[House Report 108-8]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                      108-8

======================================================================
 
                     DO-NOT-CALL IMPLEMENTATION ACT

                                _______
                                

 February 11, 2003.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 395]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 395) to authorize the Federal Trade Commission 
to collect fees for the implementation and enforcement of a 
``do-not-call'' registry, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.









                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Committee Cost Estimate..........................................     6
Congressional Budget Office Estimate.............................     6
Federal Mandates Statement.......................................     8
Advisory Committee Statement.....................................     8
Constitutional Authority Statement...............................     8
Applicability to Legislative Branch..............................     8
Section-by-Section Analysis of the Legislation...................     8
Changes in Existing Law Made by the Bill, as Reported............    10

                          Purpose and Summary

    The purpose of H.R. 395 is to authorize the Federal Trade 
Commission (FTC or Commission) to collect fees from telemarkers 
to fund the implementation and enforcement of the Commission's 
national do-not-call registry, and for other purposes.

                  Background and Need for Legislation

    Telemarketing has been, and continues to be, a 
controversial marketing practice. Telemarketing can provide 
many benefits for consumers, such as introducing them to new 
opportunities or products. According to a DRI-WEFA Group 
study,\1\ Economic Impact, U.S. Direct and Interactive 
Marketing Today, 2002 Forecast, in 2001, consumer outbound 
telephone marketing generated $274.2 billion in sales, 
accounting for 27.3 percent of all consumer direct marketing 
sales. In fact, outbound telemarketing alone generated almost 
four percent of all U.S. consumer sales in 2001. In 2001, the 
telemarketing industry that markets to consumers was estimated 
to employ 4.1 million workers.
---------------------------------------------------------------------------
    \1\ This study was commissioned by the Direct Marketing 
Association.
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    Unfortunately, certain telemarketing practices can be an 
intrusive nuisance for consumers, an invasion of privacy, and a 
source of consumer confusion. In some instances, unscrupulous 
telemarketers have taken advantage of this confusion and 
committed fraud against consumers. Indeed, the FTC receives 
thousands of complaints annually regarding a variety of 
telemarketing practices. According to the FTC, consumer 
complaints regarding unwanted telemarketing calls increased 
over one-thousand percent between 1998 and 2002.
    In order to assist consumers in dealing with telemarketing, 
Congress provided authority to the FTC and the Federal 
Communications Commission (FCC) to limit these intrusions into 
their homes. Under the Telemarketing and Consumer Fraud and 
Abuse Prevention Act (15 U.S.C. Sec. Sec. 6101-08) enacted by 
Congress in 1994, the FTC implemented the Telemarketing Sales 
Rule (TSR). The TSR requires telemarketers to make certain 
disclosures and prohibits certain misrepresentations. These 
rules required company-specific do-not-call lists, required 
callers to identify the seller, their purpose and the nature of 
what is being sold, limited commercial telephone solicitations 
to between 8:00 a.m. and 9:00 p.m., and gave state law 
enforcement officers the authority to prosecute fraudulent 
telemarketers who operate across state lines.
    Congress also enacted the Telephone Consumer Protection Act 
(TCPA) of 1991 (47 U.S.C. Sec. 227). Regulated by the FCC, the 
TCPA, among other things, requires telemarketers to abide by 
do-not-call requests from consumers, restricts telemarketing 
calling hours to 8:00 a.m.-9:00 p.m., mandates that 
telemarketers provide the name of the solicitor, name of the 
entity calling, and the telephone number or address where that 
person may be contacted, and includes a private right of 
action. Exemptions exist for established business relationships 
