Amicus Curiae Brief — Trans Union LLC v. Federal Trade Commission

No. 01-1080 25 22

Supreme Court of the Gnife

TRANS UNION LLC.,

Petitioner,

Vv .

FEDERAL TRADE COMMISSION,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF OF THE COALITION FOR SENSIBLE

PUBLIC RECORDS ACCESS AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

LUCINDA MINTON LANGWORTHY

(Counsel of Record)

FRED H. CATE

_ HUNTON & WILLIAMS) =~

1900 K Street, N.W.

Washington, D.C. 20006

(202) 955-1500

February 25, 2002 Counsel for Amicus Curiae

WiILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

+6 ¢¢

TABLE OF CONTENTS

Page

ee Ce tiiitsinieiinneninccinniieauiininsiapibinticaidamimeal il

INTEREST OF AMICUS CURIAE .........:.00ccccsescsssscssssssesseeees l

SUMMARY OF ARGUMEDNT..............cscccccssssossssssssessssssereees l

SE ITTE ‘ceiniciurcssenitenissciinntitaneienninaeininetacetnmencinsattidiliabiadags 3

i I ccticescnrestnnscintnnninenteiitincmndidniennanninnitenseneeie 3

Il. THE D.C. CIRCUIT ERRED IN APPLYING DUN

& BRADSTREET TO CREATE A “NO MATTER

OF PUBLIC CONCERN” STANDARD FOR

TRUE, LAWFULLY-OBTAINED EXPRESSION......... 5

lll. THE D.C. CIRCUIT ERRED IN _ ITS

ASSUMPTION THAT TARGET MARKETING

LISTS ARE OF “NO PUBLIC CONCERN..”.................. 7

IV. THE D.C. CIRCUIT ERRED IN APPLYING THE

CENTRAL HUDSON COMMERCIAL SPEECH

TEST TO PETITIONER’S EXPRESSION. .................. 10

V. THE D.C. CIRCUIT ERRED IN ITS

APPLICATION OF INTERMEDIATE

NT BUGS 0 crencossopppansencensnenensenenosacsensnabeeseenmnenettaseteiients 12

A. The Court Did Not Require the Government To

Demonstrate Either a Substantial Interest or

That the Restraint on Petitioner’s Expression

Se NE IIIT accntencsnecincnneninciinnnintniineniineea 12

B. The Restriction on Petitioner’s Expression Fails

To Serve Any Plausible Interest. ....................:ccc0000 14

C. The D.C. Circuit Ignored the Fact That Opt-Out

Is Substantially Less Restrictive of Petitioner’s

RIES TRE GOO cccrniccesccccsentesninssnniasssitansenses 16

CU EEOS cnscecnesesccnsstsnssnninyesscensnsiinimsaenenietmennpeniioen 20

TABLE OF AUTHORITIES

| Page

CASES

44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484

Natta deta ecinttlahientedaeicchiiasiatendinibtenesesicsencsepianinndaien 10

Bartnicki v. Vopper, 532 U.S. 514 (2001)...........cccccccccsceeeees 14

Board of Trustees v. Fox, 492 U.S. 469 (1989).........ccccc00 12

Bolger v. Young Drug Prods. Corp., 463 U.S. 60

ETE EEL a ae 6, 12, 15

Central Hudson Gas & Elec. Corp. v. Public Serv.

Comm 'n, 447 U.S. 557 (1980) .0.........ccccccccesseeeeeeeeees 10, 12

City of Cincinnati v. Discovery Network, Inc., 507

Re AID etcensccccesccosnseccesnccounesecsscetescescciesceqnenen 10, 12

Denver Area Educ. Telecomm. Consortium, Inc. v.-

SE IED cocci cencnticcntesiessdtocsesssnenemmeunne 17

Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc.,

I iccdaccneraticcescsiendnseninatictentensmnnns passim

Edenfield v. Fane, 507 U.S. 761 (1993) ..........ccccccceceees passim

Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995) .. 19, 20

Friedman v. Rogers, 440 U.S. 1 (1979) .......ccccccceeeenceees 12, 13

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974)... 5

Individual Reference Servs. Group v. FTC, 145 F.

Supp. 2d 6 (D.D.C.), appeal filed, No. 01-5202

halla eenntdecetinendenentanennane 11

Lamont v. Postmaster General, 381 U.S. 301 (1965).......... 17

Linmark Assocs., Inc. v. Township of Willingboro,

Sn ose leseeaenemediediocsipenaapeiasecsousiocensnaneeneqnes 13

TABLE OF AUTHORITIES — Continued

Page

Martin v. Struthers, 319 U.S. 141 (1943)....................0006 17

New York Times Co. v. Sullivan, 376 U.S. 254 (1964) .......... 5

UE 12

Rubin v. Coors Brewing Co., 514 U.S. 476 (1995).............. 10

Trans Union Corp. v. FTC, 81 F.3d 228 (D.C. Cir.

SEs siciaiinniieancsiauapbleiithanianeitianesienabiatiguineniaigasdanietnmntinecasies 3, 5,6

Trans Union Corp. v. FTC, 245 F.3d 809 (D.C. Cir.),

reh'g denied, 267 F.3d 1138 (D.C. Cir. 2001)........ passim

Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180 (1997)........ 17

United States v. Edge Broad. Co., 509 U.S. 418

I enenicsecepeniseneninemeniniimernengunempusmninmnmneniungeamenenes 10

U.S. West, Inc. v. FCC, 182 F.3d 1224 (10" Cir.

1999), cert. denied, 528 U.S. 1188 (2000)............... 14, 15

Zauderer v. Office of-Disciplinary Counsel, 471 U.S.

