[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                   THE DO NOT CALL LIST AUTHORIZATION
=======================================================================

                                HEARING

                               before the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 8, 2003

                               __________

                            Serial No. 108-1

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES ``CHIP'' PICKERING,          GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                  (ii)

  


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Muris, Hon. Timothy J., Chairman, Federal Trade Commission...    12
Material submitted for the record by:
    Muris, Hon. Timothy J., Chairman, Federal Trade Commission, 
      response for the record....................................    33

                                 (iii)

  


                   THE DO NOT CALL LIST AUTHORIZATION

                              ----------                              


                       WEDNESDAY, JANUARY 8, 2003

                          House of Representatives,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Barton, Upton, 
Stearns, Gillmor, Cox, Deal, Burr, Shimkus, Bass, Terry, 
Dingell, Markey, Hall, Eshoo, and Strickland.
    Staff present: Kelly Zerzan, majority counsel; Ramsen 
Betfarhad, majority counsel; Brendan Williams, legislative 
clerk; John Tripp, press; and Jonathan Cordone, minority 
counsel.
    Mr. Burr [presiding]. The committee will come to order. Let 
me take this opportunity to welcome all of the members back to 
the 108th Congress.
    At this time let me make a brief opening statement. This is 
for the purpose of members a briefing rather than a hearing, 
but it is--there is a record on this, and I would make a 
unanimous consent request at the beginning that the record be 
left open for all members who might have comment on this 
hearing. No objection, so ordered.
    Although the committee does not formally organize until the 
end of January, due to the important subject matter and the 
time sensitive matter of this issue, we are holding a briefing 
rather than a hearing.
    However, like any hearing, this briefing will be an attempt 
to create a record and all members will have the opportunity to 
offer an opening statement and ask questions of our witness.
    Today we have before us the Federal Trade Commission 
chairman, Tim Muris, and welcome as always, to brief us on the 
funding issues for the Commission's new national do-not-call 
registry. We have all read about the Commission's national do-
not-call list, which is designed to provide consumers with one 
central contact to stop unwanted telemarketing calls.
    One remaining issue is the question of funding the do-not-
call registry, which is anticipated to cost upwards of $16 
million per year. The FTC plans on levying fees on the 
telemarketing industry for the use of the list, which would 
fund the operation and enforcement of the do-not-call registry.
    However, in order to assess such fees, the Commission needs 
authorization from its authorizing committee, which is why we 
are here today.
    The policy questions that need to be addressed include 
whether the authorization should be permanent or for specific 
fiscal years, and whether the authorization requires the FTC to 
raise all of its funding from the telemarketing industry or 
whether general appropriations should share the burden. I look 
forward to hearing the Commission's position on these issues.
    I understand that the Commission has a very limited 
timeframe within which it needs to secure an authorization and 
appropriations in order for the do-not-call registry to be 
operational for fiscal year 2003.
    As a result, the Commission and this committee are faced 
with a difficult time line. However, I can assure you that we 
will do our best to make sure that the national do-not-call 
registry is successful.
    For years now the FTC, the FCC, the States, and the Direct 
Marketing Association have all over--had all overlapping do-
not-call regulatory regimes to stop unwanted telemarketing 
calls.
    A new national do-not-call list will cut through this 
regulatory morass to reduce the financial and regulatory 
burdens on telemarketers and be far more user friendly for the 
American consumer. However, consumers who place their name on 
the Commission's national do-not-call list will expect, and 
rightfully expect, that the telemarketing calls will stop.
    The limited scope of the FTC's jurisdiction will not 
capture all of the telemarketing calls being made. This 
solution will not eliminate telemarketing calls for the 
American people.
    Fortunately, the FCC is currently reviewing and will be 
amending its do-not-call rules. The good news is that the FCC 
is another agency under our purview and hopefully we can all 
work together to provide a total solution to the problem of 
unwanted telemarketing calls.
    These are all important issues that we need to consider. 
Once again, Chairman Muris, thank you for this, and thank you 
for briefing the committee today. I look forward to your 
statement.
    At this time, the Chair would recognize any members who 
would also like to make opening statements. The Chair would 
recognize Mr. Markey for 3 minutes.
    [The prepared statement of Hon. Richard Burr follows:]
 Prepared Statement of Hon. Richard Burr, a Representative in Congress 
                    from the State of North Carolina
    Welcome everyone to the 108th Congress. Although the Committee does 
not formally organize until the end of January, due to the important 
subject matter and the time-sensitive nature of the issue, we are 
holding a ``briefing'' rather than a ``hearing.'' However, like any 
hearing, this briefing will be an attempt to create a record and all 
Members will have the opportunity to offer an opening statement and ask 
questions of our witness.
    Today, we have before us the Federal Trade Commission Chairman, 
Timothy Muris, to brief us on the funding issues for the Commission's 
new national ``do-not-call'' registry. We have all read about the 
Commission's national do-not-call list which is designed to provide 
consumers with one central contact to stop unwanted telemarketing 
calls.
    One remaining issue is the question of funding the do not call 
registry, which is anticipated to cost upwards of $16 million per year. 
The FTC plans on levying fees on the telemarketing industry for the use 
of the list which would fund the operation and enforcement of the do 
not call registry. However, in order to assess such fees, the 
Commission needs authorization from its authorizing committee, which is 
why we are here today. The policy questions that need to be addressed 
include whether the authorization should be permanent or for specific 
fiscal years, and whether the authorization requires the FTC to raise 
all of its funding from the telemarketing industry or whether general 
appropriations should share the burden. I look forward to hearing the 
Commission's positions on these issues.
    I understand that the Commission has a very limited time frame 
within which it needs to secure an authorization and appropriations in 
order for the do-not-call registry to be operational in fiscal year 
2003. As a result, the Commission and this Committee is faced with a 
difficult timeline. However, I can assure you that we will do our best 
to make sure that a national do-not-call registry is successful.
    For years now, the FTC, the FCC, the states, and the Direct 
Marketing Association have all had overlapping do-not-call regulatory 
regimes to stop unwanted telemarketing. A new national do-not-call list 
will cut through this regulatory morass to reduce the financial and 
regulatory burdens on telemarketers and be far more user-friendly for 
the American consumer. However, consumers who place their names on the 
Commission's national do-not-call list will expect, and rightly expect, 
that the telemarketing calls will stop. The limited scope of the FTC's 
jurisdiction will not capture all of the telemarketing calls being 
made. This solution will not eliminate telemarketing calls from the 
American people.
    Fortunately the FCC is currently reviewing, and will be amending, 
its do-not-call rules. The good news is that the FCC is another agency 
under our purview and hopefully we can all work together to provide a 
total solution to the problem of unwanted telemarketing calls.
    Thank you, Chairman Muris, for briefing the Committee today and I 
look forward to hearing from you.

