Last week, the Enforcement Bureau of the Federal Communications Commission (“FCC”) announced a $135,000 settlement with Constellium Rolled Products Ravenswood, LLC (“Constellium”) regarding the company’s unauthorized radio station operations, failure to timely file radio station renewal applications, and acquiring private land mobile radio service (“PLMRS”) station licenses without advance FCC approval. What makes the Constellium consent decree different than most is that the settlement was reached after the Bureau issued a Notice of Apparent Liability (“NAL”) proposing a forfeiture for these violations. Much more frequently, consent decree orders are reached earlier in the process, obviating the issuance of an NAL. In this case, the Bureau agreed to a significant reduction in the forfeiture in exchange for Constellium implementing a 3-year robust compliance plan, giving station licensees a glimpse into the potential value of settling in comparison with being subjected to an NAL followed by a forfeiture order if the defense against the NAL is not successful.
The investigation into Constellium’s licenses arose in August 2013 after the company filed applications in April 2013 for special temporary authority for a number of PLMRS station licenses, which included an admission that the company had been operating without authority following the expiration of its eight PLMRS station licenses. While the Commission’s investigation into the operations after license expiration was ongoing, Constellium discovered and then reported that eight special temporary authorizations and four other PLMRS authorizations held by Constellium underwent a transfer of control without receiving the FCC’s prior consent due to an initial public offering involving its parent that resulted in the indirect parent of Constellium dropping from above 50% ownership to less than a majority interest, i.e., loss of positive control.
The FCC’s May 2014 NAL sought a forfeiture of $294,400 – more than twice the settlement amount – for Constellium’s apparent violations of Sections 301 and 310(d) of the Communications Act, as amended, and Sections 1.903(a) and 1.948(a) of the FCC’s rules. The Enforcement Bureau agreed to reduce the proposed penalty in part noting that, as a result of the post-NAL negotiation, it accepted Constellium’s argument, which the Bureau had rejected leading up to the NAL, that the penalty should reflect operation of four unauthorized operations rather than eight based on the fact that the company eventually was able to consolidate eight of its PLMRS authorizations (i.e., those that had previously expired) into only four permanent authorizations. It also appears likely that Constellium’s agreement to enter into a consent decree had a salutary effect on the penalty reduction. In the consent decree, the company agreed to obligations common to such decrees, and it also specifically agreed to develop a database to track all of the company’s FCC licenses and the corresponding expiration dates. The common terms with most other decrees include development of a compliance training program that includes annual training obligations for all covered employees. Constellium also made an admission of liability, a standard term for settlements during Enforcement Bureau Chief Travis LeBlanc’s tenure.
Under the FCC’s rules, operation of wireless radio stations must be authorized by the FCC prior to commencing operations and any transfers of control of wireless radio authorizations, no matter what form the transfer of control takes, must receive prior FCC consent. The Bureau noted that these rules are in place to protect licensees from harmful interference and to promote the efficient administration of spectrum. In light of the FCC’s continued enforcement efforts, it is imperative that any company operating wireless facilities be aware of the FCC’s licensing requirements and their regulatory obligations attendant to their day-to-day operations. Similarly, companies should remain vigilant to follow preapproval filing and consent regulatory requirements not only in the context of traditional sales and acquisition transactions, but also other corporate activities, such as an IPO, which may result in the transfer of control of FCC licenses.