The "Do Not Call" Rule
October 17, 2003
No. 1

Background: In response to a tide of telemarketing calls interrupting Americans in their homes, the Federal Trade Commission and Federal Communications Commission recently promulgated rules for a national “do not call” list. For-profit telemarketers are prohibited from calling consumers who have placed their phone numbers on this list, subject to a fine of $11,000 per violation.

Status: On October 1, this system went into effect, with a rough start. One week earlier, a federal court in Oklahoma ruled that the FTC had no statutory authority to adopt such a rule. Legislation was quickly adopted by Congress to remedy this, however, passing in a record 24 hours. The same day, however, a second federal court – in Colorado – again ruled against the new rule – finding that it violation First Amendment free speech protections. The FTC has since been allowed to enforce the rule while the decision is appealed.

Discussion: The concept behind the “do not call” list is not a new one. Homeowners have long been able to place “no solicitors” signs outside their door, with the threat of legal action should visitors violate it. “Do not call” is in effect a “do not call” list for telecommunications – protecting telephone subscribers from unwanted interruption under pain of legal sanction. The direct marketing industry argues that the rule will hurt economic welfare by reducing telemarketing jobs. This is simply bad economics. Resources consumed to provide services not wanted by the consumer, while adding to GDP statistics, do not contribute to economic welfare in any real sense.

However, there is a least one real problem with the rule as adopted by the FTC (and FCC): it exempts non-profit solicitations. As a result, a large portion of telemarketing calls – including those on behalf of politicians – will continue unabated. Moreover, this exemption raises serious free speech concerns, because the rule picks and chooses which type of message will be allowed, based upon its content. This is the reason the federal court in Colorado found the rule unconstitutional. In effect, because politicians exempted themselves and others, the rule is in jeopardy.

Action item: To clear up these constitutional questions, and to more fully protect consumers, policymakers should amend the rule to cover non-commercial telemarketing.

House of Representatives hearing on "do not call"