Click here for Microsoft Word Version
********************************************************
NOTICE
********************************************************
This document was converted from
WordPerfect or Word to ASCII Text format.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Word or WordPerfect version or Adobe Acrobat version (above).
*****************************************************************
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
) File No. ENF 98-02
Business Discount Plan, Inc. )
) NAL/Acct. No. 916EF0004
Apparent Liability for Forfeiture )
ORDER OF FORFEITURE
Adopted: June 30, 2000 Released: July 17,
2000
By the Commission: Commissioner Furchtgott-Roth concurring in
part and dissenting in part, and issuing a separate statement.
I. INTRODUCTION
In this Order, we assess a forfeiture of $2,400,000
against Business Discount Plan, Inc. (``BDP'') for willful or
repeated violations of the Communications Act of 1934, as amended
(the ``Act''), and our rules and orders. We find that BDP
willfully or repeatedly violated section 258 of the Act and the
Commission's rules and orders by changing the preferred
interexchange carriers (``PICs'') designated by thirty consumers
without their authorization, a practice commonly referred to as
``slamming.'' Additionally, we find that BDP willfully or
repeatedly violated section 201(b) of the Act by using unjust and
unreasonable telemarketing practices in connection with its
slamming violations, such as misrepresenting the nature of BDP's
service offering.
II. BACKGROUND
The facts and circumstances leading to the issuance of
our December 17, 1998 Notice of Apparent Liability (``NAL'') are
fully recited in the NAL and need not be reiterated at length.1
Between December 1997 and October 1998, the Commission processed
thousands of written consumer complaints alleging slamming by
BDP.2 The Commission investigated thirty of these complaints.
Each complainant contended that BDP had converted his or her
designated PIC without authorization, and that BDP used unjust
and unreasonable telemarketing practices in effecting these
unauthorized PIC changes. All thirty complainants provided sworn
statements and evidence in support of their complaints.
Following an investigation of the above complaints,
which included an opportunity for BDP to respond to the
allegations raised by complainants, the Commission issued the BDP
NAL. We found that BDP's failure to obtain complainants'
authorization before submitting PIC-change requests apparently
violated section 258 of the Act3 and the Commission's rules and
orders against slamming.4 In addition, we determined that BDP,
prior to effecting the unauthorized conversions, apparently
represented or implied to the complainants: 1) that it was
affiliated with the consumers' existing local or long distance
carriers; and 2) that its service consisted of a ``discount
plan'' that would consolidate the consumers' local and long
distance charges on one bill for the consumers' convenience,
without changing the consumers' existing long distance carriers.5
Neither of these claims was true. Accordingly, we determined
that BDP's deceptive telemarketing practices evidenced apparent
violations of section 201(b) of the Act.6
In view of the facts and circumstances surrounding
BDP's apparent violations, we found that BDP was apparently
liable for a proposed forfeiture of $40,000 for each of the
unauthorized conversions, and an additional $40,000 for each
instance in which it employed unjust and unreasonable
telemarketing techniques with respect to each of the thirty
complainants, resulting in a total forfeiture amount of
$2,400,000.7
III. DISCUSSION
In its Response to the NAL, BDP does not deny that it
submitted PIC-change orders to the complainants' local exchange
carriers. Nevertheless, BDP contests the Commission's finding of
apparent liability for willful or repeated violations of sections
258 and 201(b) of the Act, as well as the Commission's rules and
orders. Regarding the apparent slamming violations, BDP argues
that it should not be found liable because: 1) section 258 was
not yet effective at the time of the alleged slamming conduct;
and 2) even if section 258 was effective, BDP, with one
exception, properly verified the complainants' PIC changes. With
respect to the apparent 201(b) violations, BDP asserts that it
should not be found liable because: 1) section 201(b) does not
impose any duty on common carriers to be truthful in their
promotional practices; and 2) even if section 201(b) provides a
cause of action against BDP for unjust and unreasonable marketing
practices, BDP did not engage in such fraudulent practices. BDP
also contests the amount of the proposed forfeiture as excessive.
As discussed below, we reject each of BDP's arguments.
A. Imposition of a Forfeiture Pursuant to Section 258 and the
Commission's Rules and Orders
BDP argues that it cannot be held liable for the
alleged slamming violations because section 258 of the Act was
not effective at the time of the alleged slamming conduct.8 BDP
correctly asserts that the Commission's proposed rules to
implement section 258 had not been adopted, and thus were not
``prescribed,''9 at the time of BDP's alleged slamming
violations. While acknowledging that the Commission had other
regulations in place at that time that established verification
procedures for the submission of PIC changes, BDP contends that
these regulations were not promulgated under section 258 and thus
cannot form the basis for BDP's liability.10
We reject BDP's arguments. As an initial matter, BDP's
slamming conduct violated the Commission rules and orders in
effect at the time of the activity at issue. These rules and
orders stated that prior to submitting PIC changes, interexchange
carriers such as BDP were required to obtain consumers'
authorization for changes in long distance service, and then
verify those authorizations in accordance with the telemarketing
verification procedures delineated in the rules.11 Although the
adoption of these rules and orders predated current section 258,
these rules and orders nevertheless applied to the conduct at
issue in the BDP NAL, and were expressly referenced therein.12
Moreover, we disagree with BDP's assertion that,
because our rules implementing section 258 had not yet become
effective at the time of the activity at issue here, the
Commission was somehow barred from enforcing its existing rules
against slamming. In section 258, which became law on February 8,
1996, Congress expanded the Commission's slamming prevention
authority13 to encompass not only long distance service, but also
local exchange service, and to include telecommunications
carriers14 who execute changes in subscriber's provider
selections, as well as carriers who submit such changes.15 In
December of 1998, the Commission strengthened its existing
verification rules and added new verification procedures for
local exchange carriers.16 The majority of these new rules took
effect on April 27, 1999.17 While BDP is correct in asserting
that at the time of the conduct here at issue, the new
verification rules had not yet become effective, we reject BDP's
contention that Congress intended to make our existing rules
ineffective by enacting section 258. BDP cites nothing in the
Act or the legislative history of section 258 that would indicate
such an intention. Indeed, the legislative history reflects
Congressional intent to strengthen and expand the Commission's
authority over slamming - not vitiate our existing safeguards.18
BDP's suggested result would have left consumers without any
protection against slamming while we conducted a rulemaking
pursuant to section 258.19 We decline BDP's invitation to read
such a counter-intuitive meaning into this provision.