and tax-exempt non-profit organizations, such as those of a 
charitable or political nature.
    In addition to the FTC and FCC regulations, many states 
also maintain some form of a do-not-call list, and the Direct 
Marketing Association also maintains a self-regulated do-not-
call list, called the Telephone Preference Service, used by its 
members.\2\ Despite these restrictions, telemarketing 
complaints continue to rise and there is an increasing need to 
provide consumers with the ability to opt-out of telemarketing 
calls.
---------------------------------------------------------------------------
    \2\ While all members of the Direct Marketing Association are 
required to participate in the Telephone Preference Service, the 
Association may apply sanctions only against its members. The Direct 
Marketing Association has approximately 5,000 members. There are 
approximately 4 million consumers who have subscribed to the Telephone 
Preference Service.
---------------------------------------------------------------------------
    To address the consumer demand, pursuant to its authority 
under the Telemarketing and Consumer Fraud and Abuse Prevention 
Act, the FTC initiated a rulemaking in January 2002 to create a 
national do-not-call registry and announced the adoption of its 
do-not-call amendments on December 18, 2002. The Commission's 
do-not-call registry allows consumers who prefer not to receive 
telemarketing calls to contact the FTC to be placed on its do-
not-call list. Telemarketers would be required to subscribe to 
the national do-not-call registry and to refrain from calling 
consumers who have placed their telephone numbers on this 
registry.
    The FTC provided telemarketing exemptions in the TSR for 
companies with an ``established business relationship'' with a 
consumer lasting up to 18 months after the last purchase or 
delivery, or the last payment, unless the company is asked not 
to call again. The TSR also exempts telemarketers calling to 
solicit charitable contributions, although calls made by for-
profits on behalf of non-profits are required to maintain an 
organization-specific do-not-call list.
    In order to implement the do-not-call registry, the 
Commission needs Congressional authorization to collect fees 
from the telemarketing industry. It is anticipated that fees 
collected will offset the appropriation that, in FY 2003, is 
estimated at $16 million. On May 29, 2002, the FTC issued a 
Request for Public Comment asking for guidance on thecollection 
of fees. Under the new authority provided by H.R. 395, the Commission 
intends to initiate a notice of proposed rulemaking on how the fee 
collection process will operate once authorization and funding are 
acquired.
    It is the strongly held view of the Committee that a 
national do-not-call list is in the best interests of 
consumers, businesses and consumer protection authorities. This 
legislation is an important step toward a one-stop solution to 
reducing telemarketing abuses. The FTC's rule, however, is only 
one piece of a multi-jurisdictional puzzle. Of primary concern 
to the Committee is the possibility for conflicting 
regulations. In addition to the FTC's national do-not-call 
registry, twenty-seven states \3\ maintain some form of a do-
not-call program, and the FCC requires businesses to maintain 
company-specific do-not-call lists. How these different 
regulatory regimes can compliment each other and work as one 
national program is still unclear.
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    \3\ Alabama, Alaska, Arkansas, California (effective April 1, 
2003), Colorado, Connecticut, Florida, Georgia, Idaho, Illinois 
(effective July 1, 2003), Indiana, Kansas, Louisiana, Massachusetts 
(effective April 1, 2003), Maine, Minnesota, Missouri, New York, 
Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Wisconsin 
and Wyoming.
---------------------------------------------------------------------------
    The Commission's do-not-call registry, standing alone, will 
not stop all telemarketing calls. Due to the limited 
jurisdiction of the FTC, there are telemarketing calls that 
cannot be covered by the FTC's do-not-call rule. The Commission 
does not have jurisdiction over common carriers (such as 
telephone companies and airlines), insurance companies, banks, 
credit unions, political solicitations, or intrastate 
