FCC Seeking Fines Against 14 Retailers on Labeling Violations

FCC Enforcement Bureau agents have done spot inspections of 1,280 storefronts since the labeling order took effect and issued 280 citations for alleged violations, Martin said. He also announced that notices have been circulated at the commission proposing more than $11 million in fines against two unnamed CE makers on allegations of V-chip violations. The notices were based on information that House Telecom Subcommittee Chairman Edward Markey, D-Mass., had provided, he said, without elaborating. One notice accuses a manufacturer of leaving V-chip capability out of all its sets, and the other alleges that a second manufacturer included a V-chip function that can’t be updated, Martin said.

Because retailers aren’t licensees, the FCC must give them citations before issuing notices of apparent liability, Martin said in his written testimony. When he last testified to the subcommittee in July, “I mentioned that NALs were pending against seven large retailers for apparently violating the Commission’s labeling requirements,” Martin said. “These fines, in the aggregate, total over $3 million.” The FCC since has circulated NALs to seven more retailers, proposing fines over $500,000, he said. “In addition, the Enforcement Bureau has issued another six NALs on delegated authority. It is my hope that through our vigorous enforcement actions, retailers will take concrete actions to avoid consumer confusion as the digital transition draws near.”

Martin has now circulated a DTV consumer education order at the Commission, he said. He told us Friday he couldn’t comment on any such order because it hadn’t yet circulated (CED Oct 15 p1). At the hearing, Martin was vague about whether the order would include penalties on retailers that don’t train their employees or educate the public properly and whether FCC employees will enforce it through spot inspections, as Markey and House Commerce Committee Chairman John Dingell, D-Mich., have urged. “We would continue to work with NTIA to ensure that retailers participating in the converter box program are appropriately training their employees and informing their consumers,” Martin said. Late in the hearing, Markey urged Martin to work closely with NTIA Administrator John Kneuer to crack down on retailers whose salespeople might prey on unsuspecting coupon consumers. Martin told Markey that he would be “happy to.”

Markey told Kneuer he wants penalties imposed on retailers that don’t have boxes in stock when customers with soon-to-expire coupons walk into their stores. He fears unscrupulous salespeople would try to upsell them to $500 DTV sets in a classic bait-and-switch, Markey said. Kneuer said Corporate Lodging Consultants, the IBM vendor partner responsible for retailer certification, could punish a retailer that “consistently” committed abuses, including by decertifying the retailer from the program. Rep. Joe Barton, R-Tex., doesn’t want to penalize retailers, he said. If he took a coupon a Best Buy or RadioShack and found the retailer out of stock on boxes, he would just drive to a nearby Wal- Mart or another retailer to redeem the coupon, he said. Barton thinks the market will work, he said.

Best Buy and Circuit City will take part in the NTIA’s coupon program, the chains said Wednesday in separate statements apparently timed for release with the hearing. Best Buy will begin accepting coupons in early 2008, but “an exact date for the rollout of the boxes in stores is still being determined,” it said. Best Buy didn’t say whether it would carry the boxes chainwide. Neither did Circuit City. It said its taking part in the program awaits “the resolution of a number of technical and regulatory questions.”

Best Buy is “the first CE retailer to publicly announce an exit from the analog television business,” the chain said. “Stores were instructed to stop selling these products” Oct. 1, the chain said. Kneuer mentioned the Best Buy announcement at the hearing, and Markey greeted it with sarcastic praise. Under tough questioning from Markey at a hearing in March, Best Buy Senior Vice President Mike Vitelli had said the chain expected to sell out its remaining analog TVs by May 1 (CED March 29 p1).

Circuit City stopped ordering analog-only TVs in February 2006 and no longer includes them “in our active sales program,” a spokesman told us. “We still have a few analog TVs, which are on clearance and are clearly labeled, so consumers know the sets will not be able to receive over-the-air signals after February 17, 2009,” he said. Sets on clearance include a five-inch black-and-white portable, he said. “We are evaluating the status of this remaining small stock of analog TVs.” Target likewise is “analyzing its inventory” of analog-only TVs “to assess the possibility of expeditiously offering its remaining stock” to customers, such as cable subscribers, “for whom they may be good values,” Target told Martin in an ex parte letter filed Tuesday at the FCC.

