Members will hear testimony on the current state of the national telemarketing do-not-call registry. Senator McCain will preside. Following is a tentative witness list (not necessarily in order of appearance)*: *Additional witnesses will be announced at a later time.
Witness Panel 1
The Honorable Timothy Muris
Honorable Michael K. Powell
Good morning, Mr. Chairman and distinguished members of the Committee. It is my pleasure to come before you today with my colleague Federal Trade Commission Chairman Tim Muris to discuss the implementation of the national Do-Not-Call Registry. First and foremost, let me assure every American consumer and the Congress that the FCC will continue to devote its full resources and exhaust every legal remedy to ensure that the national Do-Not-Call list survives. More than ten years ago, Congress vested the Federal Communications Commission with broad authority to protect consumers from unwanted calls. In our June order, we expanded on that effort. Last week, when these rules were challenged in the 10th Circuit Court of Appeals, the Court specifically refused to block our rules. It held that "on the record presented . . . [the telemarketing industry] ha[d] failed to establish a likelihood of success on the merits." Citing the strong public interest in leaving these rules in place, the Court made clear that the rules should go forward. Most recently, the Supreme Court yesterday declined to disturb the Court's ruling. However, as a practical matter, challenges to the FTC's rules affect the enforcement of our rules because the statute instructed the two agencies to work in partnership with one another to achieve our common consumer protection goals. Over the past week, three district court decisions (the most recent issued last night) addressing the FTC's rules have introduced confusion with regard to the implementation and enforcement of the national Do-Not-Call Registry. The Colorado district court's order last night has raised questions about the FCC's ability to enforce the list. Most directly, to the extent the court's ruling prevents the FCC from accessing the FTC's database, our enforcement efforts may be hampered. We are still studying the court's latest order and working hard to clarify the legal landscape. In the meantime, I commit to you that, to the extent legally permissible, the Federal Communications Commission will enforce its National Do-Not-Call rules against telemarketers that have obtained the Do-Not-Call Registry from the Federal Trade Commission. If consumers on the list receive a prohibited call, they may file a complaint by calling 1-888-CALL-FCC or by visiting our website at www.fcc.gov. The Commission will evaluate all complaint data so that, to the extent legally permissible, it can target enforcement to most aggressively protect consumers. I also want to emphasize that while the Do-not-Call List has captured the most attention, the FCC's comprehensive telemarketing rules protect consumers in many ways that are completely unaffected by court challenges. For example, consumers have the right (1) to be placed on a company-specific do-not-call list; (2) to be protected from all calls between 9 p.m. and 8 a.m.; and (3) to be free from excessive hang ups or dead air calls. These rules clearly are in effect and enforceable. Notwithstanding how the court challenges resolve themselves, telemarketers have important and ongoing responsibilities to protect consumers. Finally, to defend the consumer's choice about telemarketing calls, the government has marshaled all its resources. The Federal Communications Commission, the Federal Trade Commission and the Department of Justice are working together to vigorously defend the Do-Not-Call rules in a number of courts around the country. In the face of an adverse court ruling, this Congress showed decisive leadership and commitment by acting with dispatch over the past week to cure any possible jurisdictional questions. And the President without haste signed the legislation and has lent his full support to our efforts to protect consumers. I stand ready to work with Congress to find a path to effectuating the will of the American people. With this team, I remain confident that we will prevail. I believe our rules will withstand Constitutional challenge. In the end, I am simply unwilling to accept the notion that the First Amendment unavoidably bars the American people from deciding who calls them in the privacy of their own homes. I assure you that the full resources of the FCC are committed to defending our rules and taking any steps necessary to effectively implement and enforce them, to the full extent permissible by law. Thank you Mr. Chairman and distinguished members of the Committee. I will be happy to take your questions.
Witness Panel 2
Mr. Jerry CerasaleSenior Vice President, Government AffairsDirect Marketing Association
I. Introduction Good morning, Mr. Chairman and members of the Committee. I thank you for the opportunity to appear before your Committee as it examines the issues surrounding the national Do-Not-Call Registry. I am Jerry Cerasale, Senior Vice President for The Direct Marketing Association, Inc. (“The DMA”). The DMA is the largest trade association for businesses interested in direct, database, and interactive marketing and electronic commerce. The DMA represents more than 4,500 companies in the United States and 54 foreign nations. Founded in 1917, its members include direct marketers from 50 different industry segments, as well as the non-profit sector. Included are catalogers, financial services, book and magazine publishers, retail stores, industrial manufacturers, Internet-based businesses, and a host of other segments, as well as the service industries that support them. Let me begin by stating what we have stated all week: The DMA respects the wishes of all Americans who desire not to be called by telemarketers. This is evidenced by the fact that The DMA has had its national do-not-call registry, the Telephone Preference Service (“TPS”), in place since 1985. Any consumer who wants to reduce the amount of unwanted national telemarketing calls they receive can have their name placed on the TPS for that purpose free of charge. We estimate that the TPS applies to more than 80% of all telemarketing calls. The TPS currently contains the telephone numbers of 8 million consumers. We continue to believe that the FTC list is fatally flawed by important constitutional defects. We continue to strongly support the resolution of these issues in court. In response to the court decisions last week, and