telemarketing calls. Under the Commission's do-not-call rule, 
if one of these non-covered entities contracts with a third-
party telemarketing company to place a call, that call would be 
covered by the FTC's rule. However, if one of these non-covered 
entities makes the same telemarketing call in-house, that call 
would not be covered by the FTC's do-not-call rule.
    The FCC's do-not-call rules were created under the TCPA. 
That statute explicitly gives the FCC the authority to set up a 
national do-not-call database. In 1992, the FCC undertook a 
rulemaking, and after reviewing comments, determined that a 
national do-not-call list was too costly and burdensome at that 
time. The FCC instead opted to require telemarketers to 
maintain company-specific do-not-call lists. On September 12, 
2002, the FCC issued a notice of proposed rulemaking to review 
and possibly revise its do-not-call rules. The comment period 
closed on January 31, 2003, and the FCC's Chief of Consumer and 
Governmental Affairs Bureau announced that the FCC's goal is to 
avoid regulatory duplication by working closely with the FTC 
and fashioning rules that benefit consumers and the 
telemarketing industry.
    As the FCC undertakes the process of revising its do-not-
call regulations, there is the potential for inconsistencies 
between the FTC and FCC do-not-call rules. To address this 
issue, H.R. 395 directs the FCC to complete its rulemaking 
within 180 days of enactment and further requires the FCC to 
consult and coordinate with the FTC to maximize consistency 
between the two regulations. However, because the FCC is bound 
by the TCPA, it is impossible for the FCC to adopt rules 
identical to the FTC's TSR.
    There are areas in which the FTC do-not-call rule is in 
conflict with the TCPA, such as the FTC's rule providing for a 
safe harbor from the call ``abandonment'' requirements if a 
telemarketer, among other things, leaves a recorded message. 
Under the TCPA, however, Congress by statute prohibited 
telemarketers from leaving recorded messages. In order to 
remedy these types of inconsistencies, either the FTC or FCC 
must address them administratively, or Congress must address 
them legislatively. We encourage the FTC and the FCC to take 
the necessary steps to make their rules as consistent and 
compatible as possible.
    Similarly, some members of the Committee raised concerns 
about how the FTC do-not-call rule will work in conjunction 
with the existing twenty-seven state do-not-call laws. The 
Commission's do-not-call rules do not preempt the state lists, 
although the FTC has committed to ``harmonizing'' the 
Commission's rule with the state laws. We are encouraged with 
the FTC's commitment and efforts to work with the states to 
ensure a harmonized approach, although some remain concerned 
that consumers and businesses could continue to face 
conflicting and confusing regulatory approaches. In light of 
the fact that many states have unique laws with protections for 
local industries or exemptions for certain products, for 
example, at least 12 states have developed specific provisions 
for local newspapers, we encourage the FTC to work diligently 
to persuade states to adopt the FTC's rule. The Committee 
cannot understate the importance of the FTC working 
aggressively to seek such harmonization, and we will continue 
to follow the FTC's progress on this issue. The Committee takes 
no position on the issue of state preemption in H.R. 395.
    While this bill focuses on the necessary authority to 
establish the do-not-call registry, the Committee maintains a 
great deal of interest in the entire TSR produced by the FTC. 
Taken as a whole, the amended TSR is a positive development 
that will help consumers. The Committee is interested in 
working with the FTC to better understand some of the 
implementation details of the rule that could raise some 
practical problems that could affect employment and small 
business. As the registry becomes available, we encourage the 
FTC to implement aggressive education efforts, including 
national awareness campaigns and a toll-free number with strong 
consumer recall.
    The Committee is committed to holding hearings during the 
108th Congress to better understand how these different do-not-
call regulatory regimes can best be coordinated to protect 
consumers in a manner that is fair and balanced to industry 
participants.