Retailers in the early going seem to be balking at signing on to the coupon program, Mark Goldstein, director of physical infrastructure issues at the Government Accountability Office, told the subcommittee. GAO polled retailers and found many resisting out of concern about their point-of-sale systems, Goldstein said. The IBM team running the program is talking with the top 23 CE retailers about taking part, said Tom Romeo, director of federal services for the Global Business Service at IBM. For retailers, the burdens of the program are “not a big deal,” Romeo said. Retailers have a choice of six coupon redemption options, including the telephone, Romeo said. Those choosing the most “automated” solution may want to wait until after the holiday selling season before changing their POS systems, Romeo said.

The CE Retailers Coalition “is more confident than ever” that many qualified retailers will take part in the coupon program “if its voluntary, marketplace-oriented nature is preserved and if it seamlessly interfaces” with their POS systems, CERC Executive Director Marc Pearl told a Senate Commerce Committee hearing Wednesday afternoon. “I am less confident if the agreement to participate is to be accompanied by new FCC regulations or other threats of legal sanction,” such as against retailers found in spot inspections not to have trained employees or educated the public properly about the coupon program, Pearl said.

The FCC “has no experience, expertise or delegated authority” to regulate retail practices, Pearl said. Though much progress has been made since IBM landed the coupon contract, retailers still don’t know “key pieces” about taking part, such as the terms of the agreements they would need to sign, Pearl said. An unnamed CERC member retailer met with the IBM team as recently as Wednesday morning, “and there was still no contract,” Pearl told Sen. Claire McCaskill, D-Mo., in questioning. McCaskill asked that CERC or NTIA send the committee a copy of the retailer contract when it becomes available.

It may not help that the FCC the day before the hearings slapped RadioShack and five other retailers with $96,000 in total proposed fines for violating the analog-only labeling order. RadioShack, which faces $16,000 in fines for two violations, “regrets the FCC’s action because it fails to account for the significant efforts RadioShack has undertaken to educate consumers” on the DTV transition, the chain said in a statement. Considering the size of the business, “that only two televisions in two stores were found to lack the correct label is remarkable,” it said. “RadioShack views this result as a tribute to its organization and to its employees who have expended substantial effort to make sure consumers are properly informed.” RadioShack also regrets that the FCC called the mislabeling of the two TVs “willful and repeated” violations, the chain said. “With 4,500 stores and dozens of products in each store, the mislabeling of only two televisions can only be viewed as accidental.”

According to the notice, FCC agents issued RadioShack citations May 31 to June 11 for violations found in 19 stores and on the company’s e-commerce site. The notice doesn’t say whether agents returned to see if RadioShack had corrected the violations. The $16,000 in proposed fines were for violations found in two stores not previously visited, the notice said. Agents visited those stores June 12, the day after it issued RadioShack the last of its citations, the notice said.

The Commission lacks “a specific base forfeiture” for violations of the analog-only labeling order, the notice said. “Similar issues arose” when the FCC enforced labeling requirements for wireless hearing-aid-compatible handsets, where the commission has imposed fines of $8,000 per violation, it said. “The labeling requirements for wireless hearing aid-compatible handsets and the analog-only tuner labeling requirements both serve the important goal of ensuring that consumers have access to necessary information. In light of the similarities in these labeling requirements, we conclude that a $8,000 base forfeiture amount per unlabeled model or device in each store where Bureau agents and investigators observed a violation is appropriate.”

“Exercising ancillary jurisdiction to adopt point-of- sale disclosure requirements” on analog-only TVs “is consistent with prior exercises of the Commission’s authority,” the FCC said May 3, stating its authority to impose the labeling order. The commission has many labeling and disclosure requirements “designed to further its statutory objectives and to protect consumers,” the order said. The CERC has disagreed, saying the FCC has no jurisdiction over retail practices. But the organization hasn’t taken the agency to court.