Free Speech Ruling and Telemarketing

Let’s begin with a one-question, multiple-choice quiz: What do the producers of the Playboy cable channel and a business conducting telemarketing have in common?

1. Attractive models frequently appear at both places of business.

2. Both businesses are subject to an extensive regulatory scheme nominally designed to protect the public.

3. Both businesses’ activities are protected as free speech by the First Amendment to the Constitution.

4. Both 2 and 3.

On May 22, the U.S. Supreme Court handed down a decision in United States vs. Playboy Entertainment Group that was a major victory for proponents of free speech. The case has important ramifications for laws affecting telemarketing as well and, if read carefully, leads to the answer to the quiz: 4 (although maybe 1 as well, depending on your business).

The 5-4 decision considered a federal law that regulated the cable industry and required providers of “sexually oriented programming,” such as the Playboy Channel, to block their transmission for 16 hours a day. This time constraint applied even though the programming was available to only paying customers and was scrambled unless specifically ordered by the consumer.

Congress passed the law in 1996 with the nominal purpose of preventing children from being exposed to signal bleed from imperfect scrambling. After the law was passed, no household in the blocked area could order the programming for two-thirds of every day.

The Supreme Court, however, in an opinion written by Justice Anthony Kennedy, found several fatal flaws in the law. Each of these flaws gives some insight into similarly drawn laws affecting telemarketing.

First, the law was applicable based solely on the content of the speech involved. Thus, it banned Playboy from transmitting its television programming but did not apply to Playboy’s competitors such as HBO or the Disney Channel.

To make matters worse, the legislative history of the bill singled out Playboy as a target for the law. When a law applies to speech based on its content, it is inherently suspect from a First Amendment standpoint. The court found that the law was therefore subject to strict scrutiny. When a court applies this type of review to a law, it is almost always struck down.

The Supreme Court took great pains to make it clear that even though some — maybe even most — people may not approve of Playboy’s programming, it is this type of speech that needs the protection of the First Amendment the most.

Many examples of telemarketing laws similarly target specific industries or offers based on the content of the call or the identity of the caller. A law passed last year in Delaware is a good example: It deregulated the electric market in the state but prohibited utilities from obtaining new customers by telemarketing. The law applied only if the content of a potential call to a Delaware consumer involved an offer to provide electrical service. The ban did not apply, then, if the call was for a long-distance service, political contribution, etc.

Based on the Playboy decision, the Delaware ban — and several other types of telemarketing laws applicable based on the content of the call — would be subject to strict scrutiny.

Second, the Supreme Court found that there were other alternatives available to combat the problem of signal bleed that were less intrusive than a 16-hour-a-day ban. When a court applies strict scrutiny to a law, it will strike it down if there are other alternatives available that are less damaging to speech. In this case, the court found that an opt-out law, passed at the same time as the time constraints were imposed, adequately protected the government’s interest.

This flaw, too, has several mirror images in the telemarketing field. The Arkansas “no-rebuttal” law is a good example. That law prohibits some but not all telemarketers from continuing a solicitation after the consumer indicates disinterest — supposedly based on the privacy interests of the consumer.

The law thus requires telemarketers to guess about when to end some conversations prematurely and to make that guess at their own peril — breaking the law can involve a jail sentence. But the privacy of the consumer can be defended in a less intrusive manner by the state’s do-not-call list, which allows consumers to opt out of solicitations without making the telemarketer guess when to end the call.

Finally, the Supreme Court concluded that the problems caused by signal bleed were not necessarily even a good enough reason for the government to burden speech at all. When a court applies strict scrutiny, it requires that the law be passed to further a compelling government purpose. That means the law must be designed to combat a real problem, and it is the government’s duty to prove that connection.

Telemarketers are often in the exact same situation when faced with the deluge of state laws restricting their business. Legislatures often cite privacy and fraud when passing telemarketing laws yet exempt vast groups of businesses from the laws’ restrictions.

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