A ccnnsstinesnrenmsein 12

CONSTITUTION AND STATUTES

The Fair Credit Reporting Act, 15 U.S.C. §§ 1681,

IIIT isniacsanintrcsiennianninninababnagnpemmmnnnclininanmensianti 3

DEEDES. 6 SEI cncecncscsccsscscsesnscssssssecssssnntemnenssnnens 13,14

DE 14, 19

iv

TABLE OF AUTHORITIES — Continued

LEGISLATIVE HEARINGS

Financial Privacy, Hearings Before the Subcomm. on

Financial Institutions and Consumer Credit of the

House Comm. on Banking and Financial Services,

106" Cong. (July 20-78, 19 V.ccccccccccccccscccsseesesseeseeees 8,

Privacy, Hearings Before the Senate Comm. on

Commerce, 107" Cong. (July 11, 2001)...........00000 16,

MISCELLANEOUS

JOHN M. BARRON & MICHAEL E. STATEN, THE

VALUE OF COMPREHENSIVE CREDIT REPORTING:

LESSONS FROM THE US EXPERIENCE (2001)...................

BOARD OF GOVERNORS OF THE FEDERAL RESERVE

SYSTEM, REPORT TO THE CONGRESS CONCERNING

THE AVAILABILITY OF CONSUMER IDENTIFYING

INFORMATION AND FINANCIAL FRAUD (1997).................

Briefs, CIRCULATION MGMT., May 1999.00... ..cccceeseeeees

FRED H. CATE, OPT-IN EXPOSED (2001) ..............ccccccccccceeees

FreD H. CATE & MICHAEL E. STATEN, PROTECTING

PRIVACY IN THE NEW MILLENIUM: THE FALLACY

Pe eeiliiiiceinieiaistiaieniaiitiititainctncitntiiitaiin

DiRECT MARKETING ASSOCIATION, ECONOMIC

IMPACT: U.S. DIRECT MARKETING Topay (5" ed.

CYNTHIA GLASSMAN, CUSTOMER BENEFITS FROM

CURRENT INFORMATION SHARING BY FINANCIAL

SERVICES COMPANIES (2000) .............ccccccccccccccccceseeeeeeeees

v

TABLE OF AUTHORITIES — Continued

Page

WALTER KITCHENMAN, US CREDIT REPORTING:

PERCEIVED BENEFITS OUTWEIGH PRIVACY

TTT cnn esinecitresentsininstenipeaerimneiatnabpmapnaainanamans 18

ROBERT E. LITAN, BALANCING COSTS AND BENEFITS

OF NEW PRIVACY MANDATES (1999).....................0 18, 19

MICHAEL E. STATEN & FRED H. CATE, THE IMPACT

OF OpT-IN PRIVACY RULES ON RETAIL CREDIT

MARKETS: A CASE STUDY OF MBNA (2001)............... 18

MICHAEL A. TURNER & LAWRENCE G. Buc, THE

IMPACT OF DATA RESTRICTIONS ON FUNDRAISING

FOR CHARITABLE & NONPROFIT INSTITUTIONS

MICHAEL A. TURNER, THE IMPACT OF DATA

RESTRICTIONS ON CATALOG AND _ INTERNET

APPAREL RETAILERS (2001) ..............c-eeccccceeeeeeeeeeeeeneeeees 18

Eugene Volokh, Freedom of Speech and Information

Privacy: The Troubling Implications of a Right to

Stop People From Speaking About You, 52 STAN.

Rn ER, Ci ee crnerendancnenssensnscsnvmmeegsinnrmnmecsnemennesees 7

INTEREST OF AMICUS CURIAE'

The Coalition for Sensible Public Records Access

(“CSPRA”) is a not-for-profit organization dedicated to

preserving the responsible commercial use of public record

information. CSPRA sponsors research, publications,

legislative briefings, and other activities designed to foster

thoughtful debate about how privacy concerns can be addressed

within the context of such use. CSPRA’s members include the

world’s leading suppliers of information on consumers,

businesses, motor vehicles, and property, including

demographic and lifestyle data and database-marketing ©

services; specialized business information products and

services; decision-making intelligence and services for

businesses, government agencies, and legal professionals; and

consumer credit information and products. The decision below,

if followed by other courts, could significantly affect their

business activities and the services they provide their

customers.

SUMMARY OF ARGUMENT

The decision of the D.C. Circuit in Trans Union Corp. v.

FTC, 245 F.3d 809 (D.C. Cir.) (“Trans Union IT’), reh'g

denied, 267 F.3d 1138 (D.C. Cir. 2001) (“Trans Union IIT’),

creates an important issue for this Court’s review for four

separate reasons. First, the D.C. Circuit misapplied this Court’s

holding in Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc.,

472 U.S. 749 (1985), to create a new category of expression,

less deserving of First Amendment protection, based solely on

the D.C. Circuit’s belief that the expression “concern[ed] no

' No counsel for any party authored this brief in whole or in part.

Petitioner Trans Union is a member of the Coalition for Sensible Public

Records Access, but was not involved in the preparation of this brief. No

other persons other than the amicus curiae, its members, or its counsel, have

made a monetary contribution to its preparation or submission. The parties’

counsel have consented to the filing of this brief, and letters reflecting that

consent are submitted to the clerk's office with this brief.

2

public issue.” Trans Union II], 267 F.3d at 1140 (quotation

omitted). The court applied a defamation case involving false

and harmful expression-to determine the standard of First

Amendment protection applicable to Petitioner’s target

marketing lists, which involve accurate, lawfully obtained

information posing no threat of harm.