Nor do we find merit in BDP's argument that the
Commission cannot enforce section 258 in the instant proceeding.
Even without new verification rules, section 258 provides the
Commission with an independent basis for addressing BDP's
conduct. Indeed, we relied on section 258 in previous
enforcement actions for slamming that occurred prior to the
adoption of our new rules.20 In these earlier actions, the
Commission enforced section 258 based on our determination that
the subject carriers violated our existing verification rules by
submitting unauthorized PIC changes for long distance service.21
Hence, violation of our existing rules constituted a violation of
the requirement in section 258 that carriers cannot submit or
execute a change in a subscriber's selection of a provider of
telephone exchange service or telephone toll service ``except in
accordance with such verification procedures as the Commission
shall prescribe.''22 Likewise, in the instant proceeding, we
find that BDP violated section 258 with conduct that was already
within our jurisdiction and subject to the Commission's existing
slamming rules.23
We also reject BDP's suggestion that the language
``shall prescribe'' in section 25824 evinces a legislative intent
that section 258 would not become effective until the Commission
established new verification rules. Contrary to BDP's
contention, we read this prospective language as directing the
Commission to strengthen its existing verification procedures and
add verification procedures for local exchange carriers, without
affecting the fundamental prohibition against slamming in our
existing rules or the verification procedures set forth therein.
Moreover, it is well-established that unless a statute specifies
an effective date, it is effective upon the date of its
enactment.25 As noted above, section 258 became law on February
8, 1996 - prior to the date of the slamming violations at issue
here.26
BDP contends that even if section 258 was effective at
the time BDP switched the complainants to its long distance
service, BDP properly verified the complainants' PIC changes.27
BDP offers four arguments in support of its position. First, BDP
claims that, except for one verifier who ``inadvertently switched
complainant Part Time Productions, Inc. by punching the wrong
button,''28 BDP did not convey the false impression that it was
performing only a bill consolidation service.29 Second, BDP
argues that twenty-five of the complaints are unreliable because
the Commission failed to obtain sworn statements from these
complainants.30 Third, BDP maintains that its verification
companies were independent and physically separate from BDP, as
required by the Commission's rules.31 Finally, BDP denies that
it misled consumers, observing that less than 1 percent of them
asked to be switched back to their prior long distance carriers
upon receipt of BDP's letter explaining that it is not affiliated
with AT&T.32
BDP's arguments must fail in light of the express terms
of section 258 and our existing rules and orders. For purposes
of determining BDP's liability under either, we need only decide:
1) whether the complainants authorized the PIC changes and, if
not, 2) whether BDP submitted these unauthorized PIC changes to
the complainants' local exchange carriers. As noted above, BDP
concedes that it submitted the PIC changes in question.33
Further, all 30 complainants have submitted sworn statements
attesting that they did not authorize the PIC changes, and BDP
has submitted no countervailing evidence to convince us
otherwise. Indeed, as discussed in the BDP NAL, the record
clearly demonstrates that BDP created the false impression that
it was offering a bill consolidation under the auspices of the
consumers' existing AT&T service. Even if, as BDP claims, its
verifiers mentioned toward the end of the call that consumers
would be ``remaining on the AT&T network'' and changing to BDP
``for inter and intra LATA calls,'' such statements are not
meaningful because the greater part of the call focused on a
``simplified billing format '' for AT&T customers,34 not a change
in long distance carriers.35 We affirm our prior determination
that BDP knew, or should have known, that consumers acting
reasonably under these circumstances would be misled or confused
by BDP's telemarketing calls and that therefore, consumers were
not authorizing a PIC change.36
We also reject BDP's claim that the record fails to
support the proposed forfeiture. Contrary to BDP's claim, all 30
complainants submitted sworn declarations in support of their
complaints, and all of these declarations were included in our
record.37 BDP's remaining assertions,38 even if valid, are
irrelevant to our determination that BDP violated section 258 and
our rules and orders governing preferred carrier changes. First,
even if we assume that BDP's verification companies maintained an
independent status, the record nevertheless shows that those
companies were acting on behalf of BDP, such that BDP is liable
for their actions.39 Second, BDP's claim of ``customer loyalty''
in the wake of its ``mailing'' does nothing to obviate our
conclusion that BDP deceived and slammed at least 30 consumers in
the first instance.
B. Imposition of a Forfeiture Pursuant to Section 201(b)
BDP contends that it cannot be held liable under
section 201(b) because the "Act does not impose any duty on
common carriers to be truthful in their promotional practices."40
To support its position, BDP cites state preemption cases in
which courts have held that the Communications Act does not
indicate a ``uniquely federal interest'' in common carriers'
unfair and deceptive telemarketing practices, so as to
``preempt'' state efforts to prevent these practices. BDP argues
that because the courts have not found a uniquely federal
interest, section 201(b) does not provide a cause of action for
addressing the reasonableness of common carriers' deceptive
telemarketing practices.
We disagree, and affirm our prior determination that
BDP's deceptive telemarketing practices constitute ``unjust and
unreasonable'' practices within the meaning of section 201(b).
