Telemarketing Restrictions and the First Amendment

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  • 1. Telemarketing Restrictions and the First Amendment IAN HEATH GERSHENGORN The U.S. Supreme Court’s commercial charitable and political organizations prompting numerous comments sug- speech doctrine is in a state of transition. make extensive use of telemarketing to gesting that the FTC’s proposed rules The Justices are openly wrestling with raise money for their various causes; in- would violate the First Amendment. the unique challenges posed by regula- deed, by one estimate, “60 percent to 70 Second, a federal judge has held por- tion of commercial speech, and the percent of nonprofit and charitable or- tions of the TCPA relating to unso- Court’s current framework for analyzing ganizations use professional fundraisers licited fax advertisements to be uncon- the constitutionality of commercial to deliver their messages to consumers stitutional under the First Amendment. speech restrictions, the test set forth in and solicit donations.”5 In 2001, the con- These two developments suggest that Central Hudson Gas & Electric Corp. v. sumer telemarketing industry employed the time has come for an examination Public Service Commission of New York,1 more than four million workers.6 of the constitutionality of the current has been criticized as insufficiently pro- The industry, however, has come un- set of telemarketing regulations. That tective of speech by a number of Justices der increasing attack as state and federal examination in turn reveals that, even on different occasions.2 This Term, how- regulators seek to curb perceived abuses. under the Court’s current doctrinal ever, as in several recent Terms, the In the early 1990s, Congress enacted framework, many current and proposed Court has refused to establish a new doc- statutes such as the Telephone Consumer restrictions on commercial speech can- trinal framework, choosing instead to in- Protection Act (TCPA)7 and the not stand. validate the commercial speech restric- Telemarketing Consumer Fraud and tions at issue by applying a rigorous ver- Abuse Prevention Act (TCFAPA)8 that Current Regulatory Framework sion of the Central Hudson analysis.3 set forth the basic federal prohibitions, Telemarketing calls are subject to a There seems little doubt that the and it charged the Federal Communi- complex web of regulations that restrict Court will at some point soon resolve cations Commission and the Federal who can be called, when calls can be this doctrinal disarray. In the meantime, Trade Commission, respectively, with made, and what types of calls are per- commercial speech is in limbo, not yet enforcing their provisions. State legisla- mitted. The principal sources of regula- fully protected, but nevertheless suffi- tures have increasingly joined the fray.9 tion, focusing on residential calls, are ciently valuable so that restrictions, and One critical question is whether two federal acts and a variety of state especially content-based restrictions, these regulatory efforts are consistent regulations, as described below. are viewed with skepticim. with the First Amendment and, in par- One set of commercial speech re- ticular, whether they impose unconstitu- Telephone Consumer Protection Act strictions that seems certain to draw the tional restrictions on protected commer- Before 1991, there was no substantial increasing attention of the courts in the cial speech. The principal vulnerabilty federal regulation of telemarketing next few years involves regulation of of these regulations is that many, if not calls.10 By the early 1990s, however, telemarketers. Recent legislation at the most, of them use content-based distinc- Congress found that the decreasing state and federal level has imposed an tions to determine the line between per- costs of telecommunications technology array of restrictions on telemarketers, mitted and forbidden telemarketing and long distance phone calls had led to vastly curtailing a wide range of com- calls. Exemptions exist in one regula- a marked increase in interstate telemar- mercial speech. tion or another for calls on behalf of keting calls and a corresponding rise in The stakes are enormous. Telemar- charitable organizations, religious or- consumer complaints.11 Although by keting is a multibillion-dollar industry ganizations, political organizations, 1991 more than forty states had enacted that is the lifeblood for many American banks, insurance companies, real estate legislation limiting telemarketing in businesses. Last year alone, telemarketers agents, newspapers, motor vehicle deal- some way, Congress determined that generated more than $274 billion in sales ers, insurance agents, and financial ad- federal legislation was necessary be- to consumers involving everything from visers. If the Court were to accord com- cause those state laws did not reach the credit cards to life insurance.4 Countless mercial speech full membership in the increasing number of interstate calls.12 pantheon of protected speech, many of To fill this perceived regulatory gap, the current restrictions would almost Congress passed the TCPA. According Ian Heath Gershengorn (igershengorn@ certainly fall. But even in the absence of to the Act’s congressional findings, the jenner.com) is a partner in the Washington, full protection for commercial speech, TCPA sought to balance “[i]ndividuals’ D.C., office of Jenner & Block, LLC. The the current regulation of telemarketing privacy rights, public safety interests, author filed comments on behalf of the U.S. raises troubling constitutional issues, es- and commercial freedoms of speech and Chamber of Commerce in connection with pecially in light of Court decisions over trade . . . in a way that protects the pri- the proposed telemarketing regulations the past decade that vigorously apply vacy of individuals and permits legiti- promulgated by the Federal Trade the Central Hudson analysis. mate telemarketing practices.”13 Commission. The views expressed in this Two recent developments have article are those of the author and do not brought this issue to the fore. First, the TCPA’s Restrictions necessarily represent the views of Jenner & FTC has proposed a nationwide do-not- The TCPA restricts three general cate- Block, LLC, or its clients. call list for many telemarketing calls, gories of telemarketing activity: (1) so- Summer 2002 ■ Communications Lawyer ■ 3
