Too much power, too little restraint: how the FCC expands its reach through unenforceable and unwieldy "voluntary" agreements.

• Author: Tramont, Bryan N.

Those who really deserve praise are the people who, while human enough to enjoy power, nevertheless pay more attention to justice than they are compelled to do by their situation.

-- Thucyclides

1. INTRODUCTION

   The character of a regulatory agency is most severely tested at the zenith of its power. When the Federal Communications Commission ("FCC" or "Commission") breaks free of the limitations imposed by the law, the Commission's leadership sets its own course. It is at these times, when legal oversight is at a minimum, that it becomes most important for the agency to "pay more attention to justice." Unfortunately, as outlined below and in Commissioner Furchtgott-Roth's separate statements, the FCC has often failed this test of institutional character.(1) Indeed, the Commission seems to capitalize on these situations to achieve goals that would not be attainable through traditional policymaking. The result is a far-reaching, unenforceable, opaque and ultimately arbitrary policy and process that undermines both the Commission's standing and the public interest.

   These criticisms spring from three fundamental principles of regulatory policy: (1) an agency should never act beyond its jurisdiction--even when it may "get away with it"--because it detracts from its statutorily defined mission, (2) an agency should not promulgate obligations that it is not prepared to enforce fully because it undermines the agency's credibility, and (3) rules should be generally applicable and transparent to the public. Following these principles, the Commission can readily achieve its public policy objectives without resorting to its current circuitous approach.

   Nonetheless, in at least the three contexts set forth below--license transfers, national security review, and consent decrees--the Commission has proven to be something less than a benevolent master. In each case, the Commission has an appropriate and limited role to play under the Communications Act of 1934 ("Act"). In each case, however, that role lies outside the traditional scope of judicial review. Unfortunately, in each case, the current Commission leadership uses the confluence of the vulnerability of licensees and the absence of legal oversight to advance its particular public policy agenda; impose many requirements it cannot or will not enforce; and facilitate the creation of vast company-specific regulatory regimes that undermine transparency and predictability.

2. EVASION OF LEGAL OVERSIGHT

   The Commission's ability to exploit its power to achieve policies outside its mandate depends on the agency's ability to escape judicial and, to a lesser degree, congressional review. In theory, a number of forces should constrain the FCC's authority. Most fundamentally, the Act, like other delegations of congressional authority, delineates the scope of the Commission's authority over the communications marketplace.(2) Essential to this statutory scheme is the ability of aggrieved parties to obtain judicial review of the FCC's actions.(3) Through judicial review, the courts limit the Commission's discretion to act by enforcing legislative limitations and holding the FCC to standards of reasoned decisionmaking and constitutional norms.(4) Beyond the limits imposed by the Act and the courts, Congress impacts the FCC's authority through appropriations and oversight.(5) Theoretically, these constraints require the Commission to stay within its regulatory and jurisdictional boundaries and to engage in reasoned and publicly documented decision-making procedures.

   In practice, however, traditional limitations on the Commission's authority have not always applied. In license-transfer proceedings, national security reviews, and consent decrees, procedural loopholes and circumstance create opportunities for the Commission to operate free of the discipline imposed by the statute and administrative procedure.

   Certain license-transfer proceedings provide perhaps the most visible example. When license-holding companies merge, the FCC reviews the proposed license transfer to the new merged entity. The FCC's statutory licensing authority only requires that the transfer be in the "public interest, convenience, and necessity," which provides little detailed guidance on the structure or standards that should be associated with the review process.(6) Months after the initial merger plans are announced, the FCC's license-transfer approval is often the only thing that stands in the way of consummation of the transaction. Sometimes these transactions, such as the mergers of SBC/Ameritech and Bell Atlantic/GTE, are worth billions of dollars.(7) In these mega-merger license transfers, the Commission and applicants typically engage in a high-stakes regulatory dance in which applicants "volunteer" to take certain actions or to refrain from certain actions as the quid pro quo for favorable agency consideration. The resulting "voluntary" conditions emerge from an elaborate and often secret process of demands and "negotiations." The licensees are left with little choice but to engage in this process or face tremendous delays or outright rejection of the transfer.(8) Indeed, there appears to be very little "voluntariness" about this process.

