[Senate Hearing 108-982]
[From the U.S. Government Publishing Office]
S. Hrg. 108-982
THE DO-NOT-CALL REGISTRY
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HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 30, 2003
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South
CONRAD BURNS, Montana Carolina, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas JOHN D. ROCKEFELLER IV, West
OLYMPIA J. SNOWE, Maine Virginia
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada RON WYDEN, Oregon
GEORGE ALLEN, Virginia BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
MARIA CANTWELL, Washington
FRANK R. LAUTENBERG, New Jersey
Jeanne Bumpus, Republican Staff Director and General Counsel
Robert W. Chamberlin, Republican Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
C O N T E N T S
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Page
Hearing held on September 30, 2003............................... 1
Statement of Senator Allen....................................... 5
Statement of Senator Burns....................................... 18
Prepared statement........................................... 18
Statement of Senator Ensign...................................... 24
Statement of Senator Lautenberg.................................. 3
Prepared statement........................................... 4
Statement of Senator McCain...................................... 1
Statement of Senator Nelson...................................... 3
Statement of Senator Sununu...................................... 4
Statement of Senator Wyden....................................... 2
Witnesses
Cerasale, Jerry, Senior Vice President, The Direct Marketing
Association, Inc............................................... 36
Prepared statement........................................... 37
Guest, James, President, Consumers Union......................... 44
Prepared statement........................................... 46
Hammond, Lee, Member, Board of Directors, American Association of
Retired Persons (AARP)......................................... 47
Prepared statement........................................... 49
Muris, Hon. Timothy, Chairman, Federal Trade Commission.......... 6
Prepared statement........................................... 9
Powell, Hon. Michael K., Chairman, Federal Communications
Commission..................................................... 13
Prepared statement........................................... 14
Searcy, Tim, Executive Director, American Teleservices
Association (ATA).............................................. 39
Prepared statement........................................... 41
Smolla, Rodney A., Dean, University of Richmond School of Law.... 27
Prepared statement........................................... 30
Appendix
Snowe, Hon. Olympia J., U.S. Senator from Maine, prepared
statement...................................................... 57
THE DO-NOT-CALL REGISTRY
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TUESDAY, SEPTEMBER 30, 2003
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:10 a.m. in
room SR-253, Russell Senate Office Building, Hon. John McCain,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
The Chairman. Good morning, and I would, of course, as
always, allow my colleagues to make opening statements. I would
strongly request that they make them brief, as I will make my
opening statement brief. We have a lot of ground to cover and a
lot of things are changing almost as we speak. And I want to
especially thank our first two witnesses, Chairman Muris and
Chairman Powell, for taking the time to visit with us this
morning.
I know of no event, perhaps spamming is one of these issues
that affect millions and millions of Americans, but this issue
attracted the attention, the ire of millions of Americans as
well. And I want to thank both chairmen for their rapid
response to an ever-changing situation dictated by court
decisions. And we've gone in a very short period of time from
what we thought was an issue that was largely resolved to one
which is somewhat confusing to say the least. And that's why
not only do we--like to hear from both chairmen as to what they
intend to do, but what they think the various scenarios that
can take place.
For example, I understand that the Tenth Circuit court has
been asked to stay this decision, and later on we'll have
witnesses that will give a, perhaps a constitutional view of
this issue. Having said that, I want to thank them and remind
my colleagues that just a week ago a decision by a Federal
court in Oklahoma started a dramatic series of events that have
called into question the implementation of a national do-not-
call registry, which is scheduled to go into effect tomorrow.
The Oklahoma court ruled that Congress had not granted the
Federal Trade Commission authority to create the registry. With
almost unprecedented speed, Congress passed a bill ratifying
the FTC's authority, and yesterday the President signed that
measure into law.
Regrettably, however, the registry, for which 50 million
phone numbers have been signed up, is still in legal limbo.
Last Thursday a Federal district court in Colorado found that
the FTC's do-not-call registry was unconstitutional. The court
determined that the registry violated the First Amendment
because it allowed consumers to keep commercial telemarketers
out of their homes while enabling political and charitable
telemarketers to operate as usual. We certainly wouldn't ever
want to prevent political operatives from operating as usual.
Although the FTC's request to stay this order was denied
yesterday by the same court, the FTC has appealed to the Tenth
Circuit Court of Appeals.
The Federal Communications Commission has also weighed in
by asserting its authority to enforce the do-not-call registry.
Just when it appeared that the registry would be stopped in its
track, on Friday a Tenth Circuit decision allowed the FCC to
move with its implementation. As it stands, the FCC, not the
FTC, appears to have the exclusive right to enforce the
registry. The current legal frenzy surrounding the registry has
left American consumers in the dark about what to expect
tomorrow after the registry opens for business. Before these
legal challenges it appeared that October 1, 2003, would mark
the day when unsolicited telemarketing calls would finally
cease. Now it is unclear whether American families gathering at
the dinner table will be bombarded tomorrow with the same
unwanted calls that they receive today.
As anyone who has kept up with the news over the past week
knows, a concept that to most people is as simple as ``do not
call me'' has become tremendously complex. So today we've asked
various interested parties and experts to join us in taking a
step back to survey the current status of the do-not-call
registry, how we got here and the prospects for the registry in
the appellate process. I want to thank again chairmen Muris and
Powell for joining us today and for their extraordinary efforts
to respond to the public demand for this registry. Chairman
Muris and the FTC have shown an unflagging commitment to
adopting and defending a national do-not-call list, and I
believe that will prevail in the end. In the meantime, Chairman
Powell and the FTC are to be commended for stepping into the
breach to cover certain telemarketers outside of the FTC's
reach and begin enforcing the law as scheduled.
I look forward to an informative hearing this morning. I
thank all the witnesses. I received a call from my wife an hour
ago who said last night she received six telemarketing calls,
four during dinner. So I hope you will take and consider my own
domestic problems as we proceed here today.
[Laughter.]
The Chairman. Senator Wyden.
STATEMENT OF HON. RON WYDEN,
U.S. SENATOR FROM OREGON
Senator Wyden. Thank you, Mr. Chairman. I just want to make
two points here very briefly. As you've stated, the public
wants the right to be able to say no to incessant interruptions
at home, and instead 50 million Americans are being taken on a
ride on a legal roller coaster, where it's not clear where it's
going to end. And I think the first question we want to get out
today is why does it have to be so hard and so complicated to
put in place a process that lets the public say no? And
hopefully we will hear from our two witnesses. I share your
view about their very useful work, about what it's going to
take, so that this doesn't turn into a multi-year process of
legal petitions and appeals.
Second point that I'd like to make, Mr. Chairman, is that
some in the telemarketing industry have said that legal opinion
or no legal opinion, they'd rather not call people whose names
are on the list, but that means that the industry is going to
need to be able to get the list from the Federal Trade
Commission. But apparently, some parties have argued in court
that if the Federal Trade Commission shares the list, it should
be held in contempt of court. Obviously, if the Federal Trade
Commission can't share the list then even voluntary compliance
becomes impossible.
So I hope that we will hear today from the industry that
they are willing to work with the two agencies that are here
today, the Federal Trade Commission and the Federal
Communications Commission, to make sure that the telemarketers
can get the list from the Federal Trade Commission. Again, this
goes to the point of whether there is just going to be
Byzantine legal maneuvering or is there going to be an effort
to release this list to those who request it. I think the
Federal Trade Commission is doing the right thing in this area
and I hope that we will hear from the industry that they are
willing to meet the agency half-way and I look forward to
hearing from our witnesses.
Senator Allen [presiding]. Thank you, Senator Wyden. Next
we'll hear from Senator Nelson. If members can make their
statements as short as practicable so that we can hear from our
witnesses, we'd appreciate it. Senator Nelson?
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Thank you, Mr. Chairman. Over the past few
months, an incredible 3 million people in my state responded by
saying that they wanted to be let alone. They just don't want
this barrage of unwanted calls which is an invasion of their
personal and private space. The courts' decision to enjoin the
enforcement of this regulation on First Amendment grounds may
be well-meaning, but it's simply wrong. Would this court, for
example, grant sign-waving protestors a constitutional right to
walk freely and uninvited into the family home and circle the
dinner table? Yet with this decision, the courts have granted
marketers the right to do the same thing even though they
haven't been invited.
And, Mr. Chairman, I'll close by one of the great respected
jurists in American history, Justice Louis Brandeis. I want to
quote something that he said regarding the framers of our
Constitution. He said they conferred as against the government
the right to be let alone, the most comprehensive of rights and
the right most valued by civilized man, end of quote. That was
Justice Brandeis. Thank you, Mr. Chairman.
Senator Allen. Thank you, Senator Nelson. Senator
Lautenberg.
STATEMENT OF FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Yes, Mr. Chairman, thank you. Very
briefly, isn't it interesting to see how quickly Congress can
jump to the task when some 50 million people agree about
something they don't like? It's the first precipitous action
that I've seen that stimulates movement here and it's good to
see it. Frankly, I commend the chairmen, Chairman Muris and
Chairman Powell, for trying to do what you can to help us get
through this dilemma. The constituents have spoken very
clearly, very loudly, and we see organization after
organization carrying the case as well.
I am a firm believer in the First Amendment, but I don't
think the First Amendment gives people the right to disturb
somebody's personal life as it happens now with the
telemarketing assaults. I was away from here a couple days over
the weekend and when I got back, my phone light on call waiting
was lit and I got a couple of people who were, once again,
espousing the cause of their particular telemarketing agency,
and it's a darn nuisance.
So what we want to do is work hard to get to the bottom
line here and see if we can fashion something that doesn't
violate people's rights to deliver a message but at the same
time protect the privacy of those who don't want to have to
hear it, and I am anxious to hear from our witnesses, Mr.
Chairman, and I hope that we'll be able to come to some
conclusion after hearing the full array of witnesses that we
have.
[The prepared statement of Senator Lautenberg follows:]
Prepared Statement of Hon. Frank R. Lautenberg,
U.S. Senator from New Jersey
Mr. Chairman:
It's not too often that nearly all Democrats and Republicans in the
House and in the Senate can agree on something. But that's what
happened last week when the House passed the ``Do-Not-Call'' bill by a
vote of 412 to 8, and the Senate followed suit with a vote of 95-0.
It seems even rarer that we can muster the will to do something at
least 50 million Americans want us to do--and to do it quickly. But
that's what happened last week.
Our constituents have spoken and it's clear that they want a ``do-
not-call'' registry to protect them from intrusive telemarketers. And
we in Congress are committed to getting this registry up and running.
I am a strong believer in the First Amendment, but Idon't think the
First Amendment gives you the right to disturb someone's dinner or tie
up their phone line. We have the right to hang ``Do Not Disturb'' signs
on our hotel room doors; we should also have the right to put a ``do
not disturb'' on our home phone.
The telemarketing industry can file all of the lawsuits it wants;
the ``bottom line'' is that Congress and the FTC are going to find a
way to make this registry a reality.
I am anxious to hear from our witnesses on how we can do that. Our
constituents are demanding no less. They deserve no less.
Thank you, Mr. Chair.
Senator Allen. Thank you, Senator Lautenberg. Senator
Sununu.
STATEMENT OF HON. JOHN SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Sununu. Thank you, Mr. Chairman. I certainly
welcome our witnesses and would put three thoughts in front of
them and the Committee members as we work through this issue.
First is whether or not in writing the legislation in the first
place we've put the responsibility for overseeing the do-not-
call list in the right place. And I'm glad to see we have both
Mr. Muris and Mr. Powell here because I think it's an important
question moving forward once the court issues are dealt with,
if we're going to have a do-not-call list that we burden the
right regulatory agency and conversely protect our regulators
so that they can focus on their core missions.
Second, is that we remain cognizant of the free speech
issues here. While Senator Nelson described a scenario of
political protestors coming into a living room and we wouldn't
be for that, we have in all reality established just that in
writing this law, because even if the law is implemented, while
those marketers wouldn't be allowed to come into your living
room, there is an exception for charitable organizations and
for politicians, those very political protestors that we might
be concerned about coming into the living room are allowed into
the living room. That may or may not be the right decision. We
have to be cognizant that while the Constitution in the Supreme
Court has made some distinction between commercial speech and
political speech, commercial speech is protected at some level
and we have to decide whether or not we want in these
regulations to continue to try to make a distinction between
the activity of a charitable organization, a political
organization, and someone trying to sell a product.
And third, and maybe most importantly today, we want to
make sure that the public knows what is happening today and
tomorrow in moving forward, to what extent will this list be
put into effect as a matter of practice by the regulators, and
to what extent will this do-not-call list be utilized by
telemarketers to protect the public. We want to make sure that
the public understands how this process works, because
confusion doesn't serve us as policymakers and it certainly
doesn't serve the public. Thank you, Mr. Chairman.
STATEMENT OF HON. GEORGE ALLEN,
U.S. SENATOR FROM VIRGINIA
Senator Allen. Thank you, Senator Sununu. I'll make a few
comments here. I'm one who's generally not in favor of
government regulations. However, it strikes me that these
regulations, the do-not-call registry is simple and it provides
individuals with the empowerment to not be bothered in their
homes, and as much as I don't like regulations, I certainly
don't want to impinge upon the ability of individuals to stop
unwanted commercial calls into their homes.
This donotcall.gov website that the FTC launched was the
fastest growing website in history, over 50 million phone
numbers were registered, 1.3 million of those in the
Commonwealth of Virginia. I would also note this: the 50
million across the country is more than the votes that either
President Bush or Vice President Gore received in the 2000
election. So the courts are going to debate this, we'll get
insight from these two chairmen and our esteemed witnesses, but
I think that you'll see that the Senate, which is sometimes
likened to a hobbled mule in its ability to move at any sort of
speed, actually that hobbled mule jumped and voted 95 to
nothing last week to effectuate the will and desires on a
bipartisan basis of the Senate, as well as obviously the will
of people and families across this country not to be pestered
with commercial calls.
So we look forward to our witnesses here today and see how
we can continue to be supportive of the desires in this common
sense solution to empower individuals. With that, we'll first
hear from the Chairman of the Federal Trade Commission, then
we'll hear from the Chairman of the Federal Communications
Commission. Mr. Muris.
STATEMENT OF HON. TIMOTHY MURIS, CHAIRMAN,
FEDERAL TRADE COMMISSION
Mr. Muris. Thank you very much, Senator. It's a pleasure to
be here with Chairman Powell. This registry is a partnership
and it will not be as fully effective in protecting consumers
unless we're both allowed to enforce it.
I want to thank this Committee and its members very much,
particularly absent Chairman McCain and Senator Hollings, for
their support of us. When the telemarketers tried to stop us
earlier this year, you quickly acted in passing the Do-Not-Call
Implementation Act. When the Oklahoma judge last week read that
statute to not authorize the registry, in lightning speed and
with unanimous Senate you passed the authorization the
President signed yesterday, which one member called the ``We
Really Meant It Act.''