    Mr. Markey. Thank you, Mr. Chairman. And I want to commend 
you and Chairman Tauzin for calling this timely members 
briefing on proposals from the Federal Trade Commission to 
create a national telemarketing do not call data base.
    I also want to welcome FTC Chairman Tim Muris to the 
committee today to hear more about the Federal Trade 
Commission's historic action in this area.
    The decision by the Federal Trade Commission to implement a 
national do-not-call data base is a giant step forward for 
consumers who are often plagued by unwanted intrusive 
unsolicited telemarketing.
    When this committee in 1991 successfully approved the 
Telephone Consumer Protection Act legislation which I 
sponsored, to help consumers deal with the seemingly daily 
ritual of unwanted telemarketing calls, and--``Hello. No, I 
don't want to change my phone service. I'm very happy. How did 
you get my cell phone number? I am in a Congressional hearing 
now on this very subject. Can you please take me off--I've 
already asked you five times before to take me off that list.''
    Doesn't that just bother you, huh? That these people, and 
they're moving to cell phones now as well.
    This was legislation--by the way, the legislation back in 
1991, it was bipartisan. Norm Lent on this committee, Matt 
Rinaldo, Bob Livingston, Bill Paxon, Chris Smith, and Tom 
DeLay, were all cosponsors of my legislation back in 1991.
    Now, Chairman Muris deserves tremendous credit for 
advancing this powerful new tool with which consumers can 
combat unsolicited telemarketing calls. And consumers around 
the country cheered when Chairman Muris announced the FTC's 
decision to move forward with a do not call data base the week 
before Christmas.
    Consumers have waited a long time for the benefits of the 
same digital and telecommunications technology that has so 
advanced the ability of telemarketers to efficiently and cost 
effectively reach consumers, to also be harnessed on behalf of 
consumers to help them address legitimate privacy concerns.
    I certainly hope that consumers do not have to wait yet 
another year or more before the FTC is able to continue 
implementing its plan. While outstanding issues remain to be 
resolved at the Federal Communications Commission with respect 
to coverage of telephone companies as well as coverage of 
financial institutions and airlines and how much and by what 
methods telemarketers may be charged to support data base 
implementation and enforcement, such issues are ripe for 
consideration by the Federal Communications Commission and by 
the Federal Trade Commission, respectively, and we need not 
bring the entire do not call data base effort to an abrupt halt 
in order to continue consideration and resolution of these 
issues.
    We want to work with you, Chairman Muris, as well as 
Chairman Tauzin and Mr. Dingell and all of the other members on 
the committee, Chairman Upton, to achieve timely implementation 
of an idea that is highly popular with our constituents. You 
have a box office runaway smash hit on your hands. As soon as 
it gets introduced into the hands of consumers, they take 
advantage of it as quickly as they can get to a phone and get 
their name on the do-not-call list.
    So let's hope that we can, in Congress, help you to 
implement your vision, because I think it is a correct one for 
America, and once again congratulations.
    Chairman Tauzin. Thank you, Mr. Markey, and welcome, 
Chairman.
    It is my time to call on Mr. Barton, but he has got a no-
call note on my desk. So I will call him anyhow. Mr. Barton is 
recognized.
    Mr. Barton. Mr. Markey has already had a better line than 
that, Mr. Chairman.
    I will point out that so far the record for going over on 
opening statements is already held by Mr. Markey. He has 
already gone over by 1 minute. But I am sure that he will break 
that record fairly soon. So he has it set up. I just wanted to 
say that.
    I just want to say I think this is a good hearing. I am on 
the Texas do-not-call list, which so far hasn't seemed to help 
me yet. But they told me it would take about 6 months. My 
questions, when we have questions, if we are going to have a 
national do-not-call list, I would encourage the Commission, to 
the extent that it is within its jurisdiction, to be inclusive 
of all calls that it can restrict, including political calls 
and charitable calls.
    You have so many gaps in your jurisdiction that if you add 
to that, for political reasons or humanitarian reasons, 
whatever you wish to call it, your do-not-call list isn't going 
to be much of a do-not-call list. So if you are going to do it, 
do it, or be honest and say that you don't have the 
jurisdiction to make it stick and pass on it.
    With that I will yield back, Mr. Chairman.
    Chairman Tauzin. Thank the gentleman. Mr. Hall is 
recognized for an opening statement.
    Mr. Hall. Thank you, Mr. Chairman. I think it is a timely 
hearing. I thank the chairman. I think we would do well to get 
underway to listen to him. I yield back my time.
    Chairman Tauzin. Further requests for time? Mr. Upton, the 
chairman of the Telecommunications Subcommittee.
    Mr. Upton. Thank you, Mr. Chairman. I would only like to 
say that we are in a little bit of an awkward sport. As 
Chairman of the Telco Subcommittee, I want to work with the FCC 
who I know has another important piece in terms of the 
regulatory side of this issue. And I know that they are in the 
process of promulgating some regulations, and think I all of us 
need to get to the bottom of why they are not as up to speed as 
the FTC is. And I intend to do that and talk with Chairman 
Powell and members of my subcommittee.
    This is something that all of us want, not only as 
individuals, but for the districts that we represent as well, 
and I yield back my time.
    Chairman Tauzin. Further requests for time? On this side, 
the gentleman, Mr. Stearns, chairman of the Commerce, Trade, 
and Consumer Protection Subcommittee.
    Mr. Stearns. Good morning. Thank you, Mr. Chairman. And 
good morning and best wishes for the new year to Chairman 
Muris.
    Let me just say, since you took the office at the 
Commission you have been kind enough to testify before our 
subcommittee, as the Chairman mentioned, the Commerce, Trade 
and Consumer Protection Subcommittee, on a number of occasions.
    It is great that you are doing so today, and I commend you 
for it. Your testimony in the past has been very helpful to 
understand the issues, and that is why we are glad you are here 
this morning.
    At the outset, you and the Commission staff should be 
commended for taking the initiative, I believe, on this issue. 
And I think you have done a lot of hard work promulgating the 
recent amendments to the Telemarketing Sales Rule, especially 
the do-not-call amendments.
    As a member that has championed consumer information 
privacy legislation for the past 2 years, I think a national 
do-not-call list is an important, although small step toward 
furthering enhancing consumers' privacy. There is no question 
that I, along with most of my constituents welcome any 
effective measure designed to protect us from unwanted 
telephone solicitations.
    A national do-not-call list goes a long way in fulfilling 
our want for a little peace and quiet at the family dinner 
table.
    On a number of occasions, the Commission staff, to their 
credit, sat down with our staff and listened carefully to 
concerns that I and a few other members have raised. Some 
concerns have been addressed in making this rule, in my view, 
more effective.
    There are, however, significant issues that remain, which 
are worthy of further Commission and committee consideration. 
For example, it is important that the national do-not-call list 
truly be a one-stop shopping experience for the consumer.
    As it stands now, I understand that 28 States have their 
own do-not-call lists. I think we must have a single national 
registry or list for all interstate calls.
    That is why I think the Commission must ensure 
harmonization among the myriad of State and Federal FTC and FCC 
telemarketing rules and do-not-call lists. However, the amended 
Telemarketing Sales Rule contains no substantive direction or 
mandate to achieve the goal of a one-stop shop for do-not-call 
lists.
    I know there is a question as to whether the Commission has 
the authority to preempt State action on this matter. I think 
the committee should carefully examine and consider the grant 
of such authority.
    I strongly encourage the FTC to work very closely with the 
FCC on its national do-not-call registry proposed rulemaking so 
that if the FCC was to promulgate its own rule, it is 
substantially in agreement and harmony with the FTC rule.
    Finally, I encourage the Commission to further review its 
authentication procedures, especially with regards to on line 
registration. These outstanding issues, among others, lend 
themselves to future oversight hearings by this committee, Mr. 
Chairman.
    Chairman Tauzin. Would the gentleman yield?
    Mr. Stearns. Yes.
    Chairman Tauzin. I want to commend him on his statement. 
While I was not here to make an opening statement, he has 
really pinpointed the big concerns of our committee, Mr. 
Chairman, and I wanted to amplify them just a bit, that is, 
that the last thing we need is for two separate agencies with 
different jurisdictional scope crafting their own do-not-call 
list formulations that are going to be different and 
administered differently, and perhaps fall differently upon 
telemarketing associations and consumers.
    And, so it is going to be critical, as we move forward in 
this hearing, to get a full understanding from you and your 
Commission as to what efforts have been made to coordinate with 
the FCC, what authority the FCC has that you do not have in 
terms of perfecting a rule that will work for all Americans and 
for the business community as well, and what efforts are going 
to be made to make sure that we don't have overlapping 
duplication, or worse yet, conflicting rules coming out of two 
Federal agencies.
    I thank the gentleman for yielding and again, compliment 
him on his opening statement.
    Mr. Stearns. I thank the chairman for emphasizing again how 
the FTC and FCC must substantially harmonize and bring their 
rules together.
    Let me conclude, Mr. Chairman, by saying that--I will end 
by speaking briefly to the specific objectives of today's 
hearing, the Commission's request for authority to collect 
fees.
    I think it is important that an agency work very closely 
and cooperatively with its authorizing committee in Congress, 
namely us, even when time is a luxury and not easily afforded.
    The hearing today is an important and necessary first step, 
according to our committee, that has jurisdiction to carefully 
examine your request. And so again I commend you, Mr. Muris, 
Chairman Muris, for coming forward and presenting your reasons 
for this fee. Thank you, Mr. Chairman.
    Chairman Tauzin. Thank the gentleman again. The Chair is 
pleased to welcome and recognize the ranking member of our full 
committee, the gentleman from Michigan, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, thank you. And happy New Year to 
you and my colleagues.
    Chairman Tauzin. And indeed to you, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, I thank you for holding this 
public briefing on the Federal Trade Commission's national not-
to-call registry. This is a matter of which I am certain will 
be appreciated by millions of Americans who are finding some of 
these calls to be a vast and a complete annoyance. This is an 
increasingly important issue then to consumers across the 
country.
    Unwanted telemarketing calls have become a genuine nuisance 
that many consider to be an outright invasion of privacy. The 
national do-not-call registry would enable consumers to 
eliminate unwanted intrusions and once again to answer their 
telephones without aggravation.
    Any national program to address these problems should 
provide common sense exceptions for charitable organizations 
and the existing relationships that businesses have with their 
customers. It should also maximize consumer choice, allowing 
individuals to receive the calls they want and to avoid those 
they do not.
    Most importantly, for a national registry to be successful, 
it must be diligently enforced. And I look forward to seeing to 
it that that transpires here. It appears also that the FTC has 
made significant progress toward establishing such a national 
program.
    Consumers, charities, telemarketers, State and local 
governments and other interested parties have voiced their 
complaints and communicated their concerns. The Commission 
appears to have carefully considered a wide range of 
complicated issues and produced what appears to be a balanced 
and thoughtful result.
    The rules have been crafted. How these rules will be 
implemented and enforced remains to be seen. I am looking 
forward to hearing from Chairman Muris today regarding the 
FTC's plans to fund, implement and enforce its national do-not-
call registry.
    I look forward to the committee inquiring what we should do 
to cooperate, to both to make this successful, and to see what 
needs to be done to assure that it works in the best way 
possible. I am looking forward to prompt Congressional action 
to address this national problem of unwanted telemarketing 
calls.
    And I note, parenthetically, that I look forward also to 
address the problems of cramming, spamming, and other improper 
actions affecting the American consuming public. Thank you for 
recognizing me, Mr. Chairman.
    Chairman Tauzin. I thank my friend and share his views 
entirely. I would be happy now to yield to my friend from 
California, Mr. Cox.
    Mr. Cox. Thank you, Mr. Chairman for holding this briefing 
on an issue of great importance, or perhaps we should say, 
great annoyance.
    Thank you, Chairman Muris, for visiting the committee today 
to describe the FTC's progress in creating a national do-not-
call list to shield consumers from unwanted telemarketing 
calls. I count myself among the many consumers who have had the 
misfortune of receiving multiple unsolicited, unwanted 
marketing pitches over the phone, almost always timed to 
coincide with something critically important.
    And I also count myself among those who have had to wade 
through a tidal wave of paper emanating from my fax machine.
    Therefore, Chairman Muris, I not only support your efforts 
to protect consumers from hassle via voice communication, but I 
encourage you also to prevent aggravation via fax, and I urge 
this committee to support legislation to create a national do-
not-fax list. Just this morning, because I left my home fax on, 
I ended up with half a dozen pieces of paper that I didn't 
want.
    I commend Chairman Muris on his success in the past 12 
months in amending the FTC's Telemarketing Sales Rule, 
concluding with the Commission's December 2002 announcement of 
a final rule for the creation of a national do-not-call list.
    Now, of course, you seek authorization from this committee 
to collect fees from telemarketers to fund this effort. I urge 
the committee to approve this request, and also to ensure that 
the FTC has the authority to enforce the rule nationwide and 
across every industry, including such industries as banks and 
telephone companies, which by statute, do not currently fall 
under the FTC's authority in this area.
    I note that the exemptions carved out from this national 
do-not-call list by the FTC include political solicitations. 
They are not covered by the do-not-call list. If protecting 
consumers is our governmental purpose, if every man and woman's 
home is to be their castle, then surely there is no reason to 
grant preferred status to political calls, which are often the 
most annoying of all.
    I know that First Amendment reasons have been advanced to 
justify this exemption. But, giving political phone calls 
protected status because of the message they convey proves too 
much under the first amendment, because the first amendment 
requires that we be neutral toward the content of these calls. 
It is not the content of the message, it is the form that is 
being regulated. An exemption for political calls betrays a 
concern with the nature and the substance of the message being 
conveyed.
    Finally, much as I want relief as a consumer who has been 
bombarded with too many intrusive marketing calls and unwanted 
faxes, I would also urge this committee to ensure that any 
authorizing legislation provide a safe harbor for those 
marketers who make a good faith effort to play by the rules and 
to ensure that the law benefits consumers, not lawyers, by 
clarifying that any private rights of action belong only to 
individual consumers, and that all damage awards go to 
consumers not Governments.
    Thank you, Mr. Chairman. Thank you, Mr. Chairman.
    Chairman Tauzin. Thank you, Mr. Cox. Is there further 
request for opening statements on this side? I will come back 
to this side when the gentlelady is settled.
    On this side? The gentleman, Lieutenant Colonel Shimkus. We 
will know when and if things happen in Iraq when we see the 
gentleman dressed in a different uniform.
    I want to welcome the gentleman and ask for the opening 
statement.
    Mr. Shimkus. Thank you, Mr. Chairman. I will be brief. I 
want to ask unanimous consent that every member should have the 
ability to submit opening statements that hasn't.
    Chairman Tauzin. Without objection, so ordered.
    Mr. Shimkus. I will just say that it will be nice to be 
about to return to the days when you wanted to--when you wanted 
to run to answer the phone because you knew that the call was 
being placed by someone who was a friend or a colleague or a 
family member or it was an important thing to do.
    And too many people today don't want to answer their 
phones. And then leave it to the answering machines to do the 
screening on their part. The problem is, the people with 
moderate incomes may not have that access to caller ID or 
answering machines.
    And so I think the consensus here is strong. I applaud this 
second day of activity by the Commerce Committee. I yield back 
my time, Mr. Chairman.
    Chairman Tauzin. Thank the gentleman. Further requests for 
time on this side? The gentlelady from California.
    Ms. Eshoo. Thank you, Mr. Chairman. It is good to be back. 
I congratulate all of my colleagues on your elections. And, Mr. 
Chairman, happy New Year to you, and I look forward to working 
with all of my colleagues here.
    Thank you for having the hearing. I want to salute the FTC 
for taking this issue on. I think it is an important consumer 
issue. And I am looking forward to your testimony.
    I have some questions. As a consumer in this country, I am, 
like so many other people, irked and ticked off by the number 
of calls that come in. And one of my favorite responses now, if 
I am home around dinner time, is to say, give me your number, 
let me call you back.
    And, at least they hang up. So obviously we need to do 
something about this. Consumers have been clamoring for some 
time. So thank you, Mr. Chairman, for holding the hearing. And 
to the FTC, I look forward to hearing your testimony and asking 
some questions.
    Chairman Tauzin. To the gentlelady, I wanted to extend to 
her a welcome too and a happy New Year to she and her 
colleagues.
    I want to point out that this, while this is not an 
official hearing, we are not even fully constituted yet. I know 
you are going to add some new members to the Democratic side of 
our committee. We are going to be busy tomorrow, I believe, 
adding three, perhaps four new members to our side of the 
committee.
    That is how important we felt this issue was that we 
thought we ought to take the time immediately and meet with our 
friend and get some reading on what is going on.
    Further opening statements? The gentleman--first of all, 
the gentleman is recognized from Ohio.
    Mr. Gillmor. Thank you, Mr. Chairman. I want to thank the 
chairman for the opportunity to address the FTC's amended 
Telemarketing Sales Rule and particular the authorization of 
funding for the creation of a national do-not-call register. 
Over the course of the last decade, Congress enacted 
legislation with a goal of protecting consumers from unwanted 
telemarketing phone calls.
    However, over the last few years, I have heard from an 
increasing number of northwest Ohioans conveying their 
opposition to telephone solicitations. And one potential reason 
for this scenario may be the presence of fly by-night 
telemarketers setting up shop and just as quickly disappearing 
with no intention of complying with the law.
    And another may be the need to further encourage legitimate 
telemarketers to comply with existing statutes. Early last 
Congress, this panel, and later the House, overwhelmingly 
approved legislation banning telemarketers from blocking caller 
ID. And I was happy to cosponsor that bill, and I certainly 
applaud the FTC's recent efforts to tighten existing laws.
    And I look forward to hearing about other pertinent issues 
from Chairman Muris, such as the rules potential impact on the 
telemarketing industry, as well as further authorization and 
funding issues.
    And I yield back, Mr. Chairman.
    [The prepared statement of Hon. Paul E. Gillmor follows:]
    Prepared Statement of Hon. Paul E. Gillmor, a Representative in 
                    Congress from the State of Ohio
    I thank the Chairman for the opportunity to address the Federal 
Trade Commission's (FTC) amended Telemarketing Sales Rule (TSR) and in 
particular, the authorization of funding for the creation of a national 
``do not call'' registry.
    Over the course of the last decade, Congress enacted legislation 
with the goal of protecting consumers from unwanted telemarketing phone 
calls. However, over the last few years, I have heard from an 
increasing number of Northwest Ohioans conveying their opposition to 
telephone solicitations. One potential reason for this scenario may be 
the presence of fly-by-night telemarketers setting-up shop and just as 
quickly disappearing, with no intention of complying with federal or 
state laws. Another may be the need to further encourage legitimate 
telemarketers to comply with existing statutes.
    Early last Congress this panel, and later the House, overwhelmingly 
approved legislation banning telemarketers from blocking Caller ID. I 
was happy to cosponsor that bill and certainly applaud the FTC's recent 
efforts to tighten existing laws. I also look forward to hearing about 
other pertinent issues from Chairman Muris such as the rule's potential 
impact on the telemarketing industry as well as further authorization 
and funding issues.
    Again, I thank the Chairman and yield back the remainder of my 
time.

