Opinion ID: 783768
Heading Depth: 4
Heading Rank: 1

Heading: Relevant Factors in Analyzing Reasonable Fit

Text: 12 Although a regulation may draw a line between commercial and non-commercial speech, that distinction must bear a relationship to the legitimate interests the government seeks to achieve. City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 424, 428, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993). For example, a distinction between commercial and non-commercial speech could be justified by reference to the differing impact those categories of speech have on esthetics, safety, privacy, or the like. In contrast, the distinction may not be justified on a perceived low value of commercial speech. Id. at 428, 113 S.Ct. 1505. 13 In Discovery Network, the Supreme Court struck down a city ordinance banning freestanding commercial newsracks on grounds that the restriction was not narrowly tailored. 507 U.S. at 412, 430, 113 S.Ct. 1505. The Court recognized that the city had substantial interests in esthetics and safety that were impaired by free-standing newsracks, but concluded that there was no reasonable fit between those goals and the city's policy of banning only commercial newsracks while leaving similar non-commercial newsracks undisturbed. Id. at 418, 113 S.Ct. 1505. Although the Court recognized that there may be situations where differential treatment of commercial and noncommercial newsracks could be justified by a reasonable fit with the government's interest in esthetics and safety, it held that the government had failed to make any such showing in that case. Id. See also Missouri v. Am. Blast Fax, Inc., 323 F.3d 649, 655-56 (8th Cir.2003) (holding that unsolicited commercial fax prohibition in Telephone Consumer Protection Act was a reasonable fit with substantial governmental interest of reducing costs and intrusion, because commercial faxes are more intrusive than non-commercial faxes). 14 Whether a commercial solicitation restriction meets the reasonable fit test depends in part on the existence of private choice on the part of homeowners. In Martin v. City of Struthers, the Supreme Court struck down a city ordinance banning door-to-door canvassing because it took the right to decide whether to receive visitors away from the individual's own private choice. 319 U.S. 141, 148-49, 63 S.Ct. 862, 87 L.Ed. 1313 (1943). While recognizing the government's interest in protecting privacy, the Court held that the ordinance swept too broadly because the dangers of door-to-door canvassing easily could have been controlled by giving the householder the right to decide whether to receive visitors. Id. at 144, 147-48, 63 S.Ct. 862. See also Watchtower Bible, 536 U.S. at 168-69, 122 S.Ct. 2080 (stating that provision facilitating residents' own utilization of no solicitation signs was less restrictive than permit requirement and sufficient to further state's privacy interest); United States v. Playboy Entm't Group, Inc., 529 U.S. 803, 815, 120 S.Ct. 1878, 146 L.Ed.2d 865 (2000) (stating that targeted consumer-initiated blocking is less restrictive than banning, and the Government cannot ban speech if targeted blocking is a feasible and effective means of furthering its compelling interests). 15 Rowan demonstrates that the element of private choice in an opt-in feature is relevant for purposes of analyzing reasonable fit. In Rowan, the Court upheld an opt-in do-not-mail list system in which a homeowner could require that a commercial advertiser remove his or her name from its mailing list if the homeowner determined in his or her sole discretion that the material received was erotically arousing or provocative. Rowan, 397 U.S. at 730, 90 S.Ct. 1484. In finding the privacy regulation reasonable, the Court emphasized the element of private choice, stating that the homeowner was the exclusive and final judge of what will cross his threshold. Id. at 736, 90 S.Ct. 1484. 16 Other courts have relied on Rowan 's analysis in finding that similar mechanisms of private choice in solicitation restrictions weigh in favor of finding a reasonable fit. See, e.g., Anderson v. Treadwell, 294 F.3d 453, 462-63 (2d Cir.2002) (noting, in its reasonable fit analysis, that resident-activated solicitation restriction was narrowly tailored and of the kind endorsed by the Supreme Court in Rowan ); Pearson v. Edgar, 153 F.3d 397, 404 (7th Cir.1998) (invalidating solicitation restriction as lacking reasonable fit because, unlike Rowan, [h]ere, the state, not the homeowner, has made the distinction between real estate solicitations and other solicitations without a logical privacy-based reason). 