******************************************************** 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, if available. ***************************************************************** 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).