Federal Regulatory Agencies
Federal Regulatory Agencies
News releases, reports, statements and associated documents from federal regulatory agencies ranging from the Securities Exchange Commission to the Commodities Futures Trading Commission
Featured Stories
Litigation: SEC Vs. Red Rock Secured, Sean Kelly, Anthony Spencer, Jeffrey Ward
WASHINGTON, May 8 -- The Securities and Exchange Commission issued the following litigation release (No. 2:23-cv-3682-RGK-PVC; C.D. Cal. filed May 15, 2023) involving Red Rock Secured LLC, Sean Kelly, Anthony Spencer, and Jeffrey Ward:* * *
SEC Obtains Final Judgment Against Red Rock Secured, Three Executives in $50 Million Scheme Targeting Retirement Account Holders
SEC Obtains $76 million Judgement Against Red Rock Secured and Executives Who Schemed to Defraud Retirement Account Holders
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On April 23, 2024, the United States District Court for the Central District of California entered ... Show Full Article WASHINGTON, May 8 -- The Securities and Exchange Commission issued the following litigation release (No. 2:23-cv-3682-RGK-PVC; C.D. Cal. filed May 15, 2023) involving Red Rock Secured LLC, Sean Kelly, Anthony Spencer, and Jeffrey Ward: * * * SEC Obtains Final Judgment Against Red Rock Secured, Three Executives in $50 Million Scheme Targeting Retirement Account Holders SEC Obtains $76 million Judgement Against Red Rock Secured and Executives Who Schemed to Defraud Retirement Account Holders * * * On April 23, 2024, the United States District Court for the Central District of California entereda final consent judgment against defendants Red Rock Secured (which now operates under the name American Coin Co.), its CEO Sean Kelly, and managers Anthony Spencer and Jeffrey Ward, ordering defendants to pay more than $76.4 million dollars in disgorgement, interest, and penalties. The judgment resolves the SEC's charges against defendants for their roles in a scheme to defraud retirement account holders out of more than $50 million in connection with defendants' sales of gold and silver coins between 2017 and 2022.
According to the SEC's complaint (filed on May 15, 2023, and amended on August 11, 2023), since at least 2017, the defendants repeatedly solicited investors through false and misleading statements, telling them to "protect" their retirement savings by selling securities held in their retirement accounts--including federal employee Thrift Savings Plan accounts, 401(k) plans, and Individual Retirement Accounts--to invest in gold or silver coins at only a 1 to 5 percent markup. The complaint alleges that in reality, Red Rock charged as much as 130 percent in markups on the precious metal coins they sold to investors. Through this scheme, defendants allegedly defrauded at least 700 investors out of more than $50 million.
Without admitting or denying the SEC's allegations, defendants consented to entry of a final judgment permanently enjoining them from violations of the antifraud provisions of Section 10(b) the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisers Act of 1940; ordering Red Rock to pay disgorgement in the amount of $50,150,000, plus prejudgment interest thereon in the amount of $6,110,000, and $10,000,000 in civil penalties; ordering Kelly to pay disgorgement in the amount of $1,841,727.89, plus prejudgment interest thereon in the amount of $224,241