CommLaw Attorney Interviewed for Recent Law360 Article – Mammoth FCC Fines Draw Flak Amid Push For GAO Probe


Mammoth FCC Fines Draw Flak Amid Push For GAO Probe

Law360, Washington (October 28, 2015, 5:38 PM ET) — A recent letter from Congress urging the Government Accountability Office to review the Federal Communications Commission’s oversight of its enforcement arm is unlikely to produce much change, but attorneys said the FCC should alter its apparent strategy of levying large fines to encourage compliance.

Republican members of the House Energy and Commerce Committee urged the GAO to review the FCC’s enforcement bureau, noting that the FCC appears to have failed to implement the improvements in collection and analysis of data that the GAO recommended in 2008 to help measure the performance of the bureau. Attorneys said it’s unlikely a second go-around will have an impact even though the review will touch on one of the most pressing issues in enforcement of late: record-setting fines.

“Congress, working through GAO, is trying to get through to management over at the FCC regarding the need to do more than just hit people over the head with these flashy, massive penalties,” said Jonathan Marashlian, managing partner at communications-focused Marashlian & Donahue PLLC. “There’s really no evidence that the current approach to enforcement is leading to any demonstrable improvement in the overall compliance of the industry with respect to whatever issue the commission is using a hammer to drive home its point.”

The FCC leveled a record-setting $100 million proposed fine against AT&T this summer over the company’s throttling of data in its unlimited plans, and it followed it up with other multimillion-dollar actions against other companies.

The GOP letter instructs the GAO to determine how the FCC measures the effectiveness of its enforcement program, and it questions whether the agency put into place previous recommendations to implement performance measures and performance goals.

An FCC spokesman has said the agency looks forward to working with the GAO on its review of the enforcement bureau activities.

“It’s very difficult to regulate competition, so you have to have a certain degree of empathy for commission, but you can see where the Republican Party is going with their letter to the FCC,” Marashlian said. “They want to see some metrics being utilized, to use data to demonstrate that the methods currently in use by the commission are actually having a positive effect.”

How to measure effective enforcement is another matter. According to the letter, the FCC assesses the performance of the enforcement bureau by the total number and monetary value of enforcement actions on a year-to-year basis, an approach the Republicans indicated was lacking. But experts say it could be difficult to find an adequate metric.

“I’m not sure how you do that — what metric you use given the range of activities the enforcement bureau can and should be looking out for,” said Harry Cole of Fletcher Heald & Hildreth.

Squire Patton Boggs attorney Koyulyn K. Miller also acknowledged that it’s difficult to evaluate the metrics for success of the enforcement arm, unless you are able to also measure whether noncompliance in any given area is actually decreasing as a result of commission action. 

“That is something which, generally, is very difficult to measure over a short period of time,” said Miller, a former special counsel to the chief of the FCC’s enforcement bureau. “At the same time, in an age of increased fines and disciplinary actions, the public — industry, consumers and Congress — need to know that the bureau’s actions are deterring bad behavior and are not just punitive for the sake of punishment.”

Some attorneys wonder if those high fines are actually having the opposite effect on compliance. Marashlian said rather than encouraging compliance, the fines may cause companies to try to stay “under the radar” until there is a regime change at the commission.

“You’re not creating any incentives for business to come forward, to clean up, to pay a penalty if they’ve had an unintentional violation,” Marashlian said.

The real incentive for larger companies to comply with the rules may lie more with keeping a clean regulatory record than in avoiding fines, which could be considered a cost of doing business, Cole said.

“At some point they’re going to want the FCC to give them something,” Cole said. “If they have a record that indicates they’re a bad citizen, that’s not a useful thing to have in the record when you go hat in hand to the agency and say, ‘Let me buy my biggest competitor.’”

There are ways to show the FCC fines are having an impact, Marashlian said. The agency could look at whether regulatory filings or certifications related to a particular regulatory issue manifest a material change in the aftermath of an enforcement bureau action, he said.

“At present, there is no data, no metrics to actually prove if this belief holds true, but there are ways that the FCC could do it,” Marashlian said. “For whatever program you’re trying to enforce, there has to be some corresponding filing, registration or report filied by companies operating in the industry.  And by analyzing this data, you can see the trends.”

The GOP letter noted that there are more than a million Telephone Consumer Protection Act consumer complaints, but the number of citations has fallen from 261 in 2009 to four in 2013. The letter also questioned the decreasing number of enforcement actions against pirate radio operators.

Steven Augustino, a partner at Kelley Drye & Warren LLP who focuses on telecommunications and enforcement matters, said that it’s not necessarily a negative outcome if the FCC opens an investigation but decides to take no enforcement action based on the information it learns from the investigation.

The letter instructed the GAO to determine if the enforcement bureau is accomplishing its goals of consumer protection, public safety and promoting competition, and if changes should be made to hold FCC leadership accountable.

A spokeswoman for the GAO said Wednesday the agency received the request and will review it next week.

Augustino said such oversight is fairly commonplace when one party controls Congress and the other controls the White House.

“They have a great incentive to scrutinize the processes at the FCC as a way of putting some kind of a check on the policy direction of the commission,” Augustino said.

Part of the criticism in the letter is that, from Congress’ view, the FCC has failed to implement the changes the GAO recommended in its prior review. That could be an indicator for the impact of this review, Cole said.

“Seven years ago GAO hit them with recommendations, and not much has happened since then,” Cole said. “And I doubt seriously anything is going to happen with this.”

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