Opinion ID: 164351
Heading Depth: 2
Heading Rank: 2

Heading: The Established Business Relationship Exception

Text: 60 The telemarketers next argue that the FCC's established business relationship exception is arbitrary and capricious in violation of the Administrative Procedure Act. See 5 U.S.C. § 706. In particular, they contend that the FCC failed to give appropriate consideration to the anti-competitive effect that this exception may have on telecommunications markets. We conclude that the FCC did in fact address this concern, and that the FCC's exception for established business relationships is not arbitrary and capricious under the APA. 61 The arbitrary and capricious standard of review is a narrow one, and we are not empowered to substitute our own judgment for that of the administrative agency. City of Albuquerque v. Browner, 97 F.3d 415, 424 (10th Cir.1996). Generally, an agency decision will be considered arbitrary and capricious if `the agency had relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.' Friends of the Bow v. Thompson, 124 F.3d 1210, 1215 (10th Cir.1997) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). 62 The Telecommunications Act of 1996, 47 U.S.C. § 251 et seq., required local telephone monopolies to make their facilities and services available to competitors for negotiated or arbitrated prices, and directed the FCC to establish regulations to advance local competition. The FCC enacted its do-not-call rules under different statutory authority, the TCPA, which specifically authorized the FCC to establish a national database of residential telephone subscribers who object to receiving telephone solicitations. See 47 U.S.C. § 227(c)(3). 63 When an agency is charged to enforce overlapping and at times inconsistent policies, it cannot act single-mindedly in furtherance of one of those policies while wholly ignoring the other. Southern S.S. Co. v. NLRB, 316 U.S. 31, 46-47, 62 S.Ct. 886, 86 L.Ed. 1246 (1942); McLean Trucking Co. v. United States, 321 U.S. 67, 80, 64 S.Ct. 370, 88 L.Ed. 544 (1944). 64 The FCC rule sufficiently addresses the telemarketers' concerns about the established business relationship exception. In its notice of rulemaking, the FCC asked for comments on the anti-competitive effect this exception might have on the telecommunications industry. See 68 Fed. Reg. at 44159. The FCC received responses indicating that such an exception would favor incumbent telephone service providers who would be able to market new services to their larger customer base. Id. at 44159-60. Also, the FCC noted some respondents' concerns that this anti-competitive effect would be particularly strong because telephone solicitations are currently the primary mechanism for selling telecommunications services. Id. at 44159. The FCC then considered several proposed ways in which such an anti-competitive effect could be mitigated, rejecting each of them. 65 First, the FCC considered a proposal to narrow the established business relationship exemption so that no telecommunications company could call its customers to advertise different services. Id. at 44160. However, the FCC cited comments in its administrative record emphasizing the importance of flexibility in communicating with ... customers not only about their current services, but also to discuss available alternative services or products. Id. Accordingly, the FCC concluded that limiting telecommunications companies' ability to market new goods or services to existing customers would not be in the public interest. Id. 66 Second, the FCC considered a proposal that the Commission revise the definition of established business relationship so that all providers of telecommunications services would be deemed to have such a relationship with all consumers, even if they had not in fact had any preexisting business connections. Id. Third, it considered an alternative proposal that the definition of established business relationship be revised to exclude companies who have historically been dominant or monopoly service providers, at least until such time as the new entrants to the telecommunications industry sufficiently penetrated the market. Id. The FCC concluded that these proposals would not adequately fulfill Congress' mandate to protect residential telephone subscribers' privacy rights to avoid telemarketing calls to which they object: To permit common carriers to call consumers with whom they have no existing relationships and who have expressed a desire not to be called by registering with the national do-not-call list, would likely confuse consumers and interfere with their ability to manage and monitor the telemarketing calls they receive. Id. 67 The FCC then explained the factors it believed would limit the established business relationship exception's anti-competitive effect. First, it noted that all providers of telecommunications services — incumbent carriers and new competitors alike — may contact competitors' customers who have not signed up for the national do-not-call registry. Id. Second, consumers who have signed up for the do-not-call registry still have the ability to place their carrier on a company-specific do-not-call list, thereby overriding the established business relationship exception. Id. Finally, the FCC emphasized that telecommunications providers are still free to use other means of marketing their products to consumers, such as direct mailings. Id. 68 The FCC's rule demonstrates that the agency did not simply ignore the potential anti-competitive effect of the established business relationship exception or its duties under the Telecommunications Act. Rather, the FCC analyzed the possible effects that this exception may have on the telecommunications industry and explained why it believed its rule would minimize any adverse consequences. When an agency has made a reasoned policy decision, we are not empowered to substitute our judgment for that of the [agency] under the arbitrary and capricious standard of review. Browner, 97 F.3d at 424. The FCC did not act in an arbitrary and capricious manner in adopting the established business relationship exception, and we decline the telemarketers' invitation to displace the FCC's policy judgment.