I wanted to emphasize three points. One is the importance
of the registry, second is the registry's constitutionality,
and spend most of my time on the necessity for both consumers
and telemarketers of the FTC, the FCC, and the states all being
able to enforce the national registry, and as I said, it's
necessary for both consumers and telemarketers.
I think the importance of the registry is obvious. Our sole
mission at the Federal Trade Commission is to protect
consumers. In the nearly 28 months since I've been Chairman,
there is nothing that we have spent more time and energy on.
There is nothing that's more important than the establishment
of this registry, for a very simple but important reason: We
believe the consumers ought to have a choice to choose whether
those unsolicited commercial telemarketing calls go into their
homes.
The response, as you've all mentioned, was enormous. There
are now over 51 million people on the registry. It's hard to
imagine a more graphic expression of public interest than how
you reacted last week.
My second point is the legality. The judge ruled that the
registry does not, ``advance the FTC's interest in protecting
privacy or curbing abusive telemarketing practices.'' I would
submit, with all respect, that the tens of millions of
Americans who have registered more than 51 million phone
numbers disagree. I'm not sure I've ever seen such resounding
empirical refutation of a statement in a court.
Second, the point that we have to treat charities and
commercial telemarketers the same puts the FTC and the FCC, if
it's applied to them, in a hopeless catch-22. The Supreme Court
has repeatedly said that charitable solicitation has greater
constitutional protection. We will ultimately be in much more
danger constitutionally if we did what or if we do what the
Denver judge wanted.
Now, we've asked the judge for----
Senator Allen. Chairman Muris, just for the record, could
you restate that again, what you just said, the distinction
between commercial versus----
Mr. Muris. Versus charitable.
Senator Allen. Right.
Mr. Muris. If we equated commercial and charitable speech,
we would be in much greater danger constitutionally ultimately
than we than the registry that we in fact have implemented. And
the reason is that the Supreme Court has repeatedly said
charitable solicitation enjoys much greater constitutional
protection, in part because the solicitation itself is
intertwined with the fully protected speech, and that's a
principle that the Court again has widely recognized.
Now, we've asked the judge for a stay. Last night he denied
it, in part because he found that the interests of the
telemarketers outweighed the interest of consumers. We're
appealing this this morning, the Tenth Circuit opens soon.
Given the Federal Communications the ruling on the FCC last
Friday, which some of you have mentioned we have considerable
optimism.
Now, let me turn to address in more length this last point
about where we are and why, from even the standpoint of
telemarketers, given the FCC's rule as to going in operation
tomorrow, it is much better for the states, for telemarketers,
for consumers, for the FCC, for the FTC, that our registry be
allowed to go into enforcement. The current situation is both
confusing and chaotic. In the months since the Commission
promulgated its do-not-call rule, the FCC and numerous states
have acted in reliance on the FTC's registry. The FTC
promulgated its own do-not-call list, which relies on the
registry.
For now, the FCC rule remains in effect. The states have
adjusted their laws, many states, to use the FTC's registry
rather than maintaining a registry of their own. It obviously
makes no sense to maintain two registries, and that's where the
states are headed and many are already there. Moreover, under
the FCC statute, any state with its own do-not-call
requirements may and I'm sure the telemarketers will argue this
may have to download names on the national registry to enforce
the state requirement. The situation is further complicated by
the fact that some telemarketers have already downloaded the
list, which they've been able to do since September 2, but
others have not.
As a result, there are at least four serious problems that
we hope the Tenth Circuit will resolve. The first problem is
access to the list. With the FCC's rule in effect,
telemarketers in states need the list to comply. After the
judge's decision, we decided this was last week we decided not
to share the list with anyone. Telemarketers, moreover, based
on what they told the judge yesterday, will apparently seek to
hold us in contempt if we do virtually anything with the list.
Indeed, the telemarketers made clear yesterday, despite
their statements about requesting voluntary cooperation or at
least leaving it up to the telemarketers, that they want us to
stop from continuing to accept consumer registrations. We had
shut the list down entirely except for the enforcement parts of
it, the complaint processing parts of it, the sharing parts of
it, except for accepting registrations. Because of the judge
ruling last night, this morning we are evaluating what steps
are necessary to shut down this part of the system.
Given the technology involved, particularly in the phone
system, it's considerably more complicated than turning off a
light. This system is set up to be entirely automated, to
receive phone calls from all over the country, and with more
than 50 million numbers you can imagine you can't do this on
index cards. We cannot at present, moreover, allow voluntary
access to the list to telemarketers. The list was set up for
paid access. When we began exploring the issue of voluntary
access, we realized it would take 7 to 10 days to reconfigure
the system and actually make the data available, and in fact
we've been working on that, on the mechanics of doing that in
the interim.
Moreover, without a stay, as I've just mentioned, we are
concerned that the telemarketers would argue that allowing
access without paying might violate the order. This is a real
issue given the position that they took in court yesterday.
We also have refused to allow those who have the list and
there are over 400 that have the whole list and there are
thousands who have parts of the list, sellers and telemarketers
we've refused to allow them to share the list with others. As
part of their sign-up process they have to pledge that they
will only use the list for the purpose of complying with the
do-not-call requirements. Now that promise is no longer
enforceable through our rule, but it is enforceable through the
criminal statutes that prohibit lying to the Government.
If we allow firms that have the list to trade it or to
share it, there will be no enforceable promise. The do-not-call
list could quickly become a do-call list in the hands of
unscrupulous telemarketers and we simply will take steps to
prevent that.
The second of the four problems I mentioned is that
telemarketers face the threat of inconsistent State and FCC
positions regarding those who have the list and those who do
not. The FCC has said it will enforce its rule against
companies that already have the list, and some states appear to
be saying that they will enforce the requirement against
sellers who use telemarketers who do not have the list and can
not comply, which is a more aggressive position.
Third, at least some State laws are in jeopardy. Many
states have made our list the State list. Enforcement requires
access to the list and that access is currently unavailable.
Finally, for the system to work well, our complaint system is a
key component for the FCC, for us, and the states. The way the
complaint system was going to work was using the same
mechanisms, which we've shut down, using the same mechanisms by
which people registered, people were going to be able to give
us complaints. Since we're expecting complaints in an
extraordinary large volume again, it was an automated system,
and that system is now unavailable, hampering enforcement.
Now, Mr. Chairman and Members of this Committee,
telemarketers have said repeatedly that they want voluntary
compliance or at least the option of voluntary compliance with
the do-not-call registry, but they apparently do not want
customers to add their names to the list, and they apparently
do not want us to be able to provide the list. A voluntary
system with no names and no access looks a lot like the current
problem. Telemarketers can call whoever they want whenever they
want.
Finally, let me conclude with a prediction. This is the
right thing to do, the law is on our side, there will
ultimately be a list, it will be maintained by the Federal
Trade Commission, and because of the publicity and the
frustration with the telemarketers, there will be many millions
of more consumers on that list than there would have been
otherwise. Thank you very much.
[The prepared statement of Mr. Muris follows:]
Prepared Statement of the Federal Trade Commission
Mr. Chairman, thank you for the opportunity to present testimony on
the status of the FTC's National Do Not Call Registry.\1\
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\1\ The views expressed in this statement represent the views of
the Commission. My oral statements and responses to any questions are
my views, not necessarily the views of the Commission or any other
Commissioner.
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As you know, the Commission adopted the Registry as one of the
amendments to the Telemarketing Sales Rule (TSR) announced December 18,
2003, and formally promulgated in the Federal Register on January 29,
2003. On March 11, 2003, President Bush signed into law the Do Not Call
Implementation Act (DNCIA), which provides for the FTC to collect fees
from sellers and telemarketers to fund the establishment and
maintenance of the National Do Not Call Registry. Congress enacted this
legislation, and provided complementary appropriations,\2\ to support
the FTC's decision to establish such a Registry (conditioned on
funding) as part of its amendment of the TSR.\3\ The DNCIA also set a
short deadline for the FCC to finish a rulemaking proceeding, already
in progress, reviewing that agency's telemarketing regulations
(originally promulgated in 1992) pursuant to the Telephone Consumer
Protection Act (TCPA), and required the FCC to maximize consistency
with the FTC's Do Not Call rules. Accordingly, the FCC announced its
adoption of complementary do not call regulations on June 27, 2003, and
formally promulgated them in the Federal Register on July 25, 2003.
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\2\ The Omnibus Appropriations Act, Public Law 108-7, enacted Feb.
21, 2003.
\3\ 16 C.F.R. Part 310.
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Both sets of regulations prohibit companies subject to the
respective agencies' jurisdiction from calling consumers who enter
their phone numbers on the National Do Not Call Registry database
established and maintained by the FTC. Both agencies set October 1,
2003 as the date when they would begin enforcing the Do Not Call
Registry provisions, and when telemarketers and sellers would be
required to refrain from calling consumers who had placed their numbers
in the Registry.
The Registry opened to accept consumer registrations on June 27,
2003, and within three days more than 10 million phone numbers had been
registered. Fourteen states have shared the contents of their
registries with the National Do Not Call Registry, contributing over
nine million phone numbers.\4\ As of September 28, 2003, there were
more than 51.5 million phone numbers in the Registry.
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\4\ The states are Alabama, Arkansas, California, Colorado,
Connecticut, Florida, Kansas, Kentucky, Maine, Massachusetts,
Minnesota, New York, North Dakota, and Oklahoma.
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On September 2, 2003, the Registry became available to
telemarketers who wished to gain access to the database so that they
could refrain from calling consumers who had expressed a preference not
to receive telemarketing calls. Since then, over 13,000 organizations
have subscribed, and of those, more than 400 have accessed and paid for
the entire Registry.
Shortly after the FTC promulgated the amended TSR, two
telemarketing trade associations filed separate legal challenges to
various provisions of the amended Rule, including the National Do Not
Call Registry provisions. The Direct Marketing Association and several
of its members brought suit in Federal district court in Oklahoma
City,\5\ and the American Teleservices Association and several of its
members sued in the Federal district court in Denver.\6\ The American
Teleservices Association also challenged the FCC's revised
telemarketing rules in a separate lawsuit.\7\ Regrettably, a decision
in the American Telemarketing Association's challenge to the FTC's Rule
may leave the FTC unable to put into effect the Registry, even though
it has received overwhelming support from consumers and from Congress.
---------------------------------------------------------------------------
\5\ U S. Security v. FTC, No. CIV 03-122-W (W.D. Okla. 2003).
\6\ Mainstream Marketing v. FTC, No. 03-N-0184(MJW) (D. Col. 2003).
\7\ Mainstream Marketing v. FCC, No. 03-9571 (D. Col. 2003).
---------------------------------------------------------------------------
On September 23, 2003, Judge West in Oklahoma City issued a summary
judgment order invalidating the Registry provisions on the grounds that
the FTC lacked statutory authority to establish such a Registry.
Congress acted with unprecedented speed to pass a new law eliminating
the problem that Judge West had perceived. We are grateful to Chairman
McCain, Senator Hollings, Chairman Tauzin and Congressman Dingell, and
all the other members of Congress who acted so fast and so
overwhelmingly to demonstrate their support for the Registry. The
President signed this legislation into law on Monday, September 29.
Nevertheless, Congress had barely finished its work when U.S.
District Judge Nottingham in Denver ruled that the Do Not Call Registry
offends the First Amendment because it makes a content-based
distinction between its treatment of commercial telemarketing calls to
sell goods or services and noncommercial calls soliciting charitable
contributions. We believe that as a matter of law this decision is
incorrect, and are therefore confident of ultimate success on appeal.
Nevertheless, this legal dispute could take years to resolve. In the
meantime, the status of the Registry is unsettled.
The Commission is acting to comply with Judge Nottingham's order
``enjoining the FTC from enforcing the amended Rules (issued in
December 2002) creating and implementing a Federal Do Not Call
Registry.'' This is not a simple or straightforward matter, because the
decision may have far reaching repercussions beyond its impact on the
FTC.
As noted, the FCC has revised its TCPA regulations to prohibit any
company under that agency's jurisdiction from calling consumers'
numbers that appear on the National Do Not Call Registry. Chairman
Powell of the FCC has announced that the FCC will enforce its do-not-
call rules against telemarketers that have obtained the Do-Not-Call
list from the FTC, beginning October 1.\8\ He noted that the recent
court cases have not disturbed the FCC rules, and that the 10th Circuit
Court of Appeals had refused to block the FCC's rules pending review-as
the telemarketing industry had urged--citing the strong public interest
of leaving the rules in place. Chairman Powell stated that the FCC
intends to continue to administer and enforce its rules to the fullest
extent possible as the litigation proceeds. These steps are made more
difficult because it is unclear the extent to which Judge Nottingham's
decision permits the FCC to access the Registry for enforcement or
companies under FCC jurisdiction to access the Registry for compliance
with the FCC's rules.
---------------------------------------------------------------------------
\8\ See press release at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-239219A1
.pdf.
---------------------------------------------------------------------------
Similarly, Judge Nottingham's ruling threatens the ability of the
states with do not call laws to enforce them. The TCPA prohibits any
state that has a do not call registry from enforcing its do not call
law unless its registry includes the phone numbers of consumers from
that state who are on the National Do Not Call Registry, which the FCC
has established as a single national do not call database as part of
its revised TCPA regulations.\9\ Because it is unclear the extent to
which Judge Nottingham's decision permits the states to access the
Registry for purposes of enforcement of state law, the decision casts
doubt on the ability of states to enforce their do not call laws.
---------------------------------------------------------------------------
\9\ 47 U.S.C. Sec. 227(e)(2).
---------------------------------------------------------------------------
We believe that the FTC is likely to succeed on the merits of its
appeal because the district court's decision reached an unprecedented
conclusion that telemarketers have a constitutional right to continue
telemarketing calls to consumers who have indicated that they do not
want these calls. This holding is at odds with the relevant Supreme
Court cases. Specifically, the court erred in its application of
Central Hudson Gas & Electric Corp. v. Public Service Commission of New
York.\10\ Under Central Hudson, a regulation of truthful nondeceptive
commercial speech will survive First Amendment scrutiny if: (1) the
government asserts a substantial interest; (2) the regulation directly
advances that interest; and (3) the regulation is reasonably tailored
to serve that interest.
---------------------------------------------------------------------------
\10\ 447 U.S. 557, 564 (1980)
---------------------------------------------------------------------------
With respect to the first prong of the Central Hudson test, the
Denver court recognized that the interest the Registry is designed to
advance, protecting consumers from unwanted telemarketing calls, is a
substantial one. Millions of consumers have signed up for the Registry
in the hope that it would shield them from unwanted telemarketing
calls. As the district court noted, ``[t]he government's interest in
protecting the well-being, tranquility, and privacy of the home is of
the highest order in a free and civilized society.'' \11\
---------------------------------------------------------------------------
\11\ Order at 19-20, citing Frisby v. Schultz, 487 U.S. 474, 484
(1988).
