Impact of Judicial Do-Not-Call Rulings on Commercial Advertising

Date: Oct 02, 2003

A whirlwind of judicial and legislative activity has occurred over the past two weeks involving the Do-Not-Call rules adopted by the Federal Trade Commission ("FTC") and Federal Communications Commission ("FCC"). Two different telemarketing coalitions challenged the FTC's rules in Colorado and Oklahoma, and legal challenges were filed against the FCC's rules in the Tenth Circuit court of appeals. While many businesses may feel that rules applying to those aggravating telemarketers who call you at mealtimes are not relevant to their operations, the outcome of the legal battle will have broad implications for U.S. advertisers and marketers. Those decisions should further define the scope of protection accorded to commercial speech, and how to balance speech and privacy rights at issue in Do-Not-Fax and unsolicited commercial e-mail ("spam") laws as well as the Do-Not-Call laws. At last count, five separate judicial decisions are at issue:
(1) a September 23 Oklahoma district court decision ruling that the FTC lacked Congressional authorization to issue Do-Not-Call rules; (2) a September 25 Colorado district court decision finding the FTC's Do-Not-Call rules unconstitutional; (3) a September 26 Order of the U.S. Court of Appeals for the Tenth Circuit refusing to stay the FCC's Do-Not-Call rules pending review, prompting the FCC to declare that it would enforce the registry beginning October 1; (4) a September 29 refusal by U.S. Supreme Court Justice Stephen Breyer to stay the FCC's Do-Not-Call rules; and (5) another order on September 29 by the Colorado district court refusing to stay its September 25 order pending appeal by the FTC.
Legislative action has in effect mooted the Oklahoma decision, but the FTC's authority to implement the national Do-Not-Call registry remains stayed on account of the Colorado decisions as of this writing. Since the FTC holds the Do-Not-Call registry, the FCC has resorted to asking the Direct Marketing Association and its members to cooperate on sharing back registry information they obtained from the FTC so that the FCC can administer the registry in light of the September 29 order. The Colorado court ruled that the FTC's Do-Not-Call rules, with exemptions for non-profits, are unconstitutional under the First Amendment because they are under-inclusive and favor charitable and political speech over commercial speech. The implications of this ruling are profound. Many state spam laws do exempt non-profits from their reach. On the other hand, the Do-Not-Fax portion of the FCC's telemarketing rule issued and the recent California spam law do not include an exemption for non-profits. While the FCC's Do-Not-Fax rules and the new California spam law may not pose the under-inclusiveness problem that lead to the Colorado court's ruling on the Do-Not-Call issue, that does not mean that these laws do not pose other legal or constitutional issues. The current debate now squarely places the right to advertise with the right to be left alone. Restrictions on telemarketing, faxing and e-mails, and the ensuing litigation on the constitutional parameters will also address questions of the First Amendment protection accorded to different media. These cases are likely to result in the most significant judicial findings regarding commercial speech that we have seen in years, particularly in light of earlier decisions concluding that the Internet should enjoy among the highest levels of constitutional protection. The implications of these decisions, and subsequent related decisions that address these issues, will undoubtedly shape the legal framework governing commercial speech in the United States, and will have an impact far beyond the telemarketing industry. For more information on telemarketing, Do-Not-Call, Do-Not-Fax and spam laws, contact Sheila A. Millar at (202) 434-4143, or by e-mail at millar@khlaw.com, or Tracy P. Marshall at (202) 434-4234, or by e-mail at marshall@khlaw.com.