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DISTRICT COURT UPHOLDS AMENDMENTS TO TELEMARKETING SALES RULE

The United States District Court for the District of Maryland recently upheld the Federal Trade Commission's (FTC) amended Telemarketing Sales Rule (TSR), which was challenged on grounds that it was beyond the FTC's statutory authority and unconstitutional under the First and Fifth amendments of the United States Constitution. National Federation of the Blind v. FTC, No. JFM-03-963, 2004 WL 345312 (D. Md. Feb. 24, 2004). Two charities that use professional telemarketers to solicit charitable contributions had challenged the TSR's (i) company-specific do-not-call provision, (ii) prohibition against abandoned calls, (iii) calling time restrictions, (iv) caller ID transmission requirement and (v) other disclosure requirements.

The district court held that the amended TSR was not beyond the FTC's statutory authority because the FTC may regulate professional fundraisers hired by charities even if the charities themselves are exempt from FTC jurisdiction. Furthermore, the court indicated that the FTC has the authority to regulate abandoned calls made by predictive dialers even if the Federal Communications Commission also has authority to regulate the dialers themselves. In response to the constitutional challenges, the court held that the amended TSR does not violate the First Amendment because the reasons for passing the TSR (i.e., preventing fraud and protecting privacy in the home) are substantial interests that the government is entitled to protect and the restrictions in the TSR are narrowly tailored to further these interests without unnecessarily interfering with freedom of speech. The court also held that the amended TSR is not impermissibly overboard and is not an unconstitutional prior restraint. The court's reasoning for upholding the TSR against plaintiffs' equal protection challenges under the Fifth Amendment is similar to the court's reasoning for upholding the TSR under the First Amendment.

An earlier ruling by the United States Court of Appeals for the Tenth Circuit also rejected challenges to the national do-not-call registry. See Alert (February 18, 2004).

Margaret Stolar and Chuck Gall