Second, the D.C. Circuit erroneously characterized

Petitioner’s target marketing lists as “solely of interest to the

company and its business customers,” Trans Union II, 245 F.3d

at 818, despite overwhelming evidence that those lists are of

significant interest to many U.S. consumers and businesses, and

have a considerable impact on the U.S. economy.

Third, the D.C. Circuit purported to apply to its new category

of expression the intermediate scrutiny traditionally reserved for

restrictions on commercial speech, even though the court did

not assert—much less demonstrate—that Petitioner’s

expression is commercial, and despite the Supreme Court’s

admonition in Dun & Bradstreet that “[w]e also do not hold. . .

that the report is subject to reduced constitutional protection

because it constitutes economic or commercial speech.” 472

U.S. at 762 n.8.

Fourth, while claiming to apply intermediate scrutiny, the

D.C. Circuit failed to find that the government had borne its

burden of proving that “the harms it recites are real and that its

restriction will in fact alleviate them to a material degree,” as it

was constitutionally required to do. Edenfield v. Fane, 507

U.S. 761, 770-71 (1993). In fact, the D.C. Circuit failed to find

that the Federal Trade Commission (“FTC” or “Commission’’)

had shown that the restriction served any interest, much less an

important or substantial one.

The D.C. Circuit’s decision threatens not only Petitioner’s

expression, but also the expression of the many businesses and

organizations that rely on Petitioner’s target marketing lists, and

myriad other valuable uses of accurate, lawfully obtained

information that undergird the information society. Given the

3

social and economic importance of these communications, the

First Amendment protection applicable to them is a matter of

great significance. Yet it is precisely these communications that

the FTC seeks to restrict and from which the D.C. Circuit

would withdraw constitutional protection. Because of the

sweeping application of the D.C. Circuit’s ill-founded “no

matter of public concern” standard and the vital First

Amendment interests at stake, the amicus curiae respectfully

urges the Supreme Court to grant the petition for writ of

certiorari.

ARGUMENT

I. BACKGROUND

In 1996, the D.C. Circuit determined that the FTC’s

application of the Fair Credit Reporting Act, 15 U.S.C. §§

1681, 168la-168lu (“FCRA”), to restrict Petitioner from

distributing target marketing lists presented “a serious First

Amendment claim.” Trans Union Corp. v. FTC, 81 F.3d 228,

235 (D.C. Cir. 1996) (“Trans Union I’)... The court

characterized the Commission’s approach as requiring an

“utterly wasteful expenditure of resources” and creating “what

looks like a mickey-mouse exception” which “may well

indicate a fatal lack of fit between the Act’s goals and the

FTC’s means of enforcement.” /d Rather than rule on the

constitutionality of the Commission’s action at that time,

however, the D.C. Circuit remanded the case “because of the

very serious doubt whether Trans Union’s lists are covered by

the Act at all.” Jd.

Five years later, a different panel of the same court found

that the First Amendment protection for Petitioner’s expression

had largely evaporated, because, the D.C. Circuit wrote, the

target marketing lists “concerned no public issue.” Trans Union

Il, 245 F.3d at 818 (quotation omitted). Relying solely on the

plurality opinion of this Court in Dun & Bradstreet, the D.C.

Circuit wrote: ,

4

Like the credit report in Dun & Bradstreet, which the

Supreme Court found “was speech solely in the interest

of the speaker and its specific business audience,” the

information about individual consumers and their credit

performance communicated by Trans Union target

marketing lists is solely of interest to the company and

its business customers and relates to no matter of public

concern.

Id. at 818 (quoting Dun & Bradstreet, 472 U.S. at 762)

(citations omitted). The D.C. Circuit, therefore, concluded that

Petitioner’s target marketing lists warranted “reduced

constitutional protection.” /d. (quotation omitted). Without

stating what that reduced level of protection was or citing any

evidence, the court determined that the FTC’s action met the

required standard, and so upheld the FTC’s decision prohibiting

Petitioner from communicating its lists without first obtaining

affirmative opt-in consumer consent. /d. at 819.

On petition for rehearing, the D.C. Circuit again asserted that

“(t]he important point is that here, as in Dun & Bradstreet, the

targeted speech solely interests the speaker (Trans Union) and

its ‘specific business audience’ (its customers).” Trans Union

111, 267 F.3d at 1140 (quoting Dun & Bradstreet, 472 U.S. at

762). The court, however, went further to cite this conclusion

as justification for ignoring Supreme Court cases that “struck

down privacy-based restrictions on the publication of truthful

information” and that required that restrictions on even

commercial speech be narrowly tailored. /d. at 1141 (quotation

omitted).

These errors threaten not only Petitioner’s expression and

that of the many businesses and organizations that rely on

Petitioner’s target marketing lists, but also meaningful First

Amendment protection for the myriad other valuable uses of

accurate, lawfully obtained information that undergird the

information society. As a result, this case warrants the Supreme

Court’s review.

5

Il. THE D.C. CIRCUIT ERRED IN APPLYING DUN

& BRADSTREET TO CREATE A “NO MATTER

OF PUBLIC CONCERN” STANDARD FOR

TRUE, LAWFULLY-OBTAINED EXPRESSION.

The D.C. Circuit’s application of Dun & Bradstreet to justify

“reduced constitutional protection” for Petitioner’s expression

misapplies this Court’s decision in that case, and ignores

extensive Supreme Court precedent.

The issue before the Court in Dun & Bradstreet was whether

the heightened constitutional protection that the Court had

applied to false and defamatory speech in New York Times Co.

v. Sullivan, 376 U.S. 254 (1964), and Gertz v. Robert Welch,

Inc., 418 U.S. 323 (1974), should be extended to a false and

defamatory credit report that was communicated under a

promise of confidentiality to five subscribers. 472 U.S. 751-53.