---------------------------------------------------------------------------
We disagree, however, with the court's analysis of the second prong
of the Central Hudson test, the requirement that the Registry must
materially advance the government's interest in protecting consumers
from unwanted telemarketing calls. The court conceded that the Registry
``might eliminate anywhere from forty to sixty percent of all
telemarketing calls for those who subscribe, a substantial amount of
unwanted calls.'' \12\ Indeed, as a result of the FCC's complementary
TCPA regulations, the Registry will likely shield consumers from as
many as eighty percent of unwanted calls. Because the Registry would
put a halt to a substantial percentage of unwanted telemarketing calls,
it materially advances the government's interest.\13\
---------------------------------------------------------------------------
\12\ Order at 22.
\13\ See United States v. Edge Broadcasting Co., 509 U.S. 418,431
(upholding regulation that restricted lottery ads from only 11 percent
of radio listening time in the affected area).
---------------------------------------------------------------------------
Nevertheless, the court ruled that the Registry could not pass
muster under Central Hudson because the Registry does not also apply to
charitable solicitations--even though charitable solicitation
constitutes fully protected speech.\14\ The court criticized the TSR's
accommodation of protected charitable solicitation as ``content
based,'' and therefore--in its view--as impermissible under City of
Cincinnati v. Discovery Network, Inc.\15\ The court appears to have
ruled out any distinction between commercial and non-commercial speech
in the regulation of telemarketing. In fact, the court's decision puts
the FTC in an awkward position--in order to protect consumers from
unwanted commercial calls, the FTC would run the risk of creating an
impermissible infringement on fully protected speech. The court's
reasoning is erroneous, for three reasons.
---------------------------------------------------------------------------
\14\ See Riley v. National Federation of the Blind of North
Carolina, Inc., 487 U.S. 781, 787-88 (1988).
\15\ 507 U.S. 410 (1993).
---------------------------------------------------------------------------
First, the court erred in supposing that there is ``no doubt'' that
calls soliciting charitable contributions are equally as invasive as
commercial calls.\16\ On the contrary, as the Eighth Circuit recognized
in Missouri v. American Blast Fax, Inc., Congress itself, in enacting
the TCPA, concluded that ``non-commercial cal1s . . . are less
intrusive to consumers because they are more expected.''\17\
---------------------------------------------------------------------------
\16\ Order at 24.
\17\ 323 F.3d 655 (8th Cir. 2003) (quoting H.R. Rep. No. 102-317,
at 16 (1991).
---------------------------------------------------------------------------
In this regard, the Court also failed to note that reasons directly
related to the abuses the Do Not Call rules seek to remedy compelled
the FTC's determination to exempt charitable solicitation calls from
the National Do Not Call Registry Requirements (while subjecting them
to the company-specific do not call provisions). For eight years, the
Rule has contained a company-specific do-not-call provision, which was
intended to shield consumers from unwanted telemarketing calls, but
until March 31, 2003, this provision applied only to commercial
telemarketers.\18\ Although the record shows that this provision failed
to achieve its goal with respect to commercial telemarketing calls
because those telemarketers frequently ignored consumers' requests to
be put on company-specific lists, there was no comparable evidence that
for-profit telemarketers who solicit on behalf of charities will ignore
the company-specific provision. There is also no record evidence that,
with respect to charitable solicitors, the company-specific provision
will not achieve the FTC's goal of protecting consumers from unwanted
telemarketing. In fact, evidence on the record indicates that the
different incentives that govern charitable solicitations as compared
to commercial solicitations may make the company-specific approach more
workable and effective with respect to charitable solicitations.
Accordingly, the record provides ample reason, directly related to the
abuses the Registry is aimed at, for treating charitable solicitations
differently.
---------------------------------------------------------------------------
\18\ On October 25,2001, the USA PATRIOT Act, Pub. L. 107-56, 115
Stat. 272 (Oct. 26, 2001), became effective, which, in relevant part,
expanded the coverage of the TSR to reach not only calls to solicit
sales of goods and services, but also calls soliciting charitable
contributions.
---------------------------------------------------------------------------
Second, the district court ignored the context in which the Supreme
Court addressed the issue in Discovery Network. In that case, the
ordinance's exception for non-commercial newsracks made the ordinance
ineffective in addressing the public purpose in question preventing the
clutter and disruption on city sidewalks engendered by newsracks--
because commercial newsracks comprised only a very small proportion of
newsracks overall.\19\ By contrast, the TSR's Do Not Call Registry
provisions cover the vast majority of telephone solicitations,
especially in light of the FCC's complementary rule. This fact
distinguishes Discovery Network.\20\
---------------------------------------------------------------------------
\19\ 507 U.S. at 418.
\20\ See Destination Ventures, Ltd. v. FCC, 46 F.3d 54 (9th Cir.
1995). In that case, the court upheld a prohibition on unsolicited
faxes that applied only to commercial faxes. The court held that
Discovery Network did not require the FCC to distinguish the harm
caused by commercial and noncommercial faxes because it was undisputed
that commercial faxes caused the bulk of the problem. 46 F.3d at 55.
Whereas, as here, the regulation furthers the government's goal,
Discovery Network does not prevent the government from regulating
commercial speech merely because it has not also regulated fully
protected speech. This is what the Supreme Court meant in United States
v. Edge Broadcasting Co., 509 U.S. 418,434 (1993), when it said that
there is no constitutional requirement that the government ``make
progress on every front before it can make progress on any front.''
---------------------------------------------------------------------------
Third, in assessing the ``fit'' of the Do Not Call Registry under
Central Hudson, the court failed to take into account the minimal
nature of any governmental intrusion on speech. Unlike the ordinance in
Discovery Network, the National Do Not Call Registry does not ban any
speech; it only facilitates consumer choice whether particular speech
is welcome. Even assuming the district court was correct in concluding
that the Registry nevertheless imposes some level of burden on speech,
the degree of any such restriction is relevant to an assessment of
whether the measure is ``narrowly tailored to achieve the desired
objective.'' \21\ The Do Not Call Registry has been carefully tailored,
allowing commercial telemarketing to be directed at all consumers
except those who have specifically requested that they be spared such
intrusions. Such a system is consonant with the underlying purpose of
the commercial speech doctrine--i.e., enhancing consumer welfare by
ensuring the availability of information consumers value.\22\
---------------------------------------------------------------------------
\21\ Board of Trustees of the State University of New York v. Fox,
492 U.S. 469,480 (1989); cf. Lanphere & Urbaniak v. Colorado, 21 F.3d
1508, 1515-16 (10th Cir. 1994) (where restriction entails ``an indirect
barrier to commercial speech,'' ``the 'reasonable fit' test of Fox is
more easily satisfied'').
\22\ See Rubin v. Coors Brewing Co., 514 U.S. 476, 481-82 (1995).
---------------------------------------------------------------------------
More than 50 million telephone numbers are now in the Registry. All
these consumers have stated that they want an end to telemarketing
calls. The Rule's Do Not Call Registry provisions that protect
consumers were scheduled to take effect on October 1, 2003. The FTC has
moved for a stay of the district court's order, but if the stay is not
granted, tens of millions of consumers will continue, after that date,
to receive those telemarketing calls.\23\ By contrast, if a stay is
granted, telemarketers will be restrained from calling only those
consumers who have signed up for the registry and who have declared
their lack of interest in telemarketing sales calls. Indeed, the Direct
Marketing Association, a telemarketing industry trade association, has
recently stated that it ``remains committed to respecting * * * the
wishes of all consumers no matter how those wishes have been
expressed.'' \24\ We believe we have a strong argument for success in
our motion for a stay, and we are hopeful that a stay will be granted.
---------------------------------------------------------------------------
\23\ See Mainstream Marketing v. FCC, No. 03-9571(10th Cir., Sept.
26, 2003) (Order denying stay, recognizing ``the strong expectation
interest of the many millions of Americans who have registered'' on the
do-not-call Registry).
\24\ See www.the-dma.org/cgi/dispnewsstand?article=1494.
---------------------------------------------------------------------------
It is hard to imagine a more graphic expression of public interest
than the Congressional response to Judge West's September 23, 2003,
decision holding that the FTC lacked statutory authority to create the
registry. Within only 48 hours of that decision, both houses of
Congress passed legislation expressly ratifying the registry. We hope
that the strong public interest embodied in Congress's recent enactment
will not be thwarted.
For over two years, the highest priority of the FTC has been
simple: to allow consumers to choose whether to accepted unsolicited
telemarketing calls in their homes. Even before the National Do Not
Call Registry was to become effective, Americans registered more than
50 million phone numbers with the FTC. Millions have also registered
with similar state lists.
This simple concept has been surprisingly difficult to implement.
The FTC spent a year reviewing the rule and another year soliciting and
considering comment from sellers, telemarketers, and consumers. Every
effort was made to accommodate the industry's concerns about the
original proposal, refining and revising it, for example, to permit a
company to call consumers on the registry if they have an established
business relationship with that company.
Despite our efforts, the telemarketers have used every weapon in
their formidable arsenal to deprive consumers of choice. The FTC will
continue to make every effort to give consumers an effective choice
about stopping unwanted and intrusive telemarketing calls.
The Chairman [presiding]. Well, that's a very uplifting
message, Chairman Muris. We appreciate it.
Mr. Muris. I'm an optimist.
The Chairman. Chairman Powell.
STATEMENT OF HON. MICHAEL K. POWELL, CHAIRMAN, FEDERAL
COMMUNICATIONS COMMISSION
Mr. Powell. Thank you, Senator McCain, good morning, Mr.
Chairman, distinguished Members of the Committee. It's always a
pleasure to come before you today and particularly honorable to
come before you on such a critical issue to our consumers and
sit with my colleague and partner in this endeavor, Chairman
Muris, who's been a great leader on the do-not-call registry
issue.
First and foremost, I want to state unequivocally and
ensure the American consumers and Congress that the FCC will
continue to devote its full resources, it will exhaust every
legal remedy possible to ensure that national do-not-call list
survives. More than 10 years ago, Congress vested the FCC with
broad authority to protect consumers from unwanted calls, and
in our June order we expanded on that effort. Last week, in
fact, when these rules were challenged in the Tenth Circuit
Court of Appeals, the court specifically refused to block our
rules. It held, and I quote, that ``on the record presented,
the telemarketing industry had failed to establish a likelihood
of success on the merits.''
Citing further the strong public interest in leaving these
rules in place, the court made clear that rules should go
forward. Most recently, the Supreme Court of the United States
yesterday declined to disturb the lower court's rulings, so the
FCC continues to put its rules into effect beginning tomorrow.
It is important, however, to understand as a practical
matter that the legal challenges to the FTC rules affect the
enforcement of our rules because the congressional statute
instructed the two agencies to work in partnership with one
another to achieve our common consumer protection goals. Over
the past week we have been through the circular mill of three
district court decisions, the most recent issued late last
night addressing the FTC's rules, and they have introduced a
great deal of confusion with regard to the implementation and
enforcement of the 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 ruling prevents the FCC from
accessing the FCC data base, our enforcement efforts could be
hampered. However, the Commission continues to explore ways to
make sure that its enforcement is effective and will continue
to do so.
We continue to study the court's decision last night and
are working hard to clarify that landscape for ourselves, for
Congress, and for consumers. And in the meantime, as I have
said, I commit to you that to the extent legally permissible,
the FCC will enforce the rules against telemarketers, period.
If consumers on the list receive a prohibited call, they
may file a complaint. I would urge them to call 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 in the most aggressive
way possible to protect consumers.
I also want to take a final second to emphasize that while
the do-not-call list, which has captured most of the attention,
the FCC's comprehensive telemarketing rules protect consumers
in many other ways that are completely unaffected by the court
challenges. For example, consumers still have the right to be
placed on companies' specific do-not-call lists. Second, they
have the right to be protected from all calls between 9 p.m.
and 8 a.m.--and Senator, if that call at dinner occurred in
that timeframe, you let us know and we'll take care of it right
away to be free from excessive hang-ups or dead air calls.
These rules are clearly in effect and they will be rigorously
enforced. Notwithstanding how the court challenges resolve
themselves, telemarketers have important and ongoing
responsibilities under our rules to protect consumers.
Finally, to defend the consumer's choice about
telemarketing calls, the Government has marshaled all of its
resources. The Federal Communications Commission, the Federal
Trade Commission, the Department of Justice, all working
together to vigorously defend the 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 jurisdictional
questions, and the President of the United States with 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 that path to
effectuating the will of the American people and with the team
we have assembled, I remain confident we will prevail. I
believe ultimately our rules will stand constitutional
challenge. In the end, I'm simply unwilling to accept that the
notion of the First Amendment unavoidably bars the American
people from deciding who calls them in the privacy of their own
homes. The First Amendment protects a willing speaker to talk
to a willing listener, not to an unwilling listener, and I
assure you that the full resources of the FCC are committed to
defending our rules, taking any steps necessary to effectively
implement and enforce them, and to the full extent permissible
by law.
Thank you, Mr. Chairman, and distinguished Members of the
Committee. I'm happy to take your questions.
[The prepared statement of Mr. Powell follows:]
Prepared Statement of Hon. Michael K. Powell, Chairman,
Federal Communications Commission
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.
The Chairman. I thank you very much. To go back to the
beginning of this problem, isn't it correct that the court
ruled the way it did, not that Congress doesn't have the right
to have a do-not-call list, but it doesn't have the right to
exempt certain aspects of it such as charitable or political?
In other words, if a do-not-call list had been blanket then the
court wouldn't have decided the way that it did? Is that a
correct assessment?
Mr. Muris. Well, I believe so, reading the judge's opinion,
but I believe that we'd be in much more constitutional danger
if the list was if the list equated commercial telemarketing
with charitable and politicians.
The Chairman. Well, I was going to get to that, but isn't
that correct, the basis of the court decision in your view?
Mr. Muris. Yes.
The Chairman. Chairman Powell also? Go ahead.
Mr. Powell. Senator, I think there's an important caveat,
at least today. What the court ruled was that the FCC, who
exempted charitable organizations and non-commercial speech,
was doing so at its initiative and it challenged that, but it
pointed out that in the context of our rules we have a
Congressional finding that distinguishes between commercial and
non-commercial speech, and it even suggested that that
Congressional finding in the TCPA might be an acceptable basis
for making the decision, citing an Eighth Circuit case in which
the facts rules were upheld against a constitutional challenge
that made the same distinction because Congress had so found.
So there's still a possibility that the rules will prevail on
the basis that Congress has made a thoughtful finding
distinguishing.
