U.S. District Court Upholds FTC's Telemarketing Sales Rule

Date: Mar 08, 2004

On February 24, 2004, the U.S. District Court for the District of Maryland upheld the constitutionality of the Federal Trade Commission's amended telemarketing Sales Rule ("TSR") in National Federation of the Blind et al. v. FTC, Civil No. JFM-03-963 (Feb. 24, 2004). In that case the National Federation of the Blind and Special Olympics Maryland, Inc., two non-profit organizations, challenged amendments to the TSR, which would restrict the activities of professional telemarketers who solicit charitable contributions on behalf of non-profit organizations. The plaintiffs argued that the TSR was unconstitutional and exceeded the scope of the FTC's authority. The plaintiffs challenged the following restrictions in the TSR: (1) the company-specific do-not-call provision, which prohibits a telemarketer from calling any consumer who has indicated a preference to not receive further calls from that particular organization, (2) the prohibition on abandoned calls, which requires a telemarketer to connect a call to a representative within two seconds of a consumer's greeting, (3) the prohibition on placing calls before 8:00 a.m. or after 9:00 p.m., (4) the requirement that telemarketers transmit caller ID information, and (5) telemarketer disclosure requirements. The court dismissed the plaintiffs' First Amendment and Equal Protection challenges and ruled that the FTC had statutory authority under the amended Telemarketing and Consumer Fraud Abuse and Prevention Act to regulate abusive telemarketing practices. The court's First Amendment analysis focused on whether the FTC's regulation is narrowly tailored to serve the government's interest without unnecessarily interfering with freedom of speech. According to the court, the challenged provisions are narrowly drawn to prevent particularly abusive practices and do not overly restrict First Amendment rights. The court also found the TSR constitutional under the Equal Protection clause because the regulation applies equally to all telemarketing, and therefore does not favor certain entities over others. Litigation over the FTC's and FCC's telemarketing rules raises important questions regarding the scope of the right to privacy versus the right to market in the U.S. The U.S. Court of Appeals for the Tenth Circuit recently addressed similar issues in Mainstream Marketing Services, Inc. et al. v. FTC (Feb. 17, 2004), where it upheld the constitutionality of the national do-not-call registry, finding a reasonable fit between the government's interests and the regulations. That decision may be appealed to the U.S. Supreme Court. 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, Vanessa R. Hamilton at (202) 434-4111, or by e-mail at hamilton@khlaw.com, or Tracy P. Marshall at (202) 434-4234, or by e-mail at marshall@khlaw.com.