By Liz Clark Rinehart, Michael A. Munoz & Miriam Weinstock

Last month, the Supreme Court of Maryland delivered a pivotal ruling defining the scope of the Maryland Telephone Solicitations Act (MTSA), holding that the act extended to inbound calls initiated by consumers who engaged with merchant advertisements. The Maryland Supreme Court also confirmed that the Maryland Public Service Commission can enforce the MTSA against covered entities.

The case, In the Matter of Smart Energy Holdings, LLC D/B/A SmartEnergy, originated in response to customer complaints to the Public Service Commission’s Consumer Affairs Division (CAD) alleging that their bills were excessive and that they were unable to cancel their service with SmartEnergy, a provider of 100% green energy. After proceedings before an administrative law judge, the Public Service Commission held:

  • SmartEnergy’s postcards had misled consumers into believing that SmartEnergy was affiliated with their current energy company
  • Neither the postcards nor the customer service representative scripts adequately disclosed the terms of the discounts being promised
  • SmartEnergy had engaged in deceptive conduct when consumers attempted to cancel their services

The Public Service Commission concluded that the record warranted the cancellation of all SmartEnergy customer enrollments in Maryland that occurred over the phone, the return of all such customers to utility standard offer service, and the issuance of refunds to affected customers for the difference between SmartEnergy’s rate and the customers’ utilities’ standard offer service.

Before the Maryland Supreme Court, SmartEnergy argued:

  • The Public Service Commission lacked authority to apply the MTSA
  • SmartEnergy properly relied on advice from the CAD that the MTSA did not apply to inbound calls
  • The Public Service Commission’s findings were not supported by substantial evidence because it improperly extrapolated from 34 consumer complaints

The Maryland Supreme Court rejected all three arguments. First, it found that the plain language of the Public Utilities Article permits the Public Service Commission to investigate and impose remedies for violation of Maryland’s consumer protection laws. Next, the opinion affirmed the Public Service Commission’s conclusion that the MTSA applies to inbound calls when the calls are placed in response to marketing materials that do not contain statutorily required disclosures. These include:

  • The name, address, and telephone number of the merchant
  • A description of the goods or services being sold
  • Any limitations or restrictions that apply to the offer

Additionally, the opinion concluded that SmartEnergy’s reliance on communications from CAD was misplaced, emphasizing that administrative officers like CAD lack the authority to change laws or grant exemptions. The Maryland Supreme Court further explained that the CAD letters were generic, not the result of a formal rule-making process, and that SmartEnergy’s focus on a few CAD letters ignored other letters supporting the Public Service Commission’s stance on applying the MTSA to inbound calls.

Finally, although SmartEnergy argued that the Public Service Commission’s findings were not supported by substantial evidence because they were based on extrapolations from only 34 complaints out of the 104,000 prospective customer calls it received, the opinion explained that the following constituted substantial evidence:

  • The postcard’s omission of license numbers and deceptive language implying an affiliation with utility companies
  • Audio recordings of the sales script demonstrating deceptive practices and failure to disclose important terms and restrictions
  • Testimony and recordings revealing recurring instances where agents failed to follow the cancellation protocol training they had received or failed to provide accurate information and answer questions when customers called

The Maryland Supreme Court also rejected SmartEnergy’s extrapolation argument, contending that all of the calls were based on the same script, so the 34 calls were representative, and that SmartEnergy possessed all of the call recordings and could have presented opposing samples. Although focused on energy suppliers, the ruling is instructive for all businesses engaging in telemarketing in Maryland, and for any business that relies on agency interpretation of appropriate conduct. Including proper disclosures in marketing materials and adequately training and monitoring employees should be part of every telemarketer’s best practices. We will be monitoring how the opinion impacts regulatory investigations and litigations.

For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. To learn more about Venable’s Advertising Law services, click here or contact one of the authors. And listen to the Ad Law Tool Kit Show—a new podcast from Venable.