Telemarketers battle static from federal regulators

Tuesday, June 27, 2000

Things aren’t looking good for telemarketers.

A House subcommittee recently held hearings on two bills designed to further regulate telephone solicitors. One, the Know Your Caller Act of 1999, would make it easier for consumers with caller-identification services to recognize and avoid telemarketers. The second, the Telemarketing Victims Protection Act, would require telephone solicitors to notify consumers of their right to be placed on a “do-not-call” list and would prohibit solicitations between 5 and 7 p.m.

While telemarketers claim they already are over-regulated (existing laws, for example, prohibit solicitations after 9 p.m.), their calls for judicial protection have gone unanswered. As a result, telemarketers find themselves longing for the First Amendment rights enjoyed by print, broadcast and Internet advertisers.

Telemarketing regulation began on a national scale in 1991, when Congress passed the Telephone Consumer Protection Act. More than 40 states have joined in, passing their own potpourri of restrictions. While courts have struck down a few of these state laws, the federal TCPA so far has withstood all constitutional challenges. In light of the deference that courts have given Congress in this area, it is not surprising that legislators are considering additional constituent-pleasing restrictions.

In the TCPA, Congress banned unsolicited advertising faxes and prohibited the use of automatic dialing devices to call homes, emergency telephone lines and health-care facilities. Although Congress did not ban unsolicited calls to businesses, it suggested that the Federal Communications Commission consider adopting such a ban. In addition, Congress encouraged the FCC to craft exemptions to the TCPA’s restrictions.

The FCC ultimately did not ban telemarketing to businesses but did ban calls after 9 p.m. and further regulated the use of automatic dialing devices. The FCC also exempted many solicitors from the TCPA, providing that its regulations would not apply to calls:

  • Made for non-commercial purposes.
  • That do not include unsolicited advertisements.
  • Made to persons with whom the solicitor has an established business relationship.
  • Made by tax-exempt nonprofit organizations.

In rejecting solicitors’ First Amendment attacks on the TCPA and its regulations, courts have held that, because telemarketing is commercial speech, it can be restricted if the regulations directly advance a substantial state interest and are no more extensive than necessary to serve that interest. Telephone solicitors have argued that the regulations do not directly advance a state interest because the law’s exemptions unfairly allow some solicitors unbridled access to consumers.

Courts, however, have not been persuaded by this argument. Instead, relying on U.S. Supreme Court precedent, they have held that Congress is not required to regulate telemarketing on an all-or-nothing basis.

While telemarketers have fared slightly better in state courts, their inability to shake free of the TCPA limits the impact of successful challenges to state laws. Occasionally, however, a state court decision gives telephone solicitors a moral victory — and hope.

In Utah, for example, a state appellate court struck down sections of that state’s telephone-harassment statute. Although the decision did not specifically address the First Amendment rights of telemarketers, the court noted that the statute’s prohibition of potentially annoying or harassing calls swept too broadly because it potentially criminalized unwanted telephone solicitations to a private home. “[T]he First Amendment,” the court said, “does not prohibit the kind of essentially harmless communications” that some might find annoying. “Simply put,” the court concluded, “the First Amendment is made of sterner stuff.”

While it perhaps is not likely that federal courts will stray from prior decisions upholding the TCPA, a legitimate basis exists for doing so, as the courts’ reliance on the proposition that Congress can directly advance a state interest by regulating only some speakers is misplaced.

In the 1993 U.S. Supreme Court case announcing this proposition, United States v. Edge Broadcasting, Congress targeted a specific message — lottery advertising — and the fit between the law and Congress’ objective was reasonably close. In the TCPA, however, the targeted message — all advertising — is much broader. The fit between the TCPA and Congress’ objective therefore is necessarily looser. The fallacy of this fit is further highlighted by the TCPA’s exemption for advertising communicated by nonprofit groups. Through this exemption, Congress has chosen to favor one type of speech — charitable advertising — over another — commercial advertising — even though the purportedly harmful effects of the speech are the same. Because this type of content discrimination traditionally has received strict scrutiny under the First Amendment, courts should not automatically defer to Congress and the FCC in the telemarketing context.

A trend in recent commercial-speech cases also suggests that the TCPA is ripe for another challenge. Since the earlier federal court decisions, more and more judges — including justices of the U.S. Supreme Court — have questioned the validity of the legal distinction between commercial and noncommercial speech. The TCPA indisputably is based on the premise that commercial speech is worth less than noncommercial speech and therefore is entitled to less First Amendment protection. As this premise becomes shakier, so does the constitutionality of the TCPA.

Until a federal court breaks with precedent, however, telemarketers will have live with the current regulations and will have to continue resisting efforts to strengthen those restrictions. While telemarketers have been successful so far in holding their ground, their industry is no more popular than it ever was. Telemarketers’ reception in Congress, in courts and in American homes likely will remain chilly. Telemarketers therefore, like the First Amendment, will need to be made of “sterner stuff.”

Douglas Lee is a partner in the Dixon, Ill., law firm of Ehrmann Gehlbach Badger & Lee and a legal correspondent for the First Amendment Center.