17 In sum, a regulation drawing a line between commercial and non-commercial speech must have a reasonable fit with substantial governmental interests. The reasonable fit analysis will at least partially depend upon whether the initiation of the solicitation restriction is at the hands of private citizens or the government. Additionally, we will consider the extent to which the regulatory scheme will materially advance the governmental interest, see Discovery Network, 507 U.S. at 418, 113 S.Ct. 1505, and the disparity in treatment between commercial and non-commercial speech. 18 2. The FTC's Record Evidence Supporting a Reasonable Fit Between the National Do-Not-Call List and its Asserted Justifications 19 In light of the above legal standards, we must review the record to determine the FTC's asserted rationales for applying its national do-not-call restrictions only to commercial sales calls, and the evidence to support those rationales. Here, the FTC attempts to justify this distinction by showing that commercial telemarketing is more abusive and coercive than charitable telemarketing and constitutes a greater intrusion upon consumer privacy. We are mindful that these rationales overlap to some extent. 20 In reviewing the FTC's rationales for its amended rules and the evidence in support of those rationales, it is important to keep in mind that the myriad of statutes, legislative history, and administrative rules addressing federal telemarketing regulation are largely interconnected and involve both the FCC and the FTC. Instead of repeating factual findings and policy rationales in each separate enactment, the FTC and FCC have often incorporated those findings by cross-reference. For instance, in creating a company-specific do-not-call list applicable only to commercial telemarketers in the original Telemarketing Sales Rule (which the FTC enacted pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act, or TCFPA), the FTC considered, among other things, the approach taken by Congress and the FCC in the TCPA and its implementing regulations. 6 Telemarketing Sales Rule, 68 Fed. Reg. 4580, 4591 (Jan. 29, 2003). See also FCC Rules and Regulations Implementing the Telephone Consumer Protection Act (TCPA) of 1991, 68 Fed. Reg. 44144, 44145 (July 25, 2003) ([W]e agree with the vast majority of consumers in this proceeding and the FTC that a national do-not-call registry is necessary to enhance the privacy interests of those consumers that do not wish to receive telephone solicitations.); Do-Not-Call Implementation Act, Pub. L. 108-10 at § 3 (Mar. 11, 2003) (In issuing such rule, the Federal Communications Commission shall consult and coordinate with the Federal Trade Commission to maximize consistency with the rule promulgated by the Federal Trade Commission.). Therefore, we must examine each of these interrelated telemarketing enactments in evaluating the asserted justifications for the FTC's distinction between commercial speech and non-commercial speech. We briefly discuss here the most relevant of these acts and regulations.
21 In the TCPA, Congress found that unrestricted telemarketing can be an intrusive invasion of privacy and that many consumers are outraged by the proliferation of intrusive calls to their homes from telemarketers. Pub.L. 102-243 at § 2 (Dec. 20, 1991). Therefore, Congress in the TCPA authorized the FCC to establish a national database of residential subscribers who object to receiving telephone solicitations. Id. at § 3. A telephone solicitation was defined as a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, excluding, inter alia, calls from a tax exempt nonprofit organization. Id. This definition excluded charitable telemarketers. 22 According to the legislative history accompanying the TCPA, the record suggests that most unwanted telephone solicitations are commercial in nature. Complaint statistics show that unwanted commercial calls are a far bigger problem than unsolicited calls from political or charitable organizations. H.R.Rep. No. 102-317, at 16 (1991). The House Report cited statistical data from several states reporting that consumer complaints were directed mostly at commercial sales calls. Id. Moreover, the Committee found that non-commercial calls were less intrusive to consumers because they are more expected and because there is a lower volume of non-commercial calls. Id. It concluded that the two main sources of consumer problems — high volume of solicitations and unexpected solicitations — are not present in solicitations by nonprofit organizations.... It is on this basis that the Committee believes that the scope of the regulation is a workable `commercial speech' distinction consistent with Supreme Court precedent. Id. at 16-17. This distinction between commercial and non-commercial telemarketing, justified in the TCPA, persists in all subsequent legislation and administrative rules regulating telemarketing calls.
