FCC Abandons 2015 Forfeiture Policy Statement in Favor of Case-by-Case Approach

While no one is likely to bemoan the Federal Communications Commission’s (FCC’s or Commission’s) May 30, 2023, Memorandum Opinion and Order (MO&O) to vacate the 2015 Forfeiture Policy Statement that had adopted a methodology of treble damages for violations of rules requiring payments to the Federal Universal Service Fund (USF), other funds applicable to common carriers, annual FCC regulatory fees, some semblance of certainty of maximum penalties may have been lost. The Commission going forward will apply its discretion to determine forfeitures based on a review of statutory and rule-based factors, the Commission’s 1997 Forfeiture Guidelines, and the individualized circumstances of each future adjudication.” In effect, this is what the FCC has been doing since it, according to the MO&O, has not actually applied the treble damages” limit in the past eight years in any adjudication.

This last fact perhaps explains why the Commission had not acted on a 2015 petition for reconsideration (and a related stay request) challenging the 2015 Forfeiture Policy Statement filed by several leading wireless and wireline carrier trade associations, which the MO&O now dismisses as moot. However, the Commission, in effect, affirmed the applicability of its existing continuing violations” treatment of unpaid or underpaid USF contributions, other fund contributions (to the Telecommunications Relay Service (TRS) Fund, Local Number Portability (“LNP”), North American Numbering Plan (NANP), and FCC regulatory fees. By finding the challenges in the foregoing petition to the treatment of fund and regulatory fee payment failures” as continuing violations are outside the scope of the 2015 Forfeiture Policy Statement and the MO&O’s decision, the Commission left that treatment in place – namely that fees unpaid by the deadlines set under the FCC’s rules and orders result in continuing violation until paid even if past the one-year statute of limitations that otherwise generally applies to enforcement actions. This same continuing violation treatment, which was developed between 2006 and 2015, applies currently to failures to timely report the revenues on which fund contributions and regulatory fee payments are based.

The FCC notes that, in the future, it could conclude in its discretion that a forfeiture greater than that which the treble damages approach in the 2015 Forfeiture Policy Statement would have yielded. The Commission did not elaborate the type of circumstances which would yield such a significant forfeiture. Such cases are likely to be the exception rather than the rule. Keep in mind also that the statutory maximum’s for different types of forfeitures (depending on the nature of the enforcement subject) still apply.

While the issuance of the MO&O technically is something of a non-event because the 2015 Forfeiture Policy Statement was never relied upon by the Commission, the FCC’s reiterated commitment, at least for now, to apply a continuing violation treatment – like the suggestion that a specific enforcement adjudicated forfeiture could exceed a treble damages standard – is noteworthy. That commitment underscores the importance of accurate and complete reporting of assessable revenues on the FCC’s 499-A forms and prompt revisions in the event underpayments are found.