Enforcement Newsletter – January 7, 2015
- The FCC Enforcement Bureau, the Federal Trade Commission (“FTC”), and Attorneys General from all 50 states and the District of Columbia entered into “global” settlements with AT&T Mobility and T-Mobile to resolve allegations that the carriers charged customers for third-party products and services that the consumers did not authorize (a practice known as “cramming”) as well as, with respect to the FCC, allegations that the carriers violated the truth-in-billing rules by not clearly disclosing the charges on their bills.
- The AT&T global settlement had a value of $105 million: (1) an $80 million payment to be distributed by the FTC for consumer redress; (2) a $20 million payment to state Attorneys General; and (3) a $5 million FCC-related payment to the U.S. Treasury.
- The T-Mobile global settlement had a value of at least $90 million: (a) a payment to consumers or the FTC of at least $67.5 million, of which, depending on the circumstances, $37.5 million may be in the form of debt relief for former customers; (2) an $18 million payment to state Attorneys General; and (3) a $4.5 million FCC-related payment to the U.S. Treasury.
- Both global settlements involved various compliance commitments.
- There is an open question about FTC jurisdiction regarding carriers’ billing for third parties given that the FTC’s jurisdiction over unfair and deceptive practices under Section 5 of the FTC Act does not cover common carriers subject to the Communications Act and the FCC regulates carrier’s billing for third parties under Section 201(b) of the Communications Act, which applies only to common carriage.
- The Consumer Financial Protection Board brought a cramming complaint against Sprint in U.S. district court, claiming that Sprint violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair practices in connection with extending credit to, and processing payments for, consumers for goods and services that Sprint does not directly sell or that consumers do not directly purchase from Sprint. There have been press reports that the FCC is planning to issue a Notice of Apparent Liability for Forfeiture (“NAL”) against Sprint relating to cramming.
- The FCC issued a $10 million NAL against two related common carriers for privacy and data security-related violations of Sections 201(b) and 222(a) of the Communications Act. The alleged violations are unrelated to Customer Proprietary Network Information (“CPNI”), which has been the historic focus of the FCC’s attention regarding common carrier privacy issues. The FCC asserted that the companies apparently: (1) violated Section 222(a) by failing to properly protect the confidentiality of consumers’ proprietary information (“PI”), which is defined more broadly than CPNI; (2) violated Section 201(b) by failing to employ reasonable data security practices to protect consumers’ PI; (3) violated Section 201(b) by engaging in deceptive and misleading practices by representing to consumers in the Companies’ privacy policies that they employed appropriate technologies to protect consumers’ PI when, in fact, they had not; and (4) violated Section 201(b) by not notifying all consumers whose PI could have been breached by the Companies’ inadequate data security policies. (The proposed forfeiture did not include items (2) and (3) due to concerns regarding lack of fair notice.)
- This action is significant and marks a new and expansive approach to privacy and data security by the FCC. This was the FCC’s first data security enforcement action and its largest privacy-related enforcement action effort. In one fell swoop, the FCC articulated a variety of specific obligations and standards for common carriers’ privacy and data security practices and policies beyond the requirements regarding CPNI, which has been the traditional area of FCC privacy regulation and enforcement. The FCC made clear that it is now an active regulator of common carriers’ privacy and cybersecurity practices: “[W]e caution other carriers that the FCC is committed to aggressive enforcement of unlawful practices related to cyber security and data protection.” Moreover, although the provisions of the Act that the Companies allegedly violated apply only to common carriers, the action likely reflects broader FCC attention to privacy and data security more generally, including with respect to other industry segments.
- Commissioners Pai and O’Rielly dissented. Both Commissioners raised concerns regarding lack of fair notice. Commissioner O’Rielly also asserted the FCC exceeded its statutory authority.
- The FCC announced that it has joined the Global Privacy Enforcement Network (“GPEN”), an international group of privacy regulators and enforcers. The FCC will now join the FTC in representing the United States in GPEN proceedings. The announcement, which was issued as a news release quoting only Enforcement Bureau Chief Travis LeBlanc, serves as yet another sign of the FCC’s strongly increased interest and involvement in privacy issues. In addition to the GPEN discussion, the release noted the FCC’s “long history of working to protect the privacy of American consumers,” Congress’s “strong, FCC-enforced protections for personally identifiable information,” and the Enforcement Bureau’s “vigorous enforcement” in the privacy area.
- The FCC Enforcement Bureau entered into a $35,000 Consent decree with a former television licensee regarding compliance with the rule requiring advance notice and permission prior to the broadcast of a telephone call and with the obligation to respond to a Bureau Letter of Inquiry. The former licensee admitted liability and agreed to pay a civil penalty. The Consent Decree and an accompanying News Release stressed the importance of this rule in protecting privacy.
- The FTC filed a federal court complaint against AT&T Mobility, claiming that AT&T misled millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds, in some cases by nearly 90 percent, according to the FTC. The FTC’s complaint alleges that AT&T failed to adequately disclose to its customers on unlimited data plans that, if they reach a certain amount of data use in a given billing cycle, AT&T reduces their data speeds until the next billing cycle. The FTC’s complaint charges that AT&T violated Section 5 of the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the network management program to consumers who renewed their unlimited data plans. Thus, the FTC’s complaint alleges that AT&T’s network management program was both “unfair” and “deceptive.” According to the FTC’s complaint, AT&T reduced customers’ speeds to the point that many common mobile phone applications – such as web browsing, GPS navigation and watching streaming video – became difficult or nearly impossible to use. The complaint states that AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The complaint also claims that AT&T failed to inform unlimited plan consumers of its network management program when they renewed their contract with AT&T, and that AT&T charged unlimited plan customers early termination fees when they canceled their contracts. According to the FTC, AT&T has reduced the speeds of at least 3.5 million unique customers a total of more than 25 million times, thus far.