further supporting our commitment not to call individuals who have expressed their interest not to be called, The DMA had called for all members to voluntarily comply with the registry. We were subsequently informed by the FTC staff that The DMA could not distribute the registry to its members for voluntary compliance because of legal requirements under the FTC’s rule that prohibit such distribution. Since then there have been additional developments in the courts regarding the FCC implementation of the registry. Our current understanding is that the FCC rule remains in effect and that those telemarketers which have already obtained the registry must not call numbers on the list. As a result of the court rulings last week, telemarketers are no longer able to obtain the registry. The effect of this is that there are telemarketers in the contradictory situation of not being able to access the registry while being subject to enforcement and private causes of action. We hope to work with the FCC and FTC to resolve this dilemma and establish a means for all telemarketers to obtain the registry, so that no telemarketers will be locked out of honoring consumer requests. II. Telemarketing is a Critical Component of the U.S. Economy While we respect the requests of consumers not to be called and are working hard towards that goal, it is important to keep in perspective that many American consumers respond favorably to telemarketing. Consumers respond to telephone service offerings, credit card offerings, magazine subscriptions, travel discount and many other businesses that are the mainstay of the economy. This fact is evident in the dollar amounts consumers spend purchasing products through telemarketing sales. The DMA estimates that outbound telemarketing sales result in 106 billion dollars annually. Similarly, telemarketing provides employment to many Americans. Employment and employment growth rate in the telemarketing industry are equally impressive. In 2001, the telemarketing industry that markets to consumers was estimated to employ 4.1 million workers. A large percentage of telemarketing employment is female, working mothers, students, minorities and handicapped--all critical employment categories. Telemarketing also adds competitiveness to the U.S. economy. It provides information on new products and services and on prices, and clearly sparks consumers’ interests to buy. As one example, telemarketing is a valuable resource to rural families and others without access to certain products or services. Also, by making information about prices widely available, it promotes price competition in the marketplace. Likewise, telemarketing provides access to goods and services not generally sold in the retail market. As a means of advertising, telemarketing is a cost-effective means of introducing new products into the marketplace. III. Steps Must Be Taken to Help Ensure the Accuracy of a Do-Not-Call List In addition to the significant constitutional and regulatory issues, The DMA filed its legal challenge in part based on concerns that we believe are fundamental to the implementation and operation of a national registry. We believe that it is imperative that the registration process ensures the accuracy of telephone numbers that are placed on the do-not-call registry. Internet registration is subject to abuse. It is our understanding and belief that there are not sufficient protections in place in connection with Internet registration to: (1) verify that the numbers were submitted by the persons to whom the numbers are assigned; (2) determine whether the individual submitting the number has permission to submit the numbers; or (3) determine that the numbers are not business numbers (which are not candidates for inclusion on the registry). The FTC registration process does not allow numbers to be removed from the registry via the Internet. The FTC’s rationale for not allowing removal via the Internet is that there is the potential for abuse and that the FTC cannot authenticate individuals that removal of telephone numbers. This same rationale and potential for abuse exists for submitting numbers to the registry. We believe that the FTC should apply the same authentication standard to submission and removal. IV. There should exist one uniform national do-not-call registry The DMA also believes that there should exist one uniform national registry. The FTC and FCC registry does not create one uniform list. Rather, it leaves in place dozens of state do-not-call lists, resulting in a complex compliance task for the many legitimate industries that rely on telemarketing as a means to contact consumers. The current framework, in which telemarketers are required to comply with numerous registries, creates significant economic and operational burdens on businesses. A preferable approach would limit these burdens by creating one registry. We believe that such an approach would in no way limit the consumer protections of individuals on the registry, but would provide a workable system for both businesses and consumers. V. Conclusion Again, we want to reiterate our commitment to the American people not to call those who have expressed their desire not to be called. We thank the Chairman and the Committee for the opportunity to express the views of The DMA. We know that Congress and this Committee will continue to monitor this issue closely and we look forward to working with you. Jerry Cerasale Jerry joined The DMA in January 1995, as Senior Vice President, Government Affairs. He is in charge of The DMA’s contact with the Congress, all federal agencies and state and local governments. Prior to joining The DMA he was the Deputy General Counsel for the Committee on Post Office and Civil Service, United States House of Representatives. He served for 12 years at the Postal Rate Commission as Legal Advisor to Chairman Steiger and most recently as Special Assistant to the Commission. He was an attorney advisor to Federal Trade Commission Chairman Steiger. Prior to the PRC he was employed in the Law Department of the Postal Service. He received his B.A. in Government and Economics from Wesleyan University, Middletown Connecticut and his J.D. from the University of Virginia School of Law. He served in the U.S. Army from 1970 to 1972. He is a Vice Chair of the Postal Matters Subsection of the Administrative Law and Regulatory Practice Section of the American Bar Association. He serves on the Board of Directors of the Mailers Council. He was a member of the Federal Trade Commission Advisory Committee on On-Line Access and Security.