First, section 201(b) prohibits ``unjust and unreasonable''
practices by common carriers ``in connection with'' communication
service.41 The record demonstrates that BDP's telemarketers
repeatedly deceived consumers as to BDP's identity and the nature
of its service, rendering BDP's telemarketing practices ``unjust
and unreasonable.'' These telemarketing practices were related
directly to BDP's efforts to provide long distance service to the
complainants, and thus were clearly "in connection with" BDP's
communication service. Hence, we conclude that such practices
are subject to the Act's section 201(b) ``just and reasonable''
standard.
Second, we reject BDP's reliance on state preemption
analyses to support its claim that its marketing practices do not
constitute unjust and unreasonable practices under section 201(b)
of the Act. Even if we accept BDP's argument that the Commission
lacks a ``uniquely federal interest'' in preventing slamming,42
BDP has presented no evidence or arguments to persuade us that
the Commission therefore lacks authority to declare a deceptive
marketing practice ``unjust and unreasonable'' under section
201(b). We need not have a ``uniquely federal interest'' in
preventing such marketing practices in order to exercise our
section 201(b) jurisdiction. Moreover, the use of section 201(b)
to address unreasonable marketing practices by common carriers is
not new. In 1992, the Commission stopped short of finding that
AT&T had violated section 201(b), but cited the provision in
admonishing AT&T concerning credit card marketing practices that
had created significant customer confusion. The Commission noted
there that AT&T ``reasonably should have realized that many
members of the general public . . . were, or could readily have
been, misled . . . to their detriment . . .'' by these marketing
practices.43 Moreover, in 1989, the Commission's Common Carrier
Bureau determined that several carriers had violated section
201(b) by engaging in ``unjust and unreasonable'' business
practices, such as ``failing to convey sufficient information as
to the carriers' identity, rates, practices, and range of
services.''44 As in these earlier proceedings, the BDP NAL
properly relied on section 201(b) in addressing the marketing
practices at issue, and we do so here.45
BDP next argues that even if section 201(b) provides a
cause of action for "misleading, deceptive and/or fraudulent
telemarketing practices, BDP did not engage in such practices."46
In support of its argument, BDP advances numerous reasons why it
believes the Commission's section 201(b) analysis is flawed. We
find all of these reasons legally insufficient and factually
irrelevant to our determination that BDP's telemarketing
practices deceived consumers in violation of section 201(b). As
an initial matter, we reject BDP's claim that it
``unequivocally'' informed complainants that they would be
changing to BDP as their long distance carrier. To the contrary,
and as noted above, the record contains clear and credible
evidence that BDP conveyed the overall impression that consumers
were confirming a new billing format offered by their existing
carriers -- not a change in interexchange carriers.47 We,
therefore, affirm our prior determination that BDP's
telemarketers unlawfully deceived consumers about the identity of
the carrier and the nature of the service offering by telling
them that they would be ``remaining on the AT&T network.''
BDP contends that it was not legally required to
disclose ``that its rates were 20% higher than AT&T's rates.''
Our NAL never suggested such an obligation. Rather, we found
BDP's omission misleading in the context of telemarketing calls
that focused on enrollment in a ``discount plan.'' BDP also
defends as reasonable its decision to target AT&T customers with
low monthly bills, contending that these consumers ``would
readily pay BDP's higher rates to obtain the convenience of
consolidated billing.'' Like many of BDP's claims, we find this
assumption about consumer behavior irrelevant to the central
question of whether BDP misrepresented or unreasonably implied an
affiliation with AT&T. Nor do we find merit in BDP's arguments
that it: 1) in fact provided consolidated billing to consumers;
or 2) never told consumers that its service consisted ``solely''
of consolidated billing. As stated above, we have examined both
the specific claims made by BDP in its telemarketing calls, as
well as the net impression created by those calls. Whether BDP
actually provided consolidated billing, in keeping with its sales
pitch,48 is irrelevant to the question of whether BDP violated
section 201(b) by tricking the complainants into changing their
long distance carriers. Further, even if BDP never specifically
stated that its service consisted ``solely'' of consolidated
billing, the record contains substantial evidence that BDP
conveyed the false overall impression that it was offering only a
simplified billing format.
For similar reasons, we reject BDP's claim that we
improperly based our forfeiture on BDP's failure to tape its
sales solicitations.49 Contrary to BDP's contention, we never
stated that BDP was obligated to tape its sales calls. Rather,
we concluded that there was no evidence or information, including
any tape recordings, to counter the complainants' allegations of
unjust and unreasonable telemarketing practices.50 Nor did we
give undue consideration to the effect of the ``Business Discount
Plan'' name, 51 or to items included in our ``background''
section, such as our reference to state actions against BDP.52
Commission documents often note the existence of other legal
proceedings against the carrier at issue.53 Further, BDP's
company name was just one of many factors we considered in our
section 201(b) analysis.
Finally, we reject BDP's attempt to blame consumers'
confusion on AT&T's ``provisioning delays.''54 Given our
substantial evidence of BDP's deceptive practices, it strains
credibility to suggest, as BDP does, that delays in provisioning
caused consumers to ``forget'' they had ordered BDP's service and
``mistakenly'' complain to federal and state regulatory agencies
that BDP had slammed them.''55
C. Appropriateness of Assessed Forfeiture Amount
BDP next argues that even if it slammed the consumers
at issue, the Commission's proposed forfeiture is
unconstitutionally excessive because it is greatly
disproportionate to the gravity of BDP's offense.56 BDP further
claims that assessing a $40,000 penalty for each of the slamming
and section 201(b) violations is inconsistent with the
Commission's Forfeiture Policy Statement.57 Finally, BDP
maintains that one of the complaints supporting our proposed
forfeiture, the ``Michael Cherney'' Complaint, is barred by the
Act's statute of limitations. We disagree with BDP's arguments,
and affirm our prior determination that a $2.4 million forfeiture
is appropriate.
We find no merit in BDP's claim that our proposed
forfeiture is disproportionate to the gravity of BDP's offense.
