Attorney General Says Proposed Order In Retail Supplier Complaint Case Would Create "Loophole" In Marketing Oversight, Compliance
January 25, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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The Consumer Protection Division of the Office of the Attorney General of Maryland (the 'Division') filed an amicus brief on a proposed order in a Maryland PSC complaint case addressing alleged violations by SmartEnergy Holdings d/b/a SmartEnergy, in which the Division alleged that the findings of a Public Utility Law Judge would create a "loophole" with respect to telemarketing and related disclosure requirements
As first reported by EnergyChoiceMatters.com (story here), the proposed order, in addressing the alleged violations of the Maryland Telephone Solicitations Act (MTSA), notes that SmartEnergy contends that its telephone transactions do not constitute "telephone solicitations" because the transactions are not initiated by outbound calls from SmartEnergy; instead, the telephone calls are inbound from the consumers in response to direct mailings.
The Public Utility Law Judge agreed, stating that, "because the solicitations began with something other than a phone call to the consumer from SmartEnergy, the transactions do not constitute telephone solicitations within the purview of the MTSA."
The Division argued that the Public Utility Law Judge erred in deeming that a deceptive advertisement, as allegedly used by SmartEnergy, can meet the exemption under the MTSA which provides that the MTSA does not apply to cases in which the customer called the merchant pursuant to an examination of marketing materials. A deceptive advertisement, the Division argued, does not provide a, "description of the goods or services being sold," as required for the exemption to apply
The Division said it, "has an interest in this case because it is responsible for the enforcement of Maryland’s consumer protection laws, including the MTSA and the Consumer Protection Act (the 'CPA'), Md. Code Ann., Com. Law § 13-101, et seq. (which, at § 13-301(14)(xiv) makes it an unfair, deceptive, or abusive trade practice to violate the MTSA) and the PULJ incorrectly interpreted the MTSA’s definition of 'telephone solicitation,' a term that describes the kinds of transactions that are covered under the statute’s consumer protections, as excluding telephonic sales solicitations that begin 'with something other than a phone call to the consumer.'"
The Division alleged, "When it is applied here, where (according to the PULJ) the relevant sales transactions 'began' with SmartEnergy sending false and misleading mailers to consumers that tricked them into calling SmartEnergy, rather than with SmartEnergy calling the consumers first, the absurd result of the PULJ’s holding is to absolve SmartEnergy from having had to comply with the requirements of the MTSA and CPA because of SmartEnergy’s own deceptive conduct. Applied more broadly, the PULJ’s holding, which is contrary to the Division’s long-standing interpretation of the MTSA and its enforcement practices, creates a baseless, yet significant, loophole in the statute’s coverage that allows any number of deceptive telemarketing scams to escape liability under the MTSA. As explained further below, beyond the obvious fact that these unreasonable results diverge sharply from the MTSA’s legislative purpose of protecting consumers against unscrupulous telemarketers, the PULJ’s holding must be reversed as a matter of law, at the least, because it irreconcilably conflicts with the MTSA’s plain meaning, and improperly renders certain of its provisions 'superfluous or nugatory.'"
The Division argued that, "the MTSA’s definition of 'telephone solicitation' includes sales in which the consumer calls the merchant."
The Division said, "The MTSA defines a covered 'telephone solicitation' as 'the attempt by a merchant to sell or lease consumer goods, services, or realty to a consumer located in this State that is: (1) Made entirely by telephone; and (2) Initiated by the merchant.' MTSA, § 14-2201(f). The plain language of this definition covers any situation in which a merchant is the instigator of an effort to sell consumer goods, services, or realty over the telephone, regardless of which party ultimately places the phone call. And, to the extent that there may be some indeterminate residual ambiguity, it is dispelled completely by reading the statute in its entirety."