Dean Rodney Smolla
I. Introduction I wish to thank the Committee for this opportunity to present testimony on the issues implicated by recent judicial rulings concerning the national telemarketing “Do Not Call” registry, developed by both the Federal Trade Commission and Federal Communications Commission. The purpose of this testimony is to (1) briefly summarize the legislative and administrative history of the registry; (2) review the current legal status of the registry in light of recent litigation developments; (3) explain the First Amendment doctrines that place the constitutionality of the registry in doubt, (4) offer a prediction as to the likelihood that the registry will survive constitutional challenge in its current form; and (5) offer suggestions as to legislative “fixes” that could substantially improve the probability that the registry will survive judicial review. II. Legislative and Administrative History of “Do Not Call” Congress in 1991 passed the Telephone Consumer Protection Act, 47 U.S. § 227 (“TCPA”). The law was enacted “to protect residential telephone subscribers’ privacy rights to avoid telephone solicitations to which they object.” Id. § 227(c)(1). The Federal Communications Commission was directed to promulgate regulations that restricted the use of automatic telephone dialing systems. Id. § 227(b)(1). In 1992, the FCC adopted rules pursuant to the TCPA, but declined to create a national “do-not-call” list. The FCC instead required telemarketers to adopt company-specific do-not-call lists. Under this system a consumer who did not wish to receive telephone solicitations from a particular company could request that the telemarketer remove that consumer’s telephone number from the telemarketer’s list. By 2002, however, the FCC appeared to realize that its company-specific approach had failed to provide adequate privacy protection to consumers, and the Commission issued a Notice of Proposed Rulemaking requesting comment on whether the Commission should revisit its decision regarding the establishment of a national do-not-call list. Three years after the enactment of the TCPA, Congress in 1994 enacted a second important piece of legislation, the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101-6108 (“TCFAP”). The law instructed the Commission to promulgate rules prohibiting deceptive and other abusive telemarketing acts or practices and to include in such rules a definition of deceptive telemarketing acts or practices. Id. § 6102(a) (1) & (2). The TCFAP, enforced by the FTC, did not apply to activities that were outside of the jurisdiction of the FTC, such as certain financial institutions, common carriers, air carriers and nonprofit organizations, or insurance companies. In 1995 the FTC adopted rules implementing this legislation, rules that did not contain any national do-not-call registry. In January 2002, the FTC issued a Notice of Proposed Rulemaking that recommended the creation of a national do-not-call registry, to be maintained by the FTC, as well as rules that addressed the problem of “abandoned calls” resulting from the use of predictive dialers by telemarketers. In January 2003, the FTC promulgated final rules establishing a nationwide do-not-call registry and specified requirements for the use of “predictive dialers.” The FTC found that the previous company-specific do-not-call rules, which permitted a consumer to request that his name be removed from a company’s call list, were insufficient to protect consumers from unwanted calls. The FTC found that telemarketers interfered with consumers’ attempts to be placed on company- specific lists by hanging up on them or ignoring their request. The FTC noted that the prior practice placed too much burden on consumers who had to repeat their do-not-call request with every telemarketer who called, that the company-specific list continually exposed consumers to unwanted initial calls which had significantly increased in numbers since adoption of the original FTC rules, and that consumers had no method to verify that their name had been removed from the company’s list. In a move that has proven enormously significant in subsequent litigation, the FTC exempted charitable organizations from the do-not-call requirements. The FTC made this exception partly in deference to the heightened First Amendment protection afforded charitable speech. The FTC also found that abusive telemarketing practices of the sort the registry sought to combat were more likely to be undertaken by commercial telemarketers than those soliciting charitable and political contributions. In an important concession, however, the FTC admitted that the interest of protecting privacy did not justify a distinction between commercial and charitable telemarketing calls, on the reasoning that consumer privacy was equally invaded by both types of calls. The FCC followed suit, ultimately adopting rules that paralleled those of the FTC. Congress strongly endorsed this movement in 2003, enacting the Do-Not-Call Implementation Act, Pub.L. No. 108- 10, 7 Stat. 577. (“Implementation Act”). The Implementation Act provided, among other things, that the FTC could promulgate regulations establishing fees sufficient to implement and enforce the provisions of its national do-not-call registry. The first significant judicial setback to this momentum was a decision on September 23, 2003 by the United States District Court for the Western District of Oklahoma, U.S. Security v. Federal Trade Commission, -- F.Supp.2d –, 2003 WL 22003719 (W.D. Okla. 2003). In U.S. Security the District Court held that the FTC lacked the statutory authority to create its national registry. Whereas Congress had clearly given the FCC the green light to adopt a national registry in acting the TCPA, the District Court reasoned, no similar explicit authority existed under the TCFAP granting parallel authority to the FTC. In reaching this judgment, the District Court was unmoved by the fact that the Implementation Act appeared to tacitly endorse the FTC’s national registry, holding that Congress’ appropriation and fee-authorizing legislation was not a “ratification” of the FTC’s actions sufficient to constitute statutory authorization for the registry. A more significant judicial blow to the national registry came two days later when the United States District Court for the District of Colorado held, in Mainstream Marketing Services, Inc., v. Federal Trade Commission, -- F.Supp.2d –, 2003 WL 2213517 (D. Colo. 2003), held that the national do-not-call registry violated the First Amendment. The District Court in Mainstream Marketing held, however, that the FTC did have statutory authority to promulgate its “abandoned calls” regulations. (The abandon calls regulations were not challenged on First Amendment grounds, but merely on statutory authority grounds.) The Colorado District Court in Mainstream Marketing did not specifically address the issue that had been decided by the Oklahoma District Court in U.S. Security--the question of whether the FTC had statutory authority to create the do-not-call registry. Generally, however, the reasoning of the Colorado District Court on the statutory authority question was in tension with the reasoning of the Oklahoma District Court, with the Colorado District Court taking a far more generous view of the authority of both the FCC and FTC to enact telemarketing rules in a coordinated inter-agency effort to deal with the privacy issues posed by telemarketing practices. III. Statutory and Constitutional Issues Posed by Do-Not-Call A. Statutory Authorization In the long run the question of statutory authority is relatively trivial. It is plain that this Congress intends to grant to both the FTC and FCC the authority to establish a national