In two similar cases (with markedly different results), the Bureau demonstrates that the calculation of fines is not art, and certainly not science.
Maybe we’re just not very smart, but we can’t figure out the FCC’s rationale for penalizing certain categories of wrongdoers.
Take, for example, the case of Taylor Oilfield Manufacturing, Inc., located in Broussard, Louisiana, a short drive from the Gulf Coast. Its website says Taylor specializes in the manufacture and repair of equipment used in drilling for oil.
In the spring of 2012, the company purchased five cell-phone jammers from overseas and installed four of them in the rafters. The purpose was to prevent employees from using their cell phones while at work, following a near-miss accident that might have involved a cell phone. As our regular readers know, all cell phone jammers are illegal, with exceptions only for the federal government. Someone complained to the FCC, which investigated. The company admitted it had bought and installed the jammers. A manager told the FCC they had been in use for a few months and handed them over. In a Notice of Apparent Liability a year later, the FCC proposed a fine of $126,000.
Get out the calculator. The FCC found three separate violations: operation without a license, use of unauthorized equipment, and interference to authorized communications. For each of the first two, it imposed the statutory maximum of $16,000, making $32,000. For the interference violation, the FCC started with the maximum of $7,000 and added $3,000 “to reflect the duration of the misconduct.” (We’ll come back to this.) That made $10,000 for the interference, which, when added to the $32,000, brought the total to $42,000. The FCC then multiplied that total by four, reasoning that the four operational jammers had each violated all of those rules: $42,000 x 4 = $168,000. Finally, the FCC knocked off 25 percent in recognition of Taylor’s having voluntarily relinquished the jammers, giving the end result of $126,000.
The FCC could have, but did not, impose a separate penalty for importing the jammers. It also has the authority to impose a separate penalty for each day of a continuing violation, up to a maximum, but it hardly ever does, at least in equipment cases. (This jammer case is a rare exception.) Here the FCC calculated that per-day penalties could exceed $1.3 million, and declined to impose them. (We’ll come back to this, too.)
On balance the proposed $126,000 fine strikes us as being within a reasonable ballpark, for an established company. The interference was deliberate. Depending on how strong the jammers were – the FCC does not say – the interference could have extended beyond Taylor’s premises to the street, and possibly to buildings nearby, where it could block not only casual conversations but also 911 calls.
(Ironically, though, the jammers could not have worked very well. They covered the 850-900 MHz frequency range, which is home to traditional, 1980s-vintage base-to-mobile cell communications. Although those frequencies are still used, especially in rural areas, most voice calls today go over the so-called PCS frequencies at 1.9 GHz, well outside the jammers’ band of operation. Chances are the Taylor employees’ phone calls went through just fine.)
As can often happen in such cases, after issuance of the Notice of Apparent Liability (in 2013), discussions occurred between the FCC and the Apparent Violator. The result was a consent decree (three years in the making) in which the FCC reduced Taylor’s fine by almost 80%, to $28,000.
That’s the first thing we don’t understand. Only one piece of information differed between the 2013 NAL and the 2016 consent decree: the company was able to prove its jammers had been in use for only two weeks rather than a period of months, as the FCC had thought in 2013. Of the original fine, $12,000 was earmarked for “duration of the misconduct,” so that might reasonably have come off. But why the drop all the way to $28,000? Here is one theory: the original fine, $126,000, over a nine-week violation is $2,000 per day; the reduced fine of $28,000 would exactly reflect a two-week violation at that same $2,000 per day. Yet, even though the numbers work out, the FCC expressly said the original fine was not calculated per day. It’s as though the FCC found Taylor to be proportionately less culpable just because it was caught sooner.
This piece was still in the CommLawBlog bunker’s old Smith-Corona manual when the FCC released another consent decree that could almost have been a carbon copy of Taylor’s. This one concerned R&N Manufacturing of Houston, Texas, whose website is here (but doesn’t work just now). The resemblance to the Taylor case is eerie. R&N, like Taylor, makes equipment for the oil and gas industries, is close to the Gulf Coast, and installed an illegal cell phone jammer to block employees’ phone conversations. (R&N used only one jammer.) AT&T has a cell tower just a two-minute walk down the road that was getting interference. AT&T engineers stopped by R&N but did not receive much cooperation. They complained to the FCC, which paid its own visit to R&N and took the jammer away.
As in the Taylor case, although scaled down to one jammer and without the “duration of the misconduct” surcharge, the FCC proposed fines of $16,000 for each offense of operation without a license and use of unauthorized equipment, plus $7,000 for causing interference, less 25% for voluntarily giving up the jammer, which results in $29,250. In the later consent decree, however, on learning the jammer had been operation for only four days, not the ten days the FCC had originally supposed, it reduced the amount by two-thirds, to $9,750.
This is the second thing we don’t understand. We thought the Taylor fine of $28,000 was low, considering the deliberate nature of the violation, but the R&N fine is almost two-thirds lower still. R&N’s offense was arguably worse, as it continued to operate the jammer even after AT&T told it about the interference. Its lower fine mostly reflects the fact of one jammer, rather than Taylor’s four, but we don’t see why that should matter. The intent in both cases was the same – to disrupt employees’ phone conversations – and the method of illegal jamming was the same. On Google Earth, the two facilities look roughly comparable in area. R&N may have been using a higher-powered device than Taylor’s, or its jamming may have been less effective, but either way, we don’t see why the smaller number of jammers makes it less culpable.
The final thing we don’t understand are these light fines after the FCC’s imposition of much steeper penalties for inadvertent paperwork violations that caused no actual trouble. In audio gear alone, these include guitar-maker Fender Musical Instruments ($265,000), amplifier-maker Peavey Electronics ($225,000), and studio-equipment-maker Behringer USA ($1,000,000). The rules these companies violated are intended to document compliance with technical rules that in turn are intended to prevent interference. But there was no actual interference in any of these cases. There was not even an allegation that the products failed to comply with the technical rules. It seems to us that Taylor’s and R&N’s intentionally causing real interference is a much more serious offense calling for much more serious sanctions. But from the fines assessed, you would never know it.