  • 2. licitations over automated dialing tion, the FCC imposed time of day re- hibiting deceptive telemarketing acts or equipment, (2) telephone solicitations, strictions that limited telephone solicita- practices.”30 Among the issues the FTC and (3) unsolicited faxes. tions to between the hours of 8 A.M. and was to consider were (1) “a requirement Automated Dialing Equipment. The 9 P.M. local time.21 that telemarketers may not undertake a TCPA generally makes it illegal to use au- Unsolicited Faxes. Congress took pattern of unsolicited telephone calls todialers or prerecorded or artificial voicesmatters more into its own hands with re- which the reasonable consumer would to call emergency lines and hospitals, as spect to faxes. The TCPA makes it un- consider coercive or abusive of such well as services where the recipient of the lawful to “use any telephone facsimile consumer’s right to privacy,” (2) restric- machine, computer, or other device to call is charged for the call.14 It also gener- tions on when unsolicited calls to con- ally prohibits prerecorded calls to residen- send an unsolicited advertisement to a sumers may be made, and (3) various tial lines,15 and requires automated callers telephone facsimile machine.”22 An “un- disclosure requirements.31 to release the called party’s line no more solicited advertisement” is defined as Consistent with the congressional de- “any material advertising sign, the FTC’s rules were principally the commercial availabil- concerned with fraud.32 Thus, the regu- Congress also tasked the FCC ity or quality of any lations required telemarketers to dis- property, goods, or serv- close, among other things, (1) the iden- with developing limitations on all ices which is transmitted tity of the seller, (2) that the purpose of to any person without the call was to make a sale, and (3) the “telephone solicitations,” live or that person’s prior ex- nature of the goods or services being of- press invitation or per- fered.33 Other provisions prohibited mis- recorded, to residential subscribers. mission.”23 Neither the representations about the cost, quantity, statute nor the FCC’s im- and other material aspects of the goods plementing regulations or services being offered.34 than five seconds after the called party prohibit the sending of an unsolicited The FTC regulations, however, were hangs up.16 Following passage of the fax that is not an “advertisement.” not entirely fraud-related. Importantly TCPA, the FCC launched a comprehen- for present purposes, the FTC, like the sive rulemaking to implement its provi- Enforcement of the TCPA and FCC when it implemented the TCPA, sions. With respect to prerecorded calls, Implementing Regulations included company-specific do-not-call the FCC created exemptions for (1) non- The TCPA provides that its provisions regulations that prohibit a seller (or a commercial calls, (2) commercial calls and the FCC’s implementing regula- telemarketer acting on the seller’s be- that do not include unsolicited advertise- tions24 may be enforced in a civil action half) from calling a person who has pre- ments, (3) calls made by tax-exempt non- by consumers or, if the telemarketer has viously asked not to be called by or on profit organizations, and (4) calls based on engaged in a “pattern or practice” of behalf of that seller.35 an “established business relationship.”17 prohibited call, by a state.25 Available Congress limited the scope of the Telephone Solicitations. Congress remedies include injunctive relief and FTC regulations so that “no activity that also tasked the FCC with developing actual monetary damages or $500 per is outside the jurisdiction of [the Federal limitations on all “telephone solicita- violation, whichever is greater. Trade Commission] Act” is covered by tions,” live or recorded, to residential In addition, the FCC can hear com- the TCFAPA. Consequently, “banks, subscribers.18 The TCPA defines tele- plaints brought by consumers against a credit unions, savings and loans, compa- phone solicitations as calls “for the pur- telemarketer for violations of the TCPA, nies engaged in common carrier activity, pose of encouraging the purchase or and it may impose the penalties provided non-profit associations, and companies rental of, or investment in, property, in that statute.26 Further, the FCC can engaged in the business of insurance” goods, or services,” excluding calls to a bring its own administrative proceeding are outside the scope of the FTC’s tele- party who has given express permis- against TCPA violators. For “willful or marketing regulations.36 sion, calls to a party with whom the repeated” violations of the TCPA, the As with the TCPA, the TCFAPA al- caller has an established business rela- FCC may demand forfeitures that result lowed for enforcement by states, when a tionship, and calls from a tax-exempt in much higher penalties than consumer “pattern or practice” is involved,37 and nonprofit organization.19 Responding to actions.27 The FCC has brought several by private parties.38 A state may seek the congressional directive, the FCC such forfeiture actions for violations of “damages, restitution, or other compen- considered a number of options, includ- the TCPA’s ban on unsolicited fax ad- sation.” Similar relief may be obtained ing a national do-not-call database. vertisements and has demanded forfei- in a suit by a private party, although the After notice and comment, the tures as high as $1.1 million.28 amount in controversy must exceed Commission rejected