registry, and to the extent that the alleged defect found by the Oklahoma District Court in the FTC’s statutory authority is at all sound, that defect was easily cured by additional legislation passed on September 29 flatly granting such authority to the FTC. It is my view that under the Implementation Act adequate statutory authority already existed, and there was no mistaking congressional intent on this point. The problem, however, has now been mooted by the new additional legislation that unequivocally authorizes the FTC to enforce the national registry. B. Constitutional Issues 1. The Protection of Privacy The do-not-call registry poses a conflict between two sacred American values, both of constitutional dimension, the right of privacy and freedom of speech. Privacy may be the most important emerging right of this new century. As technologies make it increasingly difficult for Americans to maintain their privacy, evolution in administrative, statutory, and constitutional law is necessary to keep pace, preserving privacy as an essential element of human dignity. Just as we make adjustments for inflation in cost-of-living indexes, we may need to think of “escalation clauses” in our legal protection for privacy. As the power of to impinge on privacy increases, legal principles must escalate to meet the challenge, preserving the power of the average person to fight back against unwelcome intrusions. See, e.g., Katz v. United States, 389 U.S. 347, 351 (1967) (holding that the Fourth Amendment’s guarantee against unreasonable searches extended to cover electronic eavesdropping, even though the framers of the Constitution could not have contemplated such an electronic search, because the Fourth Amendment was intended to protect “people, not places.”) The privacy of the home has always been at the core of English and American conceptions of privacy. The sacredness of the home as a “castle,” a fortress of privacy surrounded with moats of constitutional and common-law protection, is legendary and centuries old. See Semayne’s Case, 77 Eng. Rep. 194, 195 (K.B. 1604) (“[T]he house of every one is to him as his castle and fortress. . . ”); William Cuddihy & B. Carmon Hardy, A Man’s House Was Not His Castle: Origins of the Fourth Amendment to the United States Constitution, 37 Wm. & Mary Q. 371, 400 (1980) (noting that the belief that “a man’s house is his castle” found expression at least as early as the sixteenth century in English jurisprudence). William Pitt, in a speech before Parliament, declared the home a sanctuary against the force of government, demarking the line at which the brute power of the state must yield to the principle of privacy: “The poorest man may, in his cottage, bid defiance to all the forces of the crown. It may be frail; its roof may shake; the wind may blow through it; the storm may enter; the rain may enter; but the king of England may not enter; all his force dares not cross the threshold of the ruined tenement.” Id. at 386 (quoting Thomas M. Cooley, Constitutional Limitations 299 n.3 (1868)); see also 4 William Blackstone, Commentaries 223 (photo. reprint 1967) (1769) (“And the law of England has so particular and tender a regard to the immunity of a man's house, that it stiles it his castle, and will never suffer it to be violated with impunity.... For this reason no doors can in general be broken open to execute any civil process; though, in criminal cases, the public safety supersedes the private.”). This tradition was the backdrop of the Fourth Amendment, and its guarantee of the right of the people to be secure in their “persons, houses, papers, and effects” against unreasonable searches and seizures. U.S. Const. amend. IV; see also Silverman v. United States, 365 U.S. 505, 511 (1961) (“The Fourth Amendment, and the personal rights which it secures, have a long history. At the very core stands the right of a man to retreat into his own home and there be free from unreasonable governmental intrusion.”) (citing Boyd v. United States, 116 U.S. 616, 626-30 (1886); Entick v. Carrington, 19 Howell’s State Trials 1029, 1065 (C.P. 1765)). This solicitude for the home, originally conceptualized as a bulwark against the force of the state, has evolved into a broader concept, in which the home is seen as an essential to one’s autonomy and privacy, a place of respite from the cruel world. In the words of Judge Jerome Frank: “A man can still control a small part of his environment, his house; he can retreat thence from outsiders, secure in the knowledge that they cannot get at him without disobeying the Constitution. That is still a sizable hunk of liberty--worth protecting from encroachment. A sane, decent, civilized society must provide some such oasis, some shelter from public scrutiny, some insulated enclosure, some enclave, some inviolate place which is a man’s castle.” United States v. On Lee, 193 F.2d 306, 315-16 (2d Cir. 1951) (Frank, J., dissenting). Virtually everyone engaged in the debate over the do-not-call registry will concede that powerful privacy interests are stake. Uninvited telephone solicitations are highly intrusive, particularly when they come during family time such as dinner and early evenings in the home. Indeed, in a decision with many parallels to the do-not-call registry, decided in a simpler time in our history and dealing with old-fashioned land mail, the Supreme Court acknowledged the right of the consumer to reject unwanted mail. In Rowan v. United States Post Office Department, 397 U.S. 728, (1970), the Court upheld a statute that allowed an addressee to refuse mail from any sender of “erotically arousing or sexually provocative” material by notifying the local postmaster, who then instructed the sender to remove the addressee’s name and address from its mailing list under penalty of law. Noting that the purpose of the statute was to eliminate governmental involvement in any determination concerning the content of the materials, allowing the addressee complete and unfettered discretion in electing what speech he or she desired to receive, the Court sustained the law. The First Amendment right to speak, the Court reasoned, was only circumscribed by the addressee’s affirmative act in giving notice that he or she no longer wished to receive mail from the sender. Most importantly, the Court categorically rejected the argument that a vendor has the right to send unwanted material into the home of another. 2. Protection of Commercial Speech The vital privacy interests that animate the do-not-call registry must be balanced against the competing First Amendment protection for freedom of speech, a protection that often is dependent upon the ability of the speaker to initiate the message, making a preliminary attempt to engage the listener or reader even though the message may not have been invited. Commercial telemarketing is a form of “commercial speech.” Contemporary commercial speech doctrine is governed by the four-part test first articulated in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980): At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. Id. at 563-64. The arc of modern commercial speech jurisprudence is unmistakable: in decision after decision the Supreme Court has advanced protection for advertising, repeatedly striking down regulations grounded in paternalistic motivations. See, e.g., Thompson v. Western States Medical Center, 122 S.Ct. 1497, 1505 (2002) (striking down restrictions on pharmaceutical advertising); Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 554-555 (2001) (striking down some and sustaining some restrictions on tobacco advertising); Greater New Orleans Inc., v. United States, 527 U.S. 173 (1999) (striking down casino gambling advertising limitations); 44 Liquormart, Inc., v. Rhode