The proposed forfeiture is based on thirty independent slamming
complaints against BDP -- out of numerous complaints filed with
the Commission -- and rests on a calculation of $40,000 for each
unauthorized preferred carrier change conversion and $40,000 for
each instance in which BDP engaged in an unjust and unreasonable
telemarketing practice. Contrary to BDP's claim, these forfeiture
amounts are consistent with the forfeiture guidelines established
in the Forfeiture Policy Statement, and with our broad discretion
under section 503 of the Act to implement these guidelines by
issuing forfeitures on a case-by-case basis.58
First, we assessed the standard $40,000 amount
established in the Forfeiture Policy Statement for slamming
violations, even though it was within our discretion to apply the
``upward adjustment criteria'' in the forfeiture guidelines to
issue a higher forfeiture amount.59 In other proceedings
involving similarly egregious slamming activity, the Commission
has applied the upward adjustment criteria to calculate
forfeitures of double the standard amount applied for slamming
violations (i.e., $80,000).60 Second, BDP has presented no
credible evidence that it was unreasonable for the Commission to
exercise its broad discretion and use the standard amount for
slamming violations as an appropriate guideline for assessing
$40,000 forfeitures for each of the section 201(b) violations.
Although the Forfeiture Policy Statement does not establish a
specific forfeiture amount for violations of section 201(b), it
states that ``any omission of a specific rule violation . . .
should not signal that the Commission considers any unlisted
violation as nonexistent or unimportant.''61 As we explained in
the NAL, BDP's deceptive telemarketing practices were ``aimed at
slamming consumers.''62 Accordingly, we found that, under the
circumstances, the standard $40,000 forfeiture amount for
slamming violations was an appropriate guideline to use in
assessing penalties for the section 201(b) violations.63 BDP has
presented no evidence to convince us that we erred in reaching
this conclusion.64 Likewise, it was proper to treat BDP's
conduct as separate violations of our slamming rules and section
201(b) of the Act. There is nothing in the Act, the Forfeiture
Policy Statement, or any other Commission order to prevent us
from finding section 201(b) violations based conduct related to
slamming.65 We reject BDP's assertion that ``deceptive and
fraudulent'' conduct such as slamming can only be punished under
section 258 of the Act. 66 The Commission possesses broad
discretion to assess penalties for slamming and/or section 201(b)
violations on a case-by-case basis.
We also reject BDP's assertion that our forfeiture
authority is circumscribed by the ``aggregate damages sustained
by complainants,'' which BDP lists as $12,144.53.67 The
Forfeiture Policy Statement establishes a $40,000 base amount for
slamming violations, without reference to the consumers'
aggregate damages. Moreover, BDP fails to recognize that its
repeated acts of slamming did more than ``rob'' the complainants
of $12,144.53; it violated their right to select the
telecommunications providers of their choice and deprived the
authorized carriers of their customers. The Commission has taken
and will continue to take swift and decisive enforcement action,
including the imposition of substantial forfeiture penalties,
against carriers found to have engaged in slamming.68
Further, contrary to BDP's contention, the ``Michael
Cherney'' Complaint is within the one-year jurisdictional period
contained in section 503(b)(6)(B) of the Act.69 Indeed, BDP's
counsel filed a letter with the Commission stating that Michael
Cherney's service was switched to BDP on December 22, 1997, 70
which was less than a year before December 17, 1998, the date the
BDP NAL was issued. We also dismiss as unsubstantiated BDP's
argument that we should reduce the amount of the forfeiture
because its verifier ``inadvertently'' switched complainant Part
Time Productions, Inc. by ``punching the wrong button.''71 BDP
has offered no evidence to support this claim.72 Nor are we
persuaded that our forfeiture should be reduced because 1) BDP
voluntarily went to the Commission to discuss the slamming
complaints and 2) BDP sent consumers a letter offering to
transfer them back to their previous long distance carrier (as
part of BDP's settlement agreement with AT&T).73 While good
faith may serve as a mitigating factor, we do not find that BDP's
``after-the-fact'' efforts outweigh our substantial evidence of
BDP's fraudulent conduct.74
IV. CONCLUSION
After reviewing the information filed by BDP in its
Response, we find that BDP has failed to identify facts or
circumstances to persuade us that there is any basis for
reconsidering the BDP NAL. Further, BDP has not shown any
mitigating circumstances sufficient to warrant a reduction of the
$2,400,000 forfeiture penalty. Finally, we note that evidence of
further violations may lead to institution of a proceeding to
revoke BDP's authorization to be a long distance carrier under
section 214.75
V. ORDERING CLAUSES
Accordingly, IT IS ORDERED pursuant to Section 503(b)
of the Act, 47 U.S.C. § 503(b), and Section 1.80(f)(4) of the
Commission's rules, 47 C.F.R. § 1.80(f)(4), that Business
Discount Plan, Inc. SHALL FORFEIT to the United States Government
the sum of two million four hundred thousand dollars ($2,400,000)
for violating Sections 201(b) and 258 of the Act, 47 U.S.C. §§
201(b), 258, as well as the Commission's rules and orders in
effect from December 1997 to December 1998 governing preferred
interexchange carrier conversions.
IT IS FURTHER ORDERED that a copy of this Order of
Forfeiture shall be sent by certified United States mail to
Thomas David Jenkins, Owner and President, Business Discount
Plan, Inc., 3780 Kilroy Airport Way, Suite 200, Long Beach,
California, 20806.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH
CONCURRING IN PART, DISSENTING IN PART
R- Order of Forfeiture, In the Matter of Business Discount Plan,
e: Inc. Apparent Liability for Forfeiture
(rel. July X, 2000).
Although I support today's result, I continue to object to the
Commission's forays into advertising and marketing regulation. As
I stated previously,(1) there is no doubt that the Commission has
authority under § 258 to bring enforcement actions against
"slamming" carriers. Moreover, I strongly support rigorous and
aggressive enforcement of our slamming rules. In this regard, I
believe today's forfeiture amount could be easily justified based
solely on the aggravating factors associated with the carrier's
Section 258 violations.