The Chairman. But isn't it. I thank you, but my point is,
hasn't Congress passed laws regularly, as regulatory bodies
have also passed regulations with great frequency, that
separate and draw distinction between for-profit and
charitable? We give tax benefits to charitable organizations.
Isn't there a clear precedent that we do differentiate between
charitable and non-charitable activities in a broad variety of
ways? I'll ask both of you.
Mr. Muris. Well, absolutely, indeed both of us have
statutes that make that distinction. Our more general statute,
section 5 of the Federal Trade Commission Act, prohibits us
from regulating non-profits in most circumstances and this is
ubiquitous.
The Chairman. And very appropriately, we want to encourage
charitable activities. I mean, that's part of what America and
what we're all about. So this brings me, Chairman Powell, to
last night and this ever-evolving last night, plaintiffs also
claimed that the FTC is attempting to sidestep the order by
providing its register to the FCC for the implementation on
October 1. The court regards the terms of its injunctions and
judgment as reasonably clear and specific. The FTC is
prohibited from creating and implementing its do-not-call
registry. Now how do you interpret that, Chairman Powell? It
seems to me this judge is saying that Chairman Muris can't give
you that list.
Mr. Powell. Well, I think the fair reading of the court's
order is that, as against the FTC it's instructing them that
they can't provide that list and I think Chairman Muris has
acted completely appropriately in limiting the availability of
the list. However, that does not shut off every avenue for the
FCC to prosecute its rules that will go into effect pursuant to
the Tenth Circuit's refusal to stay them.
If we can have in the context of an enforcement, if we can
breach the evidentiary question of whether a telemarketer knew
that somebody was on the do-not-call list and nonetheless
violated our rules in calling them, it is our position that we
think we have other venues to potentially prosecute that as an
enforcement matter. What I'm forbidden to do is what would have
been easy, which is going to our computer and accessing the
list as it has been maintained by the FTC, but I don't think
that that necessarily means we have no other venues for
potentially getting that list.
The Chairman. So the short-term solution is that you will
exercise what you believe is your authority to prosecute those
who violate the do-not-call list. And you, Chairman Muris,
intend to, as quickly as possible, challenge this and seek a
stay of this decision so that you can proceed with the do-not-
call list enforcement. Is that a correct assessment as to the
status as it exists at this moment?
Mr. Muris. Yes, and there's a third player in this, of
course, which is the States, which have their do-not-call
lists, and they are hampered in a similar way that the FCC is,
but the court opinions don't stop them. And one of the points
we've made to the Tenth Circuit is this chaos and confusion and
hampering that's caused by treating the two agencies
differently.
Mr. Powell. One other point I'd make just for the record.
The FCC, too, will have to defend the merits of its decision
against constitutional challenge in the Tenth Circuit, and the
court has granted, I think wisely, a very expedited schedule
for briefing and hearing of those merits through the fall with,
I think, oral argument on January 12 of this year, of next
year.
The Chairman. This could be in limbo until January unless
you get a stay?
Mr. Muris. Oh, it would be much past, or at least somewhat
past January. January is the oral argument just for the FCC. We
will, if a stay is denied, will seek every other if a stay is
ultimately denied, we will seek to try to get the most
expedited schedule. It might make sense for the Tenth Circuit
to combine us all. If they do that, however, it will take them
some time to write an opinion and then there may be further
appeals.
The Chairman. It would seem to me that the court, that our
first effort should be to try to get the court to issue a stay.
Mr. Muris. Absolutely. And that's what we're doing. We are
we got the opinion last night. The court opens in 14 minutes
and we'll be there in 14 minutes.
The Chairman. Well, I want to say again, quite often and
probably with legitimacy bureaucracies of government are
accused of being slow to react to the public interest or to
difficulties in problems that arise, I would like to commend
both of you in the strongest terms for a very rapid reaction on
a very important issue to the American people and I thank you
for it. Senator Wyden.
But wait, Congress can do nothing at this moment.
Mr. Muris. Do you have any suggestions?
[Laughter.]
The Chairman. Besides demagogue the issue I mean.
Mr. Muris. Well, I hardly think this is demagoguery.
Mr. Powell. Possibly not, but I think it's important to
understand on what basis the court is holding constitutional
infirmity. It is a basis that potentially could be fixed, that
is, Congress potentially could strengthen the distinction
between commercial and non-commercial----
The Chairman. Could we on the Committee do an amicus brief?
Mr. Muris. Well, we would hope that there would be amicus
briefs from many places, including from the Congress.
The Chairman. Well, I think it would be important to come
from us who----
Mr. Muris. Yes, sir.
The Chairman.--wrote the law.
Mr. Muris. Absolutely.
The Chairman. Well, I think we'll go see about that.
Senator Wyden.
Senator Burns. Mr. Chairman.
Senator Wyden. Thank you.
The Chairman. Senator Burns.
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Can I interrupt just for a second now?
Senator Wyden. Sure.
Senator Burns. May I put my statement in the record, Mr.
Chairman?
The Chairman. Absolutely.
Senator Burns. We're in the middle of a mark-up over on the
supplemental and I know that there's enough talent around this
table to bring more light to this subject than probably needs
to come, but I would like to submit my record and I thank this
chairman for holding the hearing.
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
Mr. Chairman, Today's hearing concerns a topic of very high
interest to the American people--the right to privacy from intrusive,
aggressive telemarketing in their own homes. I commend the Chairman and
many of my colleagues on the Committee for acting with unprecedented
speed last week in pushing forward legislation that reaffirmed
Congressional intent in authorizing the Do-Not-Call list, which the
President signed into law just yesterday. I am also pleased that the
Chairman called for today's hearing, which is extraordinarily timely
given that the Do-Not-Call list is scheduled to go forward tomorrow and
over 50 million Americans are expecting it to work.
I also commend Chairman Muris of the Federal Trade Commission and
Chairman Powell of the Federal Communications Commission for using
every resource at their disposal to implement the list. In particular,
I note the critical move yesterday by Chairman Powell to enforce the
list given that recent court actions do not impact the authority of the
FCC in this area.
I was extremely disappointed at last week's Oklahoma Federal
District Court decision preventing the Federal Trade Commission from
going forward on implementing the Do-Not-Call list. The Do-Not-Call
list has proven to be one of the most popular and necessary consumer
initiatives in history. From the day consumers have been able to sign
up for the Do-Not-Call list on June 26, over 50 million Americans have
registered, including 139,000 in Montana. So urgent was the public's
need to stop intrusive telemarketers that in the first 14 hours of
enrollment on June 26, over 650,000 citizens added their numbers to the
list.
Last week's ill-considered decision by the Federal District Court
in Oklahoma would have prevented the Do-Not-Call list from going into
effect tomorrow. The decision was dead wrong in its core assumption
that the FTC acted without statutory authority in creating and
administering the Do-Not-Call list. In fact, Congress clearly granted
the FTC the authority to setup the Do Not-Call list by passing the
``Do-Not-Call Implementation Act'' in February of this year. This Act
gave the agency authority to collect fees from telemarketers to
establish and enforce the list. The ``Omnibus Appropriations Act'' in
February also authorized the FTC to enforce the do not-call provisions.
Rather than waiting for an appeals court to overturn this
wrongheaded decision, Congress acted quickly to once again reaffirm its
commitment to protecting Americans from needless and unwarranted
intrusions into their lives by aggressive telemarketing. Unwanted
telemarketing calls have reached unacceptable levels in our country. By
one estimate, telemarketers attempt almost 105 million calls daily;
implementation of the do not-call list would reduce these calls by
almost 80 percent.
Some Americans are sick and tired of these endless interruptions in
their private lives, which often take place at most unhandy times. By
responding rapidly to overturn this reckless and sloppy decision by the
Oklahoma District Court, Congress sent a clear message that this
destructive hyper-marketing will no longer be tolerated. In the wake of
the following decision against the FTC by the District Court in Denver
on different grounds, I again fully support the action of the FCC to
move forward in enforcing the list so that American consumers are not
left to suffer while lawyers argue.
While the flurry of legal activity over the past few days has at
least temporarily cast the future of the Do-Not-Call list into doubt, I
remain committed to protecting this commonsense, basic protection for
the American consumer. Thank you, Mr. Chairman.
The Chairman. Thank you. We'd like you to stay. There are
less damages done when you are here than over there.
[Laughter.]
The Chairman. Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman. Let me go right on
this last point the Chairman made about immediate help for the
public. People are sitting out there and they're in effect
running around this legal mulberry bush, waiting for some
immediate relief.
I said in my opening statement, Mr. Muris, that I'm going
to push the telemarketing industry very hard to meet you all
halfway with respect to working out the provisions for getting
access to the list, because it seems to me then you could at
least give some measure of relief immediately to the public
that is so frustrated as they go up and down this legal roller
coaster.
What exactly do you need the industry to do now in this
effort to work with them to try to get the public some relief?
Mr. Muris. Well, obviously the easiest thing would be to
withdraw the lawsuits, but that won't happen. But I think with
the telemarketers--it's in their interest to try to get
themselves--and if I could explain for a minute that the
position that they're in--some of the telemarketers have the
list, some of them do not. And given what some states have said
and what Chairman Powell has said, the telemarketers are in a
difficult position. They're almost damned if they do, damned if
they don't.
The most important thing for us is to get the stay. If we
don't get the stay, we will move to try to set up a voluntary
system, but given what the telemarketers said in court
yesterday I fully expect that they would regard that as in
contempt of the judge's order, and if they take that position
they may well prevail.
Senator Wyden. Making the argument that this is an act
that's regarded as contempt, that really sort of guts the whole
spirit of trying to do anything voluntary, doesn't it?
Mr. Muris. Well, I agree. It appears that the telemarketers
are saying one thing in public and another thing in court.
Senator Wyden. What's your advice to the two areas of
consumers that are following this? I mean, you've got consumers
who have signed up and they want to know what's going to
happen, you've got consumers who are watching all of this and
trying to make sense of it. Gentlemen, what would you advise
the public in those two groups?
Mr. Powell. I think number one, it's important to give the
consuming public a sense that its government is fully committed
to effectuating the list, and while it's wrangling with
legalese it's difficult for them to appreciate that we
ultimately do believe and I believe this in the strongest terms
it's all fixable. Whether it's all fixable to perfection by
tomorrow or each day as we deal with each court case, I am
quite confident that it's all fixable through the partnership
of the Congress and the regulatory agencies, number one.
Number two, I think we are going to consider very seriously
providing consumer information that will help people understand
what they really can expect and what they really can't expect
to the extent that we can nail that down about the court cases.
There is ambiguity here. For those consumers who get called by
people who got to access the list before it was enjoined, they
may have every right to seek enforcement protection. If they
got called from people who don't have the list and those people
are not permitted by law to get the list, it may be difficult
to enforce. They're not poor consumers are not going to know
the difference. That's going to be for us to help them sort
out.
If I could, Senator, you invited a question a moment ago
and I want to suggest something else. It would be enormously
helpful if the industry would commit to voluntarily providing
the list to the FCC when it needs it for purposes of
enforcement. I can't get the list from Chairman Muris right now
because of a court order, but there are people who have gotten
it, and to the extent that we receive complaints, if I'm able
to have evidentiary proof as to disputes then we can certainly
advance enforcement with respect to those who are entitled to
it.
Senator Wyden. One last question for this round. If you buy
the reasoning by the Denver court, how do you uphold the junk
fax law, for example? I mean, the junk fax law relates only to
commercial faxes. Aren't we really headed, if you buy that kind
of reasoning, for a variety of areas that are going to
certainly not go over well with the consuming public? Mr.
Powell?
Mr. Powell. Senator, I think it's very interesting you say
that because in the opinion last night the judge himself cited
the junk fax law, in some sense almost favorably. In that case,
he was citing--the fax laws are solely FCC rules and they flow
from Congress' TCPA statute in which Congress made findings
distinguishing the charitable and political speech from
commercial speech, and the judge cited a case in the Eighth
Circuit in which the constitutionality of those rules was
upheld, upheld because it found that Congress had adequately
made those distinctions.
I would argue that the rules under the TCPA have been
challenged constitutionally before and have been upheld,
because the congressional findings were given deference. That's
why we continue to be optimistic that our rules that do flow
from the congressional statute have a fair chance of prevailing
on a First Amendment basis.
Senator Wyden. Thank you, Mr. Chairman.
The Chairman. Senator Allen.
Senator Allen. Thank you, Mr. Chairman. I thank both these
chairmen for their leadership on this issue and also their
articulate knowledge of the law. You've become lawyers and
counsel here.
It strikes me as one of the key reasons and one of the
things we can do other than write an amicus brief, which I
think would be very important in answering the Chairman's
question, what can we do. We've passed laws. You get frustrated
when people who are appointed for life to the bench make
decisions that can't understand plain law passed by the House
and the Senate and signed by the President.
Now, we can file an amicus brief. You mentioned, Chairman
Powell, in the situation of the faxes, and there is a
distinction. There's a, as I recollect in the fax situation,
there is a difference for non-profits, there's a difference if
somebody's a member of an organization and a business
relationship and all the rest, which is a different situation
in my view, a distinction with this situation as far as the do-
not-call where these are completely unsolicited calls from
folks that have no relationship whatsoever to the household
that they're calling.
Do you, in your estimation and reading of these court
decisions, believe that we may need to, as a Congress, pass
this law again with greater Congressional findings
differentiating or explaining why we feel that commercial
speech is different than that of charitable or non-profit
calls?
Mr. Powell. Yes, sir. I think there are three points. One,
you may have done enough, stay tuned, we may win in the Tenth
Circuit just on that point that Congress did make those
findings and they're entitled to deference. By the way, I'll
even read you a quick passage from the Eighth Circuit case.
When Congress enacted the TCPA, it had found that non-
commercial calls are less intrusive to consumers because they
are more expected. The Supreme Court has indicated Congress can
rely on various forms of effort to distinguish between
different types of speech. The legislative history shows the
TCPA's distinction between commercial and non-commercial. Fax
advertising is relevant to the goal of reducing the costs and
interference associated with unwanted faxes. We might win
already because Congress made those faxes.
Second, if they are inadequate, I think that is one of
Congress' responses. It can make those findings more explicit,
more distinct, consistent with Supreme Court law, and probably
cure that infirmity.
And third, I think something Senator McCain mentioned, I
suppose if this is the basis for unconstitutionality, Congress
would be always free to eliminate the exemptions, which are the
source of the constitutional infirmity, that there are no
exceptions for these other purposes. But I don't think we'd
want to do that, but I think that certainly would be an option
available to you.
Senator Allen. Thank you. Chairman Muris and Chairman
Powell, with all the legal actions taking place, and we're
talking about amicus briefs and Congressional findings, insofar
as the general public is concerned, could you share for the
people of America, the 51 million who have signed up on this
do-not-call registry, what can they do now to stop these
unwanted calls?