the national data- $50,000.39 In addition, the FTC may en- base option as too burdensome. Instead, Telemarketing Consumer Fraud and force the telemarketing regulations, the FCC required telemarketers to main- Abuse Prevention Act bringing to bear all of the powers (and tain company-specific do-not-call lists, Congress’s other principal foray into reg- duties and restrictions) delineated in the so that if an individual asks a given ulation of telemarketers was the Federal Trade Commission Act.40 company not to call, that company may TCFAPA, which was passed in 1994 to not call for ten years, though all other help the Federal Trade Commission to State Regulation companies may continue to call that in- reduce telemarketing fraud.29 The Act re- Most states have enacted antitelemar- dividual until requested not to. In addi- quired the FTC to “prescribe rules pro- 20 keting statutes in some form to regulate 4 ■ Communications Lawyer ■ Summer 2002
  • 3. intrastate calls, interstate calls, or both,41 paper sales.49 The Tennessee statute ex- Constitutionality of the and many roughly follow the TCPA empts calls on behalf of not-for-profit Proposed Registry scheme. Most states, for example, have organizations and political groups.50 The FTC’s proposed rules are under at- enacted restrictions on automated calls. tack not only for practical problems, but The state laws often prohibit such calls FTC’s Proposed National also for constitutional difficulties. The if not preceded by an introduction by a Do-Not-Call Registry principal vulnerability of the FTC’s regu- live operator. The scope of these One occasion for increased scrutiny of lation lies in the numerous content-based statutes varies, however. Some state the constitutionality of telemarketing re- distinctions that it contains. Although the legislation governing automated calls strictions is a recent proposal by the FTC do-not-call requirements apply to most regulates commercial calls only.42 Other to drastically expand the scope of its solicitations by business and charitable state statutes ban all automated calls telemarketing restrictions.51 Most impor- organizations, at least when conducted by without the consent of the called party.43 tant, the FTC rules propose the creation for-profit telemarketers, they do not ap- In addition, although the federal statute of a national do-not-call registry to be ply to calls by for-profit telemarketers covers only calls to residences, some maintained by the FTC. The FTC’s rules calling on behalf of political or religious state provisions do not limit their appli- would thus “provide a ‘one-stop’ method organizations.57 Nor do the regulations cability just to residences and govern of allowing consumers to reach many apply to banks58 or to a number of other calls to businesses as well.44 telemarketers quickly” because, for cus- specified industries.59 If the Court were to Many states have also chosen, as did tomers that placed themselves on the hold that commercial speech is fully pro- Congress in the TCPA, to regulate live FTC’s proposed registry, it would “elim- tected, the restrictions would almost cer- telemarketing calls. In the past decade, inate all telemarketing calls from all sell- tainly fall. But even in the absence of there has been a steady proliferation of ers and telemarketers” covered by the such new doctrinal ground, the distinc- states and even some municipalities en- FTC’s rules.52 tions leave the Commission’s rules vul- acting laws creating statewide or munic- Like the previous FTC rules, the nerable under both the strict scrutiny ipality do-not-call lists. If a consumer amended rules would be limited in cov- analysis that applies to certain content- requests to be placed on the statewide erage to the areas within the FTC’s ju- based distinctions on proscribable speech list, often for a small fee, then telemar- risdiction. Thus, banks, credit unions, and the somewhat more lenient analysis keters covered by the statute, both in- certain insurance businesses, and others of Central Hudson. side the state and elsewhere, may not are exempt from the rule. The FTC’s call those consumers. The more recent proposal changes the scope of the rules R.A.V. and the Argument do-not-call laws have been well publi- in important ways. First, in the Uniting for Strict Scrutiny cized, and some lists have apparently and Strengthening America by As the Supreme Court has repeatedly garnered a significant number of names Providing Appropriate Tools Required observed, “content-based regulations and phone numbers.45 to Intercept and Obstruct Terrorism Act are presumptively invalid.”60 Indeed, The scope of these state provisions (USA PATRIOT Act) of 2001,53 “[a]s a general matter, ‘the First varies. In Georgia, for example, charita- Congress expanded the scope of the Amendment means that government has ble organizations are wholly excepted definition of telemarketing that appears no power to restrict expression because from the do-not-call list legislation.46 in the TCFAPA to include any cam- of its message, its ideas, its subject mat- The Arkansas Consumer Telephone paign conducted to induce “a charitable ter, or its content.’ ”61 Permitting the Privacy Act contains a do-not-call list contribution, donation, or gift of money government broad leeway to make con- provision that specifically covers both or any other thing of value.”54 The FTC tent-based distinctions on speech “raises commercial and charitable calls,47 but thus extended the reach of its do-not- the specter that the government may ef- excludes a broad array of calls in both call provisions to cover telemarketers fectively drive certain ideas or view- commercial and noncommercial cate- soliciting charitable contributions.55 points from the marketplace.”62 Rather gories, including: (1) charitable solicita- Second, the FTC made clear that its than a system of government control, tions made by someone who is not paid telemarketing rules do not apply to re- the First Amendment “ ‘is intended to to make the call, (2) calls by a licensed quests for contributions to “political remove governmental restraints from real estate agent, (3) calls by a licensed clubs, committees, or parties” or “con- the area of public discussion, putting the motor vehicle dealer, (4) calls by a li- stituted religious organizations.” The decision as to what views shall be censed insurance agent, (5) calls by a li- former, according to the FTC, were ex- voiced largely into the hands of each of censed securities salesperson or finan- cluded because they are outside the us . . . in the belief that no other ap- cial adviser, (6) calls by a newspaper for statutory definition of “charitable con- proach would comport with the premise purposes of soliciting subscriptions, (7) tribution”; the latter were excluded “as of individual dignity and choice upon calls made on behalf of any federally or a matter of policy” because of the “risk which our political system rests.’” 63 state-chartered bank as long as the call is or perceived infringement on a para- In the commercial speech context, as not about credit cards, and (8) calls by mount societal value—free and unfet- noted above, the U.S. Supreme Court licensed funeral establishments.48 The tered religious discourse.”56 Despite has not yet deemed commercial speech Indiana telemarketing statute explicitly these exceptions, the FTC’s proposed worthy of full First Amendment protec- covers both commercial and charitable national do-not-call registry would tion, and thus content-based distinctions calls, but exempts calls by licensed in- likely threaten the continued existence in commercial speech regulations do not surance agents, licensed real estate of businesses and charities that depend automatically bring strict scrutiny. agents, and certain calls soliciting news- on telemarketing. Nevertheless, under the Court’s First Summer 2002 ■ Communications Lawyer ■ 5
  • 4. Amendment jurisprudence, strict duced constitutional protection, the gov- be upheld under Central Hudson, the as- scrutiny should apply to the FTC regu- ernment may not engage in content dis- serted government interest in restricting lations. Ironically, the key case, R.A.V. crimination for reasons unrelated to those the speech must be substantial; the gov- v. City of St. Paul,64 is not a commercial characteristics of the speech that place it ernment must show that its speech re- speech case at all. within the category.”71 striction directly and materially advances In R.A.V., the Supreme Court ad- Indeed, the case for strict scrutiny of the asserted government interest; and the dressed content-based restrictions within at least some commercial speech restric- government must narrowly tailor its re- categories of “proscribable speech,” in tions is even stronger than it was under striction to the asserted interest.78 that case, fighting words. The Court R.A.V. itself. After all, R.A.V. involved The core of the Central Hudson analy- noted that “when the basis for the con- speech that is generally unprotected. In sis, reflected in the latter two prongs tent discrimination consists entirely of contrast, the Court has, at least since above, is that the Constitution demands a the very reason the entire class of speech Virginia Board of Pharmacy v. Virginia “reasonable fit” between a speech-restric- at issue is proscribable, no significant Citizens Consumer Council, Inc.,72 con- tive regulation and the government’s as- danger of idea or viewpoint discrimina- sistently acknowledged that commercial serted goal,79 such that the challenged reg- tion exists.”65 When the content-based speech has inherent value and should ulation advances the government’s inter- distinctions are unrelated to the reason receive significant, albeit less than full, est “in a direct and material way.”80 A the speech is generally proscribable, First Amendment protection. If, as fundamental mismatch between the gov- however, the Court’s oft-noted concerns R.A.V. held, restrictions on fighting ernment regulation and its purported goal of the dangers of content-based discrim- words receive strict scrutiny when the calls into question the sincerity of the ination remain at the fore. restrictions draw distinctions that are government’s proffered justification and For example, a state may choose to unrelated to the reasons why fighting raises the specter that the government prohibit only obscenity that is “the most words are generally unprotected, then simply prefers some speakers over others. patently offensive in its prurience,” but strict scrutiny should apply a fortiori to Although the Court’s initial decisions may not prohibit only that obscenity that commercial speech restrictions when under Central Hudson suggested some includes “offensive political messages.”66 the restrictions are similarly unrelated to deference toward government regulation Similarly, the government may criminal- the reasons why commercial speech has of commercial speech, the Court’s more ize threats of violence against the presi- generally received less protection. recent decisions have applied Central dent because the “reasons why threats of Under the R.A.V. analysis, the FTC’s Hudson more rigorously. In Discovery violence [that] are outside the First regulations are unconstitutional. The Network, for example, the Court struck Amendment (protecting individuals from doctrinal distinction between commer- down a city ordinance that banned com- the fear of violence, from the disruption cial and noncommercial speech has mercial news racks but permitted non- that fear engenders, and from the possi- been justified principally on the ground commercial ones.81 The Court agreed bility that the threatened violence will that commercial speech is both “more that the city’s asserted concerns about occur) have special force when applied easily verifiable by its disseminator” the safety and aesthetics of its streets to the person of the president,” but the and less likely to be “chilled by proper and sidewalks were important; it deter- government may not criminalize only regulation.”73 The regulation of com- mined, however, that those concerns ap- those threats that “mention his policy on mercial speech, therefore, “is limited to plied equally to commercial and non- aid to inner cities.”67 the peculiarly commercial harms that commercial news racks.82 The Court More important for the present discus- commercial speech can threaten—i.e., stated that “[i]n the absence of some ba- sion, the Court made clear in R.A.V. that the risk of deceptive or misleading ad- sis for distinguishing between ‘newspa- this analysis applies fully to content- vertising”74 and the need to “preserv[e] pers’ and ‘commercial handbills’ that is based restrictions among categories of a fair bargaining process.”75 relevant to an interest asserted by the commercial speech. Thus, the Court em- The content-based distinctions in the city, we are unwilling to recognize phasized that “a State may choose to reg- FTC’s proposed do-not-call regime, Cincinnati’s bare assertion that the ‘low ulate price advertising in one industry but however, are not related to these core value’ of commercial speech as a suffi- not in others because the risk of fraud concerns. The Commission’s only justi- cient justification for its selective and (one of the characteristics of commercial fication for a nationwide do-not-call categorical ban on newsracks dispensing speech that justifies depriving it of full registry is the need to protect consumer ‘commercial handbills.’ ”83 The Court First Amendment protection) is in its privacy.76 But that interest is “unrelated thus held that if “the distinction between view greater there.”68 A state may not, to the preservation of a fair bargaining commercial and noncommercial speech however, prohibit “only that commercial process,” and under R.A.V. cannot jus- . . . bears no relationship whatsoever to advertising that depicts men in a demean- tify content-based distinctions among the particular interests that the [govern- ing fashion.”69 R.A.V. thus makes clear categories of commercial speech. Strict ment] has asserted,” such a distinc- that “the power to proscribe [speech] on scrutiny would thus apply and the regu- tion—even though it results in too little the basis of one content element (e.g., ob- lations would fall.77 rather than too much speech being re- scenity) does not entail the power to pro- stricted—is impermissible.84 scribe it on the basis of other content ele- Central Hudson Consistent with the understanding ments.”70 Justice Thomas made this same The familiar Central Hudson analysis set forth in Discovery Network that the point in his concurrence in Lorillard provides another framework for discus- First Amendment precludes speech reg- Tobacco Co. v. Reilly, arguing that “even sion. For the regulation of nonmisleading ulations that are underinclusive, the when speech falls into a category of re- truthful speech about lawful activities to Court has consistently invalidated un- 6 ■ Communications Lawyer ■ Summer 2002
  • 5. derinclusive regulations of commercial FTC could justify the regime’s numer- solicited fax advertisements. The case speech, particularly when the underin- ous exceptions on the ground that the arose out of an action brought by the clusiveness diminishes the credibility of prohibited calls are somehow more in- State of Missouri against American the government’s asserted rationale for vasive of personal privacy. Whatever Blast Fax, Inc., a corporation in the the regulations. intrusion on privacy that telemarketing business of providing fax advertising In Coors, for example, the Court calls cause is the same whether the un- services. American Blast Fax had the struck down a statutory scheme that wanted solicitation comes from a char- misfortune to send unsolicited fax ad- prohibited beer labels from displaying ity, a landscaping company, or a bank.91 vertisements to the Missouri Attorney alcohol content. The Court observed Indeed, some lower courts have al- General’s offices, a total of 229 such that while the statute “bans the disclo- ready relied on this line of reasoning to faxes to five different machines over sure of alcohol content on beer labels, it strike down antisolicita- allows the exact opposite in the case of tion provisions. In wines and spirits.”85 The Court con- Pearson v. Edgar,92 for ex- American Blast Fax had the cluded that “there is little chance that ample, the Seventh Circuit [the statute] can directly and materially invoked Discovery misfortune to send unsolicited fax advance its aim, while other provisions Network to invalidate an of the same Act directly undermine and Illinois statute that made it advertisements to the Missouri counteract its effects.”86 unlawful for a real estate Similarly, in GNOBA, the Court agent to solicit a sale or Attorney General’s offices. struck down a federal statute that pro- listing of property from hibited broadcast advertising of private any owner who had indicated a desire the course of ten months. The Attorney casino gambling. Noting that the statu- not to sell the property.93 The Court ob- General sued American Blast Fax under tory scheme permitted advertising of served that because “the distinction be- the TCPA, and the company defended casinos run by states and Indian tribes, tween real estate solicitation and other itself by alleging that the TCPA vio- as well as advertising of numerous types of solicitation is not plausible ab- lated the First Amendment.100 other gambling events, the Court held sent evidence that real estate solicitation In March 2002, U.S. District Court that the statutory regime was “so poses a particular threat to residential Judge Stephen Nathaniel Limbaugh ac- pierced by exemptions and inconsisten- privacy,” the speech restriction did not cepted American Blast Fax’s argument cies that the Government cannot hope “reasonably fit” the reason for the re- and held that the TCPA’s blanket