Both suits ask the courts to block FTC's revised "telemarketing sales rule" before the first new rules take effect March 31. Because one of the suits was filed in U.S. District Court in Colorado where a test of a state law is already under way, it may also set up a similar quick test of do-not-call laws passed by 28 states.
The federal lawsuits were filed by the Direct Marketing Association, together with four telemarketers in Oklahoma City, and by the American Teleservices Association with two other telemarketers in Denver. They target not only the do-not-call list slated to take effect later this year if Congress approves funding, but also other significant changes that would kick in earlier.
The first changes limit the number of calls marketers can abandon when they dial a number of phone numbers at once and underestimate how many people will answer ending up with an insufficient number of callers to talk to consumers who answer their phones. There is no limit currently. The FTC, which heard complaints from people who pick up their phone only to get a dead call, said marketers can't abandon more than 3% of answered calls. Industry officials say most companies abandon about 5% now and the change would greatly increase costs. Another change requires telemarketers who try to sell secondary purchases during either incoming or outgoing calls to ask for credit card numbers each time a pitch is made.
Violations of any of the rules carry heavy penalties. In the suits the two groups argue that the regulations are unwarranted, unconstitutional, in some cases too imprecise and treat different telemarketers doing the exact same thing very differently. The groups call them "arbitrary and capricious."
The American Teleservices Association, which joined with Mainstream Marketing Services and TMG Marketing in its lawsuit, contended the FTC rules violated both the First and Fifth Amendments to the Constitution, went beyond the FTC's authority to deal with telemarketing fraud and included a number of exemptions that would "subject identically situated telemarketers to radically disparate statutory requirements" and would result in speech being restricted in some categories disfavored by the government.
"A blanket national `do not call' regulation necessarily raises serious First Amendment questions because the law blocks a significant amount of constitutionally-protected speech in advance, without regard to any `abusive' behavior," the group charged. "It will inflict irreparable harm on large segments of the teleservices industry without regard to which call consumers might consider `abusive."'
The group also said the rule would allow one person in a household to block access to everyone in a household, though different people in the households could have differing views on receiving calls.
The DMA's suit, filed in Oklahoma City, named U.S. Security, a seller of alarm systems, and telemarketers Chartered Benefit Services and InfoCision Management as coplaintiffs. The DMA had been wavering on whether it would sue.
That suit charges the FTC "unlawfully exceeded its statutory authority" and said that while the list may be unconstitutional, the Federal Communications Commission not the FTC has the statutory authority to try to implement it. DMA asks for an order permanently enjoining the FTC from acting.
The FTC declined to comment last week saying it hadn't had time to examine the lawsuits.
The suits come as the congressional environment for the FTC implementing the do-not-call list continued to improve. The U.S. Senate has already approved the $16 million the FTC requested to implement the list and the House Energy and Commerce Committee last week approved legislation giving the FTC authority to create the list. Marketers would eventually pay the $16 million through fees to access the list.