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Columbia House Settles Do Not Call Charges

July 15, 2005

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The Columbia House Company, a well-known direct marketer of home entertainment products, has settled Federal Trade Commission charges that it violated federal law by calling existing or past subscribers of its home entertainment clubs after the subscribers had placed their telephone numbers on the National Do Not Call Registry, and after the subscribers had made specific requests to the company that they not be called.

Columbia House will pay a $300,000 civil penalty and is barred from making illegal telemarketing calls in the future.

Columbia House markets its home entertainment products to consumers through a variety of membership clubs, including a DVD club, a video club, and music clubs. Consumers who join the clubs receive a number of DVDs, CDs, or videos at a reduced price if they sign on to purchase a designated number of additional products over the next two years.

According to a complaint filed by the Department of Justice on the FTC�s behalf, Columbia House conducts telemarketing campaigns to existing and former members of its home entertainment clubs, soliciting former members to rejoin one of its clubs and existing members to purchase additional products.

Under the Do Not Call Rule, a company may call consumers whose telephone numbers are on the National Registry if the company has an established business relationship with the consumer, unless the consumer has asked not to be called.

Companies with whom a consumer has an existing business relationship may call the consumer for up to 18 months after the consumer�s last business transaction with the company. In addition, since 1995, the FTC�s Telemarketing Sales Rule (TSR) has required companies to keep a company-specific do not call list and to honor consumers� specific requests that they not be called. Such a request must be honored even if the company has an established business relationship with the consumer. Companies are not permitted to call former customers whose numbers appear on the National Registry after the 18-month period has elapsed.

According to the FTC, from October 2003 through March 2004, Columbia House placed tens of thousands of calls to former members whose phone numbers were registered on the National Registry, after the company no longer had an established business relationship with those members as defined by the law. The FTC�s complaint further alleged that, since December 1995, Columbia House violated the company-specific do not call provision of the TSR by calling consumers who had previously asked that they not be called. The FTC�s complaint stated that although the company had implemented procedures to attempt to prevent future calls to such consumers, those procedures had proven ineffective in preventing the alleged calls.

The stipulated judgment and order bars Columbia House from calling any consumer who has previously asked not to be called. It also prohibits Columbia House from calling any consumer whose number is registered on the National Do Not Call Registry, unless the company has received a request, in writing, from the consumer permitting future calls; or the company has an established business relationship with the consumer and the consumer has not previously requested to be removed from the company�s call list. The order further requires Columbia House to pay a $300,000 civil penalty. The order contains recordkeeping provisions to assist the FTC in monitoring the company�s compliance.

The FTC warned businesses that, before calling a former customer based on an established business relationship, they must ensure that the relationship has not expired and that the customer has not made a specific request not to be called.

Entities that hire third parties to telemarket on their behalf are responsible for ensuring that the telemarketers comply with federal law by downloading the appropriate area codes of data from the Registry; scrubbing their call lists every 31 days; making sure established business relationships are current before calling consumers whose numbers are registered; and honoring company-specific do not call requests.

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