However, I continue to believe that Section 201 alone does not
provide an independent basis for punishing carriers based on
their marketing practices. This is a particularly important
distinction to make, in light of the Commission's recent decision
to venture into the world of advertising regulation.(2) The FCC
has neither the authority nor the ability to be the "marketing
police" of the telecommunications industry.(3) Two additional
factors also support my reluctance for the FCC to regulate
marketing practices under Section 201: (1) States have the
resources and ability to regulate such conduct, and (2) the
Commission and the public are better served by expending the
FCC's limited resources on issues more clearly within our
statutory mandate. Thus, I dissent from the portion of today's
Order that seeks to punish BDP for its unjust marketing practices
on the basis of Section 201.(4)
As I detailed in my dissenting statement regarding the Joint
FTC/FCC Advertising Guidelines,(5) Section 201(b) forms a meager
basis for the proposition that the FCC has jurisdiction over
advertising. The majority's justification in today's Order does
little to relieve my concerns. Indeed, in promulgating the
Guidelines, the majority pointed to only two cases in support of
its interpretation of Section 201. One of those cases was the NAL
in this proceeding. The other case, In re AT&T's Card Issuer
Identification Cards,(6) focused on disclosures associated with
calling cards, and did not find any violation of Section 201.
Today's decision invokes those cases as well as a third case,
Telecommunications Research and Action Center and Consumer Action
(TRAC). Yet TRAC's analysis of 201(b) can best be read as
primarily turning on the reasonableness of the charged rates--an
issue that squarely fits within the FCC's authority. These
precedents underscore the fragility of our legal authority.(7)
The plain meaning of the term "practices" taken in the context of
Section 201 does not clearly reach advertising. Indeed, if
"practices" includes advertising, then it is hard to imagine what
it does not include. Furthermore, the legislative history of §
201(b) is silent on whether the FCC has authority to address
these matters. If Congress wanted the FCC to take on these types
of claims, it would have given us the express authority to do
so.(8) In the face of congressional silence, this agency should
be extremely reluctant to assume new regulatory responsibilities.
I earlier warned of the potential slippery slope associated with
a broad reading of "practices" in 201(b).(9) Unfortunately
today's decision validates that concern by not only punishing
Business Discount Plans based on its marketing, but by further
considering the appropriateness of the use of "Discount" in their
corporate name. The Order states that "BDP's company name was
just one of many factors we considered in our section 201(b)
analysis."(10) The notion that this agency will now be policing
the legitimacy of business names shows the dangerous road that a
broad reading of Section 201 will take us down.
Even if our legal authority were more solid, there are sound
reasons for the Commission to refrain from marketing regulation.
First, misleading omissions in advertising, misrepresentation,
and consumer fraud claims are more effectively enforced under the
appropriate state consumer protection laws. State regulatory
authorities have the requisite resources and expertise to protect
consumers far better than the FCC.(11) Second, the Commission's
resources are better spent in resolving issues clearly within our
statutory mandate. The FCC's budget is a zero sum game. Resources
taken for these activities must necessarily result in lower
funding levels for other initiatives. Biennial review, universal
service funding determinations for high cost areas and other core
tasks should be fully funded before we explore programs on the
edges of, or outside, our statutory mandate.
Justice may have been served in this matter, but the American
consumer does not benefit from our decision today to
independently punish BDP for its marketing practices under
Section 201. The majority's Section 201-based enforcement action
is on the periphery of our statutorily mandated domain,
unnecessarily redundant with state efforts, and an unfortunate
diversion of funds away from more integral activities.
For the foregoing reasons, I respectfully dissent in part.
1 See Statement of Commissioner Harold Furchtgott-Roth, Notice of
Apparent Liability for Forfeiture, In the Matter of Business
Discount Plan, Inc. Apparent Liability for Forfeiture, 14 FCC
Rcd. 340 (1998). The NAL raised Section 201 in concert with
Section 258 violations. Subsequent assertions by the Commission
of free standing Section 201 authority over advertising have
crystallized my opposition to the use of Section 201 as an
independent basis for advertising liability.
2 See In re Joint FCC/FTC Policy Statement for the Advertising of
Dial-Around and Other Long Distance Services to Consumers
(Publication page references are not available in Westlaw for
this document.) (2000 WL 232230 (F.C.C.) (adopted by the FCC:
Feb. 29, 2000) (hereinafter Advertising Guidelines)
3 See Dissenting Statement of Commissioner Harold Furchtgott-Roth
In re Joint FCC/FTC Policy Statement for the Advertising of Dial-
Around and Other Long Distance Services to Consumers (2000 WL
232230 (F.C.C.) http://www.fcc.gov/Speeches/Furchtgott_Roth/
Statements/2000/sthfr011.html> (hereinafter Advertising
Guidelines Dissenting Statement).
4 See In the Matter of Business Discount Plan, Inc. Apparent
Liability for Forfeiture, Order of Forfeiture, File No. ENF 98-02
(hereinafter Order) at ¶ 1.
5 See Advertising Guidelines Dissenting Statement.
6 In re AT&T's Card Issuer Identification Cards, Letter, 7 FCC
Rcd 7529 (1992).
7 I am particularly troubled by the majority's invocation of the
Joint FCC/FTC Policy Statement Regarding Advertising Guidelines.
See Order at ¶ 15. This is particularly true based on the
questionable legal foundation of the guidelines. See Weiner v
Sprint Corp, 165 F.R.D. 431 (D.N.J. 1996), appeal dismissed, Civ.
