Four months after Commissioner Pai dissented from a slamming order because the Commission was being too lenient, his fellow Commissioners apparently now agree. In two slamming orders released shortly before the holidays, the FCC upped the stakes in slamming violations. In both orders, the FCC found egregious violations, and used that finding to triple the proposed forfeiture to $120,000 per violation.
Although slamming has declined as the stand-alone long distance market has dissipated, the Commission has referred to slamming by analogy for other types of violations, including cramming and improper prepaid card marketing. This new approach to slamming may signal future changes in these enforcement areas as well.
Slamming has always enjoyed an unusual place in enforcement actions, as one of only three common carrier violations specifically addressed in the FCC’s Forfeiture Guidelines. For years, the FCC has proposed fines of $40,000 per customer slammed, and $80,000 per customer in cases of forgeries or other fraud. In August, in the LDC Communications NAL, the FCC followed this practice, proposing fines at $40,000 per customer for multiple slams. Commissioner Pai (only a few months into his new position) sharply criticized this approach, arguing for a higher fine because, among other things, the carrier involved "provided no defense whatsoever" to the majority of complaints.
The LDC Communications NAL is still pending, so we don’t know whether Commissioner Pai’s view will alter the fine in that case, but it appears to have had an effect on his fellow Commissioners. In two NALs released on December 20th, the Commission proposed to triple the standard $40,000 fine for "egregious" violations by the carriers involved. In United Telecom, for example, the Commission concluded that the carrier falsified a TPV record, violated the TPV rules in addition to the slamming rule, and repeatedly misled consumers. In Preferred Long Distance, the Commission did not find falsified TPV records, but similarly found that unauthorized changes involving misrepresentations merit a $120,000 base forfeiture. It appears that the Commission intends to use $120,000, not $40,000, as the base prospectively, at least for actions involving misrepresentation.
Three other aspects of the NALs are notable for enforcement practice:
- Both United Telecom and Preferred Long Distance involve verification scripts that the FCC found not to meet its standards based on the specific wording of the question. We noted the Commission’s increasingly strict standard for evaluating TPV scripts in a previous entry in this blog.
- The Preferred Long Distance NAL is a rare example of an enforcement action taken without a formal Letter of Inquiry to the respondent. Other than the routine handling of informal complaints, the company had no notice from the FCC of any compliance concerns.
- Both NALs were directed to companies that had not engaged experienced enforcement counsel for assistance in the proceeding. As the FCC gets more active in its enforcement efforts, and as the fines continue to increase, failing to engage enforcement counsel at the outset of a proceeding can be perilous.