prohi- to exonerate it.”87 striction.94 Similarly, in the absence of bition on unsolicited fax advertisements evidence that the real estate solicitations violated the First Amendment.101 Central Hudson and the FTC’s at issue were particularly invasive, “a Applying the Central Hudson analysis, Proposed Do-Not-Call List mechanism whereby homeowners can the court turned first to the govern- Under the Central Hudson analysis, as reject real estate solicitations but not ment’s asserted substantial interests, elaborated in recent Supreme Court deci- other kinds of solicitation cannot be said which Judge Limbaugh identified as sions, the nationwide do-not-call list the to advance the interest in residential pri- first, that “unsolicited junk faxing shifts FTC has proposed for a select group of vacy ‘in a direct and material way.’”95 advertising costs from the advertiser to commercial speakers is suspect as ap- Similarly, in Lysaght v. New the recipient,” and second, that “unso- plied to truthful, nonmisleading informa- Jersey,96 a federal district court enjoined licited fax advertising occupies a recipi- tion about a lawful commercial transac- enforcement of a New Jersey ban, ab- ent’s facsimile machine so that the re- tion.88 Even assuming that the Com- sent the called party’s consent, on auto- cipient cannot utilize it for his or her mission’s asserted interest in residential mated commercial calls. Applying in- desired business purposes.”102 Judge privacy is considered substantial,89 the termediate scrutiny and relying heavily Limbaugh expressed considerable skep- FTC cannot establish that the regulations on Discovery Network, the court held ticism about the strength of the govern- directly and materially advance the gov- that the government’s interest in pre- ment’s asserted interests, noting the ernment’s privacy interest and that they serving the privacy of the home, while paucity of material in the legislative are narrowly tailored to further the gov- valid, was not furthered by banning history indicating a real problem in ei- ernment’s asserted goals.90 only commercial calls because both ther of these areas. The problem for the FTC are the commercial and noncommercial calls But even assuming the substantiality “exemptions and exceptions” in its reg- “equally disrupt residential privacy.”97 of the government’s interests, Judge ulatory scheme. The exclusion of solici- Nor was it furthered by prohibiting only Limbaugh held that the TCPA failed to tations by nonprofits, the exceptions for prerecorded calls because such calls survive scrutiny under Central Hudson. solicitations on behalf of religious or- threaten the privacy of the home no In particular, drawing on cases such as ganizations and on behalf of “political more than live calls.98 GNOBA and Coors, Judge Limbaugh clubs, committees, or parties,” and the One lower court case in particular found that the statute failed to directly numerous industry-specific exclusions provides further evidence that some advance the government’s asserted in- counsel strongly against a finding that telemarketing restrictions may be vul- terests because it prohibited only unso- the regulations advance the FTC’s as- nerable to a commercial speech chal- licited advertisements, and not other serted privacy interests in a direct and lenge. Missouri v. American Blast Fax, types of unsolicited faxes. As Judge material way. Inc.99 presented a fairly routine applica- Limbaugh observed, “recipients can Moreover, it is hard to believe the tion of the TCPA’s proscription on un- still bear the costs of printing others’ Summer 2002 ■ Communications Lawyer ■ 7
  • 6. messages, even if they strongly oppose 4. See Comments of the Direct 21. Id. § 64.1200(e)(1). the messages’ content. The costs of Marketing Association, Inc. and the U.S. 22. Id. § 227(b)(1)(C). printing political messages, jokes, and Chamber of Commerce, at 5 (Apr. 15, 2002) 23. Id. § 227(a)(4). some advertisements which are not in- (available from author). 24. See 47 U.S.C. § 227(c)(5). The TCPA 5. Comments of the Not-for-Profit and provides an affirmative defense in any action cluded in the TCPA’s definition, still Charitable Coalition in Response to the brought pursuant to § 227(c)(5) if the defen- fall on the recipient.”103 Federal Trade Commission’s Proposed dant has“established and implemented, with Judge Limbaugh also found that the Amendments to the Telemarketing Sales due care, reasonable practices and procedures selective prohibitions in the TCPA cast Rule, at 6 (Apr. 15, 2002); see also to effectively prevent telephone solicitations doubt on whether the statute satisfied Comments of American Diabetes Ass’n in violation of the [FCC’s] regulations.” Central Hudson’s “reasonable fit” re- (“We call literally millions of people every 25. 47 U.S.C. § 227(b)(3). quirement: “Again, there is no rational- year in an effort to raise funds.”); Comments 26. See 47 U.S.C. § 208(a); In re ity behind the government’s distinction of California Professional Firefighters (Mar. Consumer.net v. AT&T Corp., 15 F.C.C.R. between unsolicited advertisements and 14, 2002) (if FTC adopts new limits on the 281, ¶¶ 1, 42 (handling § 208 formal com- other unsolicited faxes. The recipient use of professional telemarketers, “our abil- plaint proceeding and explaining that com- ity to solicit contributions supporting plainant was limited to TCPA penalties). must still bear the cost, and the fax can California’s professional firefighting and 27. 47 U.S.C. § 503(b). still interfere with the recipient’s use of EMS personnel would be severely crip- 28. See, e.g., In re 21st Century Fax(es) his or her facsimile machine for busi- pled”) (available from author). Ltd., 2000 WL 1799579 (FCC Dec. 7, 2000) ness purposes.”104 6. See DMA FTC Comments, supra note (demanding forfeiture of $1.1 million for By focusing on the exceptions in the 4, at 5. 152 violations); In re US Notary, Inc., 15 statute and the lack of a reasonable fit be- 7. 