Federal Judge Files to Block
Just-Passed 'Do Not Call' Bill
By RYAN J. FOLEY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Dealing a critical blow to the Federal Trade Commission's popular "do not call" registry, a second federal court blocked the program saying it violates telemarketers' free-speech rights under the Constitution.
The decision came at the end of a hectic day in which Congress, bowing to a wave of public outrage over the first court decision released Wednesday, swiftly passed legislation reinstating the FTC program to curb pesky telemarketing calls.
The second ruling, by U.S. District Court Judge Edward W. Nottingham in Denver, erects a far higher hurdle. Judge Nottingham said the registry was unconstitutional because the FTC allowed telemarketing calls from charities but not commercial enterprises, and violated the First Amendment.
Some 50 million phone numbers -- representing about a third of the nation's households -- signed up since the list's June 28 debut. Telemarketers were to face fines of $11,000 per call for dialing phone numbers on the list.
Now, telemarketers see not only a reprieve from rules they say will cripple their industry but also an opening to overturning do-not-call lists compiled by more than 30 states. "I think there's a high, high likelihood that the do-not-call registry will not be implemented next week," said Sean R. Gallagher, a lawyer who represents the American Teleservices Association, which brought the suit. The ruling, he said, paves the way for the industry to file suits against states that have do-not call registries and said his group has one such case pending in Colorado.
The agency, Judge Nottingham wrote in the 34-page opinion, "has chosen to entangle itself too much in the consumer's decision by manipulating consumer choice and favoring" charitable over commercial speech. Judge Nottingham's assessment of the FTC registry was blunt. The First Amendment, he said, bars the government adopting laws that give a preference to one type of speech over another when the content isn't significantly different. "Because the do-not-call registry distinguishes between the indistinct, it is unconstitutional under the First Amendment," he wrote.
There could be a silver lining for consumers. Neither court decision addressed the Federal Communications Commission's rules to regulate telemarketing calls. Unlike the FTC, however, the FCC doesn't have a do-not-call registry or funding to create one, but consumer advocates say that the agency could set one up fairly quickly. The FCC's rules, however, are also under court challenge. In the end, lawyers on all side predict, the matter could end up before the Supreme Court.
The FTC program allows consumers to block calls from companies, but there are exemptions that allow charities, political organizations, and telephone surveyors to continue dialing consumers. They also allow companies with which consumers have an existing business relationship contact them for 18 months after a purchase.
Lawrence DeMille-Wagman, the FTC lawyer handling the case, said he is "not happy" but said lawyers were meeting late last night (Thursday) to discuss the full ramifications and what steps the agency would take next. Even before Judge Nottingham's decision was released, FTC lawyers said they were unsure whether the new law would allow the agency to begin enforcing the program on next week, or whether the courts would first have to determine whether the program remains blocked.
On Wednesday, U.S. District Court Judge Lee R. West in Oklahoma City ruled that the FTC wasn't authorized by Congress to establish the registry. Yesterday, Judge West, who has been inundated with calls from angry consumers, rejected an FTC request to suspend his order while the agency filed an appeal. At one point, the phones in Judge West's chambers were so busy that even FTC lawyers had problems getting through to file a notice of appeal.
His decision was roundly criticized in Congress, too. "Perhaps we should call this bill the 'This Time We Really Mean It Act" to cure any misunderstanding in the judicial branch," said House Energy and Commerce Committee Chairman Billy Tauzin, a Louisiana Republican, better known for deregulation than a champion of fettering business. Mr. Tauzin's support reflects many consumers" overwhelming desire stop telemarketing calls. The House passed the bill 412-8. Senators, acting just before many left for the weekend, passed the measure 95-0. President Bush was expected to sign the measure into law as early as Friday.
The public clamor for relief from unwanted calls has split the telemarketing industry. Many companies support the idea of a do-not-call list because they say it will allow to them to be more efficient in their marketing efforts by targeting only those consumers who might make purchases. Others that believe their sales rely on the volume of consumers they can reach are strongly opposed.
In a reflection of that divide, a leading industry trade group, the Direct Marketing Association, called on its members to follow the list even before its ultimate legality was decided. More than 5,000 companies already have purchased the list from the FTC. Marketers should "respect the wishes of consumers who have placed their phone numbers on the FTC's list," said H. Robert Wientzen, the group's president and CEO.
The DMA maintains on its Web site instructions for registering for do-not-call lists operated by nearly 40 states-including New York, California and Texas-that aren't affected by the court's ruling blocking the federal program.
Information on the state lists can be found at www.the-dma.org/government/donotcalllists.shtml1.
Write to Ryan J. Foley at ryan.foley@dowjones.com2 |