    Chairman Tauzin. I thank the gentleman. Is there further 
request for time on this side? Then the gentleman, Mr. Bass, is 
recognized for an opening statement.
    Mr. Bass. Thank you, Mr. Chairman. And I have a full 
statement for the record. And I commend you for having this 
hearing, inviting Commission Chairman Muris here to testify on 
the do-not-call list.
    Like many members of this committee on both sides of the 
aisle, I share their support for this action. I do have 
concerns about the issue of fee collection, the scope of the 
rule, and that ultimate balance that we need to hold between 
the irritation and aggravation that this business creates 
versus an industry which employs a lot of people who might not 
be able to be employed in other capacities.
    I commend the Commission for their work in this area and 
look forward to your testimony. I yield back.
    Chairman Tauzin. I thank the gentleman. Further requests 
for opening statements?
    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Lee Terry, a Representative in Congress from 
                         the State of Nebraska
    Mr. Chairman, thank you for holding this briefing today. We have 
all gotten that phone call from a telemarketer just as we were about to 
sit down for a nice family dinner, and I think we can all agree it is 
extremely annoying when these phone calls occur often. But Mr. 
Chairman, I wonder if there is not an easier, less intrusive, less 
regulated, and much less expensive way to stop these unsolicited phone 
calls from telemarketers.
    Mr. Chairman, on numerous occasions I have picked up the phone to 
dial one of my constituents only to have been forced to listen to a 
short recording stating that the person I am calling does not receive 
solicitations and that if this phone call is for a solicitation that 
this person requests to be removed from the telemarketers phone list. 
In addition, I must enter the phone number of the phone I am calling 
from in order to get beyond the recording and reach the person I am 
dialing. Mr. Chairman, all of this happens before the phone even rings 
on the other end of the line. The person I am dialing is unaware of my 
call until after I jump through some small, non-invasive hoops. The 
phone company can provide this recording for a nominal monthly charge. 
It is easier, less intrusive, and much less expensive than the $17 
million in fees the Federal Trade Commission (FTC) proposes to charge 
telemarketing companies.
    In addition to this recording, I have seen advertisements for items 
such as the ``TeleZapper'' which currently sells for $31.95 and is 
designed to help automatically remove the user's phone number from 
telemarketing lists. The TeleZapper does not interfere with normal 
calls or telephone functions and tells predictive dialing computers 
your phone number is disconnected. Mr. Chairman, this is one of many 
devices currently on the market to stop intrusive and unwanted calls.
    Mr. Chairman, I understand the desire to have a National Do Not 
Call Registry, however, I think that more research needs to be done. 
With new technologies entering the market on almost a daily basis, I 
believe a market-based solution is more appropriate than a governmental 
one. The two examples I stated earlier are just two of potentially many 
different market-based solutions that would cost the government nothing 
and still give consumers the ability to block unsolicited telemarketing 
calls. Mr. Chairman, why are we adding more bureaucracy to an already 
burdened government when the market is already showing us that new, 
innovative technology can solve this problem?
    Mr. Chairman, it is conceivable that we could kill an industry that 
employs hundreds of thousands of people each year. Do we know how many 
jobs may be lost because of the $17 million price tag the FTC plans on 
charging the telemarketers? Before we move forward, I think it best 
that we consider all our options with regards to this industry. We 
should only move forward after careful analysis has been made of all 
viable options.
                                 ______
                                 
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    My state of Michigan has very recently, on December 30, 2002, 
enacted a law to establish a state Do Not Call list.
    Responsibility for running the list will reside with the state 
Public Service Commission, which will also have an option to enlist a 
private vendor.
    If a federal agency, such as the FTC, establishes a federal do not 
call list, the Michigan law provides for the adoption of the federal 
list as the state do-not-call list.
    The passage of the Michigan law demonstrates the Michigan 
legislature's commitment to this issue, and the importance of cutting 
down on telemarketing calls to the residents of Michigan.
    I hear frequently from constituents that are frustrated and annoyed 
with the number of calls that they get from telemarketers.
    Frankly, I share their views, after many a family dinner 
interrupted by a phone call from a telemarketer trying to sell me 
something.
    I commend the FTC for trying to address this issue, and the Direct 
Marketing Association for supporting a national registry.
    Some valid concerns have been raised regarding the wisdom of having 
separate FTC and FCC do not call registries, along with the registries 
of 28 states.
    We want to protect consumers, but not to impose an unfair or 
irrational burden on businesses.
    I support the creation of the FTC do not call registry, and look 
forward to working on ways to streamline and harmonize these registries 
as much as possible.
    Thank you.
                                 ______
                                 
 Prepared Statement of Hon. Eliot Engel, a Representative in Congress 
                       from the State of New York
    Thank you Mr. Chairman and I want to the thank the FTC Chairman for 
coming to brief us today.
    Like all my colleagues, I have had numerous complaints about 
telemarketers calling during dinner, calling too early or too late, as 
well as deceptive practices.
    I am pleased that the FTC is moving forward on this idea of a 
national do not call list. However, since authorizing law for the 
program is needed, I believe we should use that opportunity to provide 
one-stop shopping for our constituents. I am aware that due to the 
FTC's jurisdictional barriers, it cannot affect all telemarketers.
    The FCC is also looking at creating a ``do not call list'' for 
industries under its jurisdictions. The fact is we have a 
responsibility to empower a single agency to handle all industries when 
it comes to telemarketing. Whether it be FTC, FCC, or even NASA--our 
constituents deserve some efficiency in this process.
    My other concern is that we not destroy any of the hard work the 
states have already done. In 2000, Governor Pataki signed legislation 
creating the New York Do Not Call system. My constituents have used it, 
like it and don't believe the federal government should preempt it.
    My questions are fairly simple--for the record could you list the 
industries that FTC cannot impose the ``do not call list'' rules upon 
and would FTC welcome authority to have oversight of those other 
industries?

    Chairman Tauzin. We turn our attention to the reason we 
came together. That is to hear from the Chairman of the Federal 
Trade Commission, the Honorable Timothy Muris for his 
statement.
    And, Mr. Chairman, you know we usually have a 5-minute 
rule. It doesn't apply here. I want you to take as much time as 
you need. Give us some background, and a full explanation of 
the action of the Commission and what exactly you are seeking 
in new authorities.

