On February 17, 2004, the United States Court of Appeals for the Tenth Circuit in Mainstream Marketing Serv., Inc. v. Federal Trade Comm’n, Nos. 03-1429, 03-6258, 03-9571, 03-9594, 2004 WL 296980 (10th Cir. Feb. 17, 2004), ruled that the National Do-Not-Call Registry is constitutional and valid. This decision overturns a Colorado district court judge’s determination that the registry violates the First Amendment rights of the telemarketers by restricting commercial telemarketing but allowing charitable and political solicitations. The court of appeals decision also rejected an Oklahoma district court ruling that the Federal Trade Commission lacked authority to promulgate the "no-call" rules.
The National Do-Not-Call Registry
In response to concerns related to consumers’ privacy rights and abusive telemarketing practices, the Federal Trade Commission and the Federal Communications Commission, in 2003, promulgated rules that created the National Do-Not-Call Registry. The registry is a list of personal telephone numbers of those subscribers who have indicated that they do not wish to receive calls from commercial telemarketers. The telemarketers are prohibited from calling telephone numbers listed on the registry and must pay a fee annually to access the registry and compare registry numbers with their lists to delete to the numbers of consumers who do not wish to receive telemarketing calls. The do-not-call restrictions do not apply to calls made by or on behalf of solicitors of charitable donations or political calls. Further, the restrictions also exempt calls to consumers with whom the businesses have established business relationships or where the consumer has given the seller express written permission to call.
The telemarketers raised four issues related to the creation and implementation of the do-not-call registry: 1) whether the "First Amendment prevents the government from establishing a opt-in telemarketing regulatio n that provides a mechanism for consumers to restrict commercial sales calls but does not provide similar mechanism to limit charitable or political calls; 2) whether the FCC’s established business relationship exception is arbitrary ad capricious; 3) whether the fee to access the national do-not-call registry is constitutional; and 4) whether the FTC had statutory authority to enact its do-not-call rules.
First Amendment Analysis
The court applied the test set out in Central Hudson Gas & Elec. Corp v. Public Serv. Comm’n of N.Y. , 447 U.S. 557, 566 (1980) to determine whether the do-not-call registry regulations violate the telemarketer’s First Amendment Rights. In Central Hudson, the Court established a three-part test to govern First Amendment challenges to regulations restricting non-misleading commercial speech related to lawful activity. In order to be valid: 1) "the government must assert substantial interest to be achieved by the regulation;" 2) "the regulation must directly advance that governmental interest"; and 3) the "regulation must be narrowly tailored not to restrict more speech than necessary."
The government advanced two interests in promulgating the do-not-call regulations. First, the government sought to protect the privacy of consumers in their homes. Second, the government sought to protect consumers against the risk of fraudulent and abusive solicitation. The court, relying on Supreme Court decisions, held that an individual’s right to be "let alone" is a substantial interest which the government may protect. The court also held that protecting consumers from abusive and coercive practices is a substantial interest.
In determining that the do-not-call-regulations directly advance these interests, the court rejected the claim that because the regulations excepted certain categories of callers, i.e., charitable and political callers, they were underinclusive and violated the First Amendment. The court noted that a regulation will not fail as underinclusive unless "it renders the regulatory framework so irrational that it fails materially to advance the aims hat it was purportedly designed to further." The do not call registry, however, has achieved the goal of preventing a substantial volume of unwanted telemarketing calls. The court also noted that Congress determined that the type of calls prohibited by the list are those that have caused most of the problems the government seeks to address—not charitable, political, or established business relationship calls.
In finding that the regulations are narrowly tailored, the court commented on the opt-in nature of the registry. Instead of imposing a sweeping prohibition, recipients choose whether or not they are included on the lists of telemarketers. This feature, along with other measures which allow consumers to choose to receive calls, supports the conclusion the registry provides a "reasonable fit between the problem and the solution."
Other Issues
Though the telemarketers argued that the registry access fee imposed a revenue tax on protected speech, the Court concluded that the registry access fee is not a revenue tax, but rather, is permissible to offset expenses associated with administration and enforcement of the registry.
The telemarketers also charged that the established business exception is arbitrary and capricious. This exception exempts from regulation those calls made to customers with whom the telemarketers have an established business relationship. The court held that the FCC rule demonstrates that the FCC carefully considered any anticompetitive effects that might arise from this exception and that the court could not substitute its judgment for that of the agency under the Administrative Procedure Act.
Finally, though the telemarketers argued that the FTC lacked authority to promulgate its rules, the court held that the FTC’s conclusion, that Congress authorized the agency to promulgate rules, was entitled to deference. The court further noted that Congress expressly ratified the FTC’s regulations.
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