No. 96354 (AMW)(May 23, 1996) (holding that there is no duty on
carriers under the Communications Act to make accurate and
authentic representations in their promotional practices); Marcus
v. AT&T Corp., 938 F.Supp. 1158 (S.D.N.Y. 1996) (finding that
there is no deceptive advertising [read marketing] federal cause
of action under the Act); and FTC v. Miller, 549 F.2d 452 (7th
Cir. 1997) (stating that the FTC efforts to regulate advertising
may reflect a desirable goal, it is not one Congress appears to
have adopted.) Moreover, because the Advertising Guidelines were
a part of a policy statement and not a product of formal
rulemaking, they should not form the basis of any Enforcement
Bureau action.
8 Congress has expressly given such regulatory authority to the
FTC. Telephone Disclosure and Dispute Resolution Act Pub. L. 102-
556, 106 Stat. 4190, (codified at 15 U.S.C. §§ 5701, 5711-5714,
5721-5724 (1994)).
9 See Advertising Guidelines Dissenting Statement.
10 See Order at ¶ 18
11 In fact, Section 414 Communications Act reads "[n]othing in
this chapter shall in any away abridge or alter the remedies now
existing at common law or by statute, but the provisions of this
chapter are in addition to such remedies." See 47 USC § 414 In my
view, this "savings clause" preserves the vitality of these state
fraud claims In fact, the majority states that it "[w]elcomes
state efforts to deter slamming." See Order at ¶ 15 n. 36. See
also Southwestern Bell Mobile Systems, FCC 99-356 (Nov. 24,
1999). The Commission has declined to preempt state "slamming"
regulations in its Rules Concerning Unauthorized Changes of
Consumers' Long Distance Carriers. See In the Matter of Policies
and Rules Concerning Unauthorized Changes of Consumers' Long
Distance Carriers. 10 FCC Rcd. 9560 P.43.
_________________________
1 Business Discount Plan, Inc., Notice of Apparent Liability
for Forfeiture, 14 FCC Rcd 340 (1998) (``BDP NAL'').
2 See Common Carrier Scorecard, Federal Communications
Commission, Jan. 1999 edition, at 14.
3 Section 258 states in pertinent part that ``no
telecommunications carrier shall submit . . . a change in a
subscriber's selection of a provider of telephone exchange
service or telephone toll service except in accordance with such
verification procedures as the Commission shall prescribe.'' 47
U.S.C. § 258.
4 See 47 C.F.R. §§ 64.1100, 64.1150; Implementation of the
Subscriber Carrier Selection Changes Provisions of the
Telecommunications Act of 1996 and Policies and Rules Concerning
Unauthorized Changes of Consumers' Long Distance Carriers, First
Order on Reconsideration, CC Docket No. 94-129, FCC 00-135 (rel.
May 3, 2000) (Section 258 Reconsideration Order); Implementation
of the Subscriber Carrier Selection Changes Provisions of the
Telecommunications Act of 1996 and Policies and Rules Concerning
Unauthorized Changes of Consumers' Long Distance Carriers, Second
Report and Order and Further Notice of Proposed Rulemaking, 14
FCC Rcd 1508 (1998) (Section 258 Order), stayed in nonrelevant
part, MCI WorldCom v. FCC, No. 99-1125 (D.C. Cir. May 18, 1999),
stay dissolved, MCI WorldCom v. FCC, No. 99-1125 (D.C. Cir. June
27, 2000); Further Notice of Proposed Rulemaking and Memorandum
Opinion and Order on Reconsideration, 12 FCC Rcd 10674 (1997);
Policies and Rules Concerning Unauthorized Changes of Consumers'
Long Distance Carriers, 10 FCC Rcd 9560 (1995) (LOA Order),
stayed in part, 11 FCC Rcd 856 (1995) (In-Bound Stay Order);
Policies and Rules concerning Changing Long Distance Carriers, 7
FCC Rcd 1038 (1992) (PIC Change Order), recon. denied, 8 FCC Rcd
3215 (1993); Investigation of Access and Divestiture-Related
Tariffs, 101 FCC Rcd 911 (1985) (Allocation Order), recon.
denied, 102 FCC2d 503 (1985); Investigation of Access and
Divestiture-Related Tariffs, 101 FCC 2d 935 (Com.Car.Bur. 1985)
(Waiver Order), recon. denied, 102 FCC 2d 503 (1985).
5 BDP NAL, 14 FCC Rcd at 355.
6 Section 201(b) states in pertinent part that ``all charges,
practices, classifications, and regulations for and in connection
with communication service shall be just and reasonable . . . .''
47 U.S.C. § 201(b).
7 BDP NAL, 14 FCC Rcd at 362. The Commission has authority
pursuant to section 503(b) of the Act, 47 U.S.C. § 503(b), to
assess a forfeiture penalty against a common carrier if the
Commission determines that the carrier has ``willfully or
repeatedly'' failed to comply with the provisions of the Act or
with any rule, regulation, or order issued by the Commission.
8 BDP Response to the NAL (``Response'') at 38.
9 Id. (citing section 258(a), 47 U.S.C. § 258(a), which
provides that ``no telecommunications carrier shall submit or
execute a change in a subscriber's selection of a provider of
telephone exchange service . . . except in accordance with such
verification procedures as the Commission shall prescribe.'')
10 Id.
11 See supra footnote 4. Specifically, the Commission's rules
and orders required that interexchange carriers either obtain a
signed letter of agency from the consumer, or, in the case of
telemarketing solicitations, complete one of four telemarketing
verification procedures before submitting preferred carrier
change requests to local exchange carriers on behalf of
consumers. The four alternatives are: (1) obtain a letter of
agency from the subscriber; (2) receive confirmation from the
subscriber via a toll-free number provided exclusively for the
purpose of confirming change orders electronically; (3) use an
independent third party to verify the subscriber's order; or, (4)
send an information package that includes a postpaid postcard
which the subscriber can use to deny, cancel, or confirm a
service order, and wait 14 days after mailing the packet before
submitting the PIC change order. See 47 C.F.R. §§ 64.1100,
64.1150; PIC Change Order, 7 FCC Rcd at 1039.