  STATEMENT OF HON. TIMOTHY J. MURIS, CHAIRMAN, FEDERAL TRADE 
                           COMMISSION

    Mr. Muris. Thank you very much, Mr. Chairman. I will take a 
little longer than 5 minutes, but not much. I want to hear your 
specific concerns and I want try to respond to some of the 
points that I have already heard.
    I am certainly pleased to be here today on behalf of the 
Commission to provide you with information about our recently 
announced amendments to the Telemarketing Sales Rule. I want to 
thank you personally, Mr. Chairman, and the committee, for your 
support of the FTC and for holding this briefing so soon in the 
new Congress. I realize it is a busy week and a busy day, and I 
am very appreciative.
    In particular, as you have already indicated, you have 
asked about our request for authority to collect fees to offset 
the cost of implementing the do-not-call registry. This is a 
critical aspect of the Commission's efforts to protect 
consumers' privacy. We look forward to working with the 
committee to ensure its implementation this fiscal year.
    As you know, we promulgated the registry and other 
amendments to the Telemarketing Sales Rule under the 
Telemarketing and Consumer Fraud and Abuse Prevention Act of 
1994. That Act directed the Commission to protect consumers 
from fraud and unwarranted intrusions on their privacy, and to 
issue a trade regulation rule defining and prohibiting 
deceptive or abusive telemarketing acts or practices.
    The Commission adopted the original Telemarketing Sales 
Rule in August 1995. Among other provisions, the rule 
prohibited certain deceptive telemarketing practices, 
prohibited calls by telemarketers or sellers to consumers who 
had previously requested not to receive such calls from that 
particular telemarketer or seller, and prohibited calls to 
consumers before 8 a.m. or after 9 p.m. local time for the 
consumer.
    The Telemarketing Act also directed the Commission to 
undertake a review of the Telemarketing Sales Rule within 5 
years of its promulgation. The Commission began its review in 
late 1999 and held a public forum to examine the then-existing 
do-not-call provision.
    On June 13, 2000, the Commission reported on its review at 
a hearing before this committee's Subcommittee on 
Telecommunications, Trade and Consumer Protection. Chairman 
Tauzin opened that hearing with insightful remarks about 
consumers' growing perception of telemarketing's intrusiveness, 
noting the rise in consumer complaints, and wondering if 
telemarketing calls were becoming more offensive.
    A look back at our consumer complaint data showed that 
Chairman Tauzin was absolutely correct in predicting consumers' 
concerns about the intrusiveness of unwanted telemarketing 
calls.
    Consumer complaints to the FTC about those unwanted calls 
have continued to increase since that hearing almost 3 years 
ago. On November 7, 2001, I presented the Commission's 
testimony, which Mr. Stearns referred to, before his 
subcommittee, and identified consumer privacy as an enforcement 
and programmatic priority. We stated our intent to increase the 
resources devoted to privacy protection, and we stated we were 
considering amending the Telemarketing Sales Rule to credit a 
national do-not-call registry.
    Shortly after that, on December 10, 2001, we held a 
briefing with your staff to discuss our plans, including that 
the do-not-call registry would need to be funded by a fee paid 
by telemarketers. The review, the ongoing review of the 
Telemarketing Sales Rule offered several opportunities for us 
to address privacy protections.
    We have prohibited--we considered, and, in fact, have 
prohibited, telemarketers from blocking the transmission of 
caller ID information on outbound telephone calls, as was just 
mentioned a minute ago.
    Second, we have promulgated specific restrictions on the 
use of predictive dialer software, which results in consumers 
receiving dead air or disconnected calls. Finally, there is the 
do-not-call registry.
    We received, during our rulemaking, over 64,000 written 
comments, which was an astonishing amount of interest, the most 
we have ever received on a rulemaking proceeding. These 
comments overwhelmingly expressed concern about unwanted calls 
and supported the do-not-call registry.
    The Commission unanimously announced its adoption of the 
do-not-call amendments last month on December 18. Throughout 
the rulemaking process, and this is an issue that I know many 
of you are concerned about and so are we. We have sought to 
harmonize our proposed registry with the States for maximum 
efficiency and cost savings.
    Twenty-seven States have enacted do-not-call laws, and 25 
States have implemented their laws by establishing registries 
and collecting fees.
    To comply with all 25 State laws, telemarketing firms are 
required to pay over $10,000 in annual fees. It is likely that 
this financial burden for telemarketers ultimately will be 
reduced with a national list. With over half of the States 
requiring telemarketers to buy no-call lists, and more States 
considering legislation to do the same, the choices are clear, 
either continue on a course that ultimately will require 
telemarketers to purchase many separate lists at an ever-
increasing cost, or move to an efficient national system that 
also provides free access to the States.
    Over the next 12 to 18 months, the FTC and the States will 
harmonize their do-not-call requirements and procedures. 
Through harmonization we believe we can eliminate costly 
inefficiencies to telemarketers by creating one national 
registry with one fee. And we have spent an enormous amount of 
time already on a State-by-State basis discussing this issue.
    The national registry will provide efficiency benefits to 
consumers as well. It will give them an easy, no-cost way to 
sign up under both Federal and State do-not-call laws, and to 
file complaints if telemarketers call them in violation of 
State or Federal law.
    Further, the national registry will benefit the 
telemarketers by eliminating consumers from their lists who do 
not wish to be called. This should enable telemarketers to be 
more efficient and effective in conducting their marketing.
    We have also had extensive consultations with the FCC. We 
are--obviously I cannot speak for the FCC, we are encouraging 
them to adopt a rule substantially like ours. They have 
rulemaking underway. They would not maintain and run the 
registry. That would certainly be duplication. They have no 
intention of doing that, and they are not considering that.
    But, because of jurisdictional gaps that we have, if the 
FCC does promulgate its rule, we believe that about 80 percent 
of the calls that individuals receive would be prohibited, if 
those individuals sign up for the do-not-call list.
    Today, we are seeking Congressional approval to collect 
offsetting fees to fund the operation of the do-not-call 
registry and its related functions. We anticipate that the 
costs will fall in three broad categories:
    First, are costs to develop and operate the do-not-call 
registry, including receiving complaints. Second, are our 
enforcement costs, which include consumer and business 
education and international coordination.
    And third, are agency infrastructure and administration 
costs, including information technology structural support. We 
have proposed language that requests funding and authority to 
collect offsetting fees sufficient to cover the costs of those 
three categories, which we estimate at $16 million.
    It is important to emphasize that this figure is only an 
estimate of the implementation and enforcement costs. This is 
largely because the most substantial component, developing and 
operating the do-not-call registry is part of an ongoing 
procurement process.
    In addition, we anticipate that there may be numerous 
difficult-to-estimate costs associated with implementing and 
enforcing the do-not-call provisions. Absent Congressional 
approval for funding and fee collection, preferable by the end 
of this month, the do-not-call system will not be available to 
consumers in FY--in this fiscal year, 2003, because the agency 
will not be able to collect fees this fiscal year.
    I appreciate the opportunity to describe our amendments to 
the Telemarketing Sales Rule, and look forward to working with 
the committee and the Congress as we move forward to implement 
these important provisions this year. I would be happy to 
answer any questions.
    [The prepared statement of Hon. Timothy J. Muris follows:]
 Prepared Statement of Hon. Timothy J. Muris, Chairman, Federal Trade 
                               Commission
    Mr. Chairman, I am Timothy J. Muris, Chairman of the Federal Trade 
Commission.1 I am pleased to appear today, on behalf of the 
Commission, to provide the Committee with information about our 
recently-announced amendments to the Telemarketing Sales Rule (``TSR'' 
or ``Rule''). In particular, you have asked about our request for 
authority to collect fees to offset the costs of implementing the ``do-
not-call'' amendments to the TSR. Our testimony provides an overview of 
the TSR amendment process, discussion of the do-not-call provisions, 
and an examination of the funding request. The do-not-call registry is 
an important aspect of the Commission's ongoing efforts to protect 
consumers' privacy, and we look forward to working with this Committee 
to ensure its implementation in fiscal year 2003.
---------------------------------------------------------------------------
    \1\ The written statement represents the views of the Federal Trade 
Commission. My oral presentation and responses are my own and do not 
necessarily reflect the views of the Commission or of any other 
Commissioner.
---------------------------------------------------------------------------
                           i. the tsr review
    The FTC promulgated the do-not-call and other substantial 
amendments to the TSR under the express authority granted to the 
Commission by the Telemarketing and Consumer Fraud and Abuse Prevention 
Act (``the Telemarketing Act'' or ``the Act.'').2 The 
Telemarketing Act, adopted in 1994, directed the Commission to issue a 
trade regulation rule defining and prohibiting deceptive or abusive 
telemarketing acts or practices. Specifically, the Telemarketing Act 
mandated that the rule include prohibitions against any pattern of 
unsolicited telemarketing calls ``which the reasonable consumer would 
consider coercive or abusive of such consumer's right to privacy,'' 
3 as well as restrictions on the hours unsolicited telephone 
calls can be made to consumers.4 Accordingly, the Commission 
adopted the Telemarketing Sales Rule on August 16, 1995, which, inter 
alia, defined and prohibited certain deceptive telemarketing 
practices,5 prohibited calls by any telemarketer or seller 
to any consumer who had previously requested not to receive such calls 
from that telemarketer or seller (the ``company-specific'' do-not-call 
provision) 6 and prohibited calls to consumers before 8:00 
AM or after 9:00 PM, local time for the consumer.
---------------------------------------------------------------------------
    \2\ 15 U.S.C. Sec. Sec. 6101-08.
    \3\ 15 U.S.C. Sec. 6102(a)(3)(A).
    \4\ 15 U.S.C. Sec. 6102(a)(3)(B).
    \5\ 16 C.F.R. Sec. 310.3.
    \6\ 16 C.F.R. Sec. 310.4(b)(1)(ii).
---------------------------------------------------------------------------
    The Telemarketing Act directed the Commission to undertake a review 
of the TSR within five years of its promulgation.7 The 
Commission began its review of the TSR on November 24, 1999, with the 
publication of a Federal Register Notice announcing a public forum on 
January 11, 2000, to examine the TSR's do-not-call 
provision.8 At that forum, industry representatives, 
consumer groups, and state law enforcement and regulatory officials 
discussed the existing do-not-call requirement, which prohibited 
telemarketers from placing calls to consumers who asked not to receive 
more calls from that telemarketer; efforts by industry at self-
regulation in this area; the growing number of state laws establishing 
do-not-call lists; the absence of caller identification information for 
some telemarketing calls; and growing consumer dissatisfaction with 
unwanted and abandoned telemarketing calls.9
---------------------------------------------------------------------------
    \7\ 15 U.S.C. Sec. 6108.
    \8\ 64 Fed. Reg. 66124 (Nov. 24, 1999).
    \9\ The transcript of the ``Do-Not-Call Forum'' is available on the 
FTC's website at the following address: http://www.ftc.gov/bcp/
rulemaking/tsr/dncforum/index.html.
---------------------------------------------------------------------------
    On February 28, 2000, the Commission published a second notice in 
the Federal Register, broadening the scope of its inquiry to encompass 
the effectiveness of all the TSR's provisions.10 This notice 
invited comments on the TSR as a whole.11
---------------------------------------------------------------------------
    \10\ 65 Fed. Reg. 10428 (Feb. 28, 2000).
    \11\ The notice also announced a second public forum to be held on 
July 27 and 28, 2000 to discuss provisions of the TSR other than the 
do-not-call requirement. The transcript for the second TSR Forum is 
located on the FTC's website at the following address: http://
www.ftc.gov/bcp/rulemaking/tsr/tsragenda/index.htm.
---------------------------------------------------------------------------
    In response to this notice, the Commission received 92 comments 
from representatives of industry, law enforcement, and consumer groups, 
as well as from individual consumers.12 The comments 
uniformly praised the effectiveness of the TSR in combating the 
fraudulent practices that had plagued the telemarketing industry before 
the Rule was promulgated. They also strongly supported the Rule's 
continuing role as the centerpiece of federal and state efforts to 
protect consumers from interstate telemarketing fraud. Commenters 
questioned the effectiveness of the Rule's provisions dealing with 
consumers' right to privacy, such as the do-not-call provision and the 
provision restricting calling times. In particular, commenters noted 
that the company-specific do-not-call provision was extremely 
burdensome to consumers, open to violation, and hard to enforce. In 
addition, the company-specific do-not-call provision did not address 
the invasive and abusive potential of each company's initial call as 
telemarketing has vastly increased. They also identified a number of 
areas ripe for fraud and abuse, as well as the emergence of new 
technologies that affect telemarketing for industry members and 
consumers. Following the receipt of public comments, the Commission's 
second forum was held on July 27 and 28, 2000. On June 13, 2000, the 
Commission reported on its do-not-call review at a hearing before this 
Committee's Subcommittee on Telecommunications, Trade and Consumer 
Protection (``the Subcommittee'') that focused on proposed legislation 
to protect consumers from unwanted telemarketing calls.13 
Chairman Tauzin opened the hearings with remarks about consumers' 
growing perception of telemarketing's intrusiveness. Noting that, from 
1997 to 1999, the FTC experienced greater than an eight-fold increase 
in consumer complaints about telemarketing, Chairman Tauzin observed:
---------------------------------------------------------------------------
    \12\ These public comments may be found on the FTC's website at the 
following address: http://www.ftc.gov/bcp/rulemaking/tsr/comments/
index.html.
    \13\ The Know Your Caller Act of 1999 and the Telemarketing Victim 
Protection Act of 1999: Hearing on H.R. 3100 and H.R. 3180 Before the 
Subcomm. on Telecommunications, Trade, and Consumer Protection of the 
House Comm. on Commerce, 106th Cong 26-34 (2000)(statement of Eileen 
Harrington, Associate Director for Marketing Practices, Federal Trade 
Commission).
---------------------------------------------------------------------------
        We, of course, can only speculate as to the reason for this 
        rise in consumer complaint. Perhaps more and more people see 
        telemarketing as an intrusion on their personal in-home 
        privacy, particularly during meal time. Don't we all have a 
        sense of that? And perhaps pitches and telemarketing sales 
        pitches and consumer relation practices are becoming more 
        offensive.14
---------------------------------------------------------------------------
    \14\ Id. at 1 (statement of Rep. Tauzin, Chairman, Subcomm. on 
Telecommunications, Trade, and Consumer Protection of the House Comm. 
on Commerce).
---------------------------------------------------------------------------
    A look back at the Commission's consumer complaint data shows that 
Chairman Tauzin's observation that consumers view unwanted 
telemarketing calls as an intrusion was correct: consumer complaints to 
the FTC about unwanted telemarketing calls have continued to increase 
significantly over the past three years.
               ii. the do-not-call amendments to the tsr
    On November 7, 2001, the Commission testified before this 
Committee's Subcommittee on Commerce, Trade and Consumer Protection, 
and delineated its enforcement and programmatic 
priorities.15 Among the areas highlighted was consumer 
privacy. The Commission stated its intent to increase the resources 
dedicated to privacy protection and, specifically, to consider amending 
the TSR to create a national do-not-call registry.
---------------------------------------------------------------------------
    \15\ The testimony may be found on the FTC's website at the 
following address: http://www.ftc.gov/os/2001/11/muris011107.htm.
---------------------------------------------------------------------------
    The TSR review, in fact, offered several opportunities for the 
Commission to address privacy protections. In January 2002, the 
Commission issued its Notice of Proposed Rulemaking (``NPR'') to amend 
