Mainstream Marketing Services, Inc. v. F.T.C.
| Citation | 283 F.Supp.2d 1151 |
| Decision Date | 25 September 2003 |
| Docket Number | No. CIV. A. 03 N 0184.,CIV. A. 03 N 0184. |
| Parties | MAINSTREAM MARKETING SERVICES, INC., a Colorado corporation; TMG Marketing, Inc., a Colorado corporation; and American Teleservices Association, Plaintiffs, v. FEDERAL TRADE COMMISSION; Timothy J. Muris, Chairman of the Federal Trade Commission, in his official capacity; Sheila F. Anthony, Commissioner, Federal Trade Commission, in her official capacity; Mozelle W. Thompson, Commissioner, Federal Trade Commission, in his official capacity; Orson Swindle, Commissioner, Federal Trade Commission, in his official capacity; Thomas B. Leary, Commissioner, Federal Trade Commission, in his official capacity; and J. Howard Beales III, Director, Bureau of Consumer Protection, in his official capacity, Defendants. |
| Court | U.S. District Court — District of Colorado |
Sean R. Gallagher, Esq., Marianne N. Hallinan, Esq., Hogan & Hartson, Denver, CO, Robert Corn-Revere, Esq., Ronald G. London, Esq., Davis Wright Tremaine, LLP, Washington, D.C., for Plaintiffs.
Lawrence DeMille-Wagman, Esq., Federal Trade Commission, Office of the General Counsel, Washington, D.C., for Defendants.
This case concerns the validity and constitutionality of the Federal Trade Commission's amended Telemarketing Sales Rules (hereinafter "amended Rules"). The amended Rules create a federal registry consisting of names and telephone numbers of consumers who have indicated, by placing their name and number on the registry, that they do not wish to receive unsolicited telephone calls from those marketers to whom the amended Rules apply. This is commonly known as a do-not-call registry because the amended Rules prohibit certain types of telemarketers from calling those telephone numbers. The amended Rules also prohibit calls that, to make mass calling more efficient, are dialed by equipment and subsequently dropped when answered by the consumer because the salesperson is delayed on a previous call. These calls are denominated in the telemarketing industry as abandoned calls.
Plaintiffs allege that, when the FTC promulgated the amended Rules, it (1) violated the First and Fifth Amendments to the United States Constitution; (2) exceeded its statutory authority under the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C.A. §§ 6101-6108 (West 1998 & Supp.2003) (hereinafter "Telemarketing Act"); and (3) acted arbitrarily and capriciously under the Administrative Procedure Act, 5 U.S.C.A. § 551 (West 1996 and Supp.2003) ("APA"). This matter is before the court on (1) "Plaintiffs' Motion for Summary Judgment," filed May 2, 2003, (2) "Defendants' Cross-Motion for Summary Judgment," filed May 30, 2003, and (3) the parties' "Consent Motion for Leave To Amend Complaint," filed August 5, 2003. Because it is uncontested and plainly proper under the federal rules, the motion to amend will be granted without discussion. Jurisdiction is based on the existence of a federal question. See 28 U.S.C.A. § 1331 (West 1993 & Supp.2003).
Many different organizations, including businesses, charities, religious groups, and political parties, generate revenue by calling individuals in their homes and soliciting sales and donations. This practice, known as telemarketing, has grown into an industry that generates $275 billion dollars annually and employs roughly 5.4 million persons in the United States. (Mem. Supp. Pls.' Mot. for Summ. J. at 7 [filed May 2, 2003] ]) Organizations perform their telemarketing activities in a variety of ways. Some utilize their own employees or volunteers to perform telemarketing activities. Others hire independent telemarketing companies that operate call-centers to make solicitations on their behalf. Plaintiffs Mainstream Marketing and TMG are independent telemarketing companies based in Colorado. (First Am. Compl. for Decl. and Inj. Relief ¶¶ 14, 17-18 [filed August 5, 2003] [hereinafter "Am. Compl."].) Plaintiff American Teleservices Association is a national non-profit association of telemarketing companies which represents its members' commercial interests and engages in self-regulation of the industry. (Id. ¶ 19; Pls.' Br. at 8.)
In 1991, Congress passed the Telephone Consumer Protection Act of 1991 ("TCPA"), wherein it granted the Federal Communications Commission the authority to promulgate rules creating a procedure to protect telephone subscribers from receiving unwanted telemarketing calls. 47 U.S.C.A. §§ 227(c)(1)(A)-(E), (c)(3) (West 2001 & Supp.2003). The TCPA suggests the creation of a national database as a method of preventing subscribers' reception of unwanted calls, but it does not require the FCC to implement such a do-not-call list. Id. By its own terms, the TCPA prohibits telemarketers from (1) using automatic telephone dialing systems to make calls or send prerecorded messages to emergency lines, hospital and elderly home lines, and cellular telephone lines, and (2) making any calls with prerecorded messages to any line unless the FCC chooses to exempt the particular type of telemarketer making the call. Id. § 227(b)(1)(A). Finally, the TCPA grants the FCC the limited authority to exempt telemarketers making
calls that are not made for a commercial purpose; and such ... calls made for a commercial purpose that the Commission determines will not adversely affect the privacy rights that this section is intended to protect, and do not include the transmission of any unsolicited advertisement.
Id. § 227(b)(2)(B). As of January 2003, when this case was filed, the FCC had utilized this grant of authority to pass rules creating company-specific do-not-call lists and prohibiting use of automatic telephone dialers and prerecorded messages, but it had not yet adopted rules creating a national database for a do-not-call registry. 47 C.F.R. § 64.1200 (2002).
