******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Lawrence E. Strickling August 12, 1998 DA 98-1383 David J. Gilles, Esq. Assistant Attorney General State of Wisconsin Office of Consumer Protection 123 West Washington Avenue P.O. Box 7857 Madison, WI 53707-7857 RE: State of Wisconsin v. Minimum Rate Pricing, Inc. and Thomas N. Salzano, Case No. 98CV1228. Dear Mr. Gilles: This is in response to your May 13, 1998 letter requesting an informal staff opinion regarding the preemptive effect of the provisions of the Communications Act (Act) and related federal regulations on the State of Wisconsin's above-captioned suit against Minimum Rate Pricing (MRP). The State alleges that MRP has used deceptive and misleading oral representations to induce prospective customers to agree to change presubscribed long distance providers. The complaint charges that the defendants have violated various state consumer protection statutes and regulations in the course of telemarketing sales efforts directed at Wisconsin residents. We interpret your letter as seeking an informal staff ruling regarding only the preemptive effect of the Commission's regulations and Section 258 of the Act on the state laws at issue in your proceeding. For the reasons discussed below, and subject to the limitations noted, we conclude that the Act and the Commission's rules do not appear to have any preemptive effect on these state statutes. Background The Commission has rules in place to prevent unauthorized changes in primary interexchange carriers (PICs), a practice commonly known as "slamming." Commission rules and orders require, inter alia, that interexchange carriers (IXCs) verify changes of subscribers' long distance service carriers. IXCs must either obtain a signed letter of agency (LOA) or, if using telemarketing, undertake one of four telemarketing verification procedures before submitting PIC-change requests to local exchange carriers (LECs) on behalf of consumers. The telemarketing verification options are: (1) obtaining an LOA from the subscriber; (2) receiving confirmation from the subscriber via a toll-free number provided exclusively for the purpose of confirming change orders electronically; (3) using an independent third party to verify the subscriber's order; or (4) mailing an information package, also known as the "welcome package," that includes a postage-paid postcard which the subscriber can use to deny, cancel, or confirm a service order, and waiting 14 days after mailing the packet before submitting the PIC change order. In July 1997, the Commission proposed rules and sought comment on the implementation of Section 258, which was added to the Act as part of the Telecommunications Act of 1996. Section 258 makes it unlawful for any telecommunications carrier to "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." The section further provides that a telecommunications carrier that violates the Commission's verification procedures and that collects charges for telephone service from a subscriber shall be liable to the carrier previously selected by the subscriber in an amount equal to all charges paid by such subscriber after such violation. The Commission is currently considering the adoption of new rules in response to the comments received. The Commission thus has taken substantial steps to protect consumers and legitimate competition from slamming by regulating carriers' PIC change practices. These actions, however, have not been intended to displace complementary state efforts. In fact, as a general proposition, the Commission welcomes state efforts to prevent slamming. In general, the Commission will make a formal determination about whether specific state laws are preempted only after the development of an adequate record that clearly describes the specific state law to be preempted and precisely how that state law conflicts with federal law or obstructs federal objectives. Because you have requested an informal staff opinion regarding federal preemption, however, we next consider the Wisconsin state laws at issue in your complaint against MRP. The Complaint The State filed its complaint in Dane County Circuit Court, State of Wisconsin. In the complaint, dated May 13, 1998, and attached to your letter to the Commission, the state alleges that MRP has utilized untrue, deceptive, or misleading oral telemarketing in order to induce Wisconsin consumers to agree to subscribe to MRP's long distance service. The first claim for relief in the complaint alleges that MRP's sales statements and practices are in violation of Wisconsin's Telecommunications Sales Law. The second claim for relief in the complaint alleges that MRP's telemarketing sales program is in violation of Wisconsin's Home Solicitation Selling Law. The third claim for relief in the complaint alleges that MRP's failure to obtain affirmative orders for telecommunications services before billing for such services is in violation of Wisconsin's Telecommunications Sales Law. Analysis State law may be preempted by Congress through the proper exercise of its legislative powers, or by a federal agency acting pursuant to its congressionally delegated authority. Preemption may occur where state law conflicts with federal law or obstructs federal objectives, or where compliance with both federal and state law is physically impossible. Our interpretation of the Commission's regulations leads us to conclude that the state laws at issue in Wisconsin's complaint against MRP do not appear to conflict with the Commission's rules. The Commission's rules deter slamming by imposing specific verification requirements on interexchange carriers who submit orders to change consumers' long distance carriers. It appears that the Wisconsin laws at issue seek to deter slamming and other harmful actions through the regulation of marketing rather than through verification procedures. Therefore, based upon the information that you have provided, we find nothing in the language of any of the state law provisions