the Telemarketing Sales Rule to address several important concerns 
raised by consumers during the rule review.16 First, the NPR 
proposed an amendment prohibiting telemarketers from blocking the 
transmission of caller identification information on outbound telephone 
calls. Second, the NPR proposed specific restrictions on the use of 
``predictive dialer'' software that, the rule review record showed, 
resulted in consumers receiving ``dead air'' or disconnected calls from 
telemarketers. Finally, the NPR proposed to require telemarketers 
subject to the Rule to subscribe to a national do-not-call registry, to 
be established and maintained by the Commission, and to prohibit them 
from calling consumers who place their telephone numbers on the 
national registry.
---------------------------------------------------------------------------
    \16\ 67 Fed. Reg. 4492 (Jan. 30, 2002).
---------------------------------------------------------------------------
    The Commission ultimately received over 64,000 written comments in 
its rulemaking proceeding. The overwhelming majority of these comments 
expressed concern about unwanted telemarketing calls, and supported the 
do-not-call registry proposal.17 The Commission concluded 
that the rulemaking record showed that a national do-not-call registry 
was necessary to protect consumers' privacy from an abusive pattern of 
calls placed by a seller or telemarketer, and formally announced its 
adoption of the do-not-call amendments on December 18, 
2002.18
---------------------------------------------------------------------------
    \17\ These comments may be found on the FTC's website at the 
following address: http://www.ftc.gov/bcp/rulemaking/tsr/tsrreview.htm.
    \18\ Apart from the national do-not-call registry, the Commission 
adopted other amendments to give consumers better tools to stop 
unwanted calls. Within one year, telemarketers will be required to 
transmit caller i.d. information so consumers can know who has called 
them. Consumers' comments reflect their strong desire to have this 
information, which is analagous to a return address on postal mail. 
This information also will enable consumers to file meaningful 
complaints against telemarketers who call them in violation of the TSR. 
Another amendment regulates telemarketers' use of predictive dialer 
software. During the rule review, consumers complained of disconnected 
telemarketing calls, which are generated by predictive dialers set to 
cause excessive call abandonment. Under the amended rule, telemarketers 
may use predictive dialers only if they set the abandonment rate at 3 
percent or less, and, within two seconds of the consumer's answering 
the call, play a message identifying the caller. This package of 
amendments addresses the most intrusive practices identified during our 
rule review and amendment proceeding. The amended rule may be viewed at 
the following address: http://www.ftc.gov/os/2002/12/tsrfrn.pdf.
---------------------------------------------------------------------------
    Throughout the rulemaking process, the Commission's staff sought to 
harmonize its proposed registry with the states for maximum efficiency 
and cost-savings. At least twenty-seven states have enacted do-not-call 
laws, and twenty-five states have implemented their laws by 
establishing registries and collecting fees from telemarketers. To 
comply with these state laws, telemarketing firms that conduct business 
in all states are required to pay an estimated $10,139 in annual fees 
to obtain the state registries. Without an effort to centralize these 
registries under one national system, states would continue to enact 
their own laws and establish their own registries. With over half of 
the states requiring telemarketers to buy their ``no-call'' lists, and 
more states considering legislation to do the same, telemarketers 
ultimately will have to purchase dozens of separate lists at an ever-
increasing cost. A national system that also provides free access to 
the states is a more efficient approach.
    As the Commission indicated in the Statement of Basis and Purpose 
for the amended Telemarketing Sales Rule, the amendment does not 
preempt state do-not-call laws.19 Based upon extensive 
discussions among the FTC staff and state enforcement colleagues, 
however, the Commission believes it likely that, over the next twelve 
to eighteen months, the FTC and the states will harmonize their do-not-
call requirements and procedures. Indeed, we believe that most states 
will begin using the FTC's do-not-call registry to satisfy state law 
requirements, and will stop operating their own registries and 
collecting fees from telemarketers subject to state ``no call'' laws. 
In the handful of instances where state do-not-call laws differ from 
the FTC's amended TSR, we are hopeful that state authorities will ask 
their legislatures to amend their statutes to make them more consistent 
with the FTC's Rule. We also are hopeful that state authorities will 
ask their legislatures to make technical amendments to a variety of 
state laws to make it possible for the states to transfer their 
registry data to the national registry; to permit telemarketers to 
subscribe to the national registry to comply with state laws; and to 
allow state agencies to phase out their state registries. Through 
harmonization, we believe we can eliminate costly inefficiencies to 
telemarketers by creating one national registry--that is, one source of 
information--with one fee.
---------------------------------------------------------------------------
    \19\ ``At this time, the Commission does not intend the Rule 
provisions establishing a national `do-not-call' registry to preempt 
state `do-not-call' laws. Rather, the Commission's intent is to work 
with those states that have enacted `do-not-call' registry laws, as 
well as with the FCC, to articulate requirements and procedures during 
what it anticipates will be a relatively short transition period 
leading to one harmonized `do-not-call' registry system and a single 
set of compliance obligations.'' Id. at 158-59.
---------------------------------------------------------------------------
    The national registry will provide efficiency benefits to consumers 
as well. It will give them an easy, no-cost way to sign up under both 
state and federal do-not-call laws, and to file complaints if 
telemarketers call them in violation of state or federal laws. Further, 
the national registry will benefit telemarketers by eliminating 
consumers from their lists who do not wish to be called. This should 
enable telemarketers to be more efficient and effective in conducting 
their marketing initiatives.
           iii. funding and offsetting fee collection request
    As mentioned earlier, the agency seeks Congressional approval to 
fund the operation of the do-not-call registry and its related 
functions through offsetting fee collections. We anticipate that the 
costs will fall primarily in three broad categories: (1) costs of 
development and operation of the do-not-call registry, including the 
handling of complaints; (2) enforcement costs, which includes consumer 
and business education and international coordination; and (3) agency 
infrastructure and administration costs, including information 
technology structural supports.
    The first category relates to the development and operation of the 
do-not-call registry. The phrase ``do-not-call registry'' refers to a 
comprehensive, automated system that will handle a range of 
functions.20 The system will enable consumers to register 
their telephone numbers via either a toll-free telephone number or a 
dedicated website. Both methods of registration will use technologies 
to provide reasonable assurance that the person registering is 
authorized to do so, and will retain only the telephone numbers of the 
registrant. To complement this registration process and enhance 
harmonization with existing state do-not-call lists, the registry will 
permit states to transfer their data into the registry.
---------------------------------------------------------------------------
    \20\ A number of these functions are discussed in more detail in 
the TSR Statement of Basis and Purpose, pp. 157-164, available at 
www.ftc.gov/os/2002/12/tsrfrn.pdf.
---------------------------------------------------------------------------
    Further, the system will allow telemarketers, at a minimum, 
quarterly access to all the registration information. Telemarketer 
access to the registry will be through a secure website maintained by 
the selected vendor, and will be granted based upon area codes selected 
by the telemarketer, following payment of the requisite 
fees.21
---------------------------------------------------------------------------
    \21\ The exact fees to be assessed and other aspects regarding 
telemarketer subscription to the do-not-call registry, will be 
addressed in a separate rule making that will commence upon 
Congressional approval of funding.
---------------------------------------------------------------------------
    The system also must permit access by law enforcement agencies to 
appropriate information. Law enforcers will be able to obtain data to 
determine when a consumer registered, when or if a particular 
telemarketer accessed the registry, and what information (i.e., which 
area codes) the telemarketer accessed. Access by law enforcement 
agencies will be provided through the Commission's existing Consumer 
Sentinel system, which is a secure Internet website.
    Additionally, the system will be designed to handle complaints from 
consumers who indicate they have received telemarketing calls in 
violation of the TSR. Consumers will be able to lodge such complaints 
either by a toll-free telephone call or online.22
---------------------------------------------------------------------------
    \22\ The Commission currently receives consumer complaints through 
its toll-free number, 877-FTC-HELP or online at www.ftc.gov. We hope to 
steer most do-not-call complaints to the selected vendor's dedicated 
complaint system, where they can be processed and verified in an 
efficient manner. Nonetheless, we anticipate that some consumers will 
complain through the agency's other channels.
---------------------------------------------------------------------------
    In sum, the scope of the do not call system is considerable. It 
will have the immediate capacity to register and verify over 60 million 
telephone lines and process hundreds of thousands (and possibly 
millions) of complaints.23
---------------------------------------------------------------------------
    \23\ States that have established statewide do-not-call registries 
have experienced consumer registration levels ranging from a few 
percent of the telephone lines in use within the state, to over 40 
percent of all lines. Forty percent of all consumer telephone lines in 
the United States would equal approximately 60 million telephone 
numbers. In the State of Missouri, about two percent of consumers who 
signed up for Missouri's registry filed complaints with the State 
within nine months. Assuming two percent of consumers who sign up for 
the FTC's do-not-call registry file complaints, the Commission could 
expect to receive 1.2 million complaints.
---------------------------------------------------------------------------
    The second cost category consists of various expenditures to 
enforce the do-not-call and related TSR provisions. As with all TSR 
enforcement, we plan to coordinate ``sweeps'' with our state partners 
and the Department of Justice, thereby leveraging resources and 
maximizing the deterrent impact. Further, given the fact that various 
telemarketing operations are moving offshore, international 
coordination will be especially important in the future. As such, it is 
a vital part of our enforcement plan.
    We consider consumer and business education as important 
complements to enforcement in securing compliance with the TSR. Past 
law enforcement initiatives have made clear that a key to compliance is 
education. Because the amendments to the TSR are substantial, and the 
do-not-call system is an entirely new feature, educating consumers and 
businesses will reduce confusion, enhance consumers' privacy, and 
ensure the overall effectiveness of the new system. Based on our 
experience, a substantial outreach effort will be necessary and 
constructive.
    The last category of costs consists of expenditures for related 
agency infrastructure and administration, including necessary 
enhancements to the agency's information technology structural support. 
For example, as noted above, law enforcement agencies will access do-
not-call complaints through the existing Consumer Sentinel secure 
website. Currently, there are nearly one million consumer complaints in 
the Sentinel system (including identity theft-related complaints). Over 
one thousand individual law enforcers access the Sentinel system, 
passing through its secure firewall. The Sentinel system allows these 
law enforcers to successfully and securely identify targets, categorize 
trends, and buttress existing investigations.
    The Sentinel system and attendant infrastructure must be upgraded 
to handle the anticipated increased demand from state law enforcers for 
access to the do-not-call complaints. Further, the Sentinel system will 
require substantial changes so that it may handle the significant 
additional volume of complaints that are expected. As noted above, the 
vendor's system must be able to accept hundreds of thousands and 
possibly millions of consumer complaints. Those complaints will be 
transferred to and accessible within the Sentinel system. The impact to 
the Sentinel system by such a huge influx of complaints can be 
illustrated as follows: In calendar year 2002, the Sentinel system 
received about 360,000 complaints. With do-not-call, the Sentinel 
system must be equipped to handle easily twice that volume of 
complaints, which will require significant changes to our information 
technology infrastructure.
    The FTC has recently proposed FY 2003 appropriations language that 
requests funding and authority to collect fees sufficient to cover the 
costs discussed above. Specifically, the language provides for 
``offsetting collections derived from fees sufficient to implement and 
enforce the do-not-call provisions of the Telemarketing Sales Rule, 16 
C.F.R. Part 310, promulgated under the Telephone Consumer Fraud and 
Abuse Prevention Act (15 U.S.C. 6101 et seq.), estimated at 
$16,000,000.'' It is important to emphasize that this figure is only an 
estimate of the implementation and enforcement costs. This is largely 
because the most substantial component B developing and operating the 
do-not-call registry B is part of an ongoing procurement process. In 
addition, we anticipate that there may be numerous, difficult-to-
estimate costs associated with implementing and enforcing the do-not-
call provisions.
    The Commission will determine the details of these new fees through 
a rulemaking proceeding. Such a proceeding will allow interested 
industry members and the general public to comment on, and provide 
information and input to, the actual fee structure.
    Absent Congressional approval for funding and fee collection very 
soon, preferably by the end of this month, the do-not-call system will 
not be available to consumers in FY 2003 because the agency will not be 
able to collect fees in FY 2003. Our target time line is as follows: We 
will be ready to award a contract in early February. Consumers will be 
able to register their telephone lines four months later, i.e., June-
July 2003. States also will be able to download their own do-not-call 
lists into the registry as of June. Next, in August, telemarketers will 
subscribe to the list, pay the requisite fees, and begin accessing 
those area codes needed.24 Consumer and business education 
efforts will continue throughout this time period. The do-not-call 
provisions become effective one month after telemarketers are first 
provided access to the national registry. Law enforcement efforts to 
ensure compliance with the do-not-call provisions of the amended TSR 
may begin at that time.
---------------------------------------------------------------------------
    \24\ Because the fiscal year ends in September, this time line 
gives us very little margin for error in implementing the rule in time 
to collect fees in fiscal year 2003.
---------------------------------------------------------------------------
                             iv. conclusion
    These amendments to the TSR will greatly benefit American 
consumers, allowing them to continue receiving the telemarketing calls 
they want, while empowering them to stop unwanted intrusions into the 
privacy of their homes. The amendments also will help direct marketers 
target their telephone marketing campaigns to consumers who want to 
hear from them over the telephone. Consumers who want to continue 
receiving the calls they currently receive need take no action. 
Consumers who wish to reduce the number of telemarketing calls they 
receive may do so by placing their telephone numbers on the national 
do-not-call list when registration opens. Those consumers still can 
receive calls from companies with which they have an existing business 
relationship, unless they instruct those particular companies, on a 
company-by-company basis, to stop calling them.25 Consumers 
who have placed their telephone number on the registry also can give 
permission to specific companies to call them.26
---------------------------------------------------------------------------
    \25\ See Amended TSR Sec. 310.4(b)(1)(iii)(B)(ii).
    \26\ Id. at Sec. 310.4(b)(1)(iii)(B)(i).
---------------------------------------------------------------------------
    The Commission appreciates the opportunity to describe its 
recently-promulgated amendments to the Telemarketing Sales Rule. We 
look forward to working with the Committee and the Congress as we move 
forward to implement these important provisions in the current fiscal 
year.

