By Matthew Lasar | Published: May 19, 2008 - 08:59AM CT
The nation\'s biggest electronics retailer has told the Federal Communications Commission that the agency lacks the authority to punish Best Buy for screwing up its digital transition TV selling rules. "The Commission never before has claimed, asserted, or exercised direct or ancillary jurisdiction over retailers, or retail practices, of the nature that is asserted" by the FCC, Best Buy attorneys say. And the appliance giant charges that the Commission\'s recent Notice of Apparent Liability (NAL) holds the company to "a standard of flawless compliance." That\'s especially unfair, Best Buy complains, given that the FCC\'s NAL also contains mistakes.
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As Ars has reported, in mid-April the Commission proposed almost $4 million in fines to seven major retailers for "willfully and repeatedly" selling analog-only TV sets without labels that warn consumers that the devices may not work after February 17, 2009—the last day of analog broadcasting. The fined stores included the Sears-Roebuck/K-Mart group, dinged to the tune of $1.096 million; Wal-Mart, hit with a $992,000 forfeit; and CompUSA, which took the lowest penalty of $168,000.
Best Buy received a proposed fine of $280,000. FCC Enforcement Bureau agents say that they checked numerous Best Buy stores and found analog only TVs on sale without warning labels. The agency told Best Buy about the sets, then "after affording Best Buy a reasonable opportunity to respond to the first Citation," FCC staff surveyed the stores again, only to find more unlabeled analog TVs.
Circuit City and Sears are also challenging these fines. In Best Buy\'s May 12th, 41 page response, the retailer throws the book at the FCC\'s NAL, giving five reasons for its appeal. Here are three:
You have no authority:
"The Commission has not claimed any express authorization from Congress to enact the Labeling Rule, and none exists," Best Buy argues. Said "Labeling Rule" requires all analog only TVs to display clear statements warning consumers that they will need to purchase a digital converter box after February 17th to receive over-the-air broadcasts.
Best Buy concedes that the agency takes its authority from court decisions that say that if a matter is "reasonably ancillary to the effective performance of the Commission’s various responsibilities," the FCC can make rules that have teeth. But the company insists that the Communications Act limits the agency\'s authority to matters regarding "communication by wire or radio." It does not give the agency the power to regulate retailers who sell related equipment.
"The Commission has never previously sought—and the courts have never identified—any Commission jurisdiction over persons or device elements that were not involved in transmitting or receiving a signal," Best Buy writes.
Willful? Us?
Best Buy takes particular exception to the FCC\'s assertion that it "willfully and repeatedly" violated the agency\'s TV labeling rules. The company says that it had thousands of analog only TV products in its inventory, which it struggled to find following the FCC\'s labeling order.
"Slight differences in model numbers could indicate substantial differences in product configuration," Best Buy contends. "Compounding the difficulty, manufacturer product manuals often are written on a product family basis, such that the manuals had to be reviewed with great care to learn the significance of various alphanumeric differences."
The retailer concedes that the Commission\'s enforcers found unlabeled analog only sets in Best Buy stores, but says the company did not deliberately put them there. "Conduct that is accidental, or not known to the organization, is not willful," Best Buy says. "The Commission bears the burden to \'demonstrate\' that the conduct complained of was not accidental or unintentional."
We are not perfect
"Stores are highly dynamic environments," Best Buy notes. Its retail outlets\' products, inventory, and even shelf arrangements constantly change. No two Best Buy stores are exactly alike. "Given these circumstances," the firm says, "predictable and perfect execution, even after the initial round of Citations and their research by Best Buy management, was impossible, or at least unreasonable to expect as a matter of logic and statistical probability."
And Best Buy claims that the list of unlabeled analog only TV sets the FCC\'s Enforcement Bureau say they found at various outlets includes a model that does not exist and a model that the company has no record of ever selling—the point being that Best Buy, like the FCC, does not run a flawless operation.
Less credible is Best Buy\'s complaint that the FCC issued its NAL "without proper opportunity for prior notice and comment." In fact, the Notice is the agency\'s invitation for appeal and comment. In many instances NAL appeals are at least partially successful; the Commission revokes charges and substantially lowers fines—although it is unclear whether Best Buy will get what it\'s asking for here, "cancellation or reduction to zero of Notice of Apparent Liability for forfeiture."
It\'s also pretty unlikely that the FCC will concede its lack of authority in this enforcement matter—at least short of a court battle.