Island, 517 U.S. 484 (1996) (striking down liquor advertizement restrictions); Rubin v. Coors Brewing Company, 514 U.S. 476 (1995) (striking down beer advertising regulations); Ibanez v. Florida Dep’t of Business and Professional Regulation, 512 U.S. 136, 147 (1994) (striking down restrictions on accountancy advertising); Edenfield v. Fane, 507 U.S. 761 (1993) (striking down commercial speech limitations on accountants); Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993) (striking down restrictions on newsracks for commercial flyers and publications); Peel v. Attorney Registration and Disciplinary Commission of Illinois, 496 U.S. 91(1990) (regulation banning lawyer advertisement of certification by the National Board of Trial Advocacy as misleading unconstitutional); Shapero v. Kentucky Bar Ass’n, 486 U.S. 466 (1988) (regulation banning solicitation for legal business mailed on a personalized or targeted basis to prevent potential clients from feeling undue duress to hire the attorney unconstitutional); Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) (striking down some and upholding some restrictions on lawyer advertising); Bolger v. Youngs Drug Product Corp., 463 U.S. 60 (1983) (statute banning unsolicited mailings advertising contraceptives to aid parental authority over teaching their children about birth control unconstitutional); In re R.M.J., 455 U.S. 191 (1982) (regulations limiting the precise names of practice areas lawyers can use in ads and identifying the jurisdictions lawyer is licensed in as misleadingly unconstitutional); Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980) (striking down restrictions on advertising statements by public utilities); In re Primus, 436 U.S. 412 (1978) (striking down restrictions on solicitation of legal business on behalf of ACLU); Bates v. State Bar of Ariz., 433 U.S. 350 (1977) (regulation banning lawyer advertisement of prices for routine legal services as misleadingly unconstitutional); Linmark Associates, Inc. v. Township of Willingboro, 431 U.S. 85 (1977); (regulation banning placement of “for sale” signs in the front lawns of houses in order to prevent the town from losing its integrated racial status unconstitutional); Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976) (striking down restrictions on pharmaceutical advertising); Bigelow v. Virginia, 421 U.S. 809 (1975) (striking down restrictions on abortion advertising). 3. Content-Based Distinctions and the Charitable Speech Exception The District Court in Mainstream Marketing did not hold that any form of do-not-call registry would be unconstitutional. Indeed the District Court explicitly acknowledged that the protection of privacy was a substantial government interest sufficient to satisfy the second prong of Central Hudson, and also acknowledged that the registry directly and materially advanced that interest, satisfying the third prong of the test. Rather, the District Court rested its decision on a non-discrimination principle that cuts across many First Amendment areas, a principle that generally looks with great skepticism at content-based distinctions. See, e.g, R.A.V. v. City of St. Paul, 505 U.S. 377 (1992). This antipathy toward content-based discrimination applies to commercial speech regulation. In a key precedent, Cincinnati v. Discovery Network, Inc. 507 U.S. 410 (1993), the Supreme Court struck down an ordinance that engaged in content-based distinctions similar to those in the do-not-call registry. In Discovery Network the city of Cincinnati enacted an ordinance prohibiting the distribution of commercial handbills on public property. The ordinance effectively granted distributors of traditional “newspapers,” such as the Cincinnati Post, USA Today, or The Wall Street Journal, access to public sidewalks through newsracks, while denying equivalent newsrack access to the distributors of commercial magazines and handbills, such as publications for apartment or house rentals or sales. The ordinance was designed to reduce the visual and spacial clutter of newsracks. The constitutional difficulty, however, was that no principled distinction could be drawn between the clutter caused by a USA Today newsrack and one caused by a real estate magazine. Clutter was clutter, and a newsrack was a newsrack, and the content of the speech inside the rack bore no relation to the city’s environmental or aesthetic interests. The Supreme Court pointedly rejected the notion that government could simply “pick on” commercial speech, making such speech bear a disproportionate burden, merely because the Central Hudson test contemplates somewhat reduced constitutional protection for commercial speech. The harm the government sought to address simply had nothing to do with the commercial or non-commercial character of the speech that was regulated. The District Court in Mainstream Marketing applied similar logic. An unwanted telephone call during dinner is an unwanted telephone call during dinner. An abusive or overbearing or fraudulent call is an abusive or overbearing or fraudulent call. Whether the caller is a commercial vendor, a solicitor for a charity, or a political fundraiser, the essential hit on privacy interests remains the same. Similarly, the District Court could find nothing in the record before it to support the supposition that commercial telemarketers are as a class are more prone to abuse or fraudulent practices than non-commercial telemarketers. Following the straightforward logic of Discovery Network, the District Court thus struck down the do-not-call registry. The District Court distinguished Rowan largely on the ground that in Rowan Congress left to the addressee the power to make the content judgments to block mail from senders. As the District Court was careful to note: “Were the do-not-call registry to apply without regard to the content of the speech, or to leave autonomy in the hands of the individual, as in Rowan, it might be a different matter. As the amended Rules are currently formulated, however, the FTC has chosen to entangle itself too much in the consumer's decision by manipulating consumer choice and favoring speech by charitable over commercial speech. The First Amendment prohibits the government from enacting laws creating a preference for certain types of speech based on content, without asserting a valid interest, premised on content, to justify its discrimination. Because the do-not-call registry distinguishes between the indistinct, it is unconstitutional under the First Amendment.” IV. The Future of Do-Not-Call in its Present Form The do-not-call registry is enormously popular with the American people and with Members of Congress, and it is firmly grounded in the enormously important and ongoing American battle to preserve human privacy and dignity. It is a concept worth saving. Nevertheless, the analysis of the District Court in Mainstream Marketing is, if one will indulge the pun, within the mainstream. Mainstream Marketing is not a radical extension of existing law, not a “stretch” in which existing doctrines are applied in some exotic or implausible manner, not an aggressive exercise in inappropriate judicial activism. This is not to say that the District Court’s opinion in Mainstream Marketing would certainly withstand analysis on appeal. Although the District Court distinguished Rowan, for example, it is worth noting that even in Rowan the law was not entirely content-neutral. Congress had singled out sexually explicit messages for special treatment. At the same time, Rowan itself is a relatively old case by First Amendment standards, decided before modern commercial speech doctrines evolved, decided before Discovery Network, and decided before the strong current First Amendment doctrines heavily disfavoring