Mr. Muris. Well, there is the glass is half-full here.
Because we created the registry and have 51 million phone
numbers on it, and because it appears that most and perhaps
almost all of the large telemarketers have the list, and
because of what Chairman Powell is doing, they can expect
starting tomorrow some significant diminution in phone calls,
assuming that the telemarketers comply with the law, and there
are some other things that they can do.
They can obviously complain to the FCC and their state
attorney general if they receive calls and they can ask to be
placed in addition on the company-specific do-not-call list,
which we can still enforce as well as Chairman Powell as well
as the States. That's a much more cumbersome way to avoid the
calls than the registry because you have to opt out seller by
seller, but there are steps that they can take, and because we
created the registry, because Chairman Powell has taken the
aggressive steps that he's taken, I do believe that there will
be some significant reduction.
Senator Allen. What's the website for the, if you could,
can they do this online?
Mr. Muris. Can you complain?
Senator Allen. No, obviously complain online, but insofar
as the company by company?
Mr. Muris. Well you have to--two things have to happen. You
have to ask the company, you have to say please put me on your
company-specific do-not-call list, then they have to call you
back again. We have given advice, and if the stay is upheld we
will probably try to do this more aggressively to have
consumers in fact take those two steps, which is to write down
when they asked to be placed on the company-specific list, who
the seller was, and then if they're called again to do that and
they can complain to us and to the FCC and they can do it
online. They can go to ftc.gov, and file a complaint.
Senator Allen. Thank you.
Mr. Powell. Senator, I would say it the way I would say to
a consumer. I think there are four things you ought to be
cognizant of because I think consumers can be our partners in
this effort. Chairman Muris already mentioned, if I was called,
immediately request to be put on the company-specific list.
Two, if called, inform them that you're on the national do-not-
call list and ask if they have it. That can be an important
source of deterring those who have it and nonetheless violating
it. It will also be important evidentiary information if they
exercise their third right, which is to let the FCC know and
potentially file a complaint.
And I think four, also as Chairman Muris mentioned, they
should explore what State-specific lists they have. I think if
consumers are vigilant and are well-informed, they will be an
important part of deterring the worst instincts of the
commercial entities who may attempt to circumvent the
regulation.
Senator Allen. Well they may do all of that. Thanks for the
advice, but their food will be cold by the time they go through
that, but thank you for that advice.
The Chairman. How do you get that information out to
people?
Mr. Powell. Well, we're going to explore that. We do
something at the FCC called consumer alerts. We try to put
together a very simply speaking informational. We'll put it on
the Web, we'll circulate it to news organizations, we'll speak
publicly----
The Chairman. Maybe we could get some----
Mr. Powell. We'll get you copies.
The Chairman.--consumer groups to be involved with their
mailing lists.
Mr. Muris. Yes, Senator. One very important form of
information, which I believe virtually all of your offices with
us and I assume with the FCC, are very good about containing
links on your website to the sorts of things that we do.
The Chairman. We'll try and get that information on every
Senator's website.
Senator Allen. The reason I asked the question, Mr.
Chairman, that hopefully newspapers, for example, will publish
the answers of these two gentlemen on how consumers can be at
least vigilant and protected while this court bumbles through
their decisions.
The Chairman. Senator Nelson? Thank you.
Senator Nelson. Thank you, Mr. Chairman. You know, this
Committee, along with you all, have grappled with the problem
of spam and there are very similar issues here of invasion of
privacy, of in some cases making your ability to use the
Internet almost non-existent because it's loaded up with so
much spam. Either one of you want to draw some parallels here?
Mr. Muris. Well, we have talked repeatedly about spam.
We've testified. We've brought over 50 cases involving spam.
We're the only people in the world that like spam. You can go
to our website and send us spam. We get over 100,000 a day.
We've collected millions of spam. We use it to understand spam,
the patterns in it. We've brought over 50 cases.
I think, unfortunately, the distinction is that the
spammers are mostly already violating, I mean overwhelmingly
already violating lots of laws, including our own, where the
telemarketers are mostly not doing that, at least I hope that
continues through tomorrow. Now, Senators, this Committee,
Senators Wyden and Burns have a bill that, although we would
write some changes in it, we think the bill would be helpful.
We think technology would be helpful.
At the end of the day, however, unlike the telemarketing
problem, the spam problem is a much tougher problem, and
although legislation would be helpful, I don't think it would
solve the problem. Now, I believe I have as much standing as
anyone in the country to comment on a do-not-spam list and I do
not think a do-not-spam list would be a useful idea. I would
advise consumers not to waste their time to put their name on
it because, again, the overwhelming majority of spammers are
already violating laws. The problem is we can't find them
because of the anonymity of the Internet. I believe the
legislation that you are working on and they're working on in
the House would be helpful, but it will not solve the spam
problem.
Senator Nelson. Understandably, but there are certain types
of spam that according to normal standards are egregious, and I
think that's going to be the intent of the legislation coming
out.
Mr. Muris. Yes, absolutely.
Senator Nelson. And when that legislation gets to the
floor, since they wanted to keep the Committee bill clean
coming out of the Judiciary Committee on the penalties, the
most egregious types, I will be offering an amendment to make
this one element of the RICO Act, the Racketeering Influenced
Corrupt Organization Act, so you can go after the criminal
enterprise, for example, the child pornography spam that's
going on.
Mr. Muris. We are working right now with the United States
attorneys using current laws, current criminal laws, to go
after spammers, including the kind that you mentioned. There
are criminal enforcement provisions, I believe, in the
Committee's bill. The Justice Department has made some
suggestions that I think would improve them. I understand the
Committee is working with the Justice Department. I think
probably the most important part of the bill would be to make
appropriate criminal enforcement easier.
Senator Nelson. Well, this is a whole new day of invasion
of folks' privacy. Let me ask you this, Mr. Chairman Muris,
does this Colorado court's decision impact your ability to
enforce your FTC rules on deceptive and abusive calls?
Mr. Muris. Well, absolutely, it shuts us down in terms of
the do-not-call registry. If you take the logic of the judge,
and this is what Chairman McCain was going at, the logic of
what the judge has said, given the non-profit distinction in
our statute, calls into question an enormous amount of what we
do. On the other hand, we would argue there's a sharp
distinction because deceptive practices and fraudulent
practices should have no constitutional protection.
But there are wide ramifications from the argument that he
made and I would hope the judge, for example, would defer to
the findings of the Congress, but reading his opinions, even
though he made that argument in the context of the Eighth
Circuit opinion, that's hardly a model of consistency with
other statements that he made.
Senator Nelson. Would you expand on your comments earlier
about if this decision stood, whether or not the states would
be able to enforce their do-not-call lists?
Mr. Muris. There are several problems that the states have.
The logic of this decision eliminates virtually all the State
lists because they make various distinctions, most of them in
terms of charities, but there are other distinctions that they
make. The practical problem, many of the states, 13 or 14, have
adopted our rule as theirs and they can't get it now.
There's also a potential problem, and I believe the
telemarketers will argue this, that their failure to be able to
get our registry read with the FCC statute, and this would be
an extraordinarily unfortunate combination, would prohibit them
from enforcing their laws.
The Chairman. Senator Ensign.
STATEMENT OF HON. JOHN ENSIGN,
U.S. SENATOR FROM NEVADA
Senator Ensign. Thank you, Mr. Chairman. Just a couple of
comments on the whole idea of free speech and what is free
speech. Chairman Powell, you mentioned a willing audience. I
would even take that, you know, we've discussed the difference
between commercial and charity speech I mean, I don't know, it
seems to me that if somebody didn't want the charitable speech
coming into their house they shouldn't have to listen to that
as well, same thing with political speech.
I understand that Congress' intent was simply because
sometimes you try to get something done and there would be a
lot of opposition to have included the charitable and the
political speech in this, but as far as if a person doesn't
want to be bothered, just like a person doesn't want to go
vote, they don't have to go vote. If they don't want to
participate and donate to charities, they don't have to. I
mean, that is part of freedom. That seems to me that that is
their right to be able to do that. It would seem to me even
constitutionally that that should be able to be structured
regardless of how we do it.
But also, if Congress just wants to limit the commercial,
then Congress has the right to be able to do that. It just
seems another one of these court decisions where you just
scratch your head and you wonder what some of these judges are
thinking when they're making some of these rulings. I don't
understand how somebody can say that you're limiting free
speech by somebody voluntarily signing up on a list that says,
please don't call me. That just makes no sense, I think, to
people, and I think that's the reason Congress responded so
quickly and in such a bipartisan way to, when the first ruling
came out, to make sure that it was clear that Congress was
authorizing the do-not-call list.
You mentioned, Chairman Muris, until we get all this
straightened out in the courts, you know, companies have this
do-not-call list that you can sign up with, but like you said,
then they have to call you back and the problem is that there
are 5,000 companies. I don't think that anybody wants to make
5,000 phone calls out there to make sure that they are off of
every list.
Mr. Muris. Well, the way they would have to do this--I
agree completely with your opening remarks--but they way they
would have to do this is not to call everybody, they would have
to make notes as people call them. It is more cumbersome. It's
why that rule has existed for a long time--it's why we proposed
this national rule. When I, two years ago I spent time, for
example, with Senators Wyden and Lansdowne talking about
privacy, Congress wanted the Federal Trade Commission to be the
privacy agency. We looked at the privacy issues and decided
that this was the single most important step we could take that
would practically affect Americans.
There are more Americans interested in this than
practically everything I know of since the Seabiscuit-War
Admiral match race in 1938, when during working hours a third
of Americans stopped and listened to it on the radio. There
aren't very many things that touch the average person the way
this has, and it's because the company-specific list is
cumbersome.
We believe that people are aroused so much that we could do
more enforcement, but Chairman Powell has rightly and
aggressively said, if you have the list, we're not talking
voluntary here, we're talking under his rules, you have to
comply.
Senator Ensign. Chairman Powell, could you maybe comment on
what we can do; what do you see over the next several months? I
know that you're going to be doing what you can enforcement-
wise. Do you see at the end of the day though if this
particular judgment held up where you couldn't make the
distinction, so then would Congress I mean, it would seem to me
if that held up through the courts, Congress' only choice then,
if we really wanted a do-not-call list would be to include the
political and the charitable speech. Isn't that--wouldn't that
be a logical assumption?
Mr. Powell. It could be. I think that it's important again
to emphasize the fluid nature of the litigation. Each day we
learn another piece, and I think there are a few more shoes to
drop before we're sure what the full range of cards we have to
play are. One of them is, if the FTC is successful in getting
the Third Circuit to stay this, it's a different ball game. If
we don't, it's a different kind of ball game.
I think there are three potential scenarios here: both of
our rules are struck down as unconstitutional; the FTC's are
and ours are not, but then we just have a mechanical
administrative problem of how we have the list operational with
one agency with constitutional rules, one without; or
ultimately both are sustained and we can go back to doing it
the way we designed it.
I think what I'm encouraged by, at least so far in the
court opinions, is the reasons that they are asserting for
finding constitutional infirmity are reasons that need not
necessarily be unfixable, which is, if there is the possibility
for either the regulatory agency or Congress to more clearly
explain the distinction between commercial and non-commercial,
it may be able to pass constitutional muster. And I think
ultimately your point, which is, I think, that under that under
the logic of the district court's decision, if those exemptions
were not there the ruling would have gone another way.
So it's not for me to tell Congress which of those it would
choose, but I do think ultimately that is one option it will
have, whether to not allow those exemptions in order to cure
the finding of the court. But my caution here is we're going to
have to see what are the full range of cards we can play, and I
think that will happen quick. I think in the next several days
we'll basically know the parameters.
Senator Ensign. Mr. Chairman, I have to leave, but could I
just ask a followup? It's a very quick question and it has to
do with the relationship with someone, a consumer walks in,
whether it's a hotel, let's use a real simple example. Somebody
comes in, as a veterinarian, comes into my animal hospital. Now
they're a client. Do you think that under the do-not-call list
that that relationship is protected? Let's say that I happen to
be running a geriatric special for check-ups for animals as
they get older and we want to be able to call our clients and
offer it. That's something that they want to hear about. Do you
think that that relationship is protected under the do-not-call
list?
Mr. Powell. Within very careful limits. I mean, I think one
of the things that Chairman Muris and I both worked on in our
rules is to have a narrowly defined zone of existing business
relationships in which calls are permitted within certain
parameters if there are certain indicia of an existing
relationship and it's not allowed to last forever in the
context of the telemarketing rules. It's an 18 and 3 rule, we
could get into the details of it, but I think that's a scenario
that we contemplated.
I mean, I think it's important that we went after
protecting consumers but we were cautious to protect legitimate
business relationships as well. This isn't a jihad for its own
sake. I think it's to protect consumers within the parameters
of fair business and legal practice, and one of them is,
sometimes you have a business relationship with a consumer or
citizen and we shouldn't stop communications between people who
have established relationships within limits. And I think the
scenario you're describing is probably one of them.
Mr. Powell. And indeed that, just to add a quick comment,
that relationship is in the consumer's interest to know.
Senator Ensign. Correct, right, and that's what I want to
make sure that as we go forward, if we are able to implement
the do-not-call list, that that kind of relationship is
protected. Thank you, Mr. Chairman.
The Chairman. Thank you. I want to thank both of you, as I
said before, for your remarkable reactions to this difficult
situation, which is obviously of enormous importance to most
Americans. Chairman Powell, we'd like to get that four-point
list from you and try and get as wide a dissemination as
possible so Americans at least have some recourse, and of
course we can all hope that the Court of Appeals will issue a
stay and this hearing will have been rendered a pleasant
exercise. Thank you very much for being here.
Mr. Muris. Thank you.
Mr. Powell. Thank you, Mr. Chairman.
The Chairman. Our next panel is Dean Rodney Smolla of the
University of Richmond School of Law at the University of
Richmond; Mr. Gerald Cerasale, who is the Senior Vice President
of Government Affairs for the Direct Marketing Association; Mr.
Tim Searcy of the American Teleservices Association; Mr. James
Guest is the President of the Consumers Union; and Mr. Lee
Hammond, a Member of the Board of Directors, American
Association of Retired Persons.
Welcome to all of the witnesses. Thank you for joining us
here today, and Dean Smolla, is that the proper pronunciation?
Mr. Smolla. It is, Senator, thank you.
The Chairman. Thank you for joining us today and please
proceed.
STATEMENT OF RODNEY A. SMOLLA, DEAN, UNIVERSITY OF RICHMOND
SCHOOL OF LAW
Mr. Smolla. Thank you, Mr. Chairman and Members of the
Committee. It's my pleasure to have this opportunity to address
the Committee. I've submitted substantial written testimony,
but I'd like to focus primarily on the constitutional conflicts
that various members have focused upon.
