The Nonprofit Do-Not-Call Exemption Considered as a Matter of Social Policy

Abstract

Accepting the logic of the court in Mainstream Marketing v. FTC and other rulings on the Telemarketing Sales Rule, namely that the distinction between for-profit and nonprofit solicitation is constitutionally permitted because there is a rational basis for doing so, this article questions the wisdom of the exemption as a matter of social policy. Given the broad mandate of the FTC to protect the privacy rights of American citizens and to alleviate the problems of deceptive and fraudulent telemarketing practices aimed at American consumers, shouldn't we include nonprofit donors and prospective donors within the class to be protected? This article acknowledges that it is not unconstitutional for the FTC to have created such a profit/nonprofit distinction, but observes that it is by no means constitutionally necessary for the Commission to have done so. It argues that it would be a better policy for Congress to empower the FTC to protect consumers against invasions of privacy regardless of the corporate legal form of the privacy intruder, and to protect against deceptive and fraudulent marketing practices regardless of the corporate form in which the abuse occurs. Our argument proceeds to examine whether it is constitutionally permissible to eradicate the for-profit/not-for-profit distinction. After analyzing the statutory language that created the distinction between purely commercial and not for profit solicitation, it considers recent case law justifying the exemption of nonprofit corporations from the do-not-call registry, principally based upon the value of the nonprofit sector's ability to solicit and the chilling of non-purely commercial speech. This part concludes that the exemption from a national do-not-call registry for nonprofit solicitors is not necessary. Part Three evaluates the gravity of the problems associated with nonprofit solicitation, building on earlier work in this area. It considers claims made by the FTC and by nonprofit organizations which maintain that the problems associated with telemarketing are less serious than those which have been deemed to require the do-not-call registry for for-profit telemarketing. After reviewing problems including unwanted invasions of privacy, fraud, abuse of the nonprofit form, and possible unintended gaming effects which can result from the dual policy regime created by the FTC exemption, we conclude that the problems which flow from a nonprofit exemption from the FCC's regulations are akin to those which justify the FTC's consumer regulation in other areas. Part Four examines countervailing justifications for the exemption from a nationwide do-not-call list, growing out of the distinctive character of some or all nonprofits, which might militate in favor of allowing them to retain their current advantage over for-profits in the telemarketing context. This section explores whether nonprofits should remain exempt based on the fact that their solicitations (1) advance activities of a charitable nature and which are traditionally considered to be of great social value; (2) are chronically disadvantaged in comparison with for-profits in terms of their ability to raise needed funds, for which the telemarketing exemption compensates as a form of subsidy; and (3) are more favorably received in their telemarketing practices because of their non-pecuniary objectives, and because of their social and other contributions. We conclude that contemporary scholarship offers some limited support for each of these claims. Finally, in Part Five, we evaluate the desirability of eliminating the exemption in light of benefits and costs. Here we argue for the importance of respecting the freedom of consumers to decide when to subject themselves to aggressive, intrusive solicitation, and when not to; freedom that is, to choose whether or not to enter the donor/donee matrix. Given the intrusive nature of the nonprofit soliciting that takes place and the alternate channels for less intrusive solicitation which are available, we conclude that the distinction should not survive as it currently is maintained. It would be a more sound social policy to create a national opt-out/do-not-call registry as well as a do-not-share registry for nonprofit corporations.