Advisory opinion concluding that the Telemarketing Sales Rule generally imposes no restrictions on the legitimate fundraising activities of nonprofit organizations

1154 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	120F.T.C.
Re: 	The applicability of the Telemarketing Sales Rule -- the
Telemarketing Rule generally imposes no restrictions on
the 	legitimate 	fundraising 	activities 	of 	nonprofit
organizations.
[American Telephone Fundraisers Association, Inc., PIR #]
December 15, 1995
Dear Mr. Paper:
This letter responds to your request on behalf of the American
Telephone Fundraisers Association, Inc. for an advisory opinion
concerning the applicability of the Telemarketing Sales Rule, 16 CPR
Part 310, to fundraising telephone calls made by for-profit companies
on behalf of nonprofit organizations. The Association seeks advice
on the scope of the Rule's coverage as it may apply to fundraising
activities of Association members that involve the use of the
telephone.
Although the Telemarketing Sales Rule does not apply to entities
over which the Commission lacks jurisdiction, it does apply to for
profit 	telemarketers 	acting 	on 	behalf of such 	entities. 	The
Commission's view, however, is that telephone fundraising activities
on behalf of nonprofit organizations will constitute a "plan, program
or campaign which is conducted to induce the purchase of goods or
services." 	As discussed below, this means that the Rule ordinarily
imposes 	no 	restrictions 	on 	legitimate 	fundraising 	activities
undertaken on behalf of nonprofit organizations.
The Telemarketing Act states that, "[N]o activity is outside the
jurisdiction of [the FTC] Act shall be affected by this Act." Section
6(a) of the Telemarketing Act, Pub L. No. 103-297 (to be codified at
15 U.S.C. 6105(a)). Therefore, because the FTC Act does not apply
to any entity that is not "organized to carry on business for its own
profit or that of its members," neither does the Telemarketing Act or
the Telemarketing Sales Rule. See 15 U.S.C. 44; Community Blood
Bank v. FTC, 405 F.2d 1011 (8th Cir. 1969). The Rule, like the FTC
Act, however, does apply to a company acting for profit even when
it is providing services to a nonprofit organization. 	Statement of
Basis and Purpose, Telemarketing Sales Rule, 60 Fed. Reg. 43,842,
at 43,843 (Aug. 23, 1995).

AMERICAN TELEPHONE FUNDRAISERS ASSOCIATION, INC.I 155
1154 	Advisory Opinion
The Rule's applicability to fundraising telephone calls made by
for-profit companies depends on whether such calls fall within the
definition of "telemarketing." The Rule defines telemarketing as a
"plan, program or campaign which is conducted to induce the
purchase of goods or services." 16 CFR 310.2(u). This language is
identical to the pertinent section of the Telemarketing Act. Section
7(4) (to be codified at 15 U.S.C. 6106(4)). Thus, the critical question
in determining coverage under the Rule is whether a call is conducted
to induce a "purchase of goods of services."
The Commission's understanding is that telephone fundraising on
behalf of nonprofit organizations is not, in fact, typically undertaken
as part of a "plan, program or campaign ... conducted to induce the
purchase of goods or services" (emphasis added). This is true despite
the fact that fundraising campaigns often involve the incidental
provision of goods or services, such as premiums, memberships, or
other incentives for donations. 1 Legitimate fundraising activity is
conducted primarily to elicit donations and not to induce purchases.
Even when donors receive gifts, premiums, memberships or other
incentives, representatives of the non-profit sector have advised the
Commission that legitimate charities generally do not conduct
telephone solicitations in which the stated or actual value of goods or
services offered exceeds the amount of a donor's payment. 	The
Commission's enforcement experience suggests 	that fraudulent
telemarketers, 	in 	contrast, 	obtain 	money 	from 	consumers 	by
promising goods or services with inflated values as consideration for
smaller "donations."
Thus, the Commission concludes that only if goods or services
offered in a covered telemarketing telephone call as an inducement
for the consumer's payment have an actual or claimed value equal to
or greater than the amount of the donor's payment, is such a call
conducted for the purpose of inducing a purchase. 	Consequently,
only calls 	of that nature 	would fall 	within the definition of
"telemarketing" and be subject to the applicable requirements of the
Telemarketing Sales Rule. 	The Commission's construction of the
term "telemarketing," as defined in the Act and the Rule, is fully
consistent with the legislative purpose of the Telemarketing Act. The
Section l 70(f)(8) of the Internal Revenue Code provides that contributions of more than $250
are eligible charitable deductions for the donor only where the donee organization has provided a
description and good faith estimate of the value of any goods or services provided as consideration, in
whole or in part, for the donation. 26 U.S.C. 170(f)(8). In addition, a taxpayer may claim a deduction
only for the difference between a payment to a charitable organization and the market value of any
benefit received in return. 3 Fed. Tax Serv. (CCH) A:17-41[4] (1995).

1156 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	120F.T.C.
Commission's interpretation permits efficient interdiction of fraud
without encumbering the legitimate use of telemarketing by sellers of
good or services or by non-profit entities. In sum, the Telemarketing
Rule generally imposes no restrictions on the legitimate fundraising
activities of nonprofit organizations.
As is true of all Commission advisory opinions, this letter is
limited to the proposed conduct described in the request. The
Commission retains the right to reconsider the questions involved,
and with notice to the requesting party in accordance with Section
l.3(b) of the Commission's Rules of Practice, 16 CFR l.3(b), to
rescind or revoke its opinion should be proposed conduct result in
significant consumer injury, the purposes of the conduct be found not
to be legitimate, or the public interest so require.