U.S. District Court Rules in FTCs Favor in TSR Case

On February 24, 2004, the U.S. District Court for the District of Maryland rejected challenges from two charities that the Federal Trade Commission’s amended Telemarketing Sales Rule (TSR) is unconstitutional and beyond the scope of the agency’s authority. The court granted the FTC’s motion for summary judgment. National Federation for the Blind and Special Olympics Maryland, Inc. challenged amendments to the TSR that place restrictions on professional telemarketers who solicit charitable contributions on behalf of non-profit organizations.

National Federation for the Blind and Special Olympics Maryland are both nonprofit organizations that hire professional representatives to solicit charitable contributions for their programs and services. The two charities challenged the TSR’s company-specific do-not-call provision, prohibition on abandoned calls, calling time restrictions, requirement to transmit caller ID information, and disclosure requirements.

The court ruled that the FTC had statutory authority under the amended Telemarketing and Consumer Fraud Abuse and Prevention Act to regulate for-profit telefunders and to prohibit abandoned calls. With respect to the charities’ challenges on constitutional grounds, which involved First Amendment and Equal Protection issues, the court held that the TSR did not violate the charities’ free speech rights because the challenged provisions “are very narrowly drawn to prevent only particularly abusive practices and leave First Amendment rights largely unrestricted,” thereby furthering the government’s substantial interests in preventing fraud and protecting home privacy. The court also concluded that the TSR applied “evenhandedly to all ‘telemarketing,’” and that it was not “intended to favor certain groups or subject matters over others.” For similar reasons, the court upheld the TSR against the plaintiffs’ Equal Protection challenges.

While the TSR exempts from the Rule’s National Do Not Call Registry provision professional telemarketers that solicit contributions on behalf of non-profit charitable organizations, it does require these entities to comply with the other provisions of the Rule, including the company-specific do-not-call provision, which requires telemarketers to maintain an in-house “do not call” list so they can honor consumers’ requests not to be called, restrictions on the hours during which they may call consumers, prohibition on abandoned calls, and the requirement that they transmit caller ID information.

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 any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://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.