Dissenting Statement of FCC Commissioner Furchgott-Roth - Re: Joint FCC/FTC Policy Statement for the Advertising of Dial-Around and Other Long Distance Services to Consumers

Date:

Dissenting Statement of FCC Commissioner Furchgott-Roth

Re: Joint FCC/FTC Policy Statement for the Advertising of Dial-Around and Other Long Distance Services to Consumers File No. (Rel. March 1, 2000)

Today's action marks another unfortunate stop in the majority's self-defined jurisdictional mission to "do good." Regardless of how tenuous our statutory authority may be, or the potential adverse collateral consequences, the majority boldly goes where no Commission has gone before in an effort to "do good." Such an agile jurisdictional approach makes it politically difficult to dissent. Needless to say, I am not against doing "good." More specifically, I am not against efforts to eliminate fraudulent or misleading advertising. Yet our inquiry simply cannot stop with whether we are doing "good"-- to do so would be to abdicate our responsibility to the American people. We were hired to do a pretty daunting job: administer and enforce the Communications Act. When we act outside our job description, our "moonlighting" is not only questionable as a matter of law, it shortchanges the American people on the job they hired us to do.

An Effort to Do Good

Certain carriers' marketing may be confusing, misleading, or even fraudulent. I share the desire to see this advertising curtailed. I also understand that the Federal Trade Commission lacks authority over advertising practices by certain industries, including common carriers, under 15 U.S.C. §§ 45, 46(1) In light of the perceived problem and the lack of FTC authority, the majority is responding to a perceived "gap" in federal regulatory authority over common carrier advertising. However, it is not obvious that this "gap" is filled by the plain language of the Communications Act. It is possible that there are many instances when pressing issues are not addressed by current federal law. But it is the exclusive responsibility of Congress, not the FCC, to assess these issues and to fill in any "gaps" by changing the law.

The FCC's Tenuous Jurisdiction Over Advertising

The Statement asserts FCC authority over advertising based on 47 U.S.C. § 201(b). That Section "requires that common carriers' practices . . . for and in connection with . . . communication service, shall be just and reasonable . . . ." The Statement then contends that advertising qualifies as a "practice" under the statute. As an initial matter, the plain meaning of the term "practices" taken in the context of Section 201 does not clearly reach advertising. This is particularly true in light of Congress' ability and practice of crafting explicit "advertising" jurisdiction over common carrier services when its desires such jurisdiction. For example, Congress has specifically granted the FTC jurisdiction over "advertisement[s] for pay-per-call services."(2) In the end, if the majority reads "practices" to include advertising, it is difficult to discern what the term does not include. For example, are telephone company labor and employment policies "practices" under the Act? What about the use of energy efficient equipment, is that a "practice"?

The questionable nature of our authority in this area is best illustrated by our own experiences. Despite the statute's sixty-five years on the books, the Statement cites only two cases in which the Commission has equated "practices" with advertising(3) This lack of precedent alone demonstrates what a significant step these guidelines represent in expanding the reach of the Commission's authority(4) It is one thing to nibble on the edges of advertising regulation (as these cases arguably did); it is quite another to enter into that arena full stride after sixty-five years of dormancy(5)

Courts Have Been Reluctant to View Section 201's "Practices" Language to Include Advertising

Courts have also called into doubt the majority's interpretation of Section 201. Although the jurisdictional issue has never been squarely presented, courts have examined the scope of the FCC's advertising authority in the context of various state preemption cases. While the legal analyses in these cases are distinguishable, the decisions illustrate the facial weaknesses in our jurisdictional assertions. For example, a federal district court in New Jersey concluded that "Sections 201, 202, and 203 of the Communications Act impose no duty on common carriers to make accurate and authentic representations in their promotional practices. . . "(6) In holding that state law advertising claims could go forward against a carrier, the Second Circuit similarly held that "while the [Communications Act] does provide some causes of action for customers, it provides none for deceptive advertisement and billing."(7) That court concluded that the Act "does not indicate a uniquely federal interest . . . in preventing a carrier from misrepresenting the nature of its rates to its customers."(8) The Seventh Circuit's message to the FTC in Miller is equally applicable to the FCC here: "The regulatory approach articulated by the Commission, while it may be a desirable one, is not the one Congress appears to have adopted."(9)

Although I am heartened by the Statement's assertion that it "does not preempt existing state law," I am also concerned that today's decision may cast doubt on state authority in this area. As one district court held, "[t]he savings clause of the Communications Act must be read to preserve only state claims that address obligations different from those created by the Communications Act."(10) Our action today suggests that the Communications Act creates an obligation regarding truthful advertising - potentially creating uncertainty regarding state law claims in this area.

I also want to point out that it appears that the states have done an adequate job in this area. Thus, it is not clear from a policy or consumer perspective that our intervention is necessary.

