FTC Settles With Alcazar for Alleged Telemarketing Sales Rule Violations

The Federal Trade Commission announced that it reached a proposed settlement for a TCPA lawsuit in the second action of its kind against a Voice over Internet Protocol (VoIP) provider over allegations that the company assisted and facilitated robocalls in violation of the Telemarketing Sales Rule.

The FTC filed its complaint on Dec. 3, 2020 against Alcazar Networks Inc. and its owner, Gavin Grabias in the U.S. District Court for the Middle District of Florida, alleging that the VoIP provider and its owner “assisted and facilitated violations” of the Telemarketing Sales Rule by knowingly providing services to companies that made calls to consumers who were on the National Do Not Call Registry, spoofed caller IDs, and delivered prerecorded messages.

The FTC asserted that the nationwide VoIP provider knew, or “consciously avoided knowing” about the alleged illegal robocalls and demonstrated a pattern of facilitating Telemarketing Sales Rule violations.

Specifically, the FTC contends that one of Alcazar’s customers, Derek Bartoli, made over 50 million illegal calls with the VoIP provider’s services. Purportedly, Alcazar knew that Bartoli was using its lines to make the calls which were facilitated between December 2017 and May 2018. According to the action, Alcazar informed Bartoli several times about complaints made from his account. Nonetheless, the VoIP provider continued to allow the customer to utilize its services.

The complaint also asserts that India based company, E. Sampark, made fraudulent calls displaying 911 on the caller ID and impersonated the Social Security Administration to solicit money using Alcazar’s services. The FTC contends that Alcazar had “several specific indications” of the spoofed 911 calls and allowed thirteen others to also dial calls that would reflect 911 on the recipient’s Caller ID.

The Settlement Terms

Under the terms of the proposed settlement, Alcazar would be required to take measures to block calls that display 911 or other emergency numbers on the caller ID and screen customers before allowing them to use the company’s VoIP services. If customers didn’t pass the screening process, Alcatraz would have to terminate the business relationship.

Alcatraz would also be required to authenticate all calls made after June 30, 2021 under the STIR/SHAKEN Framework — technology that confirms caller IDs are legitimate before the call gets to the consumer.

Additionally, the settlement imposes a $105,562 monetary judgment which must be paid to the FTC within seven days of the settlement’s entry.

FTC Commissioner Christine S. Wilson said in a statement, “Combatting the scourge of illegal robocalls remains a top priority for the Commission. VoIP service providers play a significant role in the telemarketing and robocall ecosystem, helping ‘bad actors to place millions or even billions of calls, often from abroad, at very low cost, and in ways that are difficult to trace.’” She continued, “This case sends a strong signal to the market that VoIP providers cannot knowingly provide substantial assistance to illegal robocallers harassing Americans with unwanted calls.”

What is the Telemarketing Sales Rule?

The FTC’s Telemarketing Sales Rule is a law that helps protect consumers from the deceptive and abusive practices that may be committed by telemarketers by imposing a number of requirements on them.

Importantly, the rule prohibits businesses from making misrepresentations and are required to make disclosures about their identity and the services they provide. To safeguard consumers’ privacy rights, the rule requires that telemarketers transmit accurate numbers to caller ID.

While most prerecorded messages are not allowed under the rule, there is an exception for those that are solely informational in nature.

Pursuant to the Telemarketing Sales Rule, telemarketers are not permitted to call consumer before 8 a.m. and after 9 p.m. Telemarketers are also barred from making calls to those on the National Do Not Call List.

The Telemarketing Sales Rule Case is Federal Trade Commission v. Alcazar Networks Inc., et al., Case No. 6:20-cv-02200-PGB-DCI in the United States District Court for the Middle District of Florida.