I think at the outset it's important to acknowledge that
there are two constitutional values here that are deeply
cherished by the American people: the right to privacy,
particularly in the home and freedom of speech. And we always
struggle in our society to accommodate those two values when
they are in conflict and it's not always easy to do so.
It's important, I think, for us to understand, as many
people have observed, that as technology increases the capacity
for various people to invade our privacy in American life, the
law has got to have a kind of a cost-of-living increase sort of
index. You have to be able to escalate the legal tools that
government can bring to bear so that the average person can
keep some measure of human dignity and some measure of privacy,
notwithstanding the technological ingenuity of those who use
devices to invade it.
The district court's decision in Denver, I think it's
important to emphasize, absolutely did not say that any form of
do-not-call list registry would be unconstitutional. As the
chairman has focused upon, the district judge's opinion is
actually relatively narrow. It is not that you can not have a
do-not-call list. What the district judge is concerned about
are the distinctions that reside in the list between the
commercial callers and the non-commercial callers.
So really I think the key is whether that's right or wrong
as a matter of constitutional law, whether it's likely to
prevail or not prevail in the Tenth Circuit and conceivably in
the Supreme Court, and also to ask the question whether there
are any fixes, either administrative fixes or Congressional
fixes that might take the oxygen out of the argument and
provide a quick rescue, perhaps a rescue even before this
reaches the Tenth Circuit. And I do have a suggestion as to a
possible fix that might moot the controversy and I'll get to
that in a second.
Let me first very quickly talk about the merits of the
district judge's opinion. I think that the district judge did
undervalue one of the Supreme Court precedents that's the
backdrop of this, the Rowan case, which is a relatively old
case from the 1960s involving the primitive old world of bulk
mail, you know, the LL Bean catalogs and all the things that we
all get in the mailbox. In that decision in Rowan, the U.S.
Supreme Court very powerfully endorsed the notion of privacy,
and if you read that opinion by Chief Justice Burger, you see
the Court unequivocally rejects the notion that freedom of
speech carries with it the right to go into someone's home and
engage in speech conduct that they do not wish to receive.
Now, the district judge says, yes, Rowan is precedent and
it looks a lot like a controlling precedent, but the district
court in Denver said there's a distinction, and the distinction
is that Rowan was a neutral statute. All Rowan did was give you
the power to block senders, whereas in this one, Congress and
the agencies have put their thumb on the scale by singling out
commercial speech and treating it disfavorably.
But that overlooks a key element in Rowan. There was a
content-based distinction in Rowan. Rowan dealt only with
sexually explicit speech. It was only lewd or lascivious speech
that you had a right to block, so there is a precedent
involving content discrimination even in Rowan that the
district court never addressed, and I think it makes that
decision arguably vulnerable when the case goes to the Tenth
Circuit on that ground.
Now let's give the district court its due. I know it's a
very unpopular decision and it's easy to attack it, but there
is an important Supreme Court precedent on the other side of
this that I think has to be contended with, and it's a more
modern decision. It's the Discovery Network case and it's a
very simple case to understand. It involved the City of
Cincinnati's effort to keep newspaper kiosks, news racks, off
the streets in Cincinnati, to reduce the clutter that comes
when you come around the corner and there are 9 or 10 news
racks there.
So the city said, we're going to not allow news racks, but
we're going to have an exception for true newspapers, USA
Today, Wall Street Journal, Cincinnati Post or Cincinnati
Inquirer, they get to stay but the commercial handbill news
racks, the real estate----
The Chairman. It was a way of getting around at the
sexually explicit stuff too, right?
Mr. Smolla. Well, it was commercial and there often would
be, that is to say the commercial handbills might be for adult
stores and that sort of thing, exactly, Senator.
The U.S. Supreme Court said you can't do this, and the
reason you can't draw this commercial/non-commercial
distinction is that clutter is clutter, that the same news rack
was going to bother your eyes or bother your traffic flow no
matter what was in it, so the distinction in that case between
commercial speech and non-commercial speech didn't cut it, the
Supreme Court said, because there was nothing in the character
of the speech as commercial or non-commercial that connected to
the harms.
Now, just to give the district judge in Denver his due, so
you understand what you're up against, all right, the district
judge said essentially the same logic applies here. What's the
real problem? The problem is you're sitting down at dinner and
the phone rings and then you get up and you can't get rid of
the person and you've got to deal with it and then you go back,
and it's just an invasion of your privacy, it's an intrusion.
Or maybe there's this other problem. Somebody's on the
phone with you and they're trying to mess with you, they're
trying to trick you, there's fraud, there's overbearing, and
there's another element of annoyance. And what the district
court said is, really it doesn't matter whether that's a credit
card vendor that's called you or a political fundraiser that's
called you, or my alma mater, the University of Richmond,
trying to raise money, or a charity trying to raise money. It's
still a phone call. A phone call at 6 in the evening is a phone
call and they hit on privacies the same and the district judge
says there's no evidence really to prove that the commercial
callers are worse, that they're more vexatious, that they're
more overbearing and so on, and so he said that's a lot like
the news rack issue and that's the kind of distinction that the
First Amendment forbids.
Now that may not be right. That could get reversed in the
Tenth Circuit. It could get reversed in the Supreme Court. But
objectively, someone that's not here representing any interest
group or any vested economic interest, I have to say it could
win, that is to say it's not some outlying, ridiculous
application of these Supreme Court precedents. And the
Discovery Network case is a more recent case, a more modern
case that brings to bear all of the new protections for
advertising that the Supreme Court has adopted over the last 20
years, whereas Rowan is an older case.
So let me end with a possible creative solution. If you
look at this from the point of view of the big picture, not how
will the stay work out in the next 24 hours and so on, but the
long picture, one option would be to just give up on the do-
not-call registry. That's not tenable, we don't want to do that
in our society, it's not appropriate. People want this
protection and in some way or another undoubtedly they will get
it.
A second would be to go for the full blanket do-not-call
list, just everything is activated. That would eliminate the
First Amendment problem that the district judge identified, but
as the Chairman of the FTC has pointed out, even that's tricky
because it has the bad effect of squelching more speech,
including speech that's clearly at the core of the First
Amendment, political speech, charitable speech, and so on. So
that's not necessarily the most appealing solution, though it's
probably a fairly safe one from a First Amendment perspective,
though I think there would be some argument from some groups.
Third possibility is just to hold the line, argue
vociferously that this distinction is tenable and that the
cases like Discovery Network ought not apply in this situation.
A fourth possibility, and there has been a hint of it
already, would be to adopt a kind of hybrid, and this is my
creative suggestion. Congress could amend the empowerment
statutes here to say every consumer can do any of the
following: can block all the calls; can block only the
commercial calls but let the charitable calls and political
calls come through; can block the political calls and
charitable calls, block those but allow the commercial calls I
mean there are some people that like Home Shopping Network
better than C-SPAN, you know, so let the people that want to do
that do that and essentially you create a kind of menu. You can
block as much or as little as you want.
There are parallels to this. We do something like this with
the V-chip. We do something like this with filtering software.
This would be the true ultimate empowerment. It would place in
the hands of every family the decision as to how much to block
or how much not to block and I think it would eliminate this
content-based distinction argument that has been troublesome
and vexatious no matter how you play it.
So that's the gist of my comments on the constitutional
issue and of course later I'll be happy to take questions.
[The prepared statement of Mr. Smolla follows:]
Prepared Statement of Rodney A. Smolla, Dean, University of Richmond
School of Law
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. Sec. 227 (``TCPA''). The law was enacted ``to protect residential
telephone subscribers' privacy rights to avoid telephone solicitations
to which they object.'' Id. Sec. 227(c)(l). The Federal Communications
Commission was directed to promulgate regulations that restricted the
use of automatic telephone dialing systems. Id. Sec. 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. Sec. Sec. 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. Sec. 6102(a) (1) and (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 carne 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 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. 3v.
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 ofTrial 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 ofhouses 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 ofthe 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 modem 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, modem 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 inour
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.
The Chairman. Thank you very much, Dean, and that's a
remarkable idea. We thank you. Mr. Cerasale.
STATEMENT OF JERRY CERASALE, SENIOR VICE PRESIDENT, THE DIRECT
MARKETING ASSOCIATION, INC.
Mr. Cerasale. Thank you, Mr. Chairman, thank you, Members
of the Committee, for giving me the opportunity to be here.
I represent the Direct Marketing Association, been around
since 1917. We have marketers that use every channel of
communication to try and reach individuals, including the
telephone, and we've been in this space for quite a while.
In 1985, we started our own national do-not-call list and
it has 8 million phone numbers on it and our survey has shown
that it stops about 80 percent of the phone calls.
But let me start on this--what we've been saying for an
entire week now since the first court decision came down we
want our members to respect the wishes of American consumers.
They, millions of them, have put 50 million numbers on the list
and they don't want to be called. It makes business sense to
treat our customers the way they want to be treated and not
call them, but we continue, on the other side we continue to
believe that we have to settle the constitutional issues here.
If they're not settled, then anytime there's enforcement, those
constitutional issues come up and it's going to hinder
enforcement.
So the court cases must go on and we must find a solution,
a constitutional solution to this issue, but we do want to
respect the wishes of the American public. Now last week we
said we were asking all our members to voluntarily use the
list, and that was before these latest court decisions and the
determination of the Federal Trade Commission that we can not
use the list, we can not share the list with anyone, and based
on contract, even people that have the list can't use it for
others. For example, a teleservice bureau that has the list,
has downloaded it, paid for it, can not use it for its members
for its clients, excuse me that it does not know have already
paid for it, have permission to use the list.
So that's a problem we have and we're willing to work with
the Government to try and see if we can fix that problem. At
the moment, according to what Chairman Powell has said, most of
our members, our large members, do have the list and will use
the list so that a vast majority of the telephone calls from
our members will be covered by FCC enforcement. Also, there are
certain states that are not part of many states that are not
part of the FTC list and those enforcements will remain in
place.
We do have a problem with those members of ours who do not
have the list and the problem of them wanting not to call these
people, but you cannot find they cannot legally use those
numbers. And we have the problem with members who don't have
the list making phone calls and still potentially being liable
even though they can't find out who they're not supposed to
call from the situation of the private right of action in the
TCPA and enforcements by the States.
So we're in a conundrum ourselves and we need this
confusion to be settled, but it has to be settled in a
constitutional way. Otherwise, any list, any attempt of
American consumers to say they do not want to receive
information will be--could eventually be thwarted.
Now, telemarketing is big in the economy. It's $106 billion
a year from outbound telemarketing to consumers. There are
millions of Americans that are employed and even voluntary
compliance is going to clearly have some effect on our members,
where there are going to be loss of jobs and loss of sales. But
whatever the case, our view is that we should be listening to
the American public.
Now, we also raised issues and went to court ourselves for
issues other than just the constitutional issues that we've
been talking about. We believe that if there's going to be any
list it should be a list that is authenticated, and we think
that the Internet sign-up that the Federal Trade Commission has
put into place and we've told them this before as well--is not
authenticated. You can put any number on this list, it can be a
business number, it can be someone else's number, it can be
your neighbor's number, and there's no check whatsoever. So we
think that there needs to be some authentication. Now, if you
call by phone on the list that the Trade Commission has put
together, that is authenticated, so we think that's a problem.
And the other thing that we are concerned about is what the
two Chairmen talked about, the proliferation of lists that we
think that we need as a telemarketing industry, if there's
going to be a list there be one, not a national list plus 50
State lists and so forth, so that's the other area that we had
raised, other reasons that we went to court on.
So in conclusion, I want to thank you very much for giving
me the opportunity to be here and reiterate again that if we
can, we'd like to work with the Government during this period
of trying to figure out the constitutional question of seeing
if we can voluntarily find out how to satisfy the wishes of the
American consumers. Thank you very much.
[The prepared statement of Mr. Cerasale follows:]
Prepared Statement of Jerry Cerasale, Senior Vice President,
The Direct Marketing Association, Inc.
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 percent 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 m 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 ofthe 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.
The Chairman. Thank you, sir. Mr. Searcy, welcome.
STATEMENT OF TIM SEARCY, EXECUTIVE DIRECTOR, AMERICAN
TELESERVICES ASSOCIATION (ATA)
Mr. Searcy. Thank you, Mr. Chairman, Senators, thank you
for giving us the opportunity to testify before you today on a
matter of great importance to both U.S. consumers and business
alike, the formation of a Federal do-not-call registry.
I'm the Executive Director of the American Teleservices
Association, known as the ATA, 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 firms involved in the industry in a
wide variety of means.
As elected officials, I'm certain you know how difficult it
is to get a complete message delivered in a sound bite through
the media. Of course my recent time in the media has not
improved my self-esteem very much as I was recently told by a
Bloomberg reporter that I had become America's pinata, so I
certainly understand what you folks must go through on an
occasional basis.
Teleservices enjoys a unique role in providing competition
in the United States marketplace for goods and services. Long-
distance cable and the recent boom of refinancing in the
mortgage arena can in part give thanks to teleservices for
spreading the competitive message and cost-effectively to
millions of consumers throughout the United States. Our
industry has grown because it is extremely effective. If
consumers are not purchasing we would not be calling, and
thankfully we would not be here today.
However, in addition to the consumer choice and
competition, teleservices has also provided jobs. In the U.S.
today, 6.5 million people make a living either making calls to
or taking calls from U.S. consumers. Although we know that not
all jobs in our industry are concerned with calling consumers
at home, we know the symbiotic nature of teleservices means
that every employee in our industry is impacted by legislation
and regulation.
Mr. Chairman, in your home state of Arizona, 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 the Federal do-not-call list is enforced.
If you examine the people that use teleservices, it is all
our neighbors, not just the big call centers that you see 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. Imagine
how our fragile economy will react to much higher unemployment,
the loss of tax revenue, and the inability of consumers to
purchase goods and services. Even a percentage of the impact we
anticipate could be crippling to our already fragile economy.
In terms of the 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 can not
distinguish who is calling, when the Federal Government
restricts who the appropriate caller is and the content of the
message, it violates the First 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.
For a long time, the ATA, as the voice of the industry, has
attempted to engage proper regulatory agencies and other
policymakers to find appropriate means to address consumer and
business interests. Our comments to the FTC and FCC have been
ignored completely. Even more importantly, the congressional
requirements for an economic impact study, including the
potential effects on small business regarding new regulations
and the necessary regulatory paperwork assessments have also
been ignored. Of course, if you would like to see copies of the
comments that we have made to those organizations, we would be
happy to send them to you. [Editor's note: Comments were sent
and are retained in Committee files as part of the official
record of this hearing.]
Thank you, sir. In a rush to judgment, the regulatory
agencies have pushed through the kind of policy that creates
confusion without true relief. 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. If
that is not enough, because no cellular database itself, as
well as no national disconnect data base, it is virtually
impossible to keep the list current and accurate.