    Chairman Tauzin. Thank you. I would recognize myself first 
under our time rules. Let me first ask you, what are the gaps 
under your authority that would be filled by the FCC?
    Mr. Muris. The FCC has authority over common carriers that 
we do not have. And we are primarily talking about the--you 
weren't here. Mr. Markey received a--appeared to receive a 
telephone call soliciting a long distance plan.
    Chairman Tauzin. That was all rigged, you know that.
    Mr. Muris. Well----
    Chairman Tauzin. Go ahead.
    Mr. Muris. They also, because of the nature--we don't have 
the authority over banks, the FCC would have authority over 
banks. Our rule exempts, the Telemarketing Sales Act exempts 
the political calls. That wasn't--it wasn't our doing, it was 
in the Telemarketing Act.
    Chairman Tauzin. That is in the Act?
    So that is the 20 percent you are talking about?
    Mr. Muris. If the FCC acts----
    Chairman Tauzin. If they close the gaps and the rule were 
to go forward, what 20 percent----
    Mr. Muris. We are talking charities and we are talking the 
politicians. Now, the charity--and surveys, which are not 
covered by the Act, which are----
    Chairman Tauzin. Like the census. Like political surveys.
    Mr. Muris. Or a marketing survey. People call you up and 
ask you about politicians----
    Chairman Tauzin. They call and ask you about products?
    Mr. Muris. Sure.
    Chairman Tauzin. Those would be exempt.
    Mr. Muris. Also intrastate calls.
    Chairman Tauzin. Give us some idea of what would be 
covered, the kind of calls that you could block by getting on a 
do-not-call list.
    Mr. Muris. An enormous number of the calls are from those--
the FCC areas, particularly the people trying to pitch long 
distance to you. All business calls would be blocked if you 
signed up for the list--cold calls, those are calls from people 
with whom you don't have an established business relationship.
    Obviously the pattern of calls that individuals receive 
varies depending on their purchasing habits, you know, what 
lists they find themselves on. But, we do believe, and this is 
based on experience in talking to the States, and there are 
many State rules already in effect, that we would block about 
80 percent of the calls.
    Chairman Tauzin. Now, turning to the question of 
duplication. What assurances do you have that the FCC won't 
duplicate your rules or write conflicting rules? Have you and 
the Chairman of the FCC actually talked head to head to ensure 
that that won't happen?
    Mr. Muris. We have--at the staff level we have had 
extensive conversations. Before our rulemaking began, I had 
considerable conversations with Chairman Powell. Again, I can't 
speak for him, but I believe, based on their actions so far, 
that they are moving forward on adopting a rule that would look 
very much like ours.
    Chairman Tauzin. In terms of the funding, and your 
authority to collect fees, you have indicated to us that you 
need to have that included in, I believe, the January 
appropriations, before the end of the month, so that you can 
proceed with implementing this in 2003? Is that correct? Why is 
that so?
    Mr. Muris. Well, the problem is, and let me walk you very 
briefly through the time line.
    Chairman Tauzin. All right.
    Mr. Muris. If we received the authority, we would move to 
finalize the contract, and we could do that in early February. 
It would take a while. This is a considerable infrastructure 
that needs to be set up. It would take about 4 months before 
consumers could begin registering. So consumers would register, 
say, in June.
    Then, we would, by a month or 2 after that, the 
telemarketers would begin to access the registry. But it is 
only then, in August, you know, very near the end of the fiscal 
year that the telemarketers would have to pay the fee, because 
it is only then that we would have the registry set up that you 
have to access.
    So if we slipped the timing very much at all, we won't be 
able to get the fees in this fiscal year.
    Chairman Tauzin. I see. In terms of the contract you 
signed, will it be a multi-year contract or a single-year 
contract?
    Mr. Muris. The contract will provide--it will provide for 
multi years, but it will be on a year basis with an option.
    Chairman Tauzin. With an option. So then, would it be 
acceptable, would it be workable if the Congress were to 
authorize this fee for a single year, this authority to collect 
it as a pilot operation, renewable if we agreed with you that 
it was working and consumers were happy with the program? Would 
that be acceptable and workable under the contract structure 
you are going to design?
    Mr. Muris. I don't think it would be feasible for a year. 
It might be feasible, and I want to talk to my staff and get 
back to you for a multi-year basis, because again, we are 
talking about being at the end of the fiscal year, and it will 
be--it will be many months--we anticipate that the registration 
process and, accessing the list and then addressing complaints 
and all of that, will carry over into the next fiscal year.
    So if we had to shut down on September 30, which is this 
fiscal year, we would not really be able to implement the 
system.
    Chairman Tauzin. So if we adopted a strategy that allowed 
you whatever time is necessary to put this program into effect, 
and implemented it, but with a sunset that would have to be 
reauthorized on the basis is whether it was working to the 
satisfaction of both consumers in this country and to those who 
use these information systems to do their business, that that 
could be an option that we might exercise before the end of 
January?
    Mr. Muris. Obviously, I don't know what the period is, I 
would have to get back to you on that. But obviously it would 
be reasonable to let the program get set up, run, and see if it 
is working. So I just don't know what the precise timing would 
be. I do know it would take at least a couple of fiscal years.
    Chairman Tauzin. I would urge your staff to give that some 
strong consideration, because I have picked up a sentiment from 
a number of members that while they are equally determined as 
you are to set up some system for the consumers of America to 
have better control of this, that they are a little anxious 
about authorizing permanent fees in a system that we haven't 
seen operating yet.
    Mr. Muris. I understand that concern. My only hesitation is 
to what the period would need to be. But that seems--if that is 
what Congress wanted to do, that would be perfectly reasonable.
    Chairman Tauzin. Thank you. The Chair recognizes the 
gentlelady from California for a round of questions.
    Ms. Eshoo.
    Ms. Eshoo. Thank you. And thank you, Chairman Muris, for 
your comments. I have four questions. I am just going to state 
them, and then you can respond. Because I find that when I take 
them one at a time, wait for the response, that the clock runs 
out.
    So the first question that I have is I would like you to 
clarify who has jurisdiction over the credit card companies. 
Obviously the FCC has the telephone companies, as I understand 
it.
    But I think in terms of telemarketing, and the peskiest and 
the most aggressive marketing is done by those two. So who has 
jurisdiction, and how is it going to be covered?
    My next question is: As you stated, there are what, 27 
States that have also passed legislation. How have you worked 
with the States to harmonize what they have already enacted 
with the FTC's proposal? And do you favor the Congress 
providing any kind of preemption, preemptive authority so that 
there are consistent standards? The last thing we want is an 
inconsistency here. Every consumer in every State across the 
country should have this wonderful prepackaged plan and access 
to it, and not one set of standards in one place and another 
obviously in another.
    Does the--has the DMA list been an effective marketing tool 
in meeting consumer demands? I don't know where you are on 
that. If you could just comment quickly on it.
    And my last question, which may be the fifth question 
instead of the fourth, is, in addition to the FTC fee that you 
are requesting of the Congress, would the same companies have 
to pay fees to the States as well, or would that be eliminated?
    So those are my questions, and I hope that you can answer 
them fully and briefly. Thank you.
    Mr. Muris. Thank you. In terms of the credit card 
companies, in terms of anybody who uses a for-profit 
telemarketer, they are subject to our jurisdiction even if the 
underlying company is not.
    Ms. Eshoo. Is that what they traditionally use?
    Mr. Muris. Yes. I think a lot of the credit card companies 
use the third-party telemarketers. Now, obviously if they did 
it in-house, they would be exempt from us, but the FCC's 
authority would pick them up.
    Let me address the States and your last question about the 
multiple fees.
    Ms. Eshoo. And the phone companies, did you mention them?
    Mr. Muris. The phone companies would be the FCC's. If they 
use a third-party for-profit telemarketers, they would be ours.
    In terms of working with the States, our rule states that 
we are reserving the question of preemption. And what we have 
found is overwhelming support in the States for uniformity, in 
part because we would relieve the States of the burden of 
running a registry. And we would allow the States to access the 
registry for law enforcement purposes.
    We already have something like almost a thousand law 
enforcement partners all over the country who can access our 
complaint data. We have very good working relationships.
    And I think most of the people overwhelmingly we talk to in 
the States like the idea of our running a registry that they 
can enforce, they can enforce it in Federal court under our 
law, under the law that you all passed.
    They also, and many of them we expect would do this, would 
effectively make our law their State law, and then they could 
enforce it in State courts. There will be a transition period 
in which multiple--in which the telemarketers will have to pay 
fees both to us and to the States.
    Because it will take a while for the States to harmonize 
themselves. But we think that transition period will be with 
maybe a few exceptions not more than a year, possibly 1\1/2\ 
years.
    Ms. Eshoo. I think we need to ride on this one, because you 
don't--there is a lot of talk today about double taxation. And 
I think that we wanted to make this as tight as possible so 
that there isn't that to make it work. Otherwise, it is going 
to get tangled in the underbrush of what I just described. I 
think that it would or could.
    Mr. Muris. I agree. We have gone on a State-by-State basis.
    Your final question was about the DMA lists. It is not 
widely known or subscribed to, consumers have to pay to sign up 
or place a toll call. We think, based on the experience of the 
States, that our approach is much more preferable.
    Ms. Eshoo. Thank you, Mr. Chairman.
    Chairman Tauzin. Thank you, Ms. Eshoo. The Chair is pleased 
to recognize the chairman of the Energy Subcommittee, Mr. 
Barton.
    Mr. Barton. Thank you, Mr. Chairman. And I really just have 
one question. I want to go back to what I said in my opening 
statement. I am for a do-not-call list, because I am on the do-
not-call list in Texas. I am okay with a do-not-call list at 
the national level where there are jurisdictional issues that 
the States can't regulate.
    But, and I understand the political sensitivity. But, if 
you are going to have a do-not-call list, why not have a do-
not-call list and say politicians can't call and charities 
can't call. What is the--what is the rationale for those 
exemptions other than you are afraid that people up here on the 
dais are going to complain at you and the folks that are trying 
to get charitable contributions are going to complain to us and 
we will complain for them to you? Why not go all of the way?
    Mr. Muris. Well, the Telemarketing Sales Act again, which 
is passed by Congress, signed by the President, excludes the 
politicians.
    Mr. Barton. Are you going to blame us? Are you going to say 
that we passed a law that ties your hands? That is a low blow.
    Mr. Muris. It defines telemarketing to cover the 
solicitation of sales of goods or services or charitable 
contributions. So, we do have authority, because of the PATRIOT 
Act, over charities. We addressed charities, after extensive 
discussions and rulemaking and--almost all of the States 
exclude the charitable contributions--surveys of consumers in 
these States--there have been some surveys, which indicate that 
consumers like their do-not-call rule including the charitable 
exemption.
    What we have done with the charities for the first time is 
the charities are now going to be subject to the individual do-
not-call provision of the rule. And my experience with 
charities, and I know a lot of people's experience, I like to 
give my money between Christmas and New Years and write a 
check.
    Mr. Barton. I will remember that next year.
    Mr. Muris. Well, there is a question of what the definition 
of a charity is. But it begins at home.
    Chairman Tauzin. Many people believe that Barton is a 
charity.
    Mr. Muris. We have had a lot of experience with--you know, 
with for-profit telemarketers, and when you tried to put 
yourself on the individual do-not-call list, they would hang up 
on you. My experience with the charities, and a lot of people's 
experience, is they don't want to offend their donor base, and 
if you tell them not to call you, but instead to send you a 
letter, that they will send you a letter.
    So we think that that part of the rule will work well. But, 
obviously, just as anything any government agency does, you 
know, we should, just as we were discussing a few minutes ago, 
we should let it be implemented, have a fair test and look at 
it.
    Mr. Barton. But on the political calls, you are prohibited 
by law?
    Mr. Muris. Absolutely.
    Mr. Barton. We have seen the enemy and he is us.
    Mr. Muris. I was asked about this at the press conference 
when we announced this. I said what is the truth, which is it 
is above my pay grade.
    Mr. Barton. We want you to tell the truth. So I am glad you 
told me the truth. I yield back.
    Chairman Tauzin. I thank the gentleman. Further requests 
for time. Mr. Strickland. You are recognized for a round of 
questions.
    Mr. Strickland. This issue of charities calling is quite 
interesting, I think, because, I have personally adopted a 
policy that if charities call, I ask them to send me something 
in writing, because oftentimes, I don't know who is calling and 
whether they are legitimate or not.
    The question I have, I guess, pertains to the issue of some 
States having calls and other States not, and whether or not 
there is a States' rights issue here. If we were to make a law 
that would preempt the States, is that considered a thorny 
issue or a difficult one to deal with?
    Mr. Muris. Well, certainly the States almost reflectively 
take the position that they don't like Federal preemption. The 
reality here is, I don't think that we have to go down that 
thorny legal road, because we are offering something that the 
States want, which is, we would relieve them on the burden of 
administering their own system.
    I believe there are enormous benefits in a national system, 
both to telemarketers and consumers. And I believe that because 
of the way we can set this up, it is a win-win for both the 
States and us, that we are not going to have to face the 
preemption question.
    Mr. Strickland. Has there been an effort to survey the 
States to--to see if that assumption is an accurate assumption.
    Mr. Muris. Absolutely. Several of the individuals behind 
me, as you can imagine, have spent an enormous amount of time 
on this. And several of the individuals behind me, one of them 
in fact has a big notebook with notes State by State.
    I have charts, some of which are in front of me. There are 
many States right now that are drafting legislation to 
harmonize their rules with ours. Again, I think this is 
overwhelmingly a win-win.
    Mr. Strickland. Okay. Another question. What about 
companies that--and maybe this is not relevant. But, companies 
that may be located in another country or owned by a foreign 
entity and calls would be coming into this country from, say, 
Canada. What authority would you have over such calls, if any?
    Mr. Muris. Well, we certainly have jurisdiction over people 
who are trying to sell things within the United States.
    There is an increasing difficulty and I will be talking--I 
have already talked to the committee staff, and I will be 
talking to many of the members--I have talked to a few 
already--there is a growing problem about cross-border fraud. 
And in Canada, for example, there are telemarketers set up just 
to call into the United States.
    These are not the kind of people who the do-not-call list 
is aimed at. The telemarketing industry is overwhelmingly 
composed of legitimate people, law-abiding individuals. The 
fraud problem is a different story. Several provisons in the 
Telemarketing Sales Rule and the amendments that we just 
promulgated are aimed at those fraud issues.
    We do have a growing problem even with the do-not-call 
provision, of getting evidence, because more and more 
telemarketing firms are using telemarketers outside the U.S., 
so there is a growing international component to all of this. 
But the fraud area is where the international issues are really 