content-based distinctions were well-developed. The First Amendment principles forbidding content-discrimination, and the specific commercial speech principles that forbid discriminating against commercial speech on grounds that are unrelated to the commercial content of the speech, are well-entrenched and laudable components of our current constitutional jurisprudence. There are sound reasons why courts look with great skepticism at content-based distinctions, and sound reasons why these principles apply to advertising and commercial speech. There is probably no principle more central to our First Amendment tradition than the notion that the government ought not “pick and choose” among messages, particularly when the values it seeks to vindicate bear no demonstrable relationship to the content of those messages. In short, modern First Amendment doctrine tends to favor an “all or nothing” form of regulation. There is, admittedly, an irony here, and a heavy social cost. To eliminate the distinction between non-commercial and commercial telemarketing would actually burden more speech. One might plausibly argue that the current form of the do-not-call registry is thus actually preferable to a complete ban. Reinforcing this argument, one might argue that given the especially high place that charitable and political speech enjoy in our constitutional constellation, there is positive constitutional value in carving out an exception for those categories. Seen this way, the current do-not-call registry regime does not discriminate against commercial speech so much as it discriminates in favor of political or charitable solicitations. While these arguments do have some appeal, in the end they appear to be in tension with current First Amendment doctrines, especially decisions such as Discovery Network. No one, of course, can predict with complete confidence what the United Stated Court of Appeals for the Tenth Circuit, or possibly the Supreme Court, will do when the Mainstream Marketing decision is reviewed on the merits. Congress would be prudent not to proceed, however, on the supposition that Mainstream Marketing is some kind of “outlying” decision that is obviously wrong and heading for certain reversal. To the contrary, the decision appears consistent with emerging constitutional principles. While the District Court’s application of Discovery Network and Rowan is not free from dispute, there is certainly a substantial possibility that the District Court’s holding would be sustained on appeal. V. Legislative Solutions Admittedly, it may well be painful to extend the reach of the do-not-call registry to non-commercial solicitations. It is my view, however, that the simplest and cleanest way to maximize the probability that the do-not-call registry will withstand constitutional attack is to pattern the registry after the postal rules upheld in Rowan, permitting consumers to block all unsolicited calls, from whatever source. There are other somewhat more creative (and perhaps less certain) possibilities. Congress might authorize the promulgation of agency rules that would allow consumers to block all solicitations, or choose between blocking only commercial or non-commercial solicitations. This would be a “hybrid” model, somewhere between the current FTC and FCC approach and the approach in Rowan. Because it would empower consumers to make the choice, it would largely mitigate the content-based discrimination found unconstitutional by the District Court in Mainstream Marketing. At the same time, it would operate, somewhat like television “V-Chips” or computer filtering software, to allow some consumers to selectively permit some messages in while keeping others out. For those consumers to who do not mind receiving non-commercial telemarketing calls but object to commercial solicitations (or the reverse, those who do not mind receiving commercial calls but dislike charitable or political calls), the option would be available to block one category but not the other. VI. Conclusion I appreciate the opportunity to address the Committee on this important issue. In the short time and space available I have not attempted to canvass every nuance of the issues posed, or every aspect of the decisional law, but I do hope my testimony will assist the Committee in looking at this dispute with additional perspective as it considers possible action responsive to the ongoing judicial developments. Respectfully Submitted, Rodney A. Smolla Dean and Allen Professor of Law University of Richmond School of Law Richmond, Virginia 23173
Mr. Tim Searcy
Senators, thank you for giving me this opportunity to testify before you today, on a matter of great importance to U.S. consumers, and business alike: the formation of a federal Do Not Call Registry. I am the Executive Director of the American Teleservices Association, which is the largest and only association dedicated exclusively to the interests of the teleservices industry. We are enjoying our 20th anniversary this year, and represent approximately 650 firms involved in the teleservices industry. Our membership is tremendously diverse, and encompasses all aspects of telemarketing, customer service, market research, political calling, non- profit fundraising and technical product support. We also represent the firms that provide long distance, equipment providers, outsourced teleservices firms, consultants and in-house teleservices operations like banks, major retailers, cable television, local telephone service etc. As elected officials, I am certain you know how difficult it is to get a complete message delivered in a sound bite through the media. For that reason, at times the ATA’s opposition to the Do Not Call Registry has been mischaracterized, and I truly appreciate the opportunity to set the record straight. Of course, my recent time in the media limelight has not improved my self esteem, as I was recently told by a Bloomberg reporter that I had become America’s Piñata. Setting the Record Straight Since the inception of the FTC’s Telemarketing Sales Rule and the FCC’s Telephone Consumer Protection Act, over a decade ago, the ATA has worked with its members to educate them on issues related to compliance with federal laws. Additionally, we are often the source for understanding the many state laws that impact our member’s business interests. Teleservices enjoys a unique role in providing competition in the U.S. marketplace for goods and services. When the break up of the long distance monopoly occurred, it was teleservices that lead the way in rapidly opening the marketplace to lower priced alternatives. When cable television moved from its infancy, teleservices was one of the main advertising mediums that delivered the benefits of more channel selection to US consumers. The recent boom of refinancing in the home mortgage arena can in part give thanks to teleservices for spreading the competitive message quickly, and cost effectively to millions of consumers throughout the United States. Teleservices provides entrepreneurs and new market entrants alike, the opportunity to compete effectively against entrenched incumbents. Everyone recognizes that advertising is an embedded cost in the price of a product. Therefore it is logical that lower cost marketing alternatives would also yield lower prices for consumers. In an increasingly challenged economy, and with advertising costs escalating, lower cost marketing alternatives like teleservices have greatly increased over the last few years. But more importantly, our industry has grown because it is extremely effective. If consumers were not purchasing, we would not be calling, nor be here today. Indeed, the current marketplace coupled with the decreasing cost of long distance, have created a situation