation. But until recently, the 2006 FCC Order—and numerous other FCC interpretations—were absolutely binding on federal district courts under the Hobbs Act (or, formally, the Administrative Orders Review Act). The Hobbs Act essentially strips district courts of the ability to reconsider or alter certain agency orders, and ten Circuit Courts of Appeal held that the Hobbs Act applied to most FCC TCPA orders.   

That all changed in 2019 when the Supreme Court considered the 2006 FCC Order in PDR Resources.  While the Supreme Court did not completely foreclose Hobbs Act applicability to any FCC ruling, its decision made clear that interpretive rulings—as opposed to final legislative rulings—should not receive Hobbs Act authority. The Supreme Court remanded to the Fourth Circuit, where the FCC took another hit: not only did their interpretive rulings not receive Hobbs Act authority, but they were entitled to the lowest level of deference from the courts (aka, Skidmore deference). Under Skidmore deference, a court essentially can give whatever weight it deems appropriate—or not weight at all—to an agency ruling.

When PDR Resources finally circled back to the district court, it determined that the 2006 FCC Order deserved no deference because “[b]y its terms, the TCPA requires a commercial element to find that an unsolicited fax is an advertisement.” In the absence of statutory ambiguity, the court need not even look to the 2006 FCC Order to determine the TCPA’s meaning. Even if it considered the 2006 FCC Order, the court still would have given no deference, noting that it “has a striking absence of reasoning regarding its categorical conclusion that faxes promoting goods and services even at no cost are unsolicited advertisements under the TCPA.”

This past week in Med. V. Puls8, a Maryland district court reached the same conclusion on the 2006 FCC Order. Despite acknowledging that the TCPA gives businesses a loophole to advertise using complimentary products or events, the court determined that “FCC’s broad-brush approach to closing the loophole lacks any statute-based reasoning, evidentiary-support, or explanation of the process the agency employed to reach its seemingly conclusory determination, leaving the order entitled to no deference.”  The court also reaffirmed that the intent to promote a company’s for-profit business through a complimentary product or offer do not “create the required underlying commercial nexus where it does not exist within the fax at issue.”  

The FCC’s “commercial pretext” theory—once widely accepted as binding on federal courts—increasingly appears to be afterthought entitled to no deference. Looming larger, however, is what other FCC interpretive rulings district courts will cast aside. 

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