23 In the TCFPA, Congress directed the FTC to prescribe rules prohibiting deceptive and abusive telemarketing acts and practices, including calls that a reasonable consumer would consider coercive or abusive of such consumer's right to privacy. Pub. L. 103-297 at § 3 (Aug. 16, 1994). Congress found that consumers lose an estimated $40 billion each year in telemarketing fraud and are victimized by other forms of telemarketing deception and abuse. Id. at § 2. Significantly, Congress in the TCFPA defined the term telemarketing as calls conducted to induce purchases of goods or services, — e.g., commercial calls. Id. at § 7. This is the Act under which the FTC enacted the national do-not-call regulations challenged in this case.
24 In 1995, acting pursuant to the TCFPA, the FTC established a company-specific do-not-call provision, which prohibited telemarketers from making sales calls to persons who had previously stated their desire not to receive such calls from that solicitor. Telemarketing Sales Rule, 60 Fed. Reg. 43842, 43854-55. This rule did not apply to an entity such as a charitable organization that was not organized to carry on business for its own profit or that of its members. Id. at 43843 n. 14. Accordingly, the distinction between commercial and non-commercial speech, first enacted in the TCPA, was present in the initial FTC Telemarketing Sales Rule. In justifying this rule, the FTC relied in part on the TCFPA and its legislative history, which emphasized that sellers of goods and services regularly subjected consumers to deception and abuse infringing upon their privacy rights. Id. at 43842. Moreover, the FTC later explained that when enacting this original Telemarketing Sales Rule it also considered the TCPA (which as noted above explicitly drew a distinction between commercial and non-commercial solicitations in its legislative history) and related FCC action. 68 Fed. Reg. at 4591.
25 In its amended Rule (the subject of the instant litigation), the FTC established a national do-not-call registry that allowed individuals to block all commercial sales calls, with certain exceptions. 68 Fed. Reg. 4580, 4629. Most significantly to this case, the FTC preserved the distinction between commercial and non-commercial calls by limiting coverage of the national registry to telemarketing calls made by or on behalf of sellers of goods or services, thus exempting telemarketing calls on behalf of charitable organizations. Id. The sellers of goods or services limit relates back to Congress' findings in the TCFPA, which had documented a history of abuses specifically committed by telemarketers selling goods or services. 26 Importantly, the amended FTC Telemarketing Sales Rule did subject charitable organizations to the company-specific do-not-call provision. Id. In this amended Rule, the FTC retained the basic distinction between commercial and non-commercial calls already present in the earlier version of the Telemarketing Sales Rule, although the amended rule resulted in stricter requirements for both categories of calls. 27 The FTC found that the original Rule's company-specific do-not-call list was inadequate to prevent the type of abusive commercial sales calls it was intended to prohibit. Id. at 4629, 4631. The FTC concluded that [T]he registry is ... designed to cure the inadequacies as a privacy protection measure that became apparent in the company-specific `do-not-call' provisions included in the original Rule. Id. at 4635. For example, the FTC referred to complaints that commercial telemarketers ignored consumers' repeated requests to be placed on company-specific do-not-call lists. Id. at 4629. 7 It concluded that the national do-not-call list will also prevent fraud or abuse in some cases by protecting vulnerable consumers from exploitative telemarketers. Id. at 4635, n. 669. 28 Furthermore, the FTC specifically found that fundamental differences between commercial solicitations and charitable solicitations may confer upon the company-specific `do-not-call' requirements a greater measure of success with respect to preventing a pattern of abusive calls from a fundraiser to a consumer than it was able to produce in the context of commercial fundraising. Id. at 4637. Specifically, it reasoned that in an advocacy call, such as a charitable solicitation, a significant purpose of the call is to sell a cause, not simply to receive a donation. Therefore, the FTC found that it would be self-defeating for a non-commercial caller to engage in abusive telemarketing practices that invade personal privacy because such conduct could alienate the recipient against the cause the caller was attempting to promote. Id. When a pure commercial transaction is at stake, callers have an incentive to engage in all the things that telemarketers are hated for. But non-commercial speech is a different matter. Id. In enacting these provisions, the FTC cited both the TCFPA and the TCPA, noting that Congress knowingly put the FTC on the same path that the FCC had trod. Id. at 4638.