"MTSA section 14-2202(a)(5) creates a narrow exception to the definition’s otherwise broad coverage for those transactions in which a 'consumer purchases goods or services pursuant to an examination' of a merchant’s marketing materials containing information that clearly identifies the merchant and its location, a complete description of the goods or services being sold, and a full explanation of any limitations or restrictions on the offer. Significantly here, while this exemption specifically recognizes that consumers who examine marketing materials with the requisite information are not covered under the MTSA, the exemption additionally conversely acknowledges by implication that the MTSA covers consumers who purchase goods pursuant to the examination of marketing materials that fail to comply with § 14-2202(a)(5)’s requirements. Explained differently, if the MTSA did not cover transactions in which consumers purchase products over the phone 'pursuant to' their examination of marketing materials, there would be no reason for the exception in the first place," the Division said
"The only reasonable meaning of a transaction in which a 'consumer purchases goods or services pursuant to an examination' of marketing materials is a transaction in which the consumer first reviews the materials, and then, enticed by their content, subsequently calls the relevant merchant. Importantly, this is fully consistent with the definition of 'telephone solicitation,' which is easily understood to encompass circumstance in which a merchant has 'initiated' contact with a consumer via marketing materials (consistent with MTSA, § 14-2201(f)(2)), and the relevant sales attempt, i.e., the one in which the relevant sale was made, is conducted 'entirely' over the phone (consistent with MTSA, § 14-2201(f)(1)). Thus, under the plain meaning of its terms, the MTSA applies in scenarios that begin with something other than a merchant’s phone call to the consumer, and for this reason alone the PULJ’s holding must be reversed," the Division said
"The PULJ’s holding that 'transactions do not constitute telephone solicitations within the purview of the MTSA' if they 'began with something other than a phone call to the consumer,' Proposed Order ¶33, also improperly renders the exception in § 14-2202(a)(5) irrelevant. Specifically, the PULJ’s holding excludes from the MTSA’s coverage all transactions in which a consumer has called a merchant after examining marketing materials—the very transactions to which the exception in § 14-2202(a)(5) applies. Thus, if the PULJ’s decision is sustained, § 14-2202(g) would serve no purpose because the exception from the MTSA that it creates would apply only to a set of transactions that would not be covered under the MTSA in the first instance. Not only does this result make no sense on its face, the PULJ’s holding must be rejected as a matter of law because it is directly contrary to the inflexible rule of statutory construction that courts must interpret statutes so that 'no word, clause, sentence or phrase is rendered superfluous or nugatory,'" the Division said
"Nor does the PULJ’s holding have any support in the plain language of the MTSA. Although the PULJ provided no coherent explanation for its decision, what appears to have happened was that the PULJ (as SmartEnergy had argued that it should) conflated the requirement in § 14-2201(f)(1) that the operative sales attempt must be 'entirely over the phone,' and the requirement in § 14-2201(f)(2) that the sales attempt must have been 'Initiated by the merchant,' to create a new requirement under which covered sales must be 'initiated in a phone call made to the consumer by the Merchant.' Rather than a permissible interpretation of the statute’s plain meaning, this is a rewriting of the statute to say something other than what it actually says that must be rejected out of hand. It is black letter law that a court 'may neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute.' Carmel Realty, 395 Md. at 318. Courts are additionally prohibited from making 'forced' or overly 'subtle' interpretations of statutory language that 'limit or extend' the statute’s application. Id. Thus, even assuming that the PULJ found some minor unexplained ambiguity in the definition of 'telephone solicitation,' the PULJ’s holding, which drastically restricts the MTSA’s application, must be rejected in favor of the far more natural interpretation that the MTSA covers consumer calls to merchants," the Division said
The Division alleged, "Applying the PULJS’s holding to the facts of this case demonstrates well how it renders § 14-2202(a)(5) superfluous and forces unwarranted and absurd limits on the MTSA’s coverage. SmartEnergy sent postcards to consumers that it had designed to falsely appear to have been sent from the consumers’ regular energy provider, Baltimore Gas and Electric ('BGE'), that misleadingly promised a free month of electricity and other costs savings, and that were otherwise devoid of the information necessary for them to qualify for the exception in § 14-2202(a)(5). In addition to being unclear about who they were from, rather than providing a fair description of SmartEnergy’s services and the terms of the offer, as is required to invoke the exception, the post cards cagily avoided clearly explaining that SmartEnergy is an energy provider and that to take advantage of the promotions the consumer would have to switch to SmartEnergy’s services, and failed to set forth the promotions’ restrictions and limitations such as, among other things, that the free month of energy was contingent on the consumer both signing up for 'rate protection' and retaining SmartEnergy as their supplier into the eight month of service. See Ex. A (Exhibit SMB-6 to the Direct Testimony of Susan M. Baldwin, pgs. 6-18). Then, in a classic bait-and-switch tactic, SmartEnergy subjected those unwitting consumers who were tricked into calling the number that SmartEnergy provided on the postcard to a pressurized and highly misleading sales pitch aimed at convincing them to switch their energy service from BGE’s to SmartEnergy’s. (Ultimately, SmartEnergy’s services were much more expensive)."
"Nonsensically, the PULJ’s holding that 'telephone solicitations' cannot begin 'with something other than a phone call to the consumer,' absolves SmartEnergy from having had to comply with the MTSA’s strictures because of its deceptive practice of using misleading postcards to con consumers into calling the company. Moreover, the very facts that, according to the PULJ, supposedly take the transactions outside of the MTSA’s coverage (that consumers called SmartEnergy pursuant to examination its misleading marketing materials), are the exact same facts that in reality bring the transactions under the purview of § 14-2202(a)(5). Aside from the fact that the Maryland Legislature could not plausibly be said to have intended that companies could exempt themselves from the MTSA by compounding one dishonest tactic upon another, this blatant inconsistency with the MTSA is fatal to the PULJ’s holding," the Division said