12 See BDP NAL, 14 FCC Rcd at 341.
13 See Joint Explanatory Statement of Managers, S. Conf. Rep.
No. 104-230, 104th Cong., 2d Sess. Preamble (1996) at 1 (Joint
Explanatory Statement). The Act does not define slamming, but
the Joint Explanatory Statement states that the conference
agreement adopted the House provision, which refers to slamming
as ``illegal changes in subscriber selections.'' Joint
Explanatory Statement at 136. Prior to the Act, the Commission
defined slamming as the unauthorized conversion of a consumer's
interexchange carrier by another interexchange carrier, an
interexchange resale carrier, or a subcontractor telemarketer.
Cherry Communications, Inc., Consent Decree, 9 FCC Rcd 2086, 2087
(1994).
14 The Act defines ``telecommunications carrier'' in pertinent
part as ``any provider of telecommunications services, except
that such term does not include aggregators of telecommunications
services (as defined in section 226).'' 47 U.S.C. § 153(44).
15 Thus, Congress declared it illegal for both local exchange
and long distance carriers to submit or execute a change in a
subscriber's selection of a provider of telephone exchange
service or telephone toll service ``except in accordance with
such verification procedures as the Commission shall prescribe.''
See 47 U.S.C. § 258(a).
16 Id. at 1514.
17 In addition to these new verification rules, the Section 258
Order adopted liability rules designed to take the profit out of
slamming. Section 258 Order, 14 FCC Rcd at 1512. These
liability rules were stayed by the United States Court of Appeals
for the District of Columbia Circuit at the request of MCI
WorldCom, Inc., but that stay was dissolved on June 27, 2000.
MCI WorldCom, Inc. v. FCC, No. 99-1125 (D.C. Cir., June 27,
2000). In our Section 258 Reconsideration Order, we amended
certain of our liability rules, granting in part petitions for
reconsideration of the Section 258 Order. See Section 258
Reconsideration Order, CC Docket No. 94-129, FCC 00-135 (rel. May
3, 2000).
18 See supra paragraph 7. As the Commission noted when it
sought comment on rules to implement section 258, the issue
before us was whether ``existing safeguards against slamming were
adequate in a marketplace in which carriers can compete for local
as well as long distance service customers, and where there may
no longer be an independent third party executing changes in
subscribers' telecommunications carriers.'' See Further Notice of
Proposed Rulemaking and Memorandum Opinion and Order on
Reconsideration, 12 FCC Rcd 10674, 10680 (1997) (Emphasis added).
19 Moreover, Congress was presumptively aware of the
Commission's existing rules and orders concerning preferred
carrier change procedures at the time it enacted section 258.
The evaluation of congressional action must take into account its
``contemporary legal context,'' which, in this case, includes the
Commission's existing PIC change rules and orders. See Cottage
Sav. Ass'n v. C.I.R., 499 U.S. 554, 561 111 S.Ct. 1503, 1508
(1991); Cannon v. University of Chicago, 441 U.S. 677, 698-699,
99 S.Ct. 1946, 1958-1959 (1979).
20 See, e.g., Brittan Communications International, Inc., Order
of Forfeiture, 15 FCC Rcd 4852 (2000) (Brittan Forfeiture Order);
Long Distance Direct, Inc., Memorandum Opinion and Order, 15 FCC
Rcd 3297 (2000) (Long Distance Direct Forfeiture Order).
21 See Brittan Forfeiture Order, 15 FCC Rcd at 4852; Long
Distance Direct Forfeiture Order, 15 FCC Rcd at 3297.
22 See 47 U.S.C. § 258(a).
23 Indeed, the record reflects that BDP not only failed to
follow any of the Commission-prescribed verification procedures,
but also failed to first obtain the complainants' authorization.
See BDP NAL, 14 FCC Rcd at 341. As described in the BDP NAL,
BDP's telemarketers repeatedly misrepresented the nature of BDP's
service offering or in other ways engaged in practices designed
to prevent consumers from understanding that BDP sought to change
their preferred carriers. See id.
24 47 U.S.C. § 258 (Emphasis added).
25 See, e.g., LaFontant v. I.N.S., 135 F.3d 158, 160 (D.C. Cir.
1998).
26 See supra paragraph 8.
27 Response at 39 (citing 47 C.F.R. § 64.1100).
28 Id. at 40.
29 Id. at 9-11.
30 Id. at 41.
31 Id. at 7-9, 43-44.
32 Id. at 45. BDP sent this letter pursuant to the terms of a
1998 settlement agreement with AT&T, who had sued BDP on the
grounds that its telemarketers misrepresented that they were
affiliated with AT&T. See BDP NAL, 14 FCC Rcd at 354 n.63.
33 See, e.g., Response at 12.
34 We find it disingenuous of BDP to suggest that its
telemarketers' frequent references to AT&T's service were solely
to satisfy the Commission's policy of encouraging resellers to
advise consumers of the identity of underlying carriers. See
Response at 28. Taken in the context of BDP's telemarketing
calls, it is apparent that BDP wanted consumers to believe that
they were dealing with AT&T or one of its affiliates.
35 Indeed, the exhibits to BDP's Response belie its claim that
consumers were meaningfully apprised of a change in long distance
carriers. For example, in the verification transcript associated
with the R&S Complaint, BDP's verifier begins the call as
follows: ``The reason we are speaking is to confirm the details
you discussed regarding your Centel West billing to Business
Discount Plan one bill service. Your name is ... and you can
approve this? . . .[Verifier then checks business name and
address] . . . With your permission, if there are any other
business numbers at your location, they will be included in the
simplified billing format for you also . . . .'' Response at 10.
(Emphasis added.) Thus, the R&S transcript shows that the
complainant approved a ``one bill service,'' not a change in
carriers.
36 Further, as we noted in our NAL, some of BDP's verifiers
spoke extremely quickly, thus further confusing consumers. See
BDP NAL, 14 FCC Rcd at 346.
