[House Report 108-8]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-8
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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.
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\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.
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\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.
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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.
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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).
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By fiscal year, in millions of dollars--
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2003 2004 2005 2006 2007 2008
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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
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\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
* * * * * * *