Behind all the media, they hype, and the emotion rhetoric
sits a real problem, a problem that we acknowledge and
recognize. How do we bring relief to the U.S. consumers that
are not interested in unsolicited phone calls? Although I can
not propose today a comprehensive set of self-regulation
guidelines, I can outline areas in which all interested parties
should begin to dialogue toward policy that makes sense.
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. Senator, in
particular I noticed that Chairman Powell had identified a
number of areas that would provide relief immediately and I
encourage you to provide the educatory means by which that can
be disseminated, because we are in agreement with those. Those
are current laws and we support them.
Second, it is only fair to seek voluntary and publicized
use of existing rules by bodies that are currently exempted in
regulations, like charities and politicians. Any voluntary or
legislative action 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 does take place.
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 the 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.
[The prepared statement of Mr. Searcy follows:]
Prepared Statement of Tim Searcy, Executive Director, American
Teleservices Association (ATA)
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
(ATA), 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 Pinata.
Setting the Record Straight
Since the inception of the Federal Trade Commission's (FTC)
Telemarketing Sales Rule and the Federal Communication Commission's
(FCC) 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 U.S. 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 percent 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 nor 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 conswner. 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.
The Chairman. Thank you, sir. Mr. Guest.
STATEMENT OF JAMES GUEST, PRESIDENT,
CONSUMERS UNION
Mr. Guest. Mr. Chairman and Members of the Committee,
thanks very much for the chance to be here today to be heard on
behalf of the millions of consumers who are frustrated by the
deluge of telemarketing calls.
My name is Jim Guest. I am President of Consumers Union,
the independent, non-profit publisher of Consumer Reports
magazine and consumerreports.org, with over 5 million
subscribers. We strongly support 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.
Consumers have a right to privacy in their home, free from
the high-pressure sale pitches from the typical telemarketing
calls. We actually wrote about this in Consumer Reports
magazine back in 1993. Then, as today, consumers were looking
for relief from these incessant, annoying, unwanted phone
calls, and in the last decade since we wrote that article,
things have gotten even worse.
Telemarketing is assault by telephone on millions of
consumers who have the right to be free from harassment in the
privacy of their homes. The message from Congress, Federal
regulators, and more than 50 million consumers has been
delivered loud and clear, and we think telemarketers ought to
heed and be bound by their call, which is ``do not call.''
Consumers Union believes the FTC and the FCC have the
statutory and constitutional authority to create and enforce a
do-not-call registry, but I don't purport to be a legal expert
and I know that you and Congress and the courts will be trying
to figure out how this all is going to play out. What I'm here
to do is to represent consumers and to thank Congress, Chairman
Muris, Chairman Powell, the FTC, and the FCC, for their
vigorous defense of this important consumer right.
And the last several days certainly have been a roller
coaster for all of us who are concerned about the issue and
especially for the millions, the over 50 million consumers who
did sign up for the registry. They were expecting that starting
tomorrow the dinner hour would be a little more peaceful than
it has been in the past without the inconvenient and unwanted
telemarketing interruptions that we've unfortunately grown to
expect and that your wife had the pleasure of just last night,
and now consumers don't know what to expect.
Telemarketers every day make over 100 million phone calls,
100 million telemarketing intrusions every single day. We
believe consumers who don't want those intrusions, who don't
want those phone calls shouldn't have to receive them. It's a
matter of consumer choice as has been discussed here earlier
today. Companies nationwide should honor that choice.
We've also talked about the experience of trying to get on
the individuals companies, get on the do-not-call registry of
individual companies, which is a piecemeal approach, as it has
been described, that doesn't work, and even with the
telemarketing associations there are some similar pitfalls
there. And in any event, these are voluntary lists which are
not in any way enforceable.
The registry, the do-not-call registry, created by the FTC
and FCC, takes care of these shortcomings. Millions of
consumers flocked to it, believing they were finally going to
get relief and now we've got the recent court ruling in Denver
which throws all of that into doubt, at least temporarily. So I
fear, you fear, I think we all fear that coming tomorrow the
calls will continue, it may be an avalanche, it may be a
trickle, but it will surely be hugely upsetting to the tens of
millions of vulnerable consumers who thought the calls would
stop.
I appreciate that the Direct Marketing Association is
advising its members to respect the wishes of consumers who
have asked not to be called. Other trade associations have not
given that same respect, in our view, to the consumer
interests, suggesting that their members continue to call names
on the list. I would hope, we would hope, Consumers Union would
hope that telemarketers and the companies on whose behalf
they're paid to make the phone calls would in fact show
restraint, and until this matter is resolved by the courts, and
by Congress, if further action by you is needed, that
telemarketers respect, to the extent that it's possible to do
it, the wishes of consumers who have made their choice known.
I would also note that throughout the debate on 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 but just not this version of
it. That sentiment in fact, I would suggest, rings hollow for a
consumer whose phone rings constantly.
The consumer marketplace has spoken and industry should
heed the call of ``do not call'' and we urge Congress to do we
ask you, Mr. Chairman and your committee and Congress to do
whatever it takes to make the do-not-call list enforceable,
consistent with the Constitution. Thanks very much.
[The prepared statement of Mr. Guest follows:]
Prepared Statement of James Guest, President, Consumers Union
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 quiet
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's a distinction without much of a difference for the consumer
whose phone is ringing. Whatever the ultimate outcome of the court
challenges, tens of millions of consumers have spoken loudly and
clearly. Telemarketers should heed the call for peace and quiet, and
Congress should do whatever it takes to make this list enforceable,
consistent with our Constitution.
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.
Thank you.
The Chairman. Thank you very much. Welcome, Mr. Hammond.
STATEMENT OF LEE HAMMOND, MEMBER, BOARD OF
DIRECTORS, AMERICAN ASSOCIATION OF RETIRED
PERSONS (AARP)
Mr. Hammond. Thank you, Mr. Chairman. My name is Lee
Hammond and I'm a member of AARP's Board of Directors. On
behalf of AARP and its 35 million members, thank you for
inviting us here this morning to discuss the importance of
implementing and enforcing the FTC national do-not-call
registry.
AARP's members have been among the millions of Americans
who have taken the initiative to place their phone numbers into
the registry in an effort to reduce the amount of unwanted
telemarketing calls. We share your indignation over recent
court decisions to stymie this effort and we're here today to
offer our assistance in doing what we can to make the registry
and its necessary enforcement a reality.
AARP's interest in telemarketing sales rule and concerns
about telemarketing abuses are longstanding. Seven years ago we
were active participants in the original rulemaking proceeding.
Since the adoption of the rule in 1995, AARP has dedicated
significant resources to educating consumers about
telemarketing fraud and to work with Federal, State, and local
law enforcement agencies to combat it.
We have also worked with State legislatures to enact State
telemarketing legislation. Telemarketing fraud is a major
concern for AARP because of the severe effects it has on older
Americans, who are victimized in disproportionate numbers. In
1996, we launched a campaign against telemarketing fraud that
involved research examining older victims and their behavior,
partnerships with enforcement and consumer protection agencies,
and repeated delivery of consistent, research-based messages,
that is, fraudulent telemarketers are criminals, don't fall for
the telephone line.
AARP has repeated this warning to consumers through public
service announcements, educational workshops, and program
activities since that time. Due in large part to these
concerns, AARP became involved in all facets of telemarketing
laws and regulations, participating in workshops held by the
FCC and FTC, and providing comments and testimony at every
opportunity. Our support for a do-not-call registry has been
consistent and long-standing.
Mr. Chairman, following our active involvement in the
various proceedings, AARP was front and center in applauding
the FTC, following its announcement of the creation of a
national do-not-call registry. Our executive director and CEO,
William Novelli, commended the Commission for its aggressive
action, saying that the registry, ``will go a long way toward
eliminating unwanted telephone calls and return the control of
the telephone where it belongs, to the consumer.''
Since that day we've devoted time and resources to ensuring
that the registry move forward as anticipated, despite a series
of road blocks along the way. We made certain that AARP's
members and the general public were properly educated and made
aware of the list. We provided information through our website,
publications, and State offices to inform consumers how to sign
up for the list and to explain some of the exemptions.
Additionally, we worked with the FCC to ensure that their
amendments to the Telephone Consumer Protection Act mirrored
the fine work of the FTC.
Implementation of a national do-not-call registry that does
not preempt the existing laws of some 36 states has been a
benchmark of AARP's advocacy efforts in this area. The
recognition of the need for the registry by the Commission late
last year was a marvelous holiday present for consumers over
the age of 50 who have long lamented the nuisance created by
unwanted telemarketing calls and have been frightened by the
danger of telemarketing fraud. Unfortunately, it could become
an early Halloween nightmare.
Despite the wishes of some 50 million persons who have
placed their number on the list, we're expecting to see it go
into full effect tomorrow and the fine work of Congress to
overturn the ruling of one Federal judge. Another Federal judge
has seen fit to bring the enforcement of the registry to a
grinding halt. Fortunately, the FCC has assured the American
people that they will exercise their enforcement authority
under the law, mitigating the blow to some extent.
We know that we won't be able to completely resolve this
problem in the next 24 hours. However, we do hope that when
tomorrow arrives the telemarketing industry will heed the
resounding voices of millions of consumer who have expressed
their desire not to receive telemarketing calls and cease
making them.
Mr. Chairman, AARP appreciates having the opportunity to
testify here in support of the FTC's efforts to protect
consumers by implementing and enforcing the national do-not-
call registry. Thank you for the opportunity for providing us
to voice our views and we look forward to working with you and
your colleagues to resolve this problem. Thank you.
[The prepared statement of Mr. Hammond follows:]
Prepared Statement of Lee Hammond, Member, Board of Directors, American
Association of Retired Persons (AARP)
Chairman McCain:
My name is Lee Hammond and I am a member of AARP's Board of
Directors. On behalf of AARP and its 35 million members, thank you for
inviting us here this morning to discuss the importance of implementing
and enforcing the Federal Trade Commission's (FTC) national Do Not Call
registry. AARP's members have been among the millions of Americans who
have taken the initiative to place their phone numbers into the
Registry in an effort to reduce the amount of unwanted telemarketing
calls. We share your indignation over recent court decisions to stymie
this effort and we are here today to offer our assistance in doing what
we can to make the Registry and its necessary enforcement, a reality.
AARP's interest in the Telemarketing Sales Rule and concerns about
telemarketing abuses are long-standing. Seven years ago we were active
participants in the original rulemaking proceeding. Since the adoption
of the Rule in 1995, AARP has dedicated significant resources to
educating consumers about telemarketing fraud and to working with
federal, state and local law enforcement agencies to combat it. We have
also worked with state legislatures to enact state telemarketing
legislation.
Telemarketing fraud is a major concern for AARP because of the
severe effects it has on older Americans, who are victimized in
disproportionate numbers. In 1996, we launched a campaign against
telemarketing fraud that involved research examining older victims and
their behavior, partnerships with enforcement and consumer protection
agencies, and repeated delivery of a consistent research-based message.
That is: ``Fraudulent telemarketers are criminals. Don't fall for a
telephone line.'' AARP has repeated this warning to consumers through
public service announcements, educational workshops and program
activities since that time.
Due in large part to these concerns, AARP became involved in all
facets of telemarketing laws and regulations, participating in
workshops held by the FCC and FTC and providing comments and testimony
at every opportunity. Our support for a Do Not Call registry has been
consistent and long-standing.
Mr. Chairman, following our active involvement in the various
proceedings, AARP was front and center in applauding the Federal Trade
Commission following its announcement of the creation of the national
Do Not Call registry. Our Executive Director and CEO William Novelli
commended the Commission for its aggressive action saying that the
Registry ''will go a long way toward eliminating unwanted telephone
calls and return the control of the telephone where it belongs, with
the consumer.''
Since that day, we have devoted time and resources to ensuring not
only that the Registry, moved forward as anticipated, despite a series
of roadblocks along the way. We have made certain that AARP's members
and the general public were properly educated and made aware of the
list. We provided information through our website, publications, and
state offices to inform consumers how to sign up for the list and to
explain some of the exemptions. Additionally, we worked with the
Federal Communications Commission to ensure that their amendments to
the Telephone Consumer Protection Act mirrored the fine work of the
FTC.
The implementation of a National Do Not Call Registry--that does
not preempt the existing laws of some 36 states--has been a benchmark
of AARP's advocacy efforts in this area. The recognition of the need
for the Registry by the Commission late last year was a marvelous
holiday present for consumers over the age of 50, who have long
lamented the nuisance created by unwanted telemarketing calls and have
been frightened by the danger of telemarketing fraud. Unfortunately, it
could become an early Halloween nightmare.
Despite the wishes the some 50 million Americans who have already
signed up for the list and were expecting to see it go into effect
tomorrow, and the fine work of Congress to overturn the ruling of one
Federal judge, another Federal judge has seen fit to bring the
enforcement of the Registry to a grinding halt. Fortunately, the FCC
has assured the American people that they will exercise their
enforcement authority under the law mitigating the blow to some extent.
We know that we won't be able to completely resolve this problem in
the next 24 hours. However, we do hope that when tomorrow arrives, the
telemarketing industry will heed the resounding voices of millions of
consumers who have expressed their desire not to receive telemarketing
calls and cease making them.
Mr. Chairman, AARP appreciates having the opportunity to testify
today in support of the FTC's efforts to protect consumers by
implementing and enforcing the national Do Not Call registry.
Thank you for providing us with the opportunity to voice our views
and we look forward to working with you and your colleagues to resolve
this problem.
The Chairman. Thank you very much, Mr. Hammond, and thank
you for all that your organization has done, and I'd like to
work with you in helping disseminate Chairman Powell's
recommendations as you heard in the earlier hearing. You can, I
think, play a significant role, as can you, Mr. Guest, with
your millions of subscribers and online participants, which
brings me to Dean Smolla's proposal, which I like.
Mr. Guest, in your opinion, if that menu were offered, what
percentage of consumers would say, I don't want to hear from
any of them?
Mr. Guest. Gosh, I can't really give you an informed
opinion about that, but I think, you know----
The Chairman. After all these years of being involved in
this issue?
[Laughter.]
Mr. Guest. My crystal ball doesn't work on this one, but I
think there would be a substantial number who would say that
they didn't want any calls. I think there would be a
significant number who would choose certain calls over others.
What we would urge the Committee and Congress, if you do have
to come back and take legislative action, we certainly would
like a solution that's going to stand constitutional muster,
because consumers obviously you're hearing it everywhere you're
going consumer are hugely upset.
The Chairman. That's why I bring it up. Dean Smolla's
proposal, I think, resolves any constitutional questions, don't
you think really?
Mr. Guest. I beg your pardon?
The Chairman. I think Dean Smolla's proposal really
eliminates certainly the objections that the court raised.
