Will FCC Preempt Differing State Rules?

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Telemarketing laws are again in the national spotlight, from the network news to The Wall Street Journal. The issue is whether state laws such as those creating state do-not-call lists apply to interstate telephone calls, now subject to the national DNC list and regulated by the Federal Communications Commission and Federal Trade Commission.


A group of businesses, trade associations and nonprofit organizations has asked the FCC to preempt state laws as applied to interstate calls on topics covered by the federal rules. They argue that consumers and businesses are best served by a uniform scheme of rules when it comes to interstate commerce and telephony and that regulators - state and federal - are still empowered to protect their citizens through the federal laws.


The FCC accepted these petitions and asked for public comment on this issue: Should federal law alone apply to interstate phone calls? The comment period has closed, and the FCC is considering arguments on both sides.


Though the national DNC list has been in place only since October 2003, the basis of the preemption argument dates back much further. The law giving the FCC authority over these issues, the Telephone Consumer Protection Act of 1991, is part of the Telecommunications Act. That law created the system of interstate telephone regulation. Congress, and courts at the instruction of Congress, placed great importance on uniformity to allow interstate communication to work unfettered by differing state laws and regulators.


In the TCPA, Congress instructed the FCC to devise regulations for telemarketing, including privacy, delivery of recordings and consumer protection. The law and the FCC regulation overlap the jurisdiction of the FTC and its Telemarketing Sales Rule. The applicability of the FCC and FTC schemes overlap, but are not identical.


Since 1991, the FCC has been consistent in its opinion that state laws are preempted by the TCPA regarding applicability to interstate calls on the subject matters covered by that law and regulation. It has expressed this opinion in letters to state legislators and private individuals.


Additionally, the legislative history of the TCPA states that the act was needed because "... over 40 states have enacted legislation limiting the use of automatic dialers or otherwise restricting unsolicited telemarketing. These measures have had limited effect, however, because states do not have jurisdiction over interstate calls. Many states have expressed a desire for federal legislation to regulate interstate telephone calls to supplement their restrictions on intrastate calls."


States began implementing their own lists in the 1980s, and eventually a majority of states had them. For example, Indiana's law exempts calls from newspapers. This approach differed from the TCPA's original approach, which allowed calls until the consumer made a company-specific DNC request.


In October 2003, the FCC and FTC implemented the national DNC list. Now, companies making interstate calls face the regulations of both the federal list and the state lists. These lists' requirements overlap but are not identical. Consumers face confusion regarding who to complain to as a call may be legal under the state list but illegal based on the federal list and vice versa. This is not a situation where state laws are always more restrictive than the federal standard; e.g., the exemption for newspapers from the Indiana list. This is exactly the kind of fractured regulation of interstate telephony Congress tried to prevent when it created the FCC.


Several trade groups and companies requested preemption rulings from the FCC because the states were enforcing these lists and varying requirements against interstate calls. When the FCC passed the changes to the TCPA in 2003, it said differing state laws "almost certainly" would be preempted and that it would consider preemption petitions case by case. The FCC gave the states 18 months to make their rules consistent with the federal scheme. That period is about over.


The issue now is whether the FCC will explicitly tell those states that their rules do not apply to interstate calls. Because the TCPA covers various topics, various state laws conflict with various provisions of the FCC regulations. The three big ones are state DNC lists' treatment of nonprofit solicitations, state lists' treatment of calls to a business's established customers and state rules on prerecorded messages. States can enforce both the FCC and FTC rules, regardless of whether either agency is involved in a particular enforcement action, so the argument that states would be without weapons to protect their citizens is not a good one. Industry would argue that a uniform scheme is better for consumers, businesses and regulators.


In other federal telemarketing news, Sens. Jon Corzine and Frank Lautenberg, both D-NJ, introduced the Medicare Do Not Call Act, which would ban telephone solicitation offering various prescription drug plans. The bill claims to be aimed at fraud prevention, but many Supreme Court cases have said that when it comes to speech, including commercial speech, laws cannot cast a broad net in an effort to prevent fraud. Fraud is illegal and can be prosecuted, but Congress may not ban all speech on a topic, such as these telephone solicitations, when none, or only some, of those calls are fraudulent.


By banning calls offering one product, the bill would discriminate against these speakers versus all other commercial callers. This type of "content-based" discrimination is unconstitutional in all but the narrowest of circumstances.


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