The Ecommerce Innovation Alliance (EIA) was in Lansing, Michigan last week, engaging with various members of the Michigan legislature to discuss Senate Bill 351. This bill, which aims to regulate telephone solicitation sales and related conduct, is virtually identical to Senate Bill 1037, a similar “mini-TCPA” introduced last term that ultimately failed to advance. EIA has significant concerns that, if adopted as currently proposed, SB 351 could lead to a surge in litigation against legitimate businesses operating in Michigan and nationwide, rather than effectively targeting the actual bad actors behind scam calls and texts.

Understanding Senate Bill 351 and Its Potential Impact

Senate Bill 351, introduced by Senators Cavanagh, Anthony, Moss, McBroom, Victory, Chang, Polehanki, Klinefelt, Santana, Shink, Bayer, and Geiss, is formally known as the “telephone solicitation act”. It seeks to define the rights and duties of parties involved in telephone solicitation sales, regulate specific solicitations, empower state governmental officers, prohibit certain conduct, and prescribe civil sanctions and penalties. While well-intentioned, the EIA believes that its current provisions mirror the problematic aspects of other state-level “mini-TCPA” laws that have previously resulted in significant unintended consequences.

Our meetings in Lansing, which included representatives from Postscript and Podium, as well as former FCC Commissioner Michael O’Rielly, focused on the potential impact of such legislation, particularly on small and mid-sized businesses. Podium, for instance, serves over 1,000 brick-and-mortar businesses in Michigan that rely on SMS for local outreach, highlighting the broad reach of such legislation.

Here are the key areas where Senate Bill 351 raises significant concerns for EIA members and the broader e-commerce community:

• Overly Broad Definition of “Telephone Communication”: SB 351 defines “telephone communication” very broadly to include not only voice communications, but also text messages, graphic messages (SMS), images, photographs, and multimedia messages (MMS), including those transmitted via mobile applications. This expansive definition, which encompasses app-based features, creates considerable uncertainty for businesses and is inconsistent with existing federal telemarketing regulations.
  
• Inconsistent Auto-Dialer Definition: The bill’s definition of “ADAD” (Automated Dialing Announcing Device) includes any device or system used for automatically selecting or dialing telephone numbers. The EIA has consistently pointed out that such broad definitions go beyond the narrower interpretation of “autodialer” under the federal Telephone Consumer Protection Act (TCPA) after the U.S. Supreme Court’s 2021 Facebook v. Duguid decision. By creating a definition that could potentially encompass platforms designed to send messages only to consenting customers, SB 351 could impose unnecessary burdens on legitimate businesses, effectively creating another pathway for litigation that circumvents federal intent.
  
• Unworkable Requirements for Text Message Marketing: While SB 351 specifies that for text communications, the solicitor must state the name of the organization on whose behalf the call is initiated, previous iterations of such bills and ongoing concerns with other state mini-TCPAs include requirements like providing an individual sender’s first and last name or a voice-capable phone number in a text message. Such requirements are impractical for businesses that use short codes to message large lists of customers. Furthermore, imposing disclosure rules designed for voice calls onto concise text messages demonstrates a misunderstanding of the medium. We emphasized the need for clear, workable opt-out procedures for text messages.
  
• Excessive Damages and “Shakedown Lawsuits”: A significant concern is the bill’s provision allowing individuals who suffer a loss to recover actual damages plus reasonable attorney fees, or a statutory damage of $1,500.00 plus reasonable attorney fees, per violation. Each telephone communication can be considered a separate violation, and a single communication may generate multiple separate violations. This “litigation-centric model,” particularly with robust private rights of action and high statutory damages, has unfortunately proven to be a “cash cow” for plaintiffs’ lawyers under the federal TCPA, leading to crippling legal costs and settlements even for legitimate businesses. Our discussions with legislators highlighted how the “stacking of damages under state and federal law leads to absurd outcomes,” often hurting legitimate businesses trying to comply with the law rather than deterring bad actors.
  
• Location-Based Restrictions and CPNI Rules: SB 351 includes a “quiet hours” provision, prohibiting solicitations outside of 8 a.m. to 9 p.m. local time at the subscriber’s residence, unless there is express verifiable authorization. However, one of the primary hurdles for state laws is the technical impossibility for businesses to determine a mobile phone user’s real-time physical location due to federal Customer Proprietary Network Information (CPNI) rules. These rules strictly prohibit carriers from sharing sensitive location data with third parties, making it practically impossible for businesses engaged in nationwide communication to comply with location-based restrictions like quiet hours. This ambiguity can be “weaponized” against businesses, creating litigation risk for factors they cannot legally verify.
  
• Burden on Legitimate Businesses vs. Scammers: Critically, data indicates that “mini-TCPA” lawsuits are not primarily targeting scam artists, but rather are largely filed against legitimate businesses who had obtained consent but were unaware of a unique state-specific requirement. This litigation-heavy approach often “ensnare[s] legitimate businesses while bad actors remain elusive or indifferent to legal threats”.
  

EIA’s Recommended Path Forward: Aligning with the FCC’s Successful Strategy

During the legislative meetings, EIA shared with legislators how the focus of mini-TCPAs on private enforcement puts legitimate businesses under the threat of litigation without actually addressing the bad actors that are sending spam and scam messages into the United States from foreign countries.  We shared how the Federal Communications Commission (FCC) has fundamentally shifted its strategy to combat unwanted calls and texts, moving away from a primarily litigation-heavy model towards a “multifaceted attack” involving “technical and procedural changes within the telecommunications network itself”. This deep dive into technical controls has shown positive results, with consumer complaints regarding unwanted calls decreasing by more than 50% since 2020.

For state legislatures looking to make a real impact against scam calls and texts, the most effective path forward is to support and align with this successful technical fight, focusing state resources where they can be most effective:

1. Harmonize with Federal Efforts: If states adopt telemarketing laws, requirements should align with, rather than conflict with, existing federal law. This includes using consistent wording and phrasing as federal regulations for clarity. To avoid exacerbating lawsuit abuse, any statutory damages should be in the alternative, not in addition to, federal damages.
   
2. Support Law Enforcement and Prosecution of Scammers: Increase funding for state agencies, such as Attorney General offices and consumer protection divisions, dedicated to investigating and prosecuting illegal telemarketing and robocall operations. Resources should be provided for technical staff who can liaison with the Industry Traceback Group (ITG) and other industry partners. Supporting multistate task forces is crucial for pursuing enforcement against entities responsible for illegal traffic.
   
3. Enhance Consumer Education and Awareness Campaigns: Launch statewide campaigns to educate consumers on identifying scams, reporting them, and utilizing tools like apps or the centralized online portal for reporting unwanted calls and texts.
   
4. Ensure Transparent Reporting and Address Lawsuit Abuse: Require the Attorney General’s office to report annually on complaints received and actions taken against spam and scam calls and texts. This report should also recommend additional technical measures or resources and specifically propose efforts that are not likely to create litigation abuse.

These approaches focus on targeting the actual bad actors and illegal activities, leverage technical solutions aligned with the FCC’s successful strategy, and avoid creating unworkable burdens and litigation loopholes that ensnare legitimate businesses.

The EIA remains committed to working with Michigan legislators and all stakeholders to achieve a solution that effectively protects consumers while fostering innovation and growth within Michigan’s ecommerce sector. We will continue to advocate for a balanced approach that respects the realities of modern communication and avoids unintended negative consequences for businesses that serve their customers with consent.

Stay informed by visiting the EIA website for further updates on this critical issue.