The erroneous information—that Greenmoss Builders had

declared bankruptcy—was, in the plurality’s words, not merely

“ “false,” but “grossly misrepresented respondent’s assets and

liabilities.” Jd. at 751. The potential for that information to be

used to harm Greenmoss Builders was obvious, and the severity

of the resulting harm had already been demonstrated to be great.

The Court’s conclusion that the speech was “solely in the

individual interest of the speaker and its specific business

audience,” id. at 762, was relevant only because of these

distinct features of the case. As the plurality in Dun &

Bradstreet wrote: “This particular interest [the protection of

false, defamatory expression] warrants no special protection

when—as in this case—the speech is wholly false and clearly

damaging to the victim’s business reputation.” /d.

In the present case, by contrast, there is no suggestion that

the expression involved is either false or defamatory. The

information contained in the lists provided by Petitioner—the

names and mailing addresses of consumers meeting basic

criteria (for example, the existence of two tradelines—i.e.,

credit cards or revolving credit accounts, Trans Union I, 81

6

F.3d at 229-30)}—poses no risk of harm to consumers. A

consumer receiving an offer in which he or she is not interested

can simply discard it, as this Court has repeatedly noted.’ There

is no suggestion that the information was or could be

defamatory, embarrassing, or harmful in any way.

In addition, Dun & Bradstreet involved the distribution of

detailed information about a business to subscribers who sought

the data to determine whether or not to engage in a specific

business transaction with the subject of the credit report.

Target marketing lists, by contrast, work in almost the

opposite way. Petitioner’s customers specify certain broad

criteria, and Petitioner provides a list of consumers meeting

those criic:-4. Information is not sought about a specific

consumer. The customer then uses that information solely for

the purpose of communicating with those consumers. The

information is essential to the communication.

In sum, unlike the situation in Dun & Bradstreet, this case

does not involve information sought about a specific consumer,

the information that is revealed by the presence of a name on a

list is very general and poses little if any risk of harm, the

information is accurate, and Petitioner communicates it to its

customers so that they can use the information to communicate

with individual consumers.

In this context, amicus curiae respectfully submits that the

D.C. Circuit was wrong to conclude that this case is controlled

by Dun & Bradstreet or that the plurality opinion there

justifies, much less mandates, a lower standard of First

Amendment scrutiny of true, lawfully obtained lists of

consumer names and addresses. The D.C. Circuit ignored this

Court’s admonition that “the general rule is that the speaker and

the audience, not the government, assess the value of the

information presented.” Edenfield, 507 U.S. at 767.

? Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 72 (1983); see also

Edenfield, 507 U.S. at 776.

7

The D.C. Circuit’s error threatens a wide range of speech

that, under this Court’s First Amendment jurisprudence, should

receive full First Amendment protection. The expression put at

risk by application of a “no matter of public concern” standard

includes “the newspaper that discusses business affairs, almost

entirely in order to make money by helping its readers do well

in business,” the “product review written by its author because

he wants to be paid, published by the newspaper because it

wants to keep its paying subscribers, and read by readers

because they want to know how to best spend their money,” and

the “union buying TV ads urging people to ‘Buy American’

because that’s the best way of maintaining the viewers’ (and the

union members’) standard of living.” Eugene Volokh, Freedom

of Speech and Information Privacy: The Troubling

Implications of a Right to Stop People From Speaking About

You, 52 STAN. L. REV. 1049, 1081-82 (2000).

The D.C. Circuit’s willingness to reduce the standard of First

Amendment protection for expression that it believes addresses

“no matter of public concern” ignores the precedents of this

Court and threatens a wide array of heretofore fully protected

expression. Review by the Supreme Court is urgently needed.

Il, THE D.C. CIRCUIT ERRED IN_ ITS

ASSUMPTION THAT TARGET MARKETING

LISTS ARE OF “NO PUBLIC CONCERN.”

The D.C. Circuit also erred in its factual assumption that

Petitioner’s target marketing lists are “solely in the [individual]

interest of the speaker and its specific business audience.”

Trans Union II, 245 F.3d at 818 (quotation omitted).

Trans Union prepares target marketing lists for many

purposes. For example, the record below shows that Petitioner

has provided lists to the Republican National Committee so that

it might solicit campaign contributions (A084 1-46, A2376-77),°

> Citations to“A__” refer to the joint appendix in the D.C. Circuit.

and to the United Way so that it might solicit charitable

donations (A2376). It is simply incorrect to characterize these

communications as being “solely in the [individual] interest of

the speaker and its specific business audience” and “relat[ing]

to no matter of public concern,” Trans Union II, 245 F.3d at

818 (quotation omitted), or to subject restrictions on those

communications to less than full First Amendment scrutiny.

Petitioner also communicates lists of consumers to

businesses so that they can market products and services. More

than two-thirds of U.S. consumers—132 million adults—take

advantage of direct marketing opportunities each year. DIRECT

MARKETING ASSOCIATION, ECONOMIC IMPACT: U.S. DIRECT

MARKETING Topay (Sth ed., 2000). In 2000, target marketing

lists like those supplied by Petitioner generated $584 billion in

sales to consumers—eight percent of all consumer sales. /d.