under which Americans are experiencing more calls now than in the past. However, it is important to remember that all forms of traditional and alternative advertising have experienced similar growth, as companies struggle to bring products to market, and continually develop creative means to do so. In addition to consumer choice and competition, teleservices has also provided jobs. In the U.S. today, 6.5 million people make a living either making to or taking phones calls from U.S. consumers. Although we know that not all jobs in our industry are concerned with calling consumers at home, we know that the symbiotic nature of teleservices means that every employee in our industry is impacted by legislation and regulation. Mr. Chairman, in your home state it has been reported that 126,000 men and women make all or part of their living on the telephone. We know that individuals employed by our industry will be hard pressed to find alternative employment if the volume of calls were to be significantly decreased by a national Do Not Call Registry. We employ primarily ethnic minorities, the physically handicapped, single mothers, students, seniors, disabled combat veterans and others that are not likely to quickly find gainful employment somewhere else. By our estimate, 2 million people will lose their jobs if federal DNC list is enforced. Teleservices is a pervasive channel of marketing in the United States, and it has been difficult for government agencies to use arcane business classifications to get a handle on the appropriate size of our business. But it only makes sense that you must include everyone that makes phone calls to consumers as a primary form of marketing in the projected impact. If you examine the people that use teleservices, it is all of our neighbors, not just the big call centers shown in newspaper pictures. The people that will be decimated by these regulations are also the real estate agent seeking new listings, the insurance agent calling the client referral, or even the local handyman looking to fix your gutters. Certainly, the large outsourced call centers make up an important fraction of our business, and account for 7-8% of the industry, but the rest of the industry is made up of employees that would not be classified as telemarketers, but as bank employees, insurance agents, cable representatives and the like. The immediate impact is 2 million jobs lost of the 6.5 million people employed in the industry, but the downstream impact would be much greater. Imagine how our fragile economy will react to much higher unemployment, the loss of tax revenue, and the inability of consumers to afford to purchase goods and services. Even a percentage of the impact we anticipate could be crippling to our economy. Constitutionality In terms of ATA’s federal case, we have always strongly believed that there are important constitutional issues to be considered as we contemplate the federal government’s involvement in the teleservices industry. I believe that experts are in attendance today that are equipped to address this issue, so I will only state the ATA’s position as a matter for the record. We believe that both the FTC and FCC promulgated rules that are unconstitutional because they unfairly restrict legitimate commercial speech, and seek to make a distinction between two kinds of speech. In essence, because a ringing phone cannot distinguish who is calling, when the federal government restricts who the appropriate caller is, and the content of the message, it violates the 1st Amendment. By including the exemption for charities and politicians, the FTC and FCC have created two classes of speech, which history tells us is clearly unconstitutional. What does this mean? Despite the extraordinary benefits that teleservices provides, and the clear constitutional considerations, the last year has been a flurry of regulation, litigation and now legislation and further litigation. In advance of federal action, we already had 37 state Do Not Call Registry laws that come in a wide variety of shapes and sizes. It is not surprising that the regulatory and legislative bodies have tried to craft policy to address the legitimate needs of consumers. Unfortunately, an unconstitutional and one-size-fits-all approach is not the answer. For a long time, the ATA as the voice of industry has attempted to engage proper regulatory agencies and other policy makers to find the appropriate means to address consumer and business interests. Our comments to the FTC and FCC have been ignored. Even more importantly, the Congressional requirements for an economic impact study, including the potential effects on small business of new regulations, and the necessary regulatory paperwork assessments have also been ignored. In a rush to judgment, the regulatory agencies have pushed through the kind of policy that creates confusion without true relief. The current standings in court have also created confusion for all parties involved. The FTC has a list that it continues to take names for, although a federal judge has deemed that unconstitutional. The FCC was prepared to enforce with fines, based on a list that the same judge ruled was unconstitutional. Fortunately, Judge Nottingham further clarified his ruling in response to an FTC request for a ‘stay’, and has again made it clear that the FCC is not to use the FTC list for the purpose of enforcement. Again the court has made it clear that neither direct or indirect violation of the U.S. Constitution will be allowed. Operational problems with the list Additionally, there are numerous operational problems with the list. Not only is the list prone to fraudulent additions of phone numbers from people without legal authority, it lacks fundamental verification allowing for abuse as well. Although it is easy to get on the list, enforcement agencies have made little to no provision for interested individuals to take their names off the list. Clear enforcement guidelines and standards have not been communicated to the state agencies that are required to participate to make the list effective. If that is not enough, because no cellular database exists, as well as no national disconnect database, it is virtually impossible to keep the list current and accurate. As the Eagles’ song says, “You can check in any time you like, but you can never leave.” For a list supposedly designed to provide citizens with choice, the ultimate choice to ‘opt out’ is effectively denied to them. Enforcement of current law The ATA strongly believes that much of the current situation could have been avoided. The original rules were designed to address concerns arising from fraud and abuse. At no point has this argument been about fraud or abuse, but rather it has centered on convenience. We have heard from time to time that seniors are disproportionately targeted for fraudulent offers, or that teleservices is full of scams. In all recorded cases, legitimate teleservices providers are not the perpetrators of the crimes described. In fact, we are in active support of the original intent of the TSR and TCPA in their efforts to eliminate fraud. We continue to provide assistance to state law enforcement agencies whenever possible to identify the bad actors that use the telephone, and bring them to justice. A welcome addition to the body of regulations that were originally promulgated dealt with company specific do-not-call lists. Current law requires that every firm create a list of individuals that do not want to be called by that company. If a company violated that law, suits could be filed by the individual, and collected fines would be returned to the consumer. This proved to be effective when used. However, both regulations about fraud, and regulations about the company