A federal judge in Missouri recently held that the provision of the Telephone Consumer Protection Act that was the basis of a multimillion-dollar judgment against a Hooters restaurant in Georgia for sending unsolicited fax advertisements was unconstitutional.
The judge struck down this provision because he held that Congress had not gathered sufficient evidence when it passed the TCPA that unsolicited faxes caused real harm. Rhetoric, allegory and conjecture about the harm faxes caused were not enough to justify the law’s effect on commercial speech.
The ruling is important because it shows the standards that other laws affecting telemarketing, including state do-not-call list laws and the Federal Trade Commission’s proposed revisions to the Telemarketing Sales Rule, must meet to be constitutional.
The TCPA prohibits faxes containing advertisements in any circumstance except when the recipient has expressly given permission to the sender. Unlike most provisions of the TCPA, this ban on fax ads contained no exceptions other than if the recipient expressly invited the fax.
The judge ruled that this ban affected speech, and, therefore, was governed by the First Amendment. Because the rule involved only advertisements, the judge applied the constitutional test for laws that regulate commercial speech, which is known as the Central Hudson test after the case where it was first applied.
In that case, the U.S. Supreme Court determined that commercial speech, like advertising a good or service, was not speech protected at the “core” of the First Amendment, like a political candidate’s stump speech or a charitable solicitation for a donation. Laws regulating core speech, such as campaign finance laws, are constitutional only if they can pass the “strict scrutiny” test. The Central Hudson test applies an “intermediate” level test to laws affecting commercial speech, much less intense than a law that regulates “core” speech but more rigorous than the review applied to laws that do not affect speech at all.
Laws that do not affect speech are subject to “rational” review only, which basically means that they are constitutional unless there is no conceivable legitimate reason for the legislature to enact the law.
Not surprisingly, whether a law is constitutional depends largely on what test a court applies. Laws rarely pass the strict scrutiny test, almost always pass the rational review test and sometimes pass intermediate scrutiny.
The key difference between either intermediate or strict scrutiny and rational review, however, is that if a court applies either of the former tests, the government bears the burden of proving that the law furthers a legitimate government interest. For example, fighting fraud has often been upheld as a legitimate government interest with regard to laws affecting commercial speech. If the government advanced fighting fraud as the reason for a given law, a court reviewing the constitutionality of a law would try to determine if the government had considered real evidence that the law was actually related to fighting fraud.
The judge in the Missouri case found that the government did not offer sufficient evidence that a ban on advertising faxes furthered any legitimate goal. “It is obvious for the legislative history that Congress did not consider any studies or empirical data estimating the cost of receiving a fax or the number of unsolicited fax advertisements an average business receives in a day before enacting the TCPA,” the judge ruled. Therefore, he struck down the provision.
But that is not the end of the matter. Other parts of the TCPA have previously been upheld in other jurisdictions using other tests. As noted above, which test a court uses often determines the outcome of a constitutional challenge, regardless of the facts of a particular case. This means there may be a conflict regarding the constitutionality of this law among jurisdictions. Appellate courts exist in part to resolve these potential conflicts, so we likely will see more litigation on the constitutionality of the TCPA. The U.S. Supreme Court may ultimately resolve this conflict.
FTC’s proposed revisions to the Telemarketing Sales Rule. The comment period to the proposed revisions to the rule ended April 15. Among the thousands of submitted comments was a lengthy joint submission from the attorneys general of nearly every state that made two notable arguments.
The first was that the proposed national do-not-call list should not affect the operation of state do-not-call lists and that businesses should be required to continue to subscribe to the state lists as well as any national list. The comment argued, in part, that “maintenance of many state No Call systems is partially offset by modest fees paid by prospective telemarketers seeking access to the No Call lists. If telemarketers no longer have a need for a state list, this source of funding will be impacted, jeopardizing the ability of some states to maintain these systems.”
The explosion of state lists has made these fees anything but modest, however, and has made the compliance burden for legitimate businesses even greater. Rather than focusing on the financial need for the maintenance of state bureaucracy, the FTC should focus on maximizing consumer protection and minimizing harm on legitimate speech and industry. As set forth above, that is what is required by the First Amendment.
The second argument made by the attorneys general is that charities, as well as commercial telemarketers, should be subject to the provisions of the TSR. The proposed TSR applies restrictions to charitable solicitations only if they are made through a for-profit entity. This argument also runs afoul of the tests described above. Charitable solicitations are subject to strict scrutiny because the Supreme Court has ruled that a charitable solicitation is speech protected at the core of the First Amendment. Furthermore, the FTC does not have jurisdiction over nonprofit entities. The Supreme Court has also held that it makes no difference for the purpose of constitutional review if a charity chooses to deliver its message with the assistance of a for-profit entity.
This argument also runs afoul of the tests described above. Charitable solicitations are subject to strict scrutiny because the Supreme Court has ruled that a charitable solicitation is speech protected at the core of the First Amendment.
Furthermore, the FTC lacks jurisdiction over nonprofit entities. The Supreme Court has also held that it makes no difference for the purpose of constitutional review whether a charity chooses to deliver its message with the assistance of a for-profit entity. It is this provision of the proposed TSR that is most likely to be subject to the strict scrutiny test if challenged under the First Amendment.