Petitioner’s target marketing lists benefit more than just the

businesses that use those lists to communicate with consumers

and the 132 million consumers who respond to those

communications each year. As Federal Reserve Board

Governor Edward Gramlich testified before Congress in July

1999, “[i]nformation about individuals’ needs and preferences

is the cornerstone of any system that allocates goods and

services within an economy,” and the more such information is

available, “the more accurately and efficiently will the economy

meet those needs and preferences.” Financial Privacy,

Hearings Before the Subcomm. on Financial Institutions and

Consumer Credit of the House Comm. on Banking and

' Financial Services, 106th Cong. (July 21, 1999) (statement of

Edward M. Gramlich).

Targeted lists, like Petitioner’s, make it possible for political

parties, charitable organizations, and businesses to

communicate directly to precisely those consumers who are

most likely to be interested in the communications. This

generates substantial benefits to the public. Target marketing

lists increase the likelihood that only people likely to be

9

interested in an offer get one. This means that fewer people

who are not likely to be interested receive one, thereby saving

the business and its customers money, reducing unwanted mail

(and the environmental waste it involves), and minimizing the

burden on consumers having to sort through solicitations in

which they clearly have no interest. This also means a higher

response rate so the business, political party, or charity

generates more revenue for every dollar it invests in the

solicitation.

Target marketing lists benefit consumers in other ways as

well. For consumers who are interested, they get an offer (often

with a coupon or other discount) that they can use. The offer

can be better (the product or service cheaper, or the discount

greater) because of the precision with which it can be tailored.

That tailoring is based on demonstrated preferences, not

intrusive or time-consuming questioning or broad

generalizations. Consumers also benefit from the increased

competition and product specialization and innovation that

target marketing makes possible.

It is simply untrue to assert that these communications are

“solely in the [individual] interest of the speaker.” Trans Union

11, 245 F.3d at 818 (quotation omitted). Quite the contrary: the

efficient targeting of marketing lists is of interest to all

consumers. As the Federal Reserve Board has noted, “it is the

freedom to speak, supported by the availability of information

and the free-flow of data, that is the cornerstone of a democratic

society and market economy.” BOARD OF GOVERNORS OF THE

FEDERAL RESERVE SYSTEM, REPORT TO THE CONGRESS

CONCERNING THE AVAILABILITY OF CONSUMER IDENTIFYING |

INFORMATION AND FINANCIAL FRAUD 2 (1997). The D.C.

Circuit’s decision upholding the FTC’s restriction on

Petitioner’s expression, “threatens societal interests in broad

access to complete and accurate commercial information that

First Amendment coverage of commercial speech is designed to

safeguard.” Edenfield, 507 U.S. at 766. The decision warrants

10

review by the Supreme Court.

IV. THE D.C. CIRCUIT ERRED IN APPLYING THE

CENTRAL HUDSON COMMERCIAL SPEECH

TEST TO PETITIONER’S EXPRESSION.

Although the D.C. Circuit based its decision to deny full

First Amendment protection to Petitioner’s expression on its

assumption that the expression addressed “no matter of public

concern,” Trans Union II, 245 F.3d at 818, the court applied the

First Amendment scrutiny developed by this Court in Central

Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S.

557, 566 (1980), and traditionally reserved only for reviewing

restrictions on commercial expression.

Petitioner communicates the names and contact information

of consumers meeting general selection criteria to its customers.

This expression in no way “propose[s] a commercial

transaction,” as this Court has consistently required throughout

the past decade as a condition for applying the intermediate

scrutiny of Central Hudson. 44 Liquormart, Inc. v. Rhode

Island, 517 U.S. 484, 504 (1996) (quotation omitted); see also

Rubin v. Coors Brewing Co., 514 U.S. 476, 482 (1995); United

States v. Edge Broad. Co., 509 U.S. 418, 426 (1993); City of

Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 421

(1993). In fact, in Dun & Bradstreet itself, the Court

specifically clarified that its decision was not intended to reduce

the First Amendment protection afforded to credit reports: “We

also do not hold . . . that the report is subject to reduced

constitutional protection because it constitutes economic or

commercial speech.” 472 U.S. at 762 n.8.

While, as noted above, many customers use the information

they receive from Petitioner to send commercial solicitations to

individual consumers, this does not make Petitioner’s

expression commercial speech, any more than a reader acting

on information he or she has read in a newspaper makes the

newspaper commercial speech.

Moreover, the nature and purpose of communications that

rely on Petitioner’s target marketing lists vary widely. The

communications seeking political and charitable contributions

that relied on lists provided by Petitioner (A0841-46, A2376-

77) are in no sense commercial, but they are impeded, if not

effectively prohibited, by the restrictions on Petitioner’s

expression that the D.C. Circuit reviewed under intermediate

scrutiny.

This contributes to explaining the importance of this case:

The FTC’s interpretation of the FCRA actually restrains two

separate communications: (1) the communication by Petitioner

of the list of names (and related contact information) meeting

the customer’s parameters; and (2) the customer’s

communication to the individuals whose names are contained

on the list. By prohibiting Petitioner from communicating its

lists, the Commission is restricting not only Petitioner’s

expression, but also that of its customers.

The D.C. Circuit’s error is a significant one because it

misstates the First Amendment standard of review applicable to

a wide range of true, lawfully-obtained information that is used

for communicating important information to consumers.

Businesses, political parties, charities, and religious and

fraternal groups all rely on computerized information, often

obtained from third parties, to contact consumers, solicit

members, motivate public interest, and serve other valuable

needs of the organizations and of the public. The breadth of the

D.C. Circuit’s opinion, and the fact that is not grounded in any

existing precedent, threatens a wide array of expression.

Already, the United States District Court for the District of

Columbia has cited the D.C. Circuit’s erroneous statement as to

the sway of Dun & Bradstreet in a decision reviewing the

Gramm-Leach-Bliley Financial Services Modernization Act.

