Why You Should Care That All FCC Settlements Must Now Go Through Full Commission Vote

Image courtesy of FCC

New FCC chair Ajit Pai is a very busy man. After only a few weeks sitting behind the big desk, he’s killed off cable set-top box reform, abandoned rate caps on prison calls, scuttled Lifeline expansion, and decided violating net neutrality (which he hates) through zero-rating is officially not the FCC’s problem. Having accomplished all those goals, Pai is now targeting the Commission’s Enforcement Bureau, potentially making it more difficult to hold wrongdoing telecom companies accountable.

In a statement [PDF] made this afternoon, the chairman lays out an ostensibly banal piece of FCC procedural change that, in reality, has wide-sweeping implications.

When a telecommunications company does something in violation of the Communications Act, the FCC has jurisdiction to investigate, and potentially penalize, that company’s actions. The Enforcement Bureau is the division of the Commission that, as you’d guess, enforces its rules and the law.

Enforcement is a critical part of having a law in the first place: If there’s no penalty for violating a law, then it may as well not exist.

When the Enforcement Bureau reaches the conclusion of an investigation, it issues something called a Notice of Apparent Liability for Forfeiture (NAL), that says what it found and what it suggests the penalty should be. For example, that’s the kind of ruling the Commission issued last year when it accused AT&T of ripping off Florida schools with overpriced phone service.

The Enforcement Bureau and the companies or individuals it accuses of wrongdoing are able to enter into settlements, called consent decrees. Those usually involve Company A promising to stop doing the thing, and possibly paying some kind of fine or redress, in exchange for the Commission dropping its investigation.

After the Commission votes to issue an NAL, the Enforcement Bureau can then go ahead and reach a settlement without bringing it to the full table yet again. It only requires the sign-off of the Bureau’s boss — until now, that is.

That’s the part Pai is changing today.

“If Commissioners vote to propose and/or impose a forfeiture, the Enforcement Bureau should not settle that matter without their approval,” the Chair writes. “Therefore, I have instructed the Enforcement Bureau that starting today, any consent decree settling a Notice of Apparent Liability or Forfeiture Order issued by the full Commission must now be approved by a vote of the full Commission. This will help promote Commissioners’ involvement in and accountability for important enforcement decisions.”

This may sound like Commission inside baseball, and to a degree it is, but it comes with a nasty side effect: Reaching settlements, and issuing fines, just got a lot harder.

There are basically two main obstacles now standing in the way of getting consent decrees approved: temperament and time.

The first challenge is that FCC commissioners agree on very little, these days. During the last few years of former chair Tom Wheeler’s tenure, a large share of votes passed 3-2, split on party lines, with oral and written dissents from Republican commissioners Pai and Michael O’Rielly growing increasingly contentious.

Pai is a very pro-business chairman, and O’Rielly and any future third Republican commissioner are likely to follow his lead. That means getting a majority of commissioners to agree on some rulings that claim a private business was out of line will likely be an uphill battle.

In turn, then, the Enforcement Bureau may be less inclined to bother investigating or pursuing some cases, if they know from the start the boss will likely not allow a strict final settlement to move forward.

As for the time factor, the Enforcement Bureau is constrained by a surprisingly tight limit: By law, the FCC only has one year to investigate and issue an NAL on basically anything.

Specifically, the law says that “No forfeiture penalty shall be determined or imposed against any person … if the violation charged occurred more than 1 year prior to the date of issuance of the required notice or notice of apparent liability.”

Basically, that means that if a company does some kind of unlawful thing on May 1, 2016, the FCC has until May 1, 2017 to issue an NAL about it. There is some wiggle room based on who discovers what, when, but in general, the Commission has a year to get its investigation done and issue a Notice before the statute of limitations runs out.

Pai’s order today did not change the time frame on how long the FCC has to issue a NAL, nor did it change the process for adopting one. But the NAL itself is not the final settlement or fine; that comes later.

A company can appeal an NAL (again, like AT&T did last year), and then that basically becomes a back-and-forth legal process like so many others.

The more obstacles and road blocks that exist in the process, then, the longer it takes to overcome. If the full Commission has to vote on something, that vote can be delayed until such time as the chairman sees fit to bring it up.

So rather than being motivated to reach a settlement and make the problem go away, companies may now be motivated to dither until such time as it becomes clear the chair will never insist a settlement be reached.

We can’t say for certain whether a Pai-led FCC will indeed take a slow-motion approach to enforcement, but today’s announcement certainly raises questions about the Commission’s commitment to holding companies accountable.

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