The Pay-Per-Call Experience

Recent Congressional action further illustrates the misguided nature of today's action. In 1992, Congress passed the "Telephone Disclosure and Dispute Resolution Act" to address the problems created by 900 pay-per-call services. Those issues were not unlike the customer concerns that today's Statement is designed to address. Yet when Congress sought to solve problems created by 900 service advertising, it specifically assigned that duty to the FTC, while assigning carrier regulation to the FCC(11) Why? Because Congress understood that the FTC may lack authority over 900 services' advertising under the "common carrier" exemption yet the FTC had the requisite expertise to address advertising abuses. In doing so, Congress gave the FCC distinct regulatory responsibilities over pay-per-call services, but not for these services' advertising. If the FCC had authority over "advertising," it does not appear as if Congress knew about it. In my view, similar explicit Congressional action would be required before we should enter the advertising regulation arena.

A Zero Sum Game

The drafting of this Statement has already consumed substantial resources. Interpreting and implementing it and its potential progeny will demand significant additional energy. Moreover, the agency's lack of expertise and the wide array of entities who advertise or market these services further exacerbate these resource demands.

Inherent in the resources this initiative may consume is the majority's implicit decision to move resources away from other activities in order to regulate advertising. Our budget is a zero sum game. Resources for advertising regulation are resources taken away from other Commission activities. In a period of hiring freezes and travel moratoria, I cannot support the diversion of resources to advertising supervision. We have explicit, and in many cases exclusive, authority over a number of consumer protection initiatives, including interstate obscene and harassing phone calls (§ 223), unsolicited interstate fax advertisements (§ 227), slamming (§ 258) and radio interference (§ 302). Unlike the advertising issues addressed in the Statement, states are generally not in a position to address these consumer concerns. In my view, and apart from my legal concerns, our resources would be better deployed in areas where the FCC has clear (and often sole) jurisdiction to protect consumers. Too often we do not have the resources to promptly and comprehensively address consumer concerns in these core jurisdictional areas. I believe our job is to fully and completely do the "good" Congress charged us with under the statute long before we turn our attention to issues outside of our clear authority.

Regardless of the precision or persuasiveness of my legal and policy views, there will be those who ask: "How could you be against the FCC's protection of consumers from fraudulent advertising?" My answer is also a question: "How could you be against the FCC fully staffing and funding our primary and explicit statutory responsibilities?"

Based on the foregoing, I respectfully dissent.

1 5 U.S.C. §§ 45(a)(2), 46(a), 46 (b). This enabling statute otherwise empowering the FTC clearly has exceptions regarding regulation of common carriers. The case of FTC v. Miller, 549 F.2d 452 (7 th Cir. 1977), squarely applied this exception to misleading advertising by common carriers.

2 See 15 U.S.C. § 5711.

3 Both cases were within the last ten years, and neither was appealed on this issue. As shown below, both cases may be best described in terms other than as advertising complaints.

4 The first case cited by the item is the Business Discount Plan decision from last year. 14 FCC Rcd 340 (1998). That decision represents the only clear assertion of Commission authority over advertising under Section 201. However, even in that case, the advertising claim arose out of telemarketing based slamming complaints - an area in which we have clear jurisdiction under 47 U.S.C. § 258. I believe Business Discount Plans can best be interpreted as an indication that deceptive advertising that results in illegal activity may aggravate such conduct. However, it is a different exercise to suggest that we will now monitor all advertising - an area in which we have little, if any expertise -- and punish any misleading conduct as conduct alone. The second case cited in the Statement, AT&T 71 RR2d 775 (1992) is even weaker. AT&T did not find any violation of Section 201(b) and the "letter of admonishment" was issued under Section 4(i).

5 I also continue to object to the agency's persistent use of "Policy Statements" rather than rules to implement new regulatory policies. By removing these issues from the rigors of the Administrative Procedure Act, we eliminate the opportunity for interested parties to participate in the policy development process and shield these decisions from judicial review.

6 Weinberg v. Sprint Corp, 165 F.R.D. 431 (D. N. J. 1996), appeal dismissed, Civ. No. 96-354 (AMW)(May 23, 1996). Similarly, other courts have held that the Communications Act does not provide a remedy for failure of advertising to fully disclose certain components of services, or even fraudulent advertising. See DeCastro v. AWACS, 935 F. Supp. 541 (D.N.J. 1996); In re Long Distance Telecommunications Litig., 831 F.2d 627 (6th Cir. 1987).

7 Marcus v. AT&T, 138 F.3d 46, 54 (2d Cir. 1998).

8 Id.

9 FTC v. Miller, 549 F.2d 452 (7th Cir. 1977) (holding the FTC had no authority to regulate common carriers who were then regulated by the Interstate Commerce Act.) So, under Miller the FTC has no authority in the area of common carriers and under the Communications Act the FCC does not have clear authority either. Joint statements from the impotent agencies cannot resolve this conundrum.

10 See Marcus v. AT&T Corp., 938 F. Supp. 1158, 1168 (S.D.N.Y. 1996), aff'd, 138 F.3d 46 (2d Cir. 1998); see also Comtronics Inc. v. Puerto Rico Telephone Company, 553 F.2d 701, 707 n.6 (1st Cir. 1977). The Commission has recently affirmed the availability of state claims in this area. See Southwestern Bell Mobile Systems, FCC 99-356 (Nov. 24, 1999).

11 See 15 U.S.C. § 5711-5724. Congress also passed Section 228 of the Communications Act to give the FCC additional tools to combat 900 services' abuses.