29 Finally, in July 2003, the FCC enacted regulations to establish, with the Federal Trade Commission (FTC) a national do-not-call registry. 68 Fed. Reg. at 44144. Similar to the FTC's do-not-call regulations, the FCC list was not designed to apply to charitable callers. Citing the legislative history to the TCPA (which, as noted before, contained a congressional justification for distinguishing between commercial and non-commercial calls), the FCC reaffirmed that most unwanted telephone solicitations are commercial in nature and that charitable calls are less intrusive to consumers. Id. at 44153. The FCC rule also provided for a company-specific do-not-call system for consumers who elect not to register for the national list. Id. at 44155.
30 Congress expressly made factual findings in the TCFPA that telemarketing calls conducted to induce purchases of goods or services have subjected consumers to substantial fraud, deception, and abuse. Pub. L. 103-297 at §§ 2, 7. Consequently, in enacting a national do-not-call registry, the FTC decided to limit coverage of the national registry to telemarketing calls made by or on behalf of sellers of goods or services. 68 Fed.Reg. 4629. Furthermore, the FTC's revised Telemarketing Sales Rule states that the agency relied on TCPA and FCC authority when it initially endorsed the distinction between commercial and non-commercial calls. Id. at 4591. The legislative history accompanying the TCPA, citing complaint statistics, found that commercial telemarketing intrudes upon personal privacy more than non-commercial telemarketing. 3. The FTC's Likelihood of Success 31 In light of this record, it appears that the FTC is likely to succeed on its argument that the distinction in the Amended Telemarketing Sales Rule between commercial and non-commercial phone solicitation passes muster under Central Hudson 's reasonable fit analysis. The line between these two types of speech is not drawn solely on the basis of the lesser degree of scrutiny applied to commercial speech. See Discovery Network, 507 U.S. at 428, 113 S.Ct. 1505. Rather, we examine the constitutionality of the distinction under the Central Hudson test with reference to the substantial governmental interest in preventing the greater risk of privacy invasion and abusive sales practices correlated with commercial telemarketing. 32 We find it relevant that the national do-not-call list is of an opt-in nature, which provides an element of private choice and thus weighs in favor of a reasonable fit. The list is not invoked until the homeowner makes a private decision to invoke it. See Rowan, 397 U.S. at 737, 90 S.Ct. 1484; Playboy Entm't Group, 529 U.S. at 815, 120 S.Ct. 1878. We also find it relevant that the FTC has not exempted non-commercial speech totally from all regulation, as consumers are also given some mechanism to block non-commercial solicitations by means of company-specific objections to solicitations by charitable organizations. And it is permissible for the FTC to act now to fix a problem upon which it has record support (the inadequacy of company-specific do-not-call lists to prevent invasion of privacy and abusive practices in the context of commercial calls) without waiting until it can develop experience on whether or not a company-specific do-not-call list will be effective to prevent such abuses in the context of non-commercial telemarketing. Edge Broad. Co., 509 U.S. at 434, 113 S.Ct. 2696. Finally, this is not a regulatory scheme that will only affect a minute portion of the problematic speech because the great majority of all telemarketing calls — and therefore the preponderant source of the problem of invasion of privacy and abusive calls — are commercial calls which are covered by the FTC's rule. See Discovery Network, 507 U.S. at 418, 113 S.Ct. 1505. 33 In the context of analyzing whether to stay the district court's injunction, we conclude there is a substantial likelihood that the FTC will be able to show a reasonable fit between the substantial governmental interests it asserted and the national do-not-call list or, in other words, that the list directly advances the government's substantial interests and is narrowly tailored. See Central Hudson, 447 U.S. at 566, 100 S.Ct. 2343.