Unknowingly violating the Telephone Consumer Protection Act (TCPA) is the latest litigation dragnet ensnaring cannabis companies. The TCPA is a consumer protection law that restricts telemarketing calls, unsolicited text message marketing, the use of automatic telephone dialing systems, and artificial or prerecorded voice messages. With TCPA penalties ranging from $500 to $1,500 per individual call or text and a lengthy four-year statute of limitations, it’s alarmingly easy for businesses to find themselves potentially facing millions of dollars in fines.
Industry concerns about the TCPA began percolating in 2018 when California delivery company Eaze Solutions Inc. faced a class-action lawsuit alleging violations from unsolicited text message marketing. Although the suit ultimately was forced into arbitration and dismissed by a federal judge in 2020, a slew of cannabis businesses of all sizes are facing or have faced similar lawsuits, some with the potential to bankrupt them.
There are three main reasons for the run on TCPA lawsuits targeting cannabis companies. First, there’s the perception the industry is flush with cash. Second, these types of suits often are considered “low-hanging litigation fruit” because they can be more expensive to defend in a trial than to settle out of court. Third, cannabis companies often unwittingly put a target on their back when marketing to younger consumers, whose preferred method of communication is text, by neglecting to cross the T’s and dot the I’s of legal consent.
To protect themselves, cannabis businesses should take these five important steps.
Obtain express written consent before initiating any email, phone, or text communication.
This should be done using a collection form that provides consumers with “clear and conspicuous” disclosures—that is, not hidden in six-point font or tucked away among obscure or unrelated information—about how their contact information may be used. Language should be vetted by an attorney to ensure inclusion of all legally required disclosures as well as terms and conditions that can help protect the company, such as an arbitration clause.
Many cannabis companies are creating trouble for themselves by contacting consumers who may voluntarily have provided the business with their phone number but did so using a collection form that had hard-to-find consent disclosures or lacked the required consent language. Businesses may also be vulnerable to lawsuits if they combine an opt-in message with a marketing message, as courts have found coupling the two does not meet TCPA legal requirements.
Vet and supervise third-party marketing providers.
“My marketing company was supposed to handle that” will not hold up as a defense in court if your business is sued for TCPA violations. It is your responsibility to ensure your marketing provider is aware of TCPA requirements and operates on behalf of your business in full compliance with relevant protocols. The same logic applies to purchasing call lists from third parties. Once a company has bought and used a calling list, the list—and legal responsibility—is theirs.
Create and preserve a list of customers who have requested not to be contacted.
In addition, establish and enforce a standard operational procedure that requires cross-checking the numbers on your marketing lists against those on the National Do Not Call List at specified intervals. Federal law requires callers making sales calls to personal phone lines to refrain from calling individuals who have added their phone number to the registry. If a consumer has registered their phone number but is still receiving unwanted calls or texts after the thirty-one-day grace period, legal action can be taken against the responsible company.
Maintain and update records of consent.
Keep track of consumers who have consented to receive communications from your business, including the exact type of communications to which they have consented—text, phone, and/or email.
Provide clear, simple opt-out instructions in each communication.
This is commonly something along the lines of “Stop2End” in text messages or a hyperlink to unsubscribe for email, but TCPA opt-out notice requirements vary by type of communication. If a consumer opts out of receiving subsequent contact, you must have a protocol in place to update your database accordingly.
The final and most important piece of advice is to retain an attorney to review your consumer marketing plans and craft the appropriate legal language for all communication platforms before you contact your first consumer. You can and should protect your business from the risk of TCPA litigation by adhering to rock-solid consent and disclosure protocols and demonstrating compliance via top-notch recordkeeping policies.