Mr. Guest. It would sound like that would eliminate
constitutional problems. Again, I don't care to, I'm not an
expert, and I'm not sure Chairman Muris indicated there might
be some difficulties there that ought to be explored at least,
but again, consumers want relief.
The Chairman. Thank you. Mr. Hammond, how many members of
the AARP would say, I'm tired of being called by a pollster who
keeps me on the phone for 15 minutes while he asks me 50
questions about politicians, none of which I care much for
anyway?
Mr. Hammond. We share the same crystal ball, which is not
working well at this moment, but I would suspect also that
there would probably be a number of folks who would subscribe
to a no-call list, just as there would be others who would pick
and choose.
The Chairman. Thank you, thank you both. Mr. Cerasale, I
understand that DMA spent a significant amount of time
yesterday alleging the Members of Congress at the FTC as
unfairly impeding DMA's ability to obtain the registry list,
but in your brief to the Denver court, you argue that the FTC
would be in contempt if the agency disseminated the list. Will
DMA be willing to go to the court in Colorado and ask that the
FTC be allowed to maintain the do-not-call registry list for
use by telemarketers on a voluntary basis?
Mr. Cerasale. First, we're not in the Denver court, the
DMA.
The Chairman: I know, but you are free to go to the Denver
court.
Mr. Cerasale. No, no, the DMA did not file that brief. We
are not a party in the case in the Denver court. That's the
American Teleservices Association. We wanted to have our
members voluntarily use it. We did not raise the contempt
issue.
The Chairman. Let me ask you a simple marketing question.
You're willing to abide by the do-not-call list, right? That's
your organization's position, right?
Mr. Cerasale. Yes.
The Chairman. Voluntarily, right?
Mr. Cerasale. That's correct.
The Chairman. Only Mr. Searcy's organization is not, right,
Mr. Searcy?
Mr. Searcy. Not exactly, Senator. We have strongly
advocated that the companies who are members of our association
should make choices on their own and that as the association it
is not either our responsibility or our right to dictate
business practice where the court has already ruled.
The Chairman. I understand. You don't have the same
position as Mr. Cerasale, is that pretty accurate?
Mr. Searcy. We have a slight difference of opinion.
The Chairman. Well, I think it's pretty significant. One
thing's different when one commits to voluntarily abiding by a
do-not-call list and the other position is that we ask our
members to exercise their best judgment. I think that's a
significant difference, but maybe you don't view it as a
significant difference. Mr. Cerasale, do you view it as a
significant difference?
Mr. Cerasale. Well, it's a difference. I think it's best
judgment you should follow the wishes of the American public.
The Chairman. OK, I'm a head of a company that wants to
sell a product, OK, by telemarketing. Why wouldn't I just go to
Mr. Searcy's organization instead of yours, Mr. Cerasale?
Mr. Cerasale. That is a problem, that is an issue that the
DMA faces as an association, but our view is we have
consistently, not just in telephone.
The Chairman. Because I'd contact one of Mr. Searcy's
outfit, who he recommends to take their own independent
judgment, their independent judgment we're not going to abide
by the no-call list, and so I'd rather do business with them
because I'm not cut out of 50 million homes.
Mr. Cerasale. We may lose membership over that and that's a
decision that we have made.
The Chairman. I think there's a practical implication of
your generosity here. Mr. Searcy, is the ATA prepared to make
the same pledge? I asked you that before. You're leaving it up
to your individual members, right?
Mr. Searcy. We've never been opposed to a do-not-call
program. We're just opposed to the Federal Government creating
an unconstitutional and one-size-fits-all program, so in no way
have we ever advocated that people don't use company-specific
do-not-call lists or other regulatory opportunities created by
the FCC. We just think that this program is both
unconstitutional, poorly founded, and the list is
inappropriately gathered.
The Chairman. And you are perfectly entitled to that
opinion, Mr. Searcy, and I respect that opinion.
Mr. Searcy. Thank you, Mr. Chairman.
The Chairman. But I believe very strongly that that means
that you are not going to, as an organization, comply with the
do-not-call list, and that's your right to do that. And that's
why obviously we are exploring other options and trying to get
action taken by a stay in the court, so----
Mr. Searcy. Well, Mr. Chairman, if I may----
The Chairman. Go ahead.
Mr. Searcy.--for just a moment. The only comment I would
make is that neither Mr. Cerasale or myself make calls to
consumers. Neither one of our associations make calls. It is
our members that we advise about their legal rights and
responsibilities, so nobody can contract with me.
The Chairman. I understand that. Mr. Cerasale is advising
his organization to comply with the do-not-call list. You are
advising your organization to make their own independent
judgment, isn't that an accurate depiction of the situation?
Mr. Searcy. Well stated, sir.
The Chairman. Thank you very much. I thank the witnesses,
and Dean, thank you for an innovative idea. I will be hearing
from my political friends very soon on your proposal.
[Laughter.]
The Chairman. But it seems to me that if we don't get the
remedy that we've got to explore what we want, we've got to
explore other options. And it seems to me yours, at least on
the face of it, resolves at least the concerns that the court
raised. It may cause other concerns, but at least that reason
for the court decision as it was.
Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman. Gentlemen, let me
ask you with respect to more litigation ahead, your two
associations representing, you know, the marketers, I'm
concerned what happened in Denver is just the beginning and
that we're going to have a variety of challenges to the State
programs and that could begin immediately. Can you commit both
of your organizations today that this is not just going to set
off a wave of litigation around the country and that you will
agree today in the interim to commit to the Committee that
you're not going to file any actions at the State level to try
to exploit what's happened already. Mr. Cerasale?
Mr. Cerasale. I'll go first. The DMA, Senator Wyden, the
DMA's position is that if there's going to be a national
registry that there be a national registry, that it preempt the
State laws, at least as far as interstate calls are concerned,
so that national marketers just have to deal with one list. So
under that, we would like to have the constitutional issues on
a do-not-call list settled, and we're not going to at this
point it's not in our plan, we've had no discussions of taking
any action against any State do-not-call list. We are looking
at and waiting for to see what is the issue, how the
constitutional issue is settled on a national do-not-call list.
Senator Wyden. So you'll tell the Committee that you have
no plans to go forward to with any State challenges?
Mr. Cerasale. That is correct at this time.
Senator Wyden. Mr. Searcy, will you make the same
commitment?
Mr. Searcy. Litigation right now is extremely fluid,
Senator and the only comment I would make is that we have not
contemplated beyond challenging the Federal do-not-call list at
this point, but I would comment that the State laws, certainly
there are implications from what happens in the Federal
constitutionality issues that will and can be applied to the
states ultimately. But at this time, as of today as per your
request, we are not contemplating any State litigation.
Senator Wyden. Mr. Searcy, did you something like 72 hours
ago advise your members to continue calling numbers on the do-
not-call list?
Mr. Searcy. No, Senator, we did not.
Senator Wyden. The Washington Post is wrong?
Mr. Searcy. Papers can make mistakes.
Senator Wyden. Well, were they mistaken in that? I'm
looking at a story from Monday, September 29, and it quotes
you, well, it states Mr. Searcy advised his members to continue
calling the numbers on the do-not-call list. You did not do
that?
Mr. Searcy. No, we, as I said before, informed our members
that they would have the choice themselves to make the decision
as to whether they should go ahead and make calls or not, that
the courts had given them the relief that we had sought. And
Senators, you might imagine it would be counterintuitive for us
to apply and build a lawsuit around constitutionality only to
reject it at the moment in which we start the victorious path.
Senator Wyden. I just was struck by what seemed to be a
change in your position between Friday and today, but you're
saying there has been no change in your position?
Mr. Searcy. No, there hasn't, and in other substantial
press organs that statement has been consistent throughout,
from the 29th and beyond.
Senator Wyden. Mr. Searcy, when I talk to people at home
about this, they see this as very straightforward stuff. I
mean, at a time when you are calling for dialogues and studies
and the like, they want action and what they want is based
essentially on a very simple proposition. They want to be able
to say no. Do you believe that people ought to have that right?
Mr. Searcy. Senator, I absolutely believe that people
should have a right to control their phone and that there are
legitimate means that are already protected through the FCC's
own laws that allow them to do so, items that have already been
put into the record by Chairman Powell that give the necessary
relief. I do not believe that the Federal Government has a
right to dictate the type of speech that should be done, nor to
restrict in such a way as to create an unemployment loss of 2
million jobs.
Senator Wyden. Why do you think the public's going to be
satisfied with the voluntary system that you're advocating, Mr.
Searcy? Clearly, problems do not come to the desks of Senators
and I have been stunned at a time when there's so much concern
about terrorism how concerned people are about this issue, that
the current system doesn't work. Now you have advocated
basically a continuation of the current system, more dialogues,
more studies, more voluntary programs. What basis do you have
for demonstrating to the Congress that something like that will
work?
Mr. Searcy. Senator, I would be very excited if we could
enter into dialogue. We have been trying to do that for 3
years. The FCC and FTC have shown no interest in reviewing the
comments that were provided or providing a means by which we
can discuss intelligently with policymakers, other trade
associations, and interested parties, how we make a policy or
plan that works for everyone. So this would not be a
continuation of business as usual, but rather we have been at
the table asking for help and support. It would be exciting if
Congress would ask others to join us.
Senator Wyden. Well, I will tell you, having been party to
some of these discussions, that the Congress and the agencies
have in my view involved the private sector in an unprecedented
kind of fashion, to some extent I've tried to specialize in
these issues, been supportive of a number of the positions your
organization and Mr. Cerasale's has taken in the past. The
problem here is that you all really don't agree when it comes
down to it to making it possible for the public in a
straightforward fashion to say no, and I think that is
essentially what is at issue here.
And I think the last question I have--I'm not clear who is
involved in these various processes to say that the Federal
Trade Commission would be in contempt if they're involved in
voluntary compliance kinds of efforts. Mr. Cerasale, to your
credit, you said you're not going to be a party to it in the
future and you're not a party to it now. Mr. Searcy, what about
your organization? I mean, this goes right to the heart of what
it is you've said you wanted, which is voluntary programs, the
Government and the private sector working together, and yet it
seems when the Federal Trade Commission tries to work with the
industry to meet them half-way on a voluntary program, all we
hear are shouts of contempt and the like, so will you.
Mr. Searcy. But it's hardly a voluntary program when you
have to spend $7,375 to be in compliance. That's a purchased
program and all of our members who have purchased the list, as
well as Mr. Cerasale's members, have had to make that
expenditure, which is, I might also add, in the court case an
unlawful tax upon their business.
But as a separate note, it is not our decision to decide
whether or not someone is in contempt of court. The court makes
that decision on their own. However, the court has been very
clear that if directly or indirectly the FTC should choose to
try to bypass the court's ruling, the court will have serious
consequences that they will go ahead and dole out to those
institutions. In essence, we don't have to do anything but let
the court do its job.
Senator Wyden. Well, I'm sympathetic to the question of
costs of voluntary kinds of programs and that's why I've talked
today about the Government meeting you all half-way, but it's
pretty hard to do that when the first thing you do is punch
them with a contempt allegation. That doesn't breed a lot of
good faith when you're trying to bring the parties together,
and I would only just say to this panel and my friends at AARP
and the Consumers Union, we've worked with you all often in the
past and appreciate your leadership here.
And Professor Dean I hadn't followed your scholarship in
this area but I think Chairman McCain speaks for a lot of us--
it's an attractive idea. But the ball is really in the court of
the two associations here, and I would just urge you to
understand the kind of damage that is being done to your
organizations and to your members by what I think is very
significant stonewalling on this issue.
And Mr. Searcy, when you say, for example, we don't make
calls, so you're kind of an innocent bystander in all of this,
while you call for dialogues and studies and things of this
nature, the fact of the matter is that organizations provide
counsel to your members, that's what you all do. And it's
pretty clear to me if you didn't tell them explicitly, crank up
the calls again, you basically said, look, you don't have to be
reluctant right now, and I think that's unfortunate. I don't
think that's the kind of good faith that the public wants to
see from businesses, particularly at a time when I and others
would like to meet you half-way.
So I hope that your two associations in the days ahead will
do everything you can to resolve this expeditiously. I'll say
as a Member of the Senate I continue to be anxious to meet you
half-way. When you have good ideas we'll be very eager to have
them, but the days of dialogues and studies and more of what I
think the public sees as stonewalling here have got to end.
People want action. They want action around the proposition
that they've got a right to say no, and I started this off I
think two-and-a-half hours ago saying 50 million people are on
a legal roller coaster. Your two organizations can do a lot to
bring that ride to an end and I would urge you in the strongest
kind of fashion to work with us, to work with Senators on a
bipartisan basis to do it.
Do any of you have anything further that you'd like to add?
With that, the Committee is adjourned.
[Whereupon, at 12:07 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
Mr. Chairman, thank you for calling this timely hearing today. As
you know, late last week, the United States District Court for the
Western District of Oklahoma declared the Federal Trade Commission's
national ``Do-Not-Call'' Registry invalid after concluding that the
Commission lacked the authority to implement the rule. The next day,
Congress set the record straight by passing, H.R. 3161, which empowers
the Federal Trade Commission to create, implement and enforce the
national ``Do-Not-Call'' Registry. Later the same day in Denver, U.S.
District Judge Edward Nottingham, blocked implementation of the
registry, ruling that it violated a telemarketer's constitutional right
to free speech. Where do we go from here?
The ``Do-Not-Call'' Registry provides a very important service--it
provides people an opportunity to stop those annoying telephone
solicitations from marketers. I believe that citizens should have the
right not to be disturbed by unsolicited phone calls in their own homes
and the ``Do-Not-Call'' registry empowers citizens to stop these calls.
Support for the registry is unprecedented. To date, after only four
months, the registry contains over 50 million phone numbers. In Maine
alone, over 241,000 phone numbers have been registered and this number
is growing everyday. Ultimately, the Federal Trade Commission expects
sixty percent of the Nation's households to sign onto the registry
potentially blocking eighty percent of telemarketing calls.
Specifically, the Federal registry will supplement State ``Do-Not-
Call'' lists. It works by requiring telemarketers to search the
registry every three months and synchronize their call lists with the
phone numbers on the registry. If you don't want to be disturbed by
marketing calls, you simply register online with the FTC or call a toll
free number and request that your telephone number be added to the
registry. More importantly, this law has enforcement power-a
telemarketer who disregards the national ``Do-Not-Call'' Registry could
potentially be fined up to $11,000 for each call.
Mr. Chairman, I commend the Federal Trade Commission, the Federal
Communications Commission, and Congress for their work in the creation
and implementation of the ``Do-Not-Call'' registry. Again, I thank you
for holding this most timely hearing and I look forward to hearing from
our witnesses about ways we can ensure that the Federal registry is
implemented and enforced so that the hopes and expectations of the
fifty million people already registered are upheld.
Thank you, Mr. Chairman.