   When the licensee proposes the "voluntary conditions" and the Commission adopts them, there is little or no basis for judicial review because the conditions are all characterized as "voluntary."(9) Although Congress has questioned the FCC's process at times, it has thus far chosen not to offer a legislative solution to the unpredictable, lengthy, and demanding FCC license-transfer process.(10) Absent judicial or congressional oversight, the Commission has a free hand to impose its view of the public interest without many of the legal or procedural restraints that typically cabin FCC activities.

   The license-transfer process not only is used by the Commission to achieve its goals outside the traditional policy-making process, it also has provided a similar opportunity for the Executive Branch to act away from the bright lights of legal scrutiny. When license transfers involve foreign ownership,(11) the Justice Department and the Federal Bureau of Investigations ("FBI") have at times raised national security concerns. Rather than utilizing the statutory process designed for such Executive Branch review, these agencies instead have latched onto the FCC's license-transfer process.(12) Under this strategy, the Executive Branch files an objection to the license transfers with the Commission--often late in the process--and then offers to withdraw that objection only if the licensees "volunteer" to undertake certain obligations.(13) Once again, the "voluntary" nature of the obligations insulates the Executive Branch's demands from judicial review. The FCC, for its part, uses its procedural discretion to wait for the Executive Branch to withdraw its objection before it will approve the transaction. The entire process leaves the licensee all too willing to accede to any Executive Branch demands, because, as discussed above, the license-transfer process itself is largely free from judicial review.

   Finally, the Commission also uses the consent decree process to attain policy goals outside the strictures of the statute and the courts. Licensees who have engaged in wrongdoing are most often either (1) approached privately by the FCC in the hope of reaching a consent decree before the alleged violations become public, or (2) subjected to Notices of Apparent Liability (sometimes amounting to millions of dollars) that commence an enforcement proceeding.(14) Facing immense liability, horrible publicity, and the prospect of a potentially prolonged hearing process (possibly at both the Commission and in the courts), licensees understandably seek a "voluntary" deal. Licensees, who deal with the FCC virtually every day on a wide variety of issues, cannot afford to risk their relationships with the agency for a prolonged period. This is especially true in an era when high-ranking Commission officials openly discuss the impact of various policy battles on the "good will" of the agency.(15) Therefore, the licensee has every incentive to reach a "voluntary" decree as soon as practicable. Voluntary consent decrees with narrow terms closely linked to the alleged misconduct can serve an important function in bringing a prompt and just end to enforcement proceedings. The current Commission has been far more aggressive, however, in defining the scope of these voluntary decrees. This aggressiveness is made possible because there is nothing that limits the scope of such "voluntary" decrees. Even if there were such formal limitations on the agency, consent decrees often require licensees to waive their rights to judicial review.(16) Thus, in enforcement proceedings as well, the FCC retains a virtual free hand.

3. USING LICENSEES' VULNERABILITY TO PURSUE GOALS OUTSIDE THE TRADITIONAL POLICY-MAKING PROCESS

   Having freed itself from the legal boundaries that traditionally inform and contain its policy initiatives, the current Commission in these three contexts has been able to pursue its version of the public interest with particular zeal. As described above, the Commission has the advantage of an anxious, if not willing, victim: the licensees. Perhaps this result would not be so troubling except that the Commission uses this remarkable power to override the its statutory limits. Most fundamentally, the Commission uses these situations to achieve policy outcomes it could not gain through judicially reviewable channels.(17) As an independent agency, the Commission exists to exercise certain enumerated functions delegated by Congress.(18) When an agency exceeds its limited functions, it undermines the very foundation of its own legal existence. Moreover, the Commission creates conditions it cannot and will not enforce, undermining transparency, efficiency, and basic fairness by creating vast...