Individual Reference Servs. Group v. FTC, 145 F. Supp. 2d 6,

40-41 (D.D.C.), appeal filed, No. 01-5202 (D.C. Cir. 2001).

The magnitude of this threat justifies review by this Court.

12

V. THE D.C. CIRCUIT ERRED IN _ ITS

APPLICATION OF INTERMEDIATE SCRUTINY.

A. The Court Did Not Require the Government To

Demonstrate Either a Substantial Interest or

That the Restraint on Petitioner’s Expression

Was Narrowly Tailored.

Even if the First Amendment standard of review applicable

to commercial speech were applicable here, the D.C. Circuit

established a new, emaciated version of that standard that

conflicts with decisions of this Court.

Under this Court’s precedents, the D.C. Circuit was

obligated to determine whether the government’s interest in

restricting Petitioner from communicating its target marketing

lists was “substantial, whether the challenged regulation

advances these interests in a direct and material way, and

whether the extent of the restriction on protected speech is in

reasonable proportion to the interests served.” Edenfield, 507

U.S. at 767.

This Court has repeatedly stressed that “[iJt is well

established that ‘[t}he party seeking to uphold a restriction on

commercial speech carries the burden of justifying it,” and that

“{t}his burden is not satisfied by mere speculation or

conjecture.” /d. at 770 (quotation and citation omitted). “[A]

governmental body seeking to sustain a restriction on

commercial speech must demonstrate that the harms it recites

are real and that its restriction will in fact alleviate them to a

material degree.” /d at 770-71. This necessarily requires a

“carefulf] calculat{ion of] the costs and benefits associated with

the burden on speech imposed by its ibition.” Cincinnati,

507 U.S. at 417 (quotation omitted)." -

* See also Board of Trustees v. Fox, 492 U.S. 469, 480 (1989);

Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 648-49 (1985);

Bolger, 463 U.S. at 71 n.20, 73-74; In re R MJ, 455 U.S. 191, 205-06

(1982); Central Hudson, 447 U.S. at 569-71; Friedman v. Rogers, 440 U.S.

i

13

The D.C. Circuit wholly failed to perform the “careful

calculation” required by this Court. As evidence of the

substantiality of the governments interest the court offered only

one sentence: “The ‘Congressional findings and statement of

purpose’ at the beginning of the FCRA state: ‘There is a need

to insure that consumer reporting agencies exercise their grave

responsibilities with . . . respect for the consumer’s right to

privacy.” Trans Union II, 245 F.3d at 818 (quoting 15 U.S.C.

§ 1681(a)(4)). This one line constitutes the court’s entire

discussion of the importance of the interest being served by the

Commission’s ban on Petitioner’s expression. This cannot

meet the standard required by the Supreme Court.

The D.C. Circuit's analysis in Trans Union II of the link

between the Commission’s ban and the purpose it is alleged to

serve similarly ignored Supreme Court precedent. In fact, that

analysis consists entirely of negative statements excusing the

ill-fit between means and objective: “Congress had no

obligation to choose the least restrictive means of

accomplishing its goal,” id. at 819; “neither a perfect nor even

the best available fit between means and ends is required,” id

(quotation omitted). The D.C. Circuit clearly states what the

FTC’s ban is not, but it gives no indication of whether the ban

satisfies the standard set forth by this Court.

In its denial of a Petitioner’s petition for rehearing, the D.C.

Circuit asserted—for the first time—that the Commission’s ban

“unquestionably advances the identified state interest.” Trans

Union IIl, 267 F.3d at 1141. Unfortunately, without a clearer

understanding of what the state’s interest is and in the absence

of any explanation by the court, it is difficult to know how the

D.C. Circuit reached this conclusion.

1, 13-16 (1979); Linmark Assocs., Inc. v. Township of Willingboro, 431 U.S.

85, 95 (1977).

14

B. The Restriction on Petitioner’s Expression Fails

To Serve Any Plausible Interest.

The D.C. Circuit’s quotation from the FCRA about a

““consumer’s right to privacy,” Trans Union II, 245 F.3d at

818 (quoting 15 U.S.C. § 1681(a)(4)), suggests two possible

interests the FTC might assert its restriction on Petitioner's

expression serves. One is protecting consumers from the

disclosure of information contained in target marketing lists.

The only information conveyed, however, is name, address, and

the fact that the individual meets certain broad criteria, such as

possessing two or more credit cards. This information is either

inherently public or readily observable, and, in any event, poses

little if any risk of harm to consumers. Moreover, under the

FCRA, Petitioner is free to convey this information and much

more detailed financial information to its customers, without

obtaining individual consent, for the purpose of sending

prescreened credit and insurance offers. 15 U.S.C. § 1681m.

How can the far more limited information communicated about

a customer in a target marketing list constitute a violation of his

or her privacy rights?

Moreover, Petitioner provides its customers with target

marketing lists for the sole purpose of enabling those customers

to communicate with the consumers whose names are on the

list. The information cannot be used for any other purpose.

What privacy right is at stake and how does the communication

of these lists offend it? The Court, citing to a long line of prior

decisions, reasserted this past spring “that absent exceptional

circumstances, reputational interests alone cannot justify the

proscription of truthful speech.” Bartnicki v. Vopper, 532 U.S.

514, 534 n.21 (2001) (quotation omitted).

This was the view of the Tenth Circuit in U.S. West, Inc. v.

