Industry regulation: Marketers prepare to fight 'do not call'

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Even as consumers cheer the Federal Trade Commission's national "do not call" list, marketers are promising a fierce fight in Congress and the courts, arguing that the FTC overstepped its authority and that its plan violates the First Amendment.

At stake is the $296 billion in goods and services that the Direct Marketing Association said is sold via outbound telemarketing calls.

Marketing groups reacted quickly to the FTC's Dec. 18 announcement of the list and other significant changes to telemarketing practices. They said they would lobby Congress to block the FTC's funding request while using the courts to challenge the list's legality.

On the legal front, they argued the FTC overstepped its authority to halt fraudulent marketing and also violated the First Amendment in imposing limits on all calls. In Congress they are expected to say that the $16 million the FTC wants from marketers to fund the list would increase costs and reduce sales, hurting the economy at a crucial time.

The congressional appeal is in danger of falling on deaf ears given consumers' praise for the FTC action and distaste for unwanted telemarketing calls. Rep. Frank Wolf, R-Va., who chairs the House Appropriations Committee panel that will make the first review, has taken no position, according to an aide. An aide to Sen. Judd Gregg, R-N.H., who is likely to head the Senate appropriations panel, said the senator had not yet reviewed the proposal.

`insult to injury'

DMA President-CEO H. Robert Wientzen issued a statement questioning the list's legality and warning that the cost would be passed to consumers. "In light of the current economic climate, [the] announcement is adding insult to injury," he said.

The FTC adopted the "do not call" list as part of a set of changes to telemarketing, some of which take effect early in March. In the immediate changes, telemarketers who offer a free trial of a related product, often a magazine, will now have to ask consumers to repeat the last digits of their credit card, and all calls, even incoming ones, will have to be recorded.

"It singles out as inherently evil the free-trial marketplace," said Linda Goldstein, chairman of the Electronic Retailing Association. She warned that marketers would likely eliminate such offers.

Rita Cohen, senior VP at Magazine Publishers of America, called the requirement burdensome. "If you buy a fitness product, you up-sell with a free trial subscription to a fitness magazine," she said. "This will discourage up-selling."

The "do not call" list drew the most ire.

Unveiling final rules, the FTC announced that instead of consumers and marketers sharing costs, marketers would bear the entire cost of buying the list and updating it quarterly. In some cases they would have to buy multiple copies of the list for unrelated product lines.

"The idea is not to pay once and pass around the list," said FTC Chairman Tim Muris.

The FTC said that while it hoped to "harmonize" its list with the 28 states that have their own "do not call" laws, it did not pre-empt state regulations. At least temporarily, marketers would have to buy state lists and the national list.

limited exemption

While the FTC decided to allow marketers to still call consumers on the list with whom they have an "existing business relationship," it limited the exemption. Only consumers who have bought or received a product within 18 months or inquired about a product in the last three months can be called and then only to be offered the same or a related product. A publisher could offer another magazine, for example, but not an Internet subscription.

Mr. Muris said the list would apply to 80% of telemarketers if the Federal Communications Commission, which is considering copying the FTC action, acts. The American Telemarketing Association, however, said the FTC list affects most telemarketers since the commission contends that it oversees commercial telemarketers hired by banks and telephone companies it doesn't directly regulate.

"It's a radical departure," said Matt Mattingley, director of government affairs for the telemarketing group. An FTC official denied the latest rule represents any change in its oversight of telemarketers.

And Mr. Muris denied that the FTC overstepped its legal authority in creating the list. "We are not banning telemarketing sales calls," he said. "We are giving consumers the option to protect the privacy in their own homes."

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