In 1994, Congress enacted the Telemarketing Act, wherein it granted the FTC the authority to promulgate rules prohibiting "deceptive or abusive telemarketing practices." 15 U.S.C.A. § 6102. Congress specifically found that consumers were being increasingly victimized by telemarketing fraud and other abuses, and it required the FTC in promulgating its rules to (1) define "deceptive telemarketing acts or practices," (2) prohibit abusive patterns of unsolicited telephone calls, (3) restrict the hours of the day when telemarketing calls may be placed, and (4) require telemarketers to promptly disclose to call recipients the nature of their call. Id. § 6102(2)-(3). In response to this mandate, the FTC adopted the Telemarketing Sales Rules (the "Rules") on August 16, 1995. 16 C.F.R. Part 310; 60 Fed.Reg. 43842 (August 23, 1995). These Rules prohibit credit card laundering, mandate prompt disclosure of the nature of the call, and prohibit, among other things, threatening or repetitive calls 16 C.F.R. §§ 310.3, 310.4 (2003).
On two occasions in 2002, the FTC proposed revisions to the Rules. In January 2002, the FTC issued a notice of proposed rule making, suggesting a revision of the Rules and the creation of a do-not-call registry. 67 Fed.Reg. 4492 (January 30, 2002). In May 2002, the FTC issued another notice of proposed rule-making which would further amend the Rules to impose fees on telemarketers for access to the do-not-call registry. 67 Fed.Reg. 37362 (May 29, 2002).
In December 2002, the FTC issued the amended Rules which are the subject of this case. The amended Rules prohibit "deceptive or abusive telemarketing acts or practices." 16 C.F.R. § 310.4(b). Included among the definitions of an "abusive telemarketing act"is the following:
[1] initiating any outbound telephone call to a person when ... that person's telephone number is on the `do-not-call' registry, maintained by the Commission, of persons who do not wish to receive outbound telephone calls to induce the purchase of goods or services ....
Id. § 310.4(b)(1)(iii)(B)(emphasis added). Under the amended Rules, consumers may add their names and telephone numbers to a registry of numbers. Id. All telemarketers are prohibited from making calls to numbers on the registry to induce the purchase of goods and services. Id. An exception is made for businesses that have obtained prior written consent from the consumer, or have "an established business relationship" with the consumer, defined as a business transaction occurring in the previous eighteen months. 16 C.F.R. § 310.4(b)(1)(iii)(B)(i)-(ii). Also exempted from the do-not call requirements are those businesses beyond the jurisdictional reach of the FTC, including banks, insurance companies, and common carriers. 15 U.S.C.A. § 6105. Finally, the amended Rules contain an exemption which is critical to this case. They exempt from the do-not-call registry organizations soliciting charitable contributions. 16 C.F.R. § 310.6(a).
The amended Rules also define abusive telemarketing practices as
abandoning any outbound telephone call. An outbound telephone call is `abandoned' under this section if a person answers it and the telemarketer does not connect the call to a sales representative within two (2) seconds of the person's completed greeting.
Id. § 310.4(b)(1)(iv). A telemarketer is allowed to abandon the occasional call under the amended Rules if
the telemarketer employs technology that ensures abandonment of no more than three (3%) percent of all calls answered by a person, measured per day per calling campaign, and whenever a sales representative is not available to speak with the person answering the call within two (2) seconds after the person's completed greeting, the telemarketer promptly plays a recorded message that states the name and telephone number of the seller on whose behalf the calls was placed.
Id. § 310.4(b)(4)(i)-(ii). The amended Rules go into effect on October 1, 2003. (Pls.' Br., Statement of...
To continue reading
Request your trial
-
National Federation of Blind v. F.T.C.
...Constitution, they must be invalidated. Porter v. Califano, 592 F.2d 770, 780 (5th Cir.1979); Mainstream Mktg. Serv., Inc. v. Federal Trade Commission, 283 F.Supp.2d 1151, 1160 (D.Colo.2003). The facts in this case are undisputed, and accordingly, the only question is which party is entitle......
-
National Coalition of Prayer, Inc. v. Carter
...when the district court of Colorado heard an early challenge to the national do-not-call list in Mainstream Marketing, Inc. v. Federal Trade Commission, 283 F.Supp.2d 1151 (D.Colo.2003), rev'd, 358 F.3d 1228 (10th Cir.2004), it found that, unlike the statute in Rowan, the national do-not-ca......
-
Mainstream Marketing Services, Inc. v. F.T.C.
...Act") (defining "telemarketing" as calls "conducted to induce purchases of goods or services") with Mainstream Mktg. Servs., Inc. v. FTC, 283 F.Supp.2d 1151, 1154 (D.Colo.2003) (describing "telemarketing" as the practice of "soliciting sales and donations" conducted by businesses, charities......
-
Do Not Knock? Lovell to Watchtower and Back Again
...Supp. 2d 707, 710 (D. Md. 2004); U.S. Sec. v. FTC, 282 F. Supp. 2d 1285, 1290 (W.D. Okla. 2003); Mainstream Mktg. Servs., Inc. v. FTC, 283 F. Supp. 2d 1151, 1154 (D. Colo. 2003). 57 See Mainstream Mktg. Servs. , 283 F. Supp. 2d at 1162–63 (holding the “Do Not Call” registry violated the Fir......
-
The CAN-SPAM Act of 2003: is congressional regulation of unsolicited commercial e-mail constitutional?
...calling list. See id. (114.) See id. (115.) See id. (discussing calls that are exempt from national do-not-call registry). (116.) 283 F.Supp.2d 1151 (D. Colo. (117.) See id. (118.) See id. (119.) See id. at 1162-63. (120.) See id. at 1167 (holding that FTC's do-not-call registry does not ma......