FCC, when it struck down Federal Communication

Commission rules requiring that telephone companies obtain

opt-in consent before using data about customers’ calling

patterns to market products or services to them. 182 F.3d 1224

15

(10th Cir. 1999), cert. denied, $28 U.S. 1188 (2000). The

Tenth Circuit wrote that the government must show that the

information the law would protect as private would inflict

“specific and significant harm on individuals,” and that:

Although we may feel uncomfortable knowing that our

personal information is circulating in the world, we live

in an open society where information may usually pass

freely. A general level of discomfort from knowing that

people can readily access information about us ¢es not

necessarily rise to the level of a substantial state terest

under Central Hudson for it is not based on an

identified harm.

Id. at 1235. The D.C. Circuit’s decision conflicts directly with

this Tenth Circuit case.

The other possible privacy interest that the government

might assert is to protect individual consumers from receiving

unsolicited communications—commercial or otherwise. This

Court, however, has consistently rejected the claim that

unsolicited communications constitute a meaningful harm or

warrant government restrictions on expression. Even if

commercial (and only a portion of those communications

facilitated by Petitioner’s target marketing lists are), this Court

has written: “If they are unreceptive to his initial telephone

solicitation, they need only terminate the call. Invasion of

privacy is not a significant concern.” Edenfield, 507 U.S. at

776. As this Court stated in Bolger: “Recipients of

objectionable mailings . . . may effectively avoid further

bombardment of their sensibilities simply by averting their

eyes.” 463 U.S. at 72 (quotation omitted). “[T]he short, though

regular, journey from mail box to trash can . . . is an acceptable

burden, at least so far as the Constitution is concerned.” /d

(quotation omitted). “{W]je have never held that the

Government itself can shut off the flow of mailings to protect

those recipients who might potentially be offended.” /d Yet

16

this is precisely what the D.C. Circuit has permitted the FTC to

do. .

Consumer behavior seems to reflect the Court’s view: fewer

than three percent of consumers take advantage of opportunities

to opt out of target marketing that have existed for more than

thirty years.’ In sum, it is impossible to discern what

constitutionally cognizable harm the D.C. Circuit believes the

FTC is preventing by restricting Petitioner's expression.

C. The D.C. Circuit Ignored the Fact That Opt-Out

Is Substantially Less Restrictive of Petitioner’s

Expression Than Opt-In.

The D.C. Circuit disregarded its constitutional obligation,

under the intermediate scrutiny standard it chose to apply, to

ensure that the restraint on Petitioner’s expression was narrowly

tailored. The court rejected Petitioner’s argument that an opt-

out system would be substantially less burdensome than an opt-

in system, with the cursory observation that “[a]lthough the opt-

in scheme may limit more Trans Union speech than would the

opt-out scheme the company prefers, intermediate scrutiny does

not obligate courts to invalidate a ‘remedial scheme because

some alternative solution is marginally less intrusive on a

speaker’s First Amendment interests."” Trans Union III, 267

* Since 1971, the Direct Marketing Association (“DMA”) has operated

the Mail Preference Service (and, more recently, the Telephone Preference

Service and now the E-Mail Preference Service). With a single request to

each, it is possible to be removed from most DMA-member company

mailing, telephone, and e-mail solicitation lists. The DMA reports, however,

that less than three percent of the U.S. adult population use the service.

Financial Privacy, Hearings Before the Subcomm. on Financial Institutions

and Consumer Credit of the House Comm. on Banking and Financial

Services, 106th Cong. (July 20, 1999) (statement of Richard A. Barton).

Financial institutions, retailers, and other businesses report similar or lower

figures for their opt-out programs. Privacy, Hearings Before the Senate

Comm. on Commerce, 107th Cong. (July 11, 2001) [hereinafter Privacy}

(statement of Fred H. Cate).

17

F.3d at 1143 (quoting Turner Broad. Sys., Inc. v. FCC, 520

U.S. 180, 217-18 (1997)).

The court’s characterization of “opt-out” (under which

consumers who do not want credit report information used in

the creation of target marketing lists would express their

objection) as “marginally less intrusive” on Petitioner’s First

Amendment-protected expression than “opt-in” (under which

consumers who do want their credit report information used in

the creation of target marketing lists would express their

consent) is not merely unsupported, but ignores the hostility

that the Supreme Court has shown to conditioning expression

on opt-in consent. This Court has struck down ordinances that

would require affirmative consent before receiving door-to-door

solicitations, Martin v. Struthers, 319 U.S. 141 (1943), before

receiving Communist literature, Lamont v. Postmaster General,

381 U.S. 301 (1965), even before receiving “patently offensive”

cable programming, Denver Area Educ. Telecomm.

Consortium, Inc. v. FCC, 518 U.S. 727 (1996). Yet this is

precisely what the FTC wishes to require Petitioner to obtain

before it communicates its target marketing lists.

This Court’s decision in Edenfield, striking down a Florida

opt-in law applicable to commercial solicitations by certified

public accountants, is directly on point: “In the commercial

context, solicitation may have considerable value ... .

Florida’s law threatens societal interests in broad access to

complete and accurate commercial information that First

Amendment coverage of commercial speech is designed to

safeguard.” 507 U.S. at 766.

The D.C. Circuit also ignored the wealth of research

demonstrating that it is far more expensive, and often

impossible, for a potential user of information to obtain

consumer consent for a use of information that the user already

possesses.° U.S. West, one of the few U.S. companies to use an

® See, e.g., MICHAEL A. TURNER & LAWRENCE G. BUC, THE IMPACT OF

DATA RESTRICTIONS ON FUNDRAISING FOR CHARITABLE & NONPROFIT

’

18

opt-in system, found that to obtain permission to use

information about its customer’s calling patterns to market

services to them required an average of 4.8 calls to each

customer household before the company reached an adult who

could grant consent. Brief for Petitioner and Intervenors at 15-

16, U.S. West, 182 F.3d 1224 (No. 98-9518). In one-third of

households called by U.S. West, the company never reached the

customer, despite repeated attempts. /d Mailed solicitations

for opt-in consent are no more likely to reach consumers. The

U.S. Post Office reports that fifty-two percent of unsolicited

mail in this country is discarded without ever being read.