37 See, e.g., BDP NAL, 14 FCC Rcd at 353 n.62; see also BDP
NAL, File No. ENF 98-02.
38 See Response at 43-45.
39 See 47 U.S.C. § 217; see also Amer-I-Net Services
Corporation, Order of Forfeiture, 15 FCC Rcd 3118 (2000) (citing
numerous instances in which the Commission has stated that
carriers are responsible for the acts of their marketing agents).
40 Response at 20.
41 47 U.S.C. § 201(b).
42 As a general matter, the Commission welcomes state efforts
to deter slamming. See Section 258 Reconsideration Order, CC
Docket No. 94-129, FCC 00-135, paras. 22-42 (rel. May 3, 2000);
Policies and Rules Concerning Unauthorized Changes of Consumer's
Long Distance Carriers, 10 FCC Rcd 9560, 9583 (1995).
43 See AT&T, 71 RR2d 775 (1992).
44 See Telecommunications Research and Action Center and
Consumer Action v. Central Corp. et al., 4 FCC Rcd 2157 (Com.Car.
Bur. 1989).
45 We recently expressly relied on our section 201(b) authority
in issuing a Joint Policy Statement with the Federal Trade
Commission concerning the advertising of ``dial-around'' and
other long distance services to consumers. See Joint FCC/FTC
Policy Statement For the Advertising of Dial-Around And Other
Long Distance Services To Consumers, Policy Statement, FCC 00-72
(Mar. 1, 2000).
46 Response at 25.
47 See supra paragraph 2.
48 Response at 26.
49 Id. at 26-27.
50 See BDP NAL, 14 FCC Rcd at 357-358, 353 n.61.
51 Response at 31-33.
52 See id. at 34-37.
53 See, e.g., Vista Group International, Inc., Notice of
Apparent Liability for Forfeiture, 14 FCC Rcd 13814, 13824 (1999)
(Vista NAL); CCN, Inc., 13 FCC Rcd 13599, 13600 (1998) (CCN
Revocation Order).
54 Response at 11-13.
55 Id. at 37.
56 Response at 45-47. According to BDP, the proposed
forfeiture constitutes a civil penalty that is ``punitive in
nature,'' and therefore, subject to the Excessive Fines Clause of
the Eighth Amendment to the U.S. Constitution. Id. at 47.
57 Id. at 48-49 (citing Commission's Forfeiture Policy
Statement and Amendment of Section 1.80 of the Rules to
Incorporate the Forfeiture Guidelines, Report and Order, 12 FCC
Rcd 17087 (1997), recon. denied, 15 FCC Rcd 303 (1999)
(Forfeiture Policy Statement)).
58 See 47 U.S.C. § 503(b)(2)(D); see also Forfeiture Policy
Statement, 12 FCC Rcd at 17099.
59 These criteria include the egregiousness of the misconduct,
ability or inability to pay, whether the violation was an
intentional violation, whether substantial harm resulted from the
violations, history of compliance with Commission requirements,
whether the violator realized substantial economic gain from the
misconduct, and whether the violation is repeated or continuous.
See Forfeiture Policy Statement, 12 FCC Rcd at 17099.
60 See, e.g., All American Telephone Company, Inc., Notice of
Apparent Liability for Forfeiture, 13 FCC Rcd 15040, 15041
(1998); Brittan Forfeiture Order, 15 FCC Rcd at 4854; Amer-I-Net
Services Corp., Order of Forfeiture, 15 FCC Rcd 3118 (2000).
Subsequent to the release of the BDP NAL, the Commission applied
the ``upward adjustment criteria'' in the forfeiture guidelines
to find Vista Group International, Inc. apparently liable for
$80,000 for each unauthorized conversion that was compounded by
evidence that the carrier engaged in unjust and unreasonable
telemarketing practices. See Vista NAL, 14 FCC Rcd at 13829.
61 See Forfeiture Policy Statement, 12 FCC Rcd at 17099.
62 BDP NAL, 14 FCC Rcd at 362.
63 Id.
64 See Response at 48-49.
65 Indeed, although BDP's deceptive marketing practices were
closely related to its slamming conduct, the two violations are
separate and distinct. BDP could have slammed the complainants
without misrepresenting the nature of its service offering, and
it could have misrepresented its service offering without
slamming the complainants. The fact that it did both militates
strongly in favor of assessing an overall forfeiture amount
greater than the standard amount for slamming.
66 See Response at 48.
67 Response at 50.
68 See, e.g., Brittan Forfeiture Order, 15 FCC Rcd at 4854
(noting that the Commission seeks ``to deter companies from
engaging in the illegal act of slamming and will employ the
necessary forfeiture penalties to encourage compliance with
Commission rules and orders''); Nationwide Long Distance, Inc.,
Notice of Apparent Liability, 11 FCC Rcd 3087 (1996).
69 47 U.S.C. § 503(b)(6)(B).
70 See Letter from Greg L. Eriksen, Counsel for BDP, to Kathie
A. Kneff, Informal Complaints and Public Inquiries Branch,
Enforcement Division, Common Carrier Bureau (Aug. 7, 1998).
71 Response at 40.
72 See Response & Exhibits A - H.
73 Response at 50 n.15.
74 We note that on May 17, 2000, the Connecticut Department of
Public Utility Control (``DPUC'') determined that BDP had engaged
in slamming and imposed a fine of $50,000 on the company. The
DPUC found, among other things, that BDP had deceived customers
by representing or implying that they would remain with their
existing long distance service providers after choosing BDP's
bill consolidation service. See In re. Application of the
Attorney General to Revoke or Suspend Business Discount Plan,
Inc.'s Certificate of Public Convenience and Necessity, Docket
No. 98-11-16 (May 17, 2000).
75 See CCN Revocation Order, 13 FCC Rcd at 13599 (revoking the
Fletcher Companies' section 214 operating authority for slamming
and other violations of the Act and Commission rules).