According to a report by the Finnish Competition and Consumer Authority (FCCA), telemarketing causes a great deal of harm and has few benefits to the vast majority of consumers. The majority of consumers would also be prepared to ban telemarketing altogether. According to the FCCA, telephone sales must be restricted, but in such a way that the functioning of the market does not suffer too much.
The FCCA has carried out an extensive research project in which it has studied the impacts of telemarketing on consumers and the functioning of the market. The agency has also assessed options for regulating telemarketing, including the benefits and drawbacks of the regulation.
Based on a survey mapping consumers’ views and experiences, consumers were very negative about telemarketing. More than 80 per cent did not like telemarketing or consider it a useful purchase method. Nearly three-quarters of responders felt that telemarketing interfered with their privacy and that telemarketers put pressure on them to buy goods or services. More than half were also worried that the telemarketer might mislead them. About two-thirds of respondents supported a total ban on telemarketing. The consumers’ views were overall more negative than in the Consumer and Telemarketing survey (in Finnish) carried out by the FCCA in 2017.
One explanation for the negative attitude is that almost half of all telesales orders had, in consumers’ opinion, been associated with problems or ambiguities. The most typical situation was that the contract, which the consumer thought was one-off or fixed term, turned out to be continuous. About one-fifth of consumers who had made a telesales purchase reported having to pay more for their order than had been agreed with the seller on the telephone.
The problems of telemarketing are increased by the fact that the sales situation comes as a surprise to the consumer and requires quick decision-making. The consumer then has limited opportunities to consider, compare alternatives and familiarise themselves with the information relevant to agreeing to a contract. Most respondents found it difficult to sign up to a contract over the phone.
According to consumers, the telemarketer did not always provide all the relevant and legally required information. Two-thirds of responders thought that telemarketers did not provide enough information about goods and services. More than half had not been informed of the seller’s contact details, and more than 40 per cent had not been given any information on their cancellation rights.
Tightening regulation on telemarketing is gaining consumer support
Telemarketing is currently allowed for individuals who have not specifically banned it. According to the FCCA report, this model causes a wide range of disadvantages and has only minor benefits for the vast majority of consumers. The self-regulation of the telemarketing industry and the services restricting telemarketing have also not sufficiently prevented problems.
One option would be to change the legislation so that the seller must receive a separate written confirmation from the consumer after a contract has been made on the phone. The consumer’s position would be improved because they would have the opportunity to consider the purchase without time pressure. This model could increase costs for businesses, but on the other hand, it could also reduce customer complaints, the burden on customer service, and reputational damage. The image of telemarketing could also improve, which could contribute to the functioning of the market.
Another option would be the so-called opt-in model where telemarketing would only be allowed to consumers who have given their prior consent. The Consumer Ombudsman has long been in favour of moving to this model, as consumers would then be better able to prepare for sales situations. The model is already in use in email and SMS marketing. Prior consent could reduce the sales and marketing opportunities of some companies and also their opportunities to enter the market, thus hampering the functioning of the market. However, there is no reliable research data on the impacts.
According to the FCCA report, there is strong consumer support for regulatory changes. As many as 81 per cent of consumers were in favour of telemarketing requiring their prior consent and 78 per cent were in favour of the companies requiring a written confirmation to a contract made over the phone. The Government Programme for 2019 also states that telemarketing will be restricted and more strictly regulated to protect consumers.
“Telemarketing causes so much harm to consumers that this cannot be ignored when assessing regulation. The majority of consumers do not want telephone marketing. Consumers should have the right to decide what kind of direct marketing they want to receive,” emphasises Consumer Ombudsman Katri Väänänen.
The review of telemarketing regulation is timely as the European Commission is preparing a regulation on privacy and electronic communications (ePrivacy), which also contains general provisions on telemarketing. The regulation focuses on an opt-in model that is based on consumer’s prior consent.
Benefits and disadvantages of regulation for companies requires additional research
The FCCA has also assessed the impacts that limiting telemarketing could have on companies. The impacts were mapped out with a survey addressed to companies. If telemarketing was to become subject to prior consent, 26 per cent of companies said they would give up telemarketing altogether and continue to market via other channels as before. However, almost as many responded that they would not make any changes to their marketing. Fifteen per cent of companies said they would reduce phone marketing and increase marketing on other channels. Based on the results, marketing would shift more to online channels. Many small and medium-sized companies do not seem to be aware that email and SMS marketing requires the prior consent of consumers.
In discussions with telemarketing operators, companies said they believed the restrictions would have a negative impact on employment in the sector and subscription sales of newspapers and magazines. Restrictions are estimated to affect companies of different sizes and industries in different ways. However, further research would be needed to investigate more precise impacts.
The research material was collected by Suomen OnlineTutkimus Oy through an online consumer survey in October 2019. A total of 2,168 consumers aged 18-84 years responded to the survey, representing Finnish consumers by age, gender and place of residence.
The preliminary study is based on a literature review, the SME Barometer of Finnish Entrepreneurs, Finnvera and the Ministry of Employment and the Economy, as well as discussions with companies involved in telemarketing.
Assessment of the impact of the various regulatory options on the basis of FCCA studies.
Consumer Ombudsman Katri Väänänen, tel. +358 29 505 3164
Research Professor Mika Maliranta, tel. +358 50 369 8054
Consumer opinion report:
Senior Specialist Katja Järvelä, tel. +358 29 505 3654,
Senior Specialist Mika Saastamoinen, tel. +358 29 505 3652
Preliminary study on the operation of companies and markets:
Senior Adviser Helena Tuorila, tel. +358 29 505 3653