47 U.S.C. § 227. F.C.C.R. 16,999 (2000) (demanding forfei- tween the government interests asserted 8. 15 U.S.C. §§ 6101 et seq. ture of $90,000); In re Carolina Liquidators, and the particular exceptions, American 9. See, e.g., ARK. CODE ANN. Inc., 15 F.C.C.R. 16,837 (2000) (demanding Blast Fax thus sets forth a plan of attack § 4–99–402 et seq.; GA. CODE ANN. forfeiture of $230,000 for thirty-four viola- for the FTC’s proposed regulations and § 46–5–27; IND. CODE § 24–4.7–1–1; N.Y. tions); In re Get-Aways, Inc., 15 F.C.C.R. GEN. BUS. § 399-z(1)(i); TENN. CODE ANN. 1805 (1999) (demanding forfeiture of other antitelemarketing regimes that draw § 65–4–401(6)(A); see also www.ftc.gov/ $85,500 for nineteen violations). content-based distinctions. bcp/conline/pubs/alerts/dncalrt.htm (provid- 29. Congress also enacted the Senior ing links to state do-not-call registries). Citizens Against Marketing Scams Act of Conclusion 10. The FCC had considered regulating 1994, 18 U.S.C. §§ 2325 et seq, which pro- The FTC is currently reviewing com- telemarketing as early as 1980, but con- vides for longer prison sentences for certain ments on its proposed telemarketing re- cluded that the volume of interstate calls, telemarketing-related crimes. strictions, and American Blast Fax is which were the only calls the Commission 30. 15 U.S.C. § 6102(a). currently moving its way up the appel- could regulate under the Communications 31. See id. § 6102(a)(3). late chain. Either case could provide a Act, was insufficient to justify Commission 32. See generally Telemarketing Sales vehicle for the Supreme Court to decide action. See In re Unsolicited Tel. Calls, 77 Rule; Proposed Rule, 67 Fed. Reg. 4492, once and for all whether commercial F.C.C.2d 1023, 1033 (1980). 4493 (Jan. 30, 2002). speech receives full First Amendment 11. S. REP. NO. 102–178, at 2–3, reprinted 33. 16 C.F.R. § 310.4(d). protection. But whether or not the Court in 1991 U.S.C.C.A.N. 1968, 1969–70; H.R. 34. Id. § 310.3(a)(2). REP. NO. 102–317, at 9–10 (Nov. 15, 1991). 35. See id. § 310.4(b)(1)(ii). The FTC also takes up that challenge, the cases pro- 12. See S. REP. supra note 11, at 3 (“These promulgated rules (like the FCC rules) that vide further opportunity for the appellate [state] measures have had limited effect, prohibit calls before 8:00 A.M. and after 9:00 courts (and even the Supreme Court) to however, because States do not have juris- P.M. Id. §§ 310.4(c) and 310.4(b)(1)(ii). remind regulators that content-based dis- diction over interstate calls.”); TCPA § 2(7) 36. FTC Proposal, 67 Fed. Reg., supra tinctions in commercial speech that are (“telemarketers can evade [state] prohibitions note 32, at 4493 n.16. unrelated either to the reasons for pro- through interstate operations”). 37. See 15 U.S.C. § 6103. scribing the speech in the first place or 13. TCPA § 2(9); see also S. REP., supra 38. See id. § 6104. to the interests purportedly being ad- note 11, at 1 (noting the need to “protect the 39. See id. §§ 6103(a); 6104(a). vanced violate the First Amendment. privacy interests of residential telephone 40. See 15 U.S.C. §§ 41 et seq.; id. § 6105(b). subscribers”). 41. To the extent that state statutes pur- Endnotes 14. 47 U.S.C. § 227(b); 47 C.F.R. port to impose restrictive regulations on in- 1. 447 U.S. 557, 566 (1980). § 64.1200(a). terstate calls, the statutes may well be pre- 2. See, e.g., Greater New Orleans 15. 47 U.S.C. § 227(b)(1)(B); 47 C.F.R. empted by the TCPA and the FCC’s imple- Broadcasting Ass’n v. United States, 527 § 64.1200(a)(2). menting regulations. U.S. 173, 197 (1999) (GNOBA) (Thomas, J., 16. 47 U.S.C. § 227(d)(3); 47 C.F.R. 42. See, e.g., N.Y. GEN. BUS. LAW concurring); 44 Liquormart, Inc. v. Rhode § 64.1200(d). § 399p(1)(d) (covering automated calls “for Island, 517 U.S. 484, 501, 510–14 (1996) 17. 47 C.F.R. § 64.1200(c); id. the purpose of soliciting a sale of any con- (opinion of Stevens, J., joined by Kennedy § 64.1200(f)(4). sumer goods or services”); GA. CODE ANN. and Ginsburg, JJ.); id. at 517 (Scalia, J., con- 18. 47 U.S.C. § 227(c). § 46–5–23(a)(2) (covering automated calls curring in part and concurring in the judg- 19. Id. § 227(a)(3). “for the purpose of advertising or offering ment); id. at 518 (Thomas, J., concurring in 20. See In re Rules and Regulations for sale, lease, rental, or as a gift any goods, part and concurring in the judgment). Implementing the Telephone Consumer services, or property”). 3. Thompson v. W. States Med. Ctr., 122 Protection Act of 1991, 7 F.C.C.R. 8752, 43. In Minnesota, for example, the legis- S. Ct. 1497 (2002); see also Lorillard ¶¶ 20–24 (1992); see also 47 C.F.R. lature initially enacted legislation banning Tobacco Co. v. Reilly, 533 U.S. 525, § 64.1200(e)(2); see 47 C.F.R. commercial automated calls without consent 554–55 (2001); GNOBA, 527 U.S. at 184. § 64.1200(e)(2)(vi). but later expanded it to cover all automated 8 ■ Communications Lawyer ■ Summer 2002
  • 7. calls. See MINN. STAT. ANN. § 325E.27 (no potential to mislead.”). 87. Greater New Orleans Broadcasting automated calls unless preceded by live op- 72. 425 U.S. 748 (1976). Ass’n v. United States, 527 U.S. 173, 190 erator obtaining consent of called party); see 73. Id. at 772 n.24; see also Lorrilard (1999) (GNOBA); see also 44 Liquormart, Inc. also CAL. PUB. UTIL. CODE § 2874 (banning Tobacco Co. v. Reilly, 533 U.S. 525, 576 v. Rhode Island, 517 U.S. 484, 512 n.20 (1996) all automated calls unless live operator in- (2001) (Thomas, J., concurring). (noting examples of underinclusiveness). troduces and obtains consent for call). 74. Lorillard, 533 U.S. at 576 (Thomas, 88. To the extent the calls are fraudulent, 44. See, e.g., N.Y. GEN. BUS. LAW J., concurring) (emphasis in original). they can be regulated without First § 399p; NEB. REV. STAT. § 86–1208 (4). 75. 