                                Hearings

    The Committee on Energy and Commerce did not hold hearings 
on H.R. 395. The Full Committee did hold a briefing on January 
8, 2003 where FTC Chairman Muris testified.

                        Committee Consideration

    On Wednesday, January 29, 2002, the Full Committee on 
Energy and Commerce met in open markup session and ordered H.R. 
395, favorably reported to the House, without amendment, by a 
voice vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 395 reported. A motion by Mr. Tauzin to order H.R. 395 
reported to the House was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goal of this legislation is to authorize the FTC to 
collect fees from the telemarketing industry to fund the 
operation and enforcement of the do-not-call registry.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
395, the ``Do-Not-Call Implementation Act,'' would result in no 
new or increased budget authority, entitlement authority, or 
tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, February 4, 2003.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dera Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 395, the Do-Not-
Call Implementation Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Ken Johnson 
(for federal costs), Victoria Heid Hall (for the state and 
local impact), and Jean Talarico (for the private-sector 
impact).
            Sincerely,
                                         Barry B. Anderson,
                                                   Acting Director.
    Enclosure.

H.R. 395--Do-Not-Call Implementation Act

    Summary: H.R. 395 would authorize the Federal Trade 
Commission (FTC) to collect and spend new fees during the 2003-
2007 period for the purpose of creating a national ``do-not-
call'' registry. The ``do-not-call'' registry is a list of 
consumers whom telemarketers would be prohibited from calling 
because the consumers do not wish to receive such calls.
    Based on information from the FTC, CBO estimates that the 
agency would collect and spend a total of about $73 million in 
fees over the 2003-2008 period to implement H.R. 395, assuming 
appropriation of the necessary amounts. Over the six-year 
period, the total net effect on the federal budget would be 
insignificant. Enacting H.R. 395 would not affect direct 
spending or revenues.
    H.R. 395 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments. By authorizing 
the FTC to collect fees from telemarketing firms, H.R. 395 
would impose a private-sector mandate as defined by UMRA. CBO 
expects that the cost of that mandate would fall well below the 
annual threshold for the private sector established by UMRA 
($117 million in 2003, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 395 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\
 
Gross FTC Spending for the Do-Not-Call Registry:
    Estimated Authorization Level.........................       16       18       13       13       13        0
    Estimated Outlays.....................................        3       26       16       13       13        2
Offsetting Collections from Telemarketers:
    Estimated Authorization Level.........................      -16      -18      -13      -13      -13        0
    Estimated Outlays.....................................      -16      -18      -13      -13      -13        0
Net Changes to FTC Spending for the Do-Not-Call Registry:
    Estimated Authorization Level.........................        0        0        0        0        0        0
    Estimated Outlays.....................................      -13        8        3        0        0        2
----------------------------------------------------------------------------------------------------------------
\1\ A full-year appropriation for 2003 for the FTC has not yet been enacted. In 2002, the agency received a
  gross appropriation of $156 million.

    Basis of estimate: H.R. 395 would authorize the FTC to 
collect fees sufficient to create and operate a ``do-not-call'' 
registry, contingent upon the approval of the fees in 
appropriation acts. For this estimate, CBO assumes that H.R. 
395 and the necessary appropriation provisions will be enacted 
by the middle of this fiscal year. Based on information from 
the FTC, CBO expects that the agency would start collecting 
fees from telemarketers in 2003, in amounts equal to the full 
estimated cost of the registry.
    The costs of operating the ``do-not-call'' registry would 
have four main components: purchasing new computer systems, 
designing and maintaining those systems, hiring personnel to 
manage the registry and investigate violations, and advertising 
the new system to consumers. Based on information from the FTC, 
CBO estimates that the initial costs of purchasing the computer 
system would amount to about $1 million in 2003, $8 million in 
2004, and $4 million in 2005. We expect that these costs would 
decline to between $1 million and $2 million a year during the 
2006-2008 period. CBO estimates that designing and maintaining 
these computer systems would cost about $45 million over the 
2003-2008 period. Finally, staff salaries and advertising 
expenses would together amount to an estimated $2 million each 
year.
    In sum, CBO estimates that the FTC would implement H.R. 395 
by collecting and spending a total of about $73 million in fees 
over the 2003-2008 period, assuming the necessary 
appropriations action. Over this six-year old period, CBO 
estimates that the total net effect of the bill on the federal 
budget would be insignificant.
    If the FTC continued to operate the ``do-not-call'' 
registry beyond 2007, CBO estimates annual operating costs 
would be about $13 million a year, assuming appropriation of 
the necessary amounts. H.R. 395 would authorize the collection 
of fees to offset those costs through 2007.
    Estimated impacts on direct spending and revenues: None.
    Estimated impact on state, local, and tribal governments: 
H.R. 395 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments.
    Estimated impact on the private sector: The final rule that 
provides for a national ``do-not-call'' registry was published 
on January 29, 2003, in the Federal Register. Under that rule, 
telemarketing firms will be required to search the national 
registry at least four times a year and drop from their call 
lists the telephone numbers of consumers who have registered. 
The FTC anticipates that full compliance with the ``do-not-
call'' provision will be required within a few months after 
funding has been approved.
    In order to implement the national ``do-not-call'' 
registry, and subject to approval in appropriation acts, H.R. 
395 would authorize the FTC to collect fees from telemarketing 
firms and certain businesses associated with those firms that 
sell goods and services. The duty to pay those fees would be 
considered a private-sector mandate under UMRA. Assuming the 
necessary appropriation action, CBO estimates that the fees 
would amount to no more than $18 million annually over the next 
five years. Consequently, the cost of the mandate would fall 
well below the annual threshold for private-sector mandates 
established by UMRA ($117 million in 2003, adjusted annually 
for inflation).