Briefs, CIRCULATION MGmT., May 1999.

It is also more expensive for businesses to contact each

consumer individually to seek consent to use information than

for consumers to take advantage of existing business phone

lines and customers service centers to opt out. U.S. West found

that to obtain permission to use information about its

customers’ calling patterns to market services to them cost

almost $30 per customer contacted. Brief for Petitioner and

Intervenors at 15-16, U.S. West, 182 F.3d 1224 (No. 98-9518).

And while U.S. West was contacting its own customers, with

whom it already had an on-going relationship, Petitioner would

be contacting people with whom it had no direct relationship.

INSTITUTIONS (2002); MICHAEL E. STATEN & FRED H. CATE, THE IMPACT OF

Opt-IN PRIVACY RULES ON RETAIL CREDIT MARKETS: A CASE STUDY OF

MBNA (2001); JOHN M. BARRON & MICHAEL E. STATEN, THE VALUE OF

COMPREHENSIVE CREDIT REPORTING: LESSONS FROM THE US EXPERIENCE

(2001); FRED H. CATE, OPT-IN EXPOSED (2001); MICHAEL A. TURNER, THE

IMPACT OF DATA RESTRICTIONS ON CATALOG AND INTERNET APPAREL

RETAILERS (2001); CYNTHIA GLASSMAN, CUSTOMER BENEFITS FROM

CURRENT INFORMATION SHARING BY FINANCIAL SERVICES COMPANIES

(2000); FRED H. CATE & MICHAEL E. STATEN, PROTECTING PRIVACY IN THE

NEW MILLENNIUM: THE FALLACY OF “OPT-IN” (2000); ROBERT E. LITAN,

BALANCING COSTS AND BENEFITS OF NEW PRIVACY MANDATES (1999);

WALTER KITCHENMAN, US CREDIT REPORTING: PERCEIVED BENEFITS

OUTWEIGH PRIVACY CONCERNS (1999).

19

This explains why much of the research on opt-in highlights the

special burdens opt-in imposes on new market entrants and the

development of new products and services by “rais[ing] barriers

to entry by smaller, and often more innovative, firms and

organizations.” LITAN, supra note 6, at 4-5.

The presumption of opt-in that consumers do not wish to be

contacted is unwarranted in light of the fact that two-thirds of

American consumers make purchases in response to targeted

offers, and fewer than three percent take advantage of

opportunities to opt out. Privacy, supra note 5, (statement of

Fred H. Cate).

The costs, inconvenience, and economic impact of opt-in

appear all the more unjustified in view of the Court’s

characterization of the privacy interests at stake as “not a

significant concern.” Edenfield, 507 U.S. at 776. This may

explain why opt-in is used so rarely in U.S. law. In the FCRA,

for example, Co required that consumer reporting

agencies like Petitioner give consumers an opportunity to opt

out—not opt in—to the processing of their most intimate

financial information for the purpose of sending firm offers of

credit or insurance. 15 U.S.C. § 1681m.

The D.C. Circuit ignored both legal precedent and extensive

research and practical experience to conclude that opt-out was

only “marginally less intrusive” on Petitioner’s “First

Amendment interests” than opt-in. Trans Union III, 267 F.3d at

1143 (quotation omitted). Most significantly, the D.C. Circuit

identified no evidence at all for its conclusion that the FTC’s

restriction on Petitioner’s expression was sufficiently narrowly

tailored. The D.C. Circuit’s silence conirasts starkly with the

evidence on which the Supreme Court relied in Florida Bar v.

Went For It, Inc., 515 U.S. 618 (1995), to uphold a Florida law

restricting attorney solicitations. In that case, involving only a

temporary restriction on solicitation of accident victims by

licensed members of the bar, the Court cited to a “106-page

summary of [the Florida Bar’s] 2-year study of lawyer

20

advertising and solicitation” and an “anecdotal record . . .

noteworthy for its breadth and detail.” /d at 626-27.

The existence of a widely used, less restrictive alternative to

opt-in casts substantial doubt on whether the FTC’s restriction

on Petitioner’s expression is narrowly tailored to serve a

substantial interest.

The D.C. Circuit’s failure to require the government to

demonstrate that “the harms it recites are real and that its

restriction will in fact alleviate them to a material degree,” as

required by this Court, Edenfield, 507 U.S. at 771, threatens not

only Petitioner’s expression, and that of its customers, but also

that of similarly situated organizations that communicate

information about consumers. . Those communications

undergird a substantial part of American commerce; they are

valuable to consumers, businesses, and political and charitable

organizations alike. They warrant, and under this Court’s

precedents are guaranteed, greater constitutional protection than

that afforded them by the D.C. Circuit.

CONCLUSION

Because of the vital First Amendment interests at stake in the

D.C. Circuit’s application of a novel and sweeping “no matter

of public concern” standard, and the broad social and economic

importance of the information that the FTC seeks to restrict, the

amicus curiae respectfully urges the Supreme Court to grant the

petition for writ of certiorari.

Respectfully submitted,

LUCINDA MINTON LANGWORTHY

(Counsel of Record)

FRED H. CATE

HUNTON & WILLIAMS

1900 K Street, N.W.

Washington, D.C. 20006-1109

(202) 955-1500

February 25, 2002 Counsel for Amicus Curiae