44 Liquormart, Inc. v. Rhode Island, Amendment objection under federal and 45. See, e.g., FTC Proposal, 67 Fed. Reg., 517 U.S. 484, 501 (1996) (Stevens, J., con- state fraud provisions. supra note 32, at 4517 (noting reports that curring, joined by Kennedy and Ginsburg, 89. The interest in protecting residential “consumers are responding in such over- JJ.); see also R.A.V. v. City of St. Paul, 505 privacy, while important in the abstract, can- whelming numbers to the State ‘do-not-call’ U.S. 377, 388–89 (noting that “risk of fraud” not be asserted at a high level of generality statutes that some States’ telephone systems is “one of the characteristics of commercial to satisfy Central Hudson. See U.S. West, have crashed”). speech that justifies depriving it of full First Inc. v. FCC, 182 F.3d 1224, 1234–36 (10th 46. See GA. CODE ANN. § 46–5–27(b)(3). Amendment protection”); Coors, 514 U.S. at Cir. 1999) (“[T]he government cannot sat- 47. ARK. CODE ANN. § 4–99–403(2). 493 (Stevens, J., concurring) (identifying the isfy the second prong of the Central Hudson 48. See id. § 4–99–406. “rationales for treating commercial speech test by merely asserting a broad interest in 49. IND. CODE § 24–4.7–2–9, differently under the First Amendment” as privacy. It must specify the particular notion 50. TENN. CODE ANN. § 65–4–401(6)(B)(ii). “the importance of avoiding deception and of privacy and interest served.”). 51. See Proposed FTC Rule, 67 Fed. Reg. protecting the consumer from inaccurate or 90. See Discovery Network, 507 U.S. at 416, supra note 32, at 4492. Comments on the incomplete information in a realm in which 417 n.13; Bd. of Trustees of the State Univ. of FTC’s proposed amendments were due April the accuracy of speech is generally ascer- N.Y. v. Fox, 492 U.S. 469, 480 (1989). 15, 2002, and the FTC held a public hearing tainable by the speaker”). 91. Cf. GNOBA, 527 U.S. at 191 (“[T]he on the amendments on June 5–7, 2002. 76. See FTC Proposed Rule, 67 Fed. Reg., Solicitor General does not maintain that 52. See id. at 4518–19. supra note 32, at 4516–17 (“This proposal di- government-operated casino gaming is any 53. Pub. L. No. 107–56 (2001). rectly advances the Telemarketing Act’s goal different . . . or that one class of advertisers 54. USA PATRIOT Act, § 1011(b)(3). to protect consumers’ privacy.”); id. at is more likely to advertise in a meaningfully 55. Proposed FTC Rule, 67 Fed. Reg., 4518–19 (“[T]he proposed modification of the distinct manner than the others.”). supra note 32, at 4516. Rule promotes the Act’s privacy protections.”). 92. 153 F.2d 397 (7th Cir. 1998). 56. Id. at 4499. 77. See, e.g., United States v. Playboy 93. Id. at 402–05. 57. See id. at 4499 (excluding “any contri- Entertainment Group, Inc., 529 U.S. 803, 812 94. Id. at 404. butions to ‘political clubs, committees, or (2000); R.A.V., 505 U.S. at 395; Lorillard, 95. Id. (quoting Edenfeld v. Fane, 507 parties’ ” and “contributions to constituted 533 U.S. at 577 (Thomas, J., concurring). U.S. 761, 767 (1993)). religious organizations”). The FTC regulations would be unlikely to 96. 837 F. Supp. 646 (D.N.J. 1993). 58. Id. at 4497 n.56. survive such scrutiny. Under strict scrutiny, 97. Id. at 651. 59. Id. at 4519. the government’s speech restrictions must be 98. Id. at 653. 60. R.A.V. v. City of St. Paul, 505 U.S. narrowly tailored to a compelling govern- 99. 196 F. Supp. 2d 920 (E.D. Mo. 2002). 377, 382 (1992). ment interest. See, e.g., Playboy Entertain- 100. The U.S. Department of Justice inter- 61. Consol. Edison Co. of N.Y. v. Pub. ment Group, 529 U.S. at 812; Austin v. vened to defend the constitutionality of the Serv. Comm’n, 447 U.S. 530, 536 (1980) Michigan Chamber of Commerce, 494 U.S. statute. (quoting Police Dep’t v. Mosley, 408 U.S. 652, 657 (1990). Even assuming that the 101. At least two other district courts have 92, 95 (1972)). Commission’s asserted privacy interest is rejected similar First Amendment challenges 62. Simon & Schuster, Inc. v. Members of compelling, the “dispositive question” here, to the fax provisions of the TCPA. See the N.Y. State Crime Victims Bd., 502 U.S. as it was in R.A.V., would be “whether con- Texas v. American Blastfax, Inc., 121 F. 105, 116 (1991). tent discrimination is reasonably necessary to Supp. 2d 1085 (W.D. Tex. 2000); Kenro, 63. Leathers v. Medlock, 499 U.S. 439, achieve [the government’s] compelling inter- Inc. v. Fax Daily, Inc., 962 F. Supp. 1162 447 (1991) (quoting Cohen v. California, ests.” R.A.V., 505 U.S. at 395–96. The FTC (S.D. Ind. 1997). 403 U.S. 15, 24 (1971)). has thus far made no effort at all to show that 102. American Blast Fax, 196 F. Supp. 2d 64. R.A.V., 505 U.S. at 388. the content-based restrictions are indeed nec- at 928. 65. Id. essary to protect the FTC’s asserted interests 103. Id. at 931. 66. Id. in residential privacy. 104. Judge Limbaugh also noted the exis- 67. Id. 78. See City of Cincinnati v. Discovery tence of variety of “other options which can 68. Id. at 388–89 (internal citations omitted). Network, Inc., 507 U.S. 410, 416 (1993). advance the government’s asserted interest 69. Id. at 389. 79. See id. at 417 n.13. in a manner less intrusive to First 70. Id. at 386 (emphasis in original). 80. Edenfeld v. Fane, 507 U.S. 761, 767 Amendment rights” than the total ban im- 71. 533 U.S. 525, 576 (2001) (Thomas, J., (1993). posed by the TCPA. Among the alternatives concurring); see also Rubin v. Coors 81. Discovery Network, Inc., 507 U.S. at he identified was the use of “a national ‘no- Brewing Co., 514 U.S. 476, 494 (1995) 430–31. fax’ database similar to those being utilized (Stevens, J., concurring) (“[A]ny description 82. Id. at 427–28. for telephone solicitations.” In light of those of commercial speech that is intended to 83. Id. at 428. available alternatives, Judge Limbaugh con- identify the category of speech entitled to 84. Id. at 424. cluded that “the regulation is more extensive less First Amendment protection should re- 85. Rubin v. Coors Brewing Co., 514 U.S. than necessary.” Id. at 932. late to the reasons for permitting broader 476, 488 (1995). regulation: namely, commercial speech’s 86. Id. at 489. Summer 2002 ■ Communications Lawyer ■ 9