- As with the FTC’s involvement in cramming discussed above, this case raises questions about whether the FTC is exceeding its Section 5 authority, which does not apply to common carriers subject to the Communications Act. In this regard, AT&T has filed a Motion to Dismiss, arguing that the FTC lacks Section 5 jurisdiction over AT&T as a common carrier, regardless of whether the activity at issue is a non-common carrier activity. AT&T also indicates that the FCC Enforcement Bureau is “actively considering” whether to issue an NAL for a violation of the FCC’s Open Internet transparency rule for the same behavior at issue in the FTC complaint. Even if the FTC is successful on the theory that it can regulate non-common carrier activities of common carriers such as the provision of data service, that authority would likely be in jeopardy if the FCC reclassifies broadband Internet access service as a Title II common carrier service.
Broadcast Sponsorship ID
- The Enforcement Bureau entered into a $115,000 Consent Decree with a television licensee for broadcasting “Special Reports” formatted in the style of a news report and featuring a station employee without disclosing that they were actually commercials paid for by local car dealerships as required by the sponsorship identification rules. The licensee admitted liability and agreed to pay a civil penalty. The accompanying Order described the rules not only as protecting consumers by “ensuring they know who is trying to persuade them,” but also as protecting competition by “providing a level playing field for advertisers who follow the rules.”
- The Enforcement Bureau entered into a $46,000 Consent Decree with a broadcast licensee for transmitting an advertisement that contained an Emergency Alert System signal. The licensee admitted liability and agreed to pay a civil penalty. The Bureau also issued a Citation against a non-FCC regulated entity for including an EAS signal in programming it transmitted to SiriusXM Radio.
Children’s Television Programming
- The Commission entered into a $25,000 Consent Decree with a television licensee regarding the sufficiency of its children’s educational and informational programming. The matter arose in connection with the licensee’s renewal application. The case was relatively rare in two respects: (1) the Media Bureau questioned whether programs listed in the station’s children’s television report satisfied the standard for children’s educational and informational programming; and (2) the Media Bureau referred the renewal application to the Commission for failure to meet the processing guideline of three hours per week of children’s educational and informational programming.
Other Notable Actions
- Auction Rules: The Enforcement Bureau entered into a Consent Decree with a 700 MHz band licensee regarding compliance with Designated Entity bidding credit and alien ownership restrictions. In addition to agreeing to a compliance plan if it did not consummate the assignment of its licenses, the company admitted liability and agreed to pay both a $100,000 civil penalty as well as approximately $165,000 in unjust enrichment.
- Equipment Marketing: The Enforcement Bureau entered into a $260,000 Consent Decree with an equipment manufacturer regarding compliance with testing and labeling rules for tablets, digital music players, and Bluetooth headphones. In addition to agreeing to a compliance plan, the company admitted liability and agreed to pay a civil penalty.
- Unauthorized Broadcast Auxiliary Operation: The Commission issued an $86,400 NAL against a broadcast television and low power television licensee for operating three Broadcast Auxiliary Services (“BAS”) stations without authorization and operating an additional six BAS stations at variance with their respective authorizations. The Commission increased the proposed forfeiture amount by $32,400 from the $54,000 base amount because the apparent violations continued for at least four years and perhaps much longer. It declined to reduce the amount for voluntary disclosure because the licensee continued to operate for approximately a year before bringing the matter to the Commission’s attention.
- Broadcast Issues-Programs Lists: The Media Bureau issued a $13,500 NAL against a noncommercial educational broadcast station (non-student run) for failing to timely file its renewal application and failure to include quarterly issues-programs lists in its public inspection file for the entire license term. The Bureau indicated that, because of the public inspection file violation, it would grant only a short-term renewal of four years rather than the full eight years.
- Broadcast Complaints and Renewals: The Chairman’s Office reported that efforts to streamline processing have led the Enforcement Bureau to “largely complete” its review of pending complaints, which in turn led to the Media Bureau granting “almost 700 license renewals” in one week in October. The referenced complaints (or the vast majority of them) were likely indecency complaints.
- Character Qualifications: The Commission reversed an Administrative Law Judge decision that had declined to revoke the amateur radio license of a convicted sex offender.
- Treatment of Unpaid Forfeitures: A Consent Decree settling a late-filed renewal application suggests that the Media Bureau is continuing to act inconsistently with the statutory prohibition against using an unpaid forfeiture against an entity prior to completion of judicial review.
- Accessibility: The Consumer and Governmental Affairs Bureau issued the Commission’s Second Biennial Report to Congress on implementation of the Twenty-First Century Communications and Video Accessibility Act of 2010 (“CVAA”) during 2012 and 2013. The Report indicated that the Bureau received 92 informal complaints and requests for dispute assistance (“RDAs”). Of these, approximately 56.5% alleged violations by service providers, 31.5% alleged violations by equipment manufacturers, and 12% alleged both service and equipment violations. Complaints and RDAs involving service providers predominantly focused on their failure to provide instructions or billing in an accessible format, accessible contact information or directory assistance, and accessible customer service. Equipment-related complaints and RDAs raised a wide range of accessibility issues by consumers with disabilities – e.g., involving handsets that lacked text-to-speech functionality or that had keyboards that were hard to read or buttons that were too small to use, or handsets that were not compatible with their hearing aids or that had poor sound quality. It appears that there is general consumer satisfaction with the Commission’s processes for complaints and RDAs. Most of the complaints and RDAs filed were resolved to the customers’ satisfaction. In most cases, equipment manufacturers and service providers worked with consumers to resolve their particular needs. The Commission did not assess any forfeiture penalties for accessibility-related violations during the two-year period covered by the Report.