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 establishes the short title as the ``Do-Not-Call 
Implementation Act.''

Section 2. Telemarketing Sales Rule; do-not-call registry fees

    Section 2 authorizes the FTC to promulgate regulations to 
collect offsetting fees sufficient to implement and enforce the 
national do-not-call registry. The authorization is effective 
between fiscal years 2003-2007. The FTC may only collect the 
amounts as provided for in advance in appropriations Acts. The 
funds collected shall only be used to offset the costs of 
activities and services related to the implementation and 
enforcement of the Telemarketing Sales Rule, and other 
activities resulting from such implementation and enforcement.
    In its forthcoming rulemaking to establish fees, the FTC 
should ensure that the fees are commercially reasonable and do 
not exceed the amounts necessary to effectively establish, 
maintain, and enforce the do-not-call rules.
    No section of this Act should be construed by the FTC to 
confer any additional authority to regulate common carriers, or 
any other industries, outside of the Commission's statutory 
jurisdiction under the Federal Trade Commission Act (15 U.S.C. 
Sec. 1 et seq).

Section 3. Federal Communications Commission do-not-call regulations

    Section 3 directs the FCC, within 180 days of enactment, to 
issue a final do-not-call rule pursuant to the rulemaking 
proceeding initiated on September 18, 2002, under the TCPA. The 
FCC is directed to consult and coordinate with the FTC to 
maximize consistency with the do-not-call rule promulgated by 
the FTC.
    In enacting section 3, it is not the intent of the 
Committee to dictate the outcome of the FCC's pending 
rulemaking proceeding. At the same time, however, it does 
endeavor to prevent situations in which legitimate users of 
telephone marketing are subject to conflicting regulatory 
requirements. The purpose of the consultation and coordination 
requirements of section 3 and the reporting requirements of 
section 4 are intended to prevent this possibility from 
becoming reality. The Committee further recognizes that the 
TCPA requires the FCC to consider a variety of factors in 
structuring a national do-not-call list. It is not the 
Committee's intent to foreclose consideration of those factors 
by enacting this legislation.

Section 4. Reporting requirements

    Section 4(a) requires the FTC and the FCC to each, within 
45 days of the FCC completing a final do-not-call rule, to 
report to the Committee on Energy and Commerce in the House of 
Representatives and the Committee on Commerce, Science, and 
Transportation in the Senate on the following: (1) an analysis 
of the telemarketing rules created by the FTC and FCC; (2) any 
inconsistencies between the two rules and the effect of any 
such inconsistencies on consumers and purchasers of the do-not-
call registry; and (3) proposals to remedy any inconsistencies.
    Section 4(b) contains an annual reporting requirement that 
mandates the FTC and FCC to report to the Committee on Energy 
and Commerce in the House of Representatives and the Committee 
on Commerce, Science, and Transportation in the Senate on the 
following: (1) an analysis of the effectiveness of the do-not-
call registry as a national registry; (2) number of consumers 
placed on the registry; (3) the number of persons paying for 
access to the registry; (4) an analysis of the progress of 
coordinating the operation and enforcement of the do-not-call 
registry with other similar state registries; (5) an analysis 
of the progress of coordinating the operation and enforcement 
of the do-not-call registry with the enforcement activities of 
the FCC; and (6) a review of the enforcement activities of the 
FTC under the Telemarketing Sales Rule and of the FCC under the 
TCPA. The annual reporting requirement is applicable to fiscal 
years 2003-2007.

Changes in Existing Law Made by the Bill, as Reported

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