named in the complaint that imposes specific verification requirements on carriers or otherwise contradicts Commission regulations. The first and third claims for relief in the complaint are based on Wisconsin's Telecommunications Sales Law. In the first claim for relief, Wisconsin alleges that MRP's sales statements and practices are in violation of Sections 100.207(2), 100.207(3)(a), and 100.207(4)(b) of Wisconsin's Telecommunications Sales Law. In the third claim for relief, Wisconsin alleges that MRP's failure to obtain affirmative orders for telecommunications services before billing for such services is in violation of Section 100.207(3)(a) of Wisconsin's Telecommunications Sales Law. Wisconsin's Telecommunications Sales Law prohibits unfair and deceptive practices generally with regard to the provision of telecommunications service. Section 100.207(2) of the Wisconsin Telecommunications Sales Law is entitled "Advertising and Sales Representations" and states in pertinent part: "[a] person may not make . . . any statement or representation with regard to the provision of telecommunications service . . . which is false, misleading or deceptive, or which omits to state material information with respect to the provision of telecommunications service that is necessary to make the statement not false, misleading, or deceptive." Section 100.207(3)(a) is entitled "Sales Practices" and states in pertinent part: "[a] person may not bill a customer for any telecommunications service that the customer did not affirmatively order unless that service is required to be provided by law, the Federal Communications Commission or the public service commission." Section 100.207(4)(b) is entitled "Collection Practices" and states in pertinent part: "[a] person may not unreasonably refuse to provide a detailed listing of the charges for telecommunications service upon request of a customer." Because these provisions of the Wisconsin law regulate marketing practices rather than impose verification requirements, compliance with both state and federal law is not impossible and there is no basis for federal preemption of the Wisconsin Telecommunications Sales Law. The Wisconsin Home Solicitation Selling Law, specifically Sections ATCP 127.02(1), ATCP 127.03(2)(b), and ATCP 127.03(3), is the basis for the second claim for relief in the complaint. Wisconsin's Home Solicitation Selling Law regulates generally the manner in which goods or services are sold at the residence or place of business of the buyer. Section ATCP 127.02(1) states in pertinent part: "[i]n a home solicitation sale every seller shall, at the time of initial contact or communication with the buyer, clearly and expressly disclose: the seller's individual name, the name of the business firm or organization he or she represents, and the identity or kind of goods or services he or she offers to sell." Section ATCP 127.03(2)(b) states in pertinent part: "[n]o seller engaged in making a home solicitation sale shall misrepresent . . . [t]he savings which will be accorded or made available to the buyer." Section ATCP 127.03(3) states in pertinent part: "[n]o seller engaged in making a home solicitation sale shall use any false, deceptive or misleading representations to induce a sale, or use any plan . . . which misrepresents the true status or mission of the person making the call . . ." The above-mentioned provisions place restrictions on the manner in which home solicitations are conducted, and do not appear to impose verification requirements, which, under Section 258, are within the authority of the Commission to promulgate. Because the state law provisions do not conflict with federal law, and compliance with both federal and state law is not impossible, preemption of the Wisconsin Home Solicitation Selling Law would not appear to be warranted. Furthermore, the Wisconsin statutes at issue do not obstruct the Commission's objectives. The State has alleged that, due to the defendants' oral statements and policies, the defendants have misled customers into switching their long distance carriers. As described above, the Commission's rules prohibit switching consumers' long distance carriers without proper authorization. Both state and federal law in this case have the effect of preventing slamming and, while utilizing different means to do so, are not incompatible. Therefore, these state statutes appear to promote rather than frustrate Commission objectives. Preemption may also occur when Congress, in enacting a federal statute, expresses a clear intent to preempt state law. Section 258 of the Act states that "[n]o telecommunications carrier shall submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." Section 258, however, does not express intent to preempt all state laws with regard to slamming. Section 258 states merely that, "[n]othing in this section shall preclude any State Commission from enforcing [the Commission's verification] procedures with respect to intrastate services," and does not, by its terms, appear to address the efforts of states to regulate the marketing of intrastate services. We conclude that the language of Section 258 does not preempt state efforts to prevent unfair and deceptive marketing practices that also have the effect of preventing or deterring slamming. Conclusion In sum, the staff's informal view is that the Commission's slamming rules do not appear to conflict with these Wisconsin laws that are designed to protect consumers from potentially deceptive practices relating to the marketing of telecommunications services, nor does Section 258 itself express an intent to preempt such laws. Accordingly, based on the information provided, we see no apparent justification for preemption of the state laws forming the basis of Wisconsin's suit against MRP. I hope this information is helpful and thank you for your interest in this matter. Please let us know if we can be of further assistance. Sincerely, Lawrence E. Strickling Deputy Chief Common Carrier Bureau