tricky.
    Fortunately, as I said, in the do-not-call area it is not a 
big problem.
    Mr. Strickland. But if fraud is not an issue, it is just 
simply calls originating from outside the country? If you have 
a no-call list would such a company be subject to that?
    Mr. Muris. Yes. People are selling into the United States, 
yes. Yes.
    Mr. Strickland. Mr. Chairman, no other questions.
    Chairman Tauzin. Thank you, Mr. Strickland.
    On this side, the gentleman, the chairman of the Commerce, 
Trade, Consumer Protection Subcommittee, Mr. Stearns.
    Mr. Stearns. I guess the first question is, when will the 
FTC formally publish its new rule?
    Mr. Muris. It will be in the--it is available on our Web 
site. It will be published in the Federal Register any day now.
    Mr. Stearns. Then I guess the next question is, what 
consideration has the Commission given to the amount of time 
that businesses affected by this rule will have to comply with 
it?
    Mr. Muris. We have had--let me give you a little 
background.
    We have had--I first publicly discussed the issue of a do-
not-call list on October 4, 2001. I discussed it again at the 
DMA's national convention the next month. I discussed it in 
front of you that month. We are talking about 14 months ago. We 
have had extensive discussions with members of the industry, 
both privately and publicly.
    In terms of when the rule will be effective, the do-not-
call parts of the rule on the fastest timetable available would 
not be effective until August in terms of when the industry 
would have to access the list.
    In terms of--we are dealing with caller identification, 
which they have a year from publication in the Federal Register 
to comply with that part of the rule; the rest of the rule, 
they have 60 days from publication of the Federal Register. I 
think there has been ample notice to the industry, and we have 
had lengthy discussions with people in the industry. I realize 
some of them don't like it and they have their objections, but 
I don't think a legitimate objection can be that we are rushing 
to implementation.
    Mr. Stearns. I guess, probably from an industry standpoint, 
they have tens of thousands of employees they have to retrain 
to comply with this rule, and it is probably a lot of computer 
programming that has to be done. And, I mean, I just don't 
know, but you are saying----
    Mr. Muris. Well, they already----
    Mr. Stearns. [continuing] because you have talked to them 
and given them plenty of notice?
    Mr. Muris. Sure. They already have 25 States to deal with. 
We would sell the list based on area codes, and area codes are 
consistent with State boundaries. So this is an issue they have 
already had to deal with, the national telemarketers.
    Mr. Stearns. How will the FCC list that is currently being 
considered relate to the FTC list?
    Mr. Muris. We have had extensive conversations at the staff 
level with the FCC. Before our rulemaking began, I discussed 
this at length with Chairman Powell. I believe--I can't speak 
for the FCC, I believe they will--that they are moving toward 
adopting a list that would substantially conform with ours.
    Mr. Stearns. So the two lists would be pretty much the same 
and coordination on the two of them would be----
    Mr. Muris. Yes. There would be only one national registry, 
which we would maintain. They would be able to enforce it in 
the industries over which they have jurisdiction, which are 
some industries over which we do not have jurisdiction.
    Mr. Stearns. The Commission has spoken to its desire to 
assure agreement among the State and Federal FTC and FCC rules, 
telemarketing rules and do-not-call lists. However, the amended 
Telemarketing Sales Rule contains no substantive direction or 
mandate to achieve the goal of a one-stop shop for a do-not-
call list. What specific plans have you adopted and what action 
do you and the Commission intend to take to ensure that this 
harmonization, coordination and consistency becomes reality?
    Mr. Muris. Well, that is obviously a very important 
question.
    On a State-by-State basis, we have had for months 
conversations about harmonization with the States that have do-
not-call registries. We believe there is overwhelming support, 
because I think there are substantial benefits to both the 
States and to us.
    We would relieve the States of the burden they now have of 
administering their own do-not-call registries for the States. 
And the States would be able to enforce--under the 
Telemarketing Sales Act, they could enforce our rule in Federal 
court. We anticipate that many of the States, because they 
would prefer to act in State court rather than Federal court, 
will change their legislation to allow them to enforce our 
rule.
    So we think--because, as I mentioned before, we think this 
is a win-win for everyone--for the States, for consumers and 
for us; we think that will drive national harmonization.
    Mr. Stearns. I think that is a good answer. That is a good 
answer. The Commission's rule will allow for registration 
through an 800 number or over the Internet.
    It is very difficult and expensive to authenticate 
individuals over the Internet without using a payment mechanism 
such as a credit card. How does the Commission intend to 
authenticate individuals that sign on to the registry over the 
phone via the Internet? For example, many States charge a 
nominal fee to consumers to sign on to State do-not-call lists 
as an attempt to limit frivolous requests and provide an 
authentication mechanism. Have you considered steps to cut down 
on these sort of frivolous requests?
    Mr. Muris. Yes. And we will be requesting information from 
people who sign up over the Internet. And we believe that 
through modern technology we can use that information to verify 
the request. We will only retain--we are not going to keep the 
information we use to verify. We are going to retain only the 
phone number. But that is an important issue, and that is one 
that we have thought about it, and we have a way to address it.
    Mr. Stearns. Just a last question, Mr. Chairman. Mr. 
Chairman, you are coming in for $16 million. And I think many 
of us have felt these small budgets start out at $16 million, 
then they escalate quite dramatically.
    How did you arrive at $16 million? I don't mean the 
details. How as a Member of Congress am I sure we are not 
talking about $16 million or $54 million or $100 million?
    Mr. Muris. Well, Congress----
    Mr. Stearns. You mentioned the three things you needed for 
the implementation, the equipment and the enforcement, things 
like that.
    Mr. Muris. Sure. That is obviously an important issue. 
Congress, through its power of the purse, obviously has the 
ability to limit the amount that we can spend. And indeed the--
that is something that frequently happens with these sorts of 
activities.
    We have had an ongoing process; the largest cost by far 
would be the cost of the contract to develop and operate the 
system, including to receive the consumer complaints. We have a 
system right now where we receive under 400,000 complaints a 
year. Do-not-call easily could double or triple that number of 
complaints. So we need a new infrastructure to receive the 
complaints and the ability to access and utilize the complaints 
other than somebody having to sit down and do them. And both of 
those will require considerable infrastructure and expense.
    Chairman Tauzin. The gentleman's time has expired.
    Let me remind all members we will have a vote in about 10 
minutes on the floor. Under the new rules of decorum, the votes 
will be limited to 15 minutes only and the machines will be 
shut down.
    The gentleman from Massachusetts, Mr. Markey, the ranking 
member of the Telecommunications Subcommittee is recognized.
    Mr. Markey. Obviously the Federal Communications Commission 
has a role to play here as well. You don't have jurisdiction 
over telephone companies' soliciting. So the issue is, should 
you wait for the Federal Communications Commission to act 
before you are able to put your rules on the books?
    And I say this knowing that the intrastate, the calls just 
made within the State are within State jurisdiction; and I will 
point out that Massachusetts' new do-not-call list was made 
available to Massachusetts citizens on January 1, last week. 
And on January 1 and 2, 140,000 people called in on the first 2 
days to put their names on the list. And we expect 1 million 
Massachusetts residents out of 6.3 million, including children, 
to be on the list by the end of this month.
    So the question is, should we wait before your part of this 
problem is solved, until the Federal Communications Commission 
should act; or should you be able to move forward? And maybe, 
if you think you should, how do we reconcile that with the 
Federal Communications Commission piece of the issue?
    Mr. Muris. Well, it is only the FTC that is going to run 
and operate the registry.
    Mr. Markey. Have you already worked that out with the 
Federal Communications Commission?
    Mr. Muris. The Federal Communications Commission proposal 
does not include--they are not even considering, you know, 
implementing and collecting the data base. So that is--I think 
that is an issue that is settled.
    Mr. Markey. So that is a moot issue. In other words, you 
are going to be--the Federal Trade Commission will have that 
responsibility for it and the Federal Communications Commission 
rules and regulations will feed into what you have?
    Mr. Muris. Yes. They would be able to access the data base 
just like all the partners that we have in all the States and 
localities. So, again, I can't speak for the FCC about its time 
line, but we are talking about not having enforcement, assuming 
we get Congressional approval soon for another 8 or 9 months.
    So the reality is that the reason we need to go now, to get 
this authority now, is to be able to set up a system that can 
be in place in 8 or 9 months. That gives the FCC considerably 
more time. And I would hope and I expect--again, I can't speak 
for the FCC, but I would hope and expect the FCC would be ready 
to go in a time very similar to the timing that we are talking 
about.
    Congress gave--you gave the FCC and the FTC authority over 
telemarketers. One of us needed to act first. We acted first.
    Chairman Tauzin. Would the gentleman yield quickly?
    We gave the FCC specific authority to do a no-call list and 
specific authority to collect fees from those accessing it. We 
gave the FTC authority over coercive and abusive practices. You 
are going to get sued over that authority; isn't that correct?
    Mr. Muris. Absolutely. But in 1991 you gave the FCC that 
authority. Three years later you gave the FTC authority. It is 
clear from the legislative history that included the authority 
to do something about do-not-call. Indeed, the 1995 regulation 
did something about do-not-call. It was on a company-by-company 
basis.
    So the idea that the FTC has no authority over do-not-call 
is extremely dubious based on legislative history, based on the 
fact that we have acted. We don't have authority over the fees; 
and that is why we are here, because we are asking for the 
authority.
    Mr. Markey. I would argue by the way, that the way in which 
these telemarketers operate when they start calling you at 9 
a.m. In the morning and it just goes all day into the evening 
is abusive and it is coercive. That is why 140,000 people woke 
up, many of them with a hangover, and the first thought in 
their mind was, I am going to call them, you know, and make 
sure that they can never reach me again this early in the 
morning.
    And I think that is--I think that is basically, you know, 
in the law of the doctrine is res ipsa loquitur--you know, the 
thing speaks for itself, the very thing that so many Americans 
are so passionate about. This issue, by definition, means that 
they view it as abusive and coercive.
    I think all we are really trying to get here is a very 
efficient way for consumers to be able to deal with it. By 
having this central do-not-call list that you have established, 
having the Federal Communications Commission play into that 
with their own rules on subjects over which they have 
jurisdiction, I think is very good.
    Just very quickly, if you don't get the authorization that 
you need, what does that mean in terms of this do-not-call 
list? What does it mean for Americans in terms of their ability 
to have this one-stop shopping?
    Mr. Muris. Sixteen million dollars is a lot of money to us. 
You know, it is not a lot of money in the grand scheme of the 
Federal budget, but it is a lot of money to us. We cannot 
possibly do the do-not-call registry and will not even consider 
doing it unless we have this additional money.
    Mr. Markey. So Americans might have to wait another year 
before----
    Mr. Muris. If we are not authorized soon, we are not going 
to be able to do it for--yes, for this fiscal year. So it 
would--the way the appropriations process works, obviously, 
because we are coming up to where the appropriators are going 
to act for this fiscal year if it is going to happen now; or 
they are going to have to wait until whenever the appropriators 
act again, which isn't going to be soon.
    Mr. Markey. I want a list to be able to call myself 
personally. I think every American does. I hope this Congress 
acts and acts quickly to give the American people what they 
want on a very important subject.
    Thank you, Mr. Chairman.
    Chairman Tauzin. The only thing that I want to point out, 
that res ipsa loquitur decisions are made in court. The problem 
I see, Mr. Markey--we are going to have to talk about it when 
this hearing is complete--is whether or not, if we want to give 
you the authority to raise money, we need to strengthen the 
legal question as to your authority to create the list. 
Otherwise, this list may not be able to go into effect because 
some court issues an injunction, and that is a serious concern 
to a legal staff.
    Mr. Markey. I was using res ipsa loquitur as an analogy, of 
course. But--an administrative agency is given broad discretion 
under the administrative procedures, but the courts have to 
give, by law, great discretion to when they are making 
judgments.
    Chairman Tauzin. But what you are arguing is the outcome of 
the legal case. I am concerned that we have the prospect of a 
legal case because there is at least some question about 
whether there is--res ipsa loquitur would apply here.
    The gentleman, Mr. Deal, is recognized.
    Mr. Deal. I would like to follow up just a bit more. 
Because my first question was going to be, do you think that 
there is need for further legislative language on anything 
other than the authorization for the fee itself? The fact that 
you may think that you have worked out the coordination with 
the FCC, I think we would all like to be certain that that is 
going to be a seamless process, because they are, in their 
jurisdiction of course, controlling an area which has the same 
kind of complaints.
    I suppose if we are going to throw around Latin terms and 
res ipsa loquitur, the other is caveat emptor, ``let the buyer 
beware,'' and the buyer is us in this case. We had better 
beware that we don't sell the American public on the idea that 
if you sign up for this, you are not going to get these calls 
anymore.
    Which leads to the area of the exemptions. Do you think 
that you need any further legislative language to make seamless 
the jurisdiction under the FCC and your jurisdiction and to 
make that workable?
    Mr. Muris. Not for purposes of do-not-call. The Senate 
Commerce Committee last year passed an authorization that gives 
us--which is something I supported--which gives us authority 
over common carriers who are now exempt. You know, that would 
involve bigger issues.
    Mr. Deal. Yes, I understand that. I don't think too many us 
have too many problems with the airlines calling us or common 
carriers calling us. I don't think that is the area of society 
we are concerned with. That is probably going to be one of 
those areas that is going to be in limbo.
    But let me talk about some the other areas that are going 
to be in limbo that fall primarily under State jurisdiction, 
namely insurance companies and financial institutions. They are 
excluded from your ability to put them on a no-call list.
    Let's assume we get this working the way we want it to. 
States are still going to have jurisdictions over those 
institutions, by and large by State law. In the coordination of 
your list with State laws that set up do-not-call lists, will 
there be--will it be seamless also, in that if a State has 
chosen to make the banking institutions or the insurance 
companies subject to do-not-call lists, can those be placed on 
this national register? Or are the States still going to have 
to maintain separate do-not-call lists over the institutions 
that only they have jurisdiction over?
    Mr. Muris. Most of these institutions that you are 
discussing engage in interstate telemarketing, and they are 
already subject to our rule if they use a third-party 
telemarketer. They are already subject--they will be subject to 
the FCC if the FCC goes ahead and acts. And, again, I want to 
emphasize that the State's--the one area where the States will 
need to act if they want to is for intrastate calls. And many 
of them, we anticipate, will still do that.
    Mr. Deal. Just one quick observation.
    Of course, some of us might like to discuss in greater 