specific rule have failed to receive proper education, and proper enforcement resources. Therefore, we believe that before new law is needed, the existing laws need to be vigorously enforced. What’s next? Behind all of the media, the hype, the emotional rhetoric sits a real problem: How do we bring real relief to the U.S. consumers that are not interested in unsolicited calls? As an association, and a member of industry, I can assure you that we have wrestled with this question a great deal. Like most others that come before this Committee, I am going to say that we would like to work with both Congress and the federal agencies involved to craft an intelligent framework for going forward. And like most others that come before this Committee, I expect that you would like me to be specific. Although I cannot propose today a comprehensive set of self-regulation guidelines, I can outline areas in which all interested parties should begin to dialog towards policy that makes sense. Although the emotions are running high, and there is pressure to move quickly, we owe it to all interested parties to take our time, and move appropriately instead of in haste. The industry is in enthusiastic favor of good policy, and doubts that such policy for a complicated issue can be developed overnight. We do not want to be party to falsely creating unfair consumer expectations again, as has occurred in the recent past through poorly developed regulatory agency policy. Clearly as a practical matter, we need to enforce the laws that have already been written, and educate consumers to make use of the company specific do not call lists. Secondly, it is only fair to seek voluntary and publicized use of the existing rules by bodies that are currently exempted in the regulations like charities and politicians. Any voluntary or legislative actions should be supported by sufficient economic impact studies that weigh the interests of all involved. Finally, we should apply intelligence to other issues like calling frequency and persistence beyond someone’s adamant statements of disinterest to create a healthier environment for the productive calling that takes place. We should all recognize that a complicated issue such as this requires study, consideration, and active participation as opposed to autocratic and capricious policy. Vilifying the hardworking people of the teleservices industry is not the right solution, but with your help we are interested in finding a better way. In conclusion, I recognize that as Senators you are engaged in truly important issues related to our men and women overseas, our economy, and our domestic security. It is gratifying to know that you are willing to adjust your schedules to listen to the important issues related to this segment of U.S. commerce. Thank you for your time, and Mr. Chairman, thank you for letting me share with you the views of the telemarketing industry.
Mr. James Guest
Mr. Chairman, members of the Committee, thank you for the opportunity to be here with you today. My name is Jim Guest, and I am President of Consumers Union, the independent, non-profit publisher of Consumer Reports magazine and ConsumerReports.org, with over five million subscribers. Consumers Union strongly supports the Do-Not-Call registry. We believe that American consumers have a right to stop telemarketers from intruding into their homes to hawk their wares. We’re talking about privacy – consumers have a right to privacy in their own home, free from the high pressure sales pitch that accompanies the typical telemarketing call. Consumer Reports wrote about this issue as early as 1993. Consumers then, like consumers today, were looking for some relief from the constant and frequently annoying phone calls. While we at Consumers Union believe that the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) have the statutory and constitutional authority to create and enforce a Do-Not-Call registry, I’m not here to offer my legal opinion about what will happen next in the courts, or how Congress should respond to the recent court ruling. However, I am here to represent consumers and commend Congress, the FTC, the FCC, Chairman Muris and Chairman Powell for vigorously defending this important consumer right. The last several days have been a bit of a rollercoaster for all of us concerned about this issue, and I’m sure it has been confusing for the tens of millions of consumers who placed their phone numbers on the Do-Not-Call registry. They were expecting the dinner hour to become a little more peaceful starting tomorrow night, without any of the inconvenient and unwanted telemarketing interruptions that we have all unfortunately grown accustomed to. Now they don’t know what to expect. Every day, telemarketers make over 100 million phone calls. 100 million. That’s astounding. While some consumers welcome these calls, many others obviously do not. Simply put, we believe that those consumers who do not want to receive telemarketing calls shouldn’t have to. It’s a matter of consumer choice, and companies nationwide should honor that choice. The Do-Not-Call registry was borne out of the mounting frustration that so many consumers have been feeling over the years. They’d like to be able to sit down to an uninterrupted dinner, or spend a quite evening with their kids, but too often that becomes impossible because of a ringing telephone and a persistent, hard sell sales pitch. Many have tried putting their numbers on the do-not-call lists that individual companies keep, but that piecemeal approach doesn’t stop the phone calls from coming in the first instance, doesn’t prevent other companies from calling, and doesn’t always work. Lists kept by the telemarketing associations have the same pitfalls. And none of these voluntary lists are in any way enforceable. The Do-Not-Call registry that the FTC and FCC have created was supposed to take care of these shortcomings. And millions of consumers flocked to it, believing that they were finally going to be getting some relief. Unfortunately, the recent court ruling in Denver throws all of that into doubt, at least temporarily. Three courts have had something to say about the list in the last week, and Congress and the President have weighed in as well. So much has happened so quickly that it is understandable if consumers have become confused. I fear that come tomorrow, the calls will continue – it may be an avalanche, it may be a trickle, but it will surely be upsetting to many people who thought the calls would stop. I appreciate the fact that the Direct Marketing Association is advising its members to respect the wishes of consumers who have asked not to be called. Unfortunately, other trade associations haven’t been as respectful, suggesting that their members should continue to use the list. Some have even wondered if telemarketers will now take the opportunity to turn this into a “Do Call” list, targeting people who have signed up. I would hope that telemarketers, and the companies on whose behalf they are calling, would show some restraint. Until this is resolved by the courts – and by Congress if further legislative action is needed – all telemarketers should respect the wishes of the consumers who’ve made their choice known. Throughout the debate over the Do-Not-Call registry, telemarketers have said that they don’t want to call consumers who don’t want to take their calls. They say they support a do-not-call list, it’s just not this do-not-call list. That sentiment rings very hollow for a consumer whose phone rings constantly. The consumer marketplace has spoken and the industry should heed the call of DO NOT CALL, and Congress should do whatever it takes to make this list enforceable, consistent with our Constitution. Thank you.
Mr. Lee Hammond