FTC Chairman Briefs House Committee on Energy and Commerce about the Telemarketing Sales Rule's "Do Not Call" Amendments

During testimony today before the House Committee on Energy and Commerce, Federal Trade Commission Chairman Timothy J. Muris provided an overview of the Telemarketing Sales Rule (the Rule or TSR) amendment process, discussion of the "Do Not Call" provisions, and an examination of the agency's request for Congressional approval to fund the operation of the "Do Not Call" registry and its related functions through offsetting fee collections. According to his testimony, Muris anticipates that the costs will fall primarily in three broad categories: 1) costs of development and operation of the "Do Not Call" registry, including the handling of complaints; 2) enforcement costs, which include consumer and business education and international coordination; and 3) agency infrastructure and administration costs, including information technology structural supports.

Muris presented the background of the Rule by explaining that the FTC promulgated the "Do Not Call" and other substantial amendments to the TSR under the express authority granted to the Commission by the Telemarketing and Consumer Fraud and Abuse Prevention Act. The Telemarketing Act, which was adopted in 1994, directed the Commission to issue a trade regulation rule defining and prohibiting deceptive or abusive telemarketing acts or practices including prohibitions against any pattern of unsolicited telemarketing calls, as well as restrictions on the hours unsolicited telephone calls can be made to consumers. Accordingly on August 16, 1995, the Commission adopted the TSR, which defined and prohibited certain deceptive telemarketing practices, prohibited calls by telemarketers or sellers to consumers who had previously requested not to receive such calls from that telemarketer or seller, and prohibited calls to consumers before 8:00 a.m. or after 9:00 p.m. local time for the consumer.

Muris explained further that the Telemarketing Act also directed the Commission to undertake a review of the TSR within five years of its promulgation. Consequently, the Commission held a public forum to examine the TSR's "Do Not Call" provision on January 11, 2000. At that forum, industry representatives, consumer groups, and state law enforcement and regulatory officials discussed the existing "Do Not Call" requirement, which prohibited telemarketers from placing calls to consumers who asked not to receive more calls from that telemarketer; efforts by industry at self-regulation in this area; the growing number of state laws establishing "Do Not Call" lists; the absence of caller identification information for some telemarketing calls; and growing consumer dissatisfaction with unwanted and abandoned telemarketing calls.

In January 2002, Muris testified, the Commission issued its Notice of Proposed Rulemaking (NPR) to amend the TSR to address several important concerns raised by consumers during the Rule review. First, the NPR proposed an amendment prohibiting telemarketers from blocking the transmission of caller identification information on outbound telephone calls. Second, the NPR proposed specific restrictions on the use of "predictive dialer" software that resulted in consumers receiving "dead air" or disconnected calls from telemarketers. Finally, the NPR proposed to require telemarketers subject to the Rule to subscribe to a national "Do Not Call" registry to be established and maintained by the Commission, and to prohibit them from calling consumers who place their telephone numbers on the national registry.

According to the testimony, the Commission ultimately received more than 64,000 written comments in its rulemaking proceeding. The overwhelming majority of these comments expressed concern about unwanted telemarketing calls, and supported the "Do Not Call" registry proposal. The Commission concluded that the rulemaking record showed that a national "Do Not Call" registry was necessary to protect consumers' privacy from an abusive pattern of calls placed by a seller or telemarketer, and formally announced its adoption of the "Do Not Call" amendments on December 18, 2002.

Muris testified that at least 27 states have enacted "Do Not Call" laws, and 25 states have implemented their laws by establishing registries and collecting fees from telemarketers. To comply with these state laws, telemarketing firms that conduct business in all states are required to pay an estimated $10,139 in annual fees to obtain the state registries. Without an effort to centralize these registries under one national system, states would continue to enact their own laws and establish their own registries. With more than half of the states requiring telemarketers to buy their "no-call" lists, and more states considering legislation to do the same, telemarketers ultimately will have to purchase dozens of separate lists at an ever-increasing cost. A national system that also provides free access to the states is a more efficient approach.

Muris noted that the amended TSR does not pre-empt state "Do Not Call" laws. The Commission is hopeful, however, that, over the next 12 to 18 months the FTC and the states will harmonize their "Do Not Call" requirements and procedures.

"The national registry," Muris said, "will provide efficiency benefits to consumers as well. It will give them an easy, no-cost way to sign up under both state and federal "Do Not Call" laws, and to file complaints if telemarketers call them in violation of state or federal laws. Further, the national registry will benefit telemarketers by eliminating consumers from their lists who do not wish to be called. This should enable telemarketers to be more efficient and effective in conducting their marketing initiatives."

Addressing the issue of the FTC's proposed FY 2003 appropriations language that requests funding and authority to collect fees sufficient to cover the costs of the "Do Not Call" registry, Muris explained that "the language specifically provides for 'offsetting collections derived from fees sufficient to implement and enforce the "Do Not Call" provisions of the TSR, promulgated under the Telephone Consumer Fraud and Abuse Prevention Act (15 U.S.C. 6101 et seq.), estimated at $16,000,000.'" It is important to emphasize, he noted, that this figure is only an estimate because the most substantial component - developing and operating the "Do Not Call" registry - is part of an ongoing procurement process. Additionally, the Commission will determine the details of these new fees through a rulemaking proceeding, which will allow interested industry members and the general public to comment on, and provide information and input to, the actual fee structure.

Muris summarized his testimony by pointing out that "absent Congressional approval for funding and fee collection very soon, preferably by the end of this month, the "Do Not Call" system will not be available to consumers in FY 2003 because the agency will not be able to collect fees in FY 2003." He then detailed the target time line as follows: The Commission will be ready to award a contract in early February. Consumers will be able to register their telephone lines four months later, i.e., June-July 2003. States also will be able to download their own "Do Not Call" lists into the registry as of June. In August, telemarketers will subscribe to the list, pay the requisite fees, and begin accessing those area codes needed. Consumer and business education efforts will continue throughout this time. The "Do Not Call" provisions will become effective one month after telemarketers are first provided access to the national registry. Law enforcement efforts to ensure compliance with the "Do Not Call" provisions of the amended TSR may begin at that time.

"These amendments to the TSR," Muris said, "will greatly benefit American consumers, allowing them to continue receiving the telemarketing calls they want, while empowering them to stop unwanted intrusions into the privacy of their homes."

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, call toll-free, 1-877-FTC-HELP, or use the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.