detail at another time whether or not we do not in fact--when 
you use an instrumentality such as a telephone that is involved 
in interstate commerce, whether or not in fact jurisdiction 
does not extend likewise to intrastate. But that is a debate 
for another time.
    My last question is a very practical question. Is the 
register going to be listed by the telephone number or by the 
name of the person who requested it? That is significant, for 
example, in my household where I have my elderly mother, my 
elderly father-in-law, who live with us. I can understand that 
if I put my telephone number, which is their telephone number, 
on the list, they may be doing business with somebody I am not 
doing business with.
    How do you work that? Does the one telephone number--it is 
by the telephone number as I understand it not the name.
    Mr. Muris. Yes, the registration is by telephone number. 
Now, there is an exemption which most States have and which we 
have although it is tighter than most of the States which is 
for established business relationships. So if you are doing 
business with someone, you will be able to call.
    Mr. Deal. I understand that but that is unlikely, that if 
they are doing business and they get a call that any complaint 
is going to be registered. But it is by the phone number 
itself.
    Mr. Muris. Yes. So if you have multiple phones in your 
house, you will have to register the multiple phones. Mr. 
Markey will have to register his cell phone.
    Mr. Deal. I am just glad that in the funding mechanism you 
are anticipating it is not like some of the States, I think 
mine was one of the first ones that the consumer had to pay to 
be able to get on the list. I am glad to see we are not taking 
that approach. I would hope we would not follow the suggestions 
that some have said that we ought to charge the consumer for 
verification cost. I think that would defeat the purpose.
    Thank you for briefing us today.
    Thank you, Mr. Chairman.
    Chairman Tauzin. Mr. Wynn is recognized.
    Mr. Wynn. Thank you, Mr. Chairman. I apologize for not 
being here for your earlier comments. I wanted to follow up on 
something Mr. Deal asked.
    It is my understanding now that there is no way under these 
procedures that you will be able to get at intrastate calls.
    Mr. Muris. We do not have authority as a Federal agency 
over intrastate calls; that is correct.
    Mr. Wynn. Is there any proposal afoot to give you that 
reach?
    Mr. Muris. No, that would raise some interesting 
constitutional issues. Most--again, the overwhelming majority 
of calls are from out of State.
    Mr. Wynn. The other question I have is, there have been 
allegations that actually this could be a cost saving to 
telemarketers so that instead of having to deal with all the 
individual State do-not-call lists, it would be a large one 
registry. Is that an accurate assessment?
    Mr. Muris. I think at the end of the day there will be 
efficiencies to telemarketers in the sense of not having to 
comply with multiple lists, one; two, of not having to pay, you 
know, lots of fees; and three--and telemarketers will tell you 
this privately, they won't say it publicly--they don't want to 
call people who don't want to be called.
    Mr. Wynn. Do you in any way address the problem of call 
abandonment?
    Mr. Muris. Absolutely. What we have done there is, we have 
essentially outlawed dead air in the following sense: First of 
all, for people who use predictive dialers there is a safe 
harbor, and that is what causes the call abandonment is they 
have a process where they call a lot of numbers and----
    Mr. Wynn. Take the first live one.
    Mr. Muris. They don't have enough people to answer them. 
They can only have 3 percent of those calls that they don't 
answer. For any call that they don't answer, they have to play 
a recording that tells the consumer who was calling.
    Mr. Wynn. Thank you very much. No further questions.
    Chairman Tauzin. Thank you, Mr. Wynn.
    Further questions from any member? We have 10 minutes and 
48 seconds on ordering the previous question motion, which we 
will have to attend.
    Mr. Chairman, let me thank you. This has been very 
enlightening. Obviously, you have heard the sentiments of the 
community of our members who represent a great community of 
citizens in this country. Who applaud your efforts. At the same 
time, we have got some serious questions about the legal and 
efficacy questions of proceeding with two agencies 
simultaneously, and you are needing some authority that you 
currently don't have. We do need to discuss that further.
    I with appreciate hearing from your staff on any concepts 
that might give us a chance to have this thing tested out in a 
way that we can come back and revisit it to make sure it is 
working the way you want it do.
    Particularly, you heard from several members that may even 
want to think about whether or not we were correct in exempting 
some areas from coverage. I personally am offended by all the 
recorded calls from politicians who aren't really live. If you 
are really live and you really want to call me, that is one 
thing, but I know a lot of folks who are tired of hearing 
messages from people who aren't really on the phone that were 
just recording a message to you from a recording studio 
somewhere.
    It is a lot--the last question I want to ask you--I would 
ask you to think about it too, we don't have time to get an 
answer, but if you can come back to us--is, what implications 
will your efforts, along with the FCC's, have in driving a $650 
billion industry?
    This is a huge industry. It is not going to stop calling 
us, and we are not going to stop working with it, because 
telemarketing is very useful. It is a very good way of getting 
your products out in America. And many Americans enjoy using 
information systems to shop and to buy and to learn about new 
products.
    It is a two-edged sword, and this $650 billion industry is 
not going to just go away because people don't want to be 
called. The question is how this will this migrate in the 
Internet world? How will it shift policy questions and 
considerations when broadband systems are fully deployed and 
voice on broadband becomes a substitute for the telephone at 
some time in the future?
    I would like generally maybe--perhaps some writing on that 
from your staff to give us some idea as to whether or not we 
are chasing something that is going to get even bigger or more 
difficult in years ahead.
    This has been very good, Mr. Chairman, and again I think 
all of us applaud your interest and the fact you are pushing 
this as hard as you are. We simply want to make sure it is done 
right, so we don't end up with something that doesn't work.
    Mr. Muris. Well, thank you very much, Mr. Chairman. Again, 
I am very appreciative--I guess I mentioned before you were 
here, the fact that you did this so quickly in the new 
Congress.
    Chairman Tauzin. Thank you very much. The hearing stands 
adjourned.
    [Whereupon, at 11:35 a.m., the committee was adjourned.]
    [Additional material submitted for the record follows:]
  Response for the Record of Hon. Timothy J. Muris, Chairman, Federal 
                            Trade Commission
               response to questions of hon. richard burr
    Question 1. Why would the Do Not Call List cost $16 million, and 
what sorts of things are covered under that figure?
    Response. The FTC seeks Congressional approval for $16 million to 
fund the operation of the do-not-call registry and its related 
functions through offsetting fee collections. We anticipate that the 
costs will fall primarily in three broad categories: (1) costs of 
development and operation of the do-not-call registry, including the 
handling of complaints; (2) enforcement costs, which include consumer 
and business education and international coordination; and (3) agency 
infrastructure and administration costs, including information 
technology structural supports.
    Question 2. Is it possible for the List to be implemented for less 
than the original $16 million figure specified?
    Response. It is difficult to predict with precision the exact costs 
of the national do-not-call system. This is largely because the most 
substantial component--developing and operating the do-not-call 
registry--is part of an ongoing procurement process. The $16 million 
request is premised upon our best estimates of what is needed to 
develop, implement, and enforce the do-not-call provisions of the 
Telemarketing Sales Rule. We do not anticipate that the costs will be 
less than $16 million.
                response to questions of hon. lee terry
    Question 1. How confident are you that the $17 million in fees you 
want to collect from the telemarketing companies will cover the cost of 
establishing and operating the national ``Do Not Call'' list? What will 
the FTC do to pay for establishing the list if more operator assisted 
calls, and the associated expense, are required to sign people up?
    Response. The FTC seeks Congressional approval for $16 million to 
fund the operation of the DNC registry and its related functions 
through offsetting fee collections. These fees will be used for the 
development and operation of the national do-not-call registry, as well 
as the attendant law enforcement, consumer and business education, and 
infrastructure and administrative expenses associated with the do-not-
call initiative. Consumer registration will be based on an automatic 
system (via telephone and Internet), and it will not provide for sign-
up via operator-assisted calls. I believe that the requested level of 
funding is sufficient to support this initiative.
    Question 2. You propose to charge the telemarketing companies to 
fund the establishment of the list. Did you consider the concept of 
asking those who wish to be on the list to pay for the cost of 
establishing the list (i.e. the consumer)? If so, why did you not 
propose that option? What would be your reaction to a Congressional 
directive to collect fees for the cost of establishing the list to 
those who wish to participate in the program?
    Response. The agency did consider charging consumers directly for 
adding their telephone numbers to the do-not-call registry, but 
determined not to impose such charges. The costs of collecting what 
would be a very small fee from each consumer who elected to list his or 
her number in the registry would be much greater than the fee itself. 
For example, if 40 million consumers register their telephone numbers 
in the first year--a potentially realistic figure given the experiences 
of some states that have established their own do-not-call registries--
each consumer would have to pay a fee of $0.40 to raise $16 million. 
The costs for collecting that fee through the automated system that is 
contemplated for the national registry would be significantly higher 
than $0.40. The agency determined not to establish a payment system 
that would have to charge more to collect a fee than the fee itself.
    Question 3. Will you accept Internet submissions of phone numbers 
to add to the list? If so, how can you be sure the person is who they 
say they are? How would you prevent a person from signing up others via 
the Internet?
    Response. The national do-not-call registry will accept submissions 
via the Internet. To verify the identity of the person submitting the 
registration request over the Internet, the national registry will ask 
the consumer to enter his or her email address along with the telephone 
number to be registered. The do-not-call system will automatically send 
an email to that address, notifying the recipient of the pending 
registration request, and asking the recipient to return to the do-not-
call website (via the Internet link included in the email) to confirm 
that registration. Only after the consumer returns to the website and 
provides confirmation will the requested telephone number be entered 
into the national registry. The system also will monitor the email 
addresses entered by consumers to prevent the excessive, repeated use 
of the same email address to verify consumer registrations.
    Question 4. Has the FTC performed any studies regarding the number 
of jobs that will be lost upon implementation of the national ``Do Not 
Call'' list? Given the country's current economic climate, should you 
conduct such a study? Besides individuals who will lose jobs, how will 
the implementation of the national ``Do Not Call'' list impact the 
overall economy due to lost sales of goods and services?
    Response. The national do-not-call registry will make the 
telemarketing industry more efficient by allowing telemarketers to 
focus their efforts on those consumers who do not object to receiving 
their sales calls. Similarly, by harmonizing the multitude of state do-
not-call registries into one national registry, the telemarketing 
industry will find it more efficient to obtain consumer registration 
information from one source--and pay one fee--rather than acquire that 
information from 27 different states, as is currently required. Equally 
important, telemarketers eventually will pay less to comply with one 
national registry than the over $10,000 currently paid by those who 
conduct business in all states that have do-not-call laws. It is also 
noteworthy that the national do not call registry will not impact the 
large portion of the telemarketing industry that conducts business-to-
business calls, that responds to calls placed by consumers to sellers 
or telemarketers, or that places calls to customers with whom they have 
an established business relationship. Finally, while we have not 
conducted an independent analysis of the assertions about job loss, it 
is worth observing that the telemarketing industry has submitted no 
information or data showing any loss of jobs as a result of the states 
that now have do-not-call registries.
    Question 5. Has the FTC performed any studies or surveys of 
consumers as to specifically which unsolicited telephone calls they 
find most ``annoying?'' If not, why not? What if the FTC discovered 
that the calls citizens find most annoying are primarily those exempted 
under the national ``Do Not Call'' list?
    Response. Given the breadth of comments the Commission received 
during its rulemaking proceeding to amend the Telemarketing Sales Rule, 
including comments about the numerous state do-not-call laws, such a 
discrete study or survey is unnecessary. Over 64,000 comments were 
submitted during that proceeding. Most of those comments wholeheartedly 
supported the establishment of a national do-not-call registry and 
generally objected to the intrusion that unwanted telemarketing calls 
as a whole cause. Those comments did indicate that consumers find less 
objectionable those calls they receive from companies with which they 
have an established business relationship. As a result, the Commission 
exempted such calls from the do-not-call requirements. As for other 
exemptions from the national registry, the FTC continues to work with 
the Federal Communications Commission (``FCC''), in that agency's 
proceeding to review and revise the regulations under the Telephone 
Consumer Protection Act, so that coverage by the complementary 
regulations will be maximized once the FCC concludes its rulemaking. 
Also, as I said during my testimony, the Commission can bring law 
enforcement actions for violations of the Telemarketing Sales Rule 
against third-party telemarketers making calls on behalf of entities 
that otherwise would be exempt from our jurisdiction.
    Question 6. How exactly does this national Do Not Call list protect 
against fraudulent telemarketing firms? How does the FTC plan to combat 
fraud perpetrated by groups and organizations exempt under the national 
``Do Not Call'' list? Are there any other measures in place or under 
consideration that better address the issue of telemarketing fraud?
    Response. The Telemarketing and Consumer Fraud and Abuse Prevention 
Act, adopted in 1994, directed the Commission to issue a trade 
regulation rule defining and prohibiting deceptive or abusive 
telemarketing acts or practices. Establishment of a national do-not-
call registry is primarily focused on protecting consumers against 
abusive telemarketing calls, namely, calls that ``the reasonable 
consumer would consider coercive or abusive of such consumer's right to 
privacy.'' 15 U.S.C. Sec. 6102(a)(3)(A). In some instances, however, 
the do-not-call registry provisions will also serve as protection 
against fraud, as with consumers who sign up on the registry to protect 
themselves from exploitative or fraudulent telemarketers. As for other 
measures that are in place to address telemarketing fraud, many 
provisions in the Telemarketing Sales Rule are aimed at protecting 
consumers from deceptive or fraudulent telemarketing practices, 
including: requiring disclosure of material information that must be 
made in every telemarketing call; prohibiting misrepresentations of 
material information; requiring that a telemarketer obtain a customer's 
express verifiable authorization before obtaining or submitting for 
payment a demand draft; generally prohibiting disclosing or receiving, 
for consideration, unencrypted consumer account numbers for use in 
telemarketing; prohibiting false and misleading statements to induce 
the purchase of goods or services; holding liable anyone who provides 
substantial assistance to another in violating the Rule; and 
prohibiting credit card laundering in telemarketing transactions.
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