DNC Lists and Commercial Speech: Can Both Be Free?

Government do-not-call lists have been around for 13 years, starting with Florida’s groundbreaking efforts in 1989. Another 26 states have joined the bandwagon, with more to follow.

With the prospect of the Federal Trade Commission and Federal Communications Commission seeking to add a federal list to their company-specific rules, all U.S. consumers will have the right to register for a central DNC list.

But universal DNC is expensive, and the question remains as to who will bear the cost. States are split between charging only telemarketers (on the premise that telemarketers should pay for the efficiencies associated with knowing who not to call) and charging consumers and telemarketers.

At the federal level, the FCC is legislatively prevented from charging consumers, and the FTC has consistently asserted that consumers should not have to pay for access to a federal DNC list. The question of who pays for the creation and long-term maintenance of DNC lists, based upon a review of state laws and the pronouncements of the FTC and FCC, really turns on how the power being asserted by the consumer is perceived. Is the consumer exercising a pre-existing right to be free from unwanted telemarketing calls in his home, or is the consumer exercising a legislatively created right that negates or trumps the right of the telemarketer to place the call? If the former, the telemarketer alone pays; if the latter, the consumer pays as well.

How a consumer’s DNC interest is perceived bears importance in the balancing of interests necessary when commercial free speech rights are affected by DNC regulations. To strike this balance, the constitutional commercial free speech standard to apply is “intermediate” scrutiny, as enunciated in the seminal case of Central Hudson Gas & Elec. Corp. v. Public Service Commission.

To determine whether restrictions on commercial speech survive intermediate scrutiny, Central Hudson first requires a determination of whether the speech concerns illegal activity or is misleading; if so, it can be freely regulated. If the speech is not illegal or misleading, the second part of the Central Hudson test is whether the government has a substantial interest in regulating the speech. Third, the government must show that the restriction on commercial speech directly and materially advances that interest. Finally, the regulation must be “narrowly tailored,” meaning that the government’s restriction reflects a careful calculation of “the costs and benefits associated with the burden on speech imposed by its prohibition.”

In broad terms, DNC lists are designed to protect the privacy interests of consumers by filtering out unwanted telephone calls made by commercial concerns selling goods and services. Therefore, in the unique context of telemarketing and DNC lists, it is not the speaker’s speech that is being restricted per se; it is instead access by the speaker to a target of the speech that is restricted.

Most importantly, the speech in question is not simply prevented by governmental mandate and thereafter halted. With a DNC list, the target of the speech is empowered, on an individual basis, to decide whether to receive the speech. The means of access to the target, a phone number, is placed off limits to the speaker at the target’s discretion.

This framework is unique in the context of free-speech regulation and related case law in that a key issue in determining whether a regulation affecting speech withstands constitutional scrutiny is the mind-set and understanding of each individual who seeks to avoid the speech in question.

Telemarketing sales statistics, along with the experiences of states with their DNC programs, indicate that many consumers who register with free DNC programs may not fully appreciate the effect this decision has on their ability to conveniently buy many goods and services. Though anecdotal evidence suggests consumers overwhelmingly favor DNC laws, the teleservices industry generated more than $660 billion in sales in 2001. In 2001, more than 185 million consumers made a purchase as a result of an outbound telemarketing call, the American Teleservices Association said. Consumers’ views clearly are more complex than opinion polls and certain consumer groups would indicate.

An example of this complexity is the registration rates in states that have DNC programs. In states that charge consumers to register (a nominal charge at that), registration rates average 5 percent of residential phone lines. In states that offer the list for free, rates average 50 percent. Rather than abhorrence of telemarketing calls, this tenfold disparity suggests widespread consumer ambivalence toward them. Consumers become interested in DNC list registration in significant numbers only when access is free.

The only way to reconcile these apparent contradictions is to conclude that most consumers only dislike telephone solicitations for products they are not interested in at the time of the call. For these consumers, there are the unwanted “annoying telemarketing calls” they wish to avoid by signing up for a DNC list, and then there are timely and convenient purchasing opportunities that result from a telephone call. For a small minority of consumers, however, all telemarketing calls, even those from which they might benefit, are unwanted.

For most consumers, two elements are critical in distinguishing whether a call is wanted – timing and need. Determining how to match a product/service with the needs of a particular consumer at just the right moment is the fundamental challenge of the inexact science of marketing. Since these elements vary among consumers (or for an individual consumer depending on time of day and emotional state), marketing requires casting a wide net to bring even a small catch.

Consumers understand this and recognize that the deluge of marketing messages they receive are part of a robust free-market economy. The key to any DNC program, from a constitutional standpoint, therefore, is to ensure that those consumers who are on a DNC list are cognizant of the privileges they relinquished by registering for it.

When given the chance to pay for DNC list registration, consumers face a cost/benefit analysis – is avoidance of unwanted calls worth a nominal charge (normally around $5) given that they will give up wanted calls as well? That consumers have to pay for this serves to identify those consumers who wish to avoid all telemarketing calls.

But where a DNC list is available to consumers for free, there is no way to ensure that all registrants are expressing a genuine desire to stop all telemarketing calls, no matter how well-timed and independent of the consumer’s need for the product or service being offered. The disparity at the state level between consumer registration rates between free lists and those that charge bears this out.

Applying Central Hudson to this, the most important element of the four-part test to consider is the last one: Is the regulation “narrowly” tailored. Specifically, does a DNC program reflect a careful calculation of the costs and benefits associated with the burden on speech imposed by its prohibition?

As discussed above, a necessary element in this calculation when it comes to DNC programs is the mind-set and understanding of individual consumers who register for the list. Is the individual consumer indicating a desire to avoid all telemarketing calls, independent of whether they are wanted or unwanted?

The above discussion, as well as the experience of state DNC programs, illustrates that many who register with free lists are not expressing such an all-encompassing intent. By signing up for a free list, many consumers may just be expressing dissatisfaction with telemarketing that is ill-timed or does not offer a needed good or service.

With any DNC program, be it free to consumers or not, all registrants forgo certain privileges and conveniences associated with telemarketing calls. This is one cost that must be balanced in the Central Hudson analysis. Where consumers are charged for access to the list, the cost of forgoing these privileges and conveniences is more than offset by the benefits to those consumers who specifically wish to assert their privacy against what they see as unwanted intrusions by all calls.

Where consumers are charged, the burden on commercial free speech as reflected in this balancing of costs and benefits is arguably not enough to render the program unconstitutional. Where a list is free, the costs associated with consumer waiver of privileges and conveniences rises, and the benefit to individual consumers on the list is less clear.

The difference in the mind-set of consumers who pay for access to a DNC list and those who do not is significant, and the Central Hudson cost/benefit analysis is affected. Whether this is sufficient to render DNC programs offered free of charge unconstitutional is ultimately a question for the courts.

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