On May 30, 2018, the Commission issued a Notice of Apparent Liability (“NAL”) proposing a total penalty of $590,380 against a company for marketing noncompliant radio frequency (“RF”) devices in apparent violation of the agency’s equipment marketing rules. The allegations in the NAL provide a textbook example of how a company that becomes aware of a violation relating to products subject to the Commission equipment authorization procedures should not respond. The NAL was issued against Bear Down Brands, LLC, dba Pure Enrichment (“Pure Enrichment”), a Delaware company, in connection with fourteen models of the company’s consumer-oriented electronic personal hygiene and wellness devices it markets and imports, all of which were Part 15 or Part 18 unintentional radiators. The NAL alleges that the devices were noncompliant because they lacked proper equipment authorization, failed to make required user manual disclosures, and/or did not have compliant FCC labels.
The Commission’s rules provides that RF devices that are subject to verification or Declaration of Conformity procedures (or the newly adopted Supplier’s Declaration of Conformity (“SDoC”) procedures) may not be marketed (which includes importation) unless the device complies with all of the Commission’s applicable technical, labeling, identification, and administrative requirements. Pure Enrichment sells its products – ultrasonic humidifiers, air purifiers, diffusers, electronic stimulator massagers, and personal care products – online and at brick-and-mortar retail establishments. (The products apparently, at least in many cases, are manufactured by contract manufacturers, based on the NAL.) In response to a March 2017 complaint to the FCC that Pure Enrichment’s humidifiers can radiate RF emissions that cause interference “to other appliances” and were not identified as having satisfied the equipment authorization requirements, the Commission’s Enforcement Bureau launched an inquiry in May of that year. Pure Enrichment, in a series of responses, claimed that it was unaware that it was marketing unauthorized models until receipt of the Bureau’s Letter of Inquiry (“LOI”), claiming that it believed that authorization was not required under a Commission exemption embodied in a Commission Laboratory Knowledge Database Publication certain (but not all) household appliances. Pure Enrichment acknowledged in responses to the FCC during the investigation that (i) five models lacked proper authorization, required user manual disclosures, and FCC labeling (ii) seven models had an authorization but lacked the required user manual disclosures and FCC labeling; and (iii) two models had an authorization but lacked user manual disclosures
Pure Enrichment provided the Commission a list of apparently noncompliant Part 15 and Part 18 radio frequency devices it marketed and imported into the United States, as well as revenues and other information about its sales of such noncompliant devices. Apparently, it continued to market the non-complaint devices after receiving the LOI and acknowledging that a number of the models were out of compliance. A number of the devices also failed to include the information required by the Commission’s rules to be included the user’s manual and/or other permitted means conveying that information to the user. This included information necessary to ensure the device is complaint with technical requirements and to instruct the user to take steps to mitigate any harmful interference caused by the device. Further, the labels required by the FCC’s rules were missing or improper. Some, but apparently not all, manuals and labels were corrected by Pure Enrichment over a three-month period following the receipt of the LOI, but it seems non-compliant product already held by third-party “logistics providers” in the United States continued to be marketed.
Even after becoming aware of the apparent violations, Pure Enrichment continued to market the fourteen models while it took corrective measures. Pure Enrichment apparently achieved compliance for thirteen of the fourteen as of February 15, 2018, but continues to market one noncompliant model that lacks the proper user manual disclosures and FCC labeling in apparent violation of the Commission’s rules.
In the NAL, the Commission proposes to apply the $7,000 base forfeiture for the marketing of unauthorized equipment to each of the fourteen models that failed to comply with the Commission’s equipment marketing requirements at some point within the last twelve months, resulting in an aggregate base forfeiture of $98,000. The Commission then applied several aggravating factors to arrive at the proposed penalty of 590,380, in particular, the intentional nature of the violations, Pure Enrichment’s resulting economic gain, and the duration and scope of the violations. As for intentionality, Pure Enrichment continued to market the noncompliant devices after becoming aware of the FCC’s investigation and then after acknowledging the noncompliance, despite later corrections covering thirteen of the fourteen devices in question. The continued marketing prior to correction resulted in revenues, which the Commission also took into account, but which data the NAL withholds from the public as confidential. As to scope and duration, the NAL notes that more than half of the devices in question allegedly suffered from at least two rule violations and that nine of the fourteen devices were marketed for more than a year, and some up to three years The Commission found no mitigating factors, underscoring that initial misunderstanding and confusion whether all of the models required authorizations provided no basis for a downward adjustment of the proposed forfeiture.
Commissioner Michael O’Rielly filed a concurring statement in which he was appreciative of the increase in proposed penalty almost $500,000 above the base amount, but he argued for reform of the enforcement process to make it more hard hitting. His statement reflects that the Chairman, at his behest, has committed to review the FCC’s forfeiture policies in the future. Commissioner O’Rielly would like to see baseline penalties that are more reflective of the severity of violations, diminishing reliance on upward adjustments and, he contends, improving the transparency, consistency, and credibility of the Commission’s enforcement process. Thus, for example, he raises concerns because, according to him,”[t]he base forfeiture is $7,000 for any model that does not comply with [the equipment authorization] requirements . . . regardless of whether one device of a certain model was sold or a million” and regardless of net profits or the period of time devices are out of compliance. Ostensibly, Commissioner O’Rielly would like to see base amounts increase in some fashion, literally or as applied.
The Commission’s ability to reset the base forfeiture amount is limited because that is set — $7000 in the case of “importation or marketing of unauthorized equipment” – under Section 503 of the Communications Act, as are maximum penalties for violations and continuing violations. The discretion of the Commission arises in taking into account aggravating and mitigating factors and determining whether to apply the baseline penalty for equipment importation/marketing violations on a per model basis, as is typical (but not required by the statute) or on a per unit basis.
When and how the Commission moves forward with any policy review in this area of enforcement is certainly something that manufacturers, importers, distributors, brokers, and retailers should watch closely. In the interim, such entities may be well-served to review the processes they have in place to ensure that RF equipment which they import or market in any way adheres to the authorization procedures and information and labeling requirements that apply under the Commission’s rules. As the NAL makes clear, misunderstanding the requirements will likely not be an accepted excuse and rapid action to correct any discovered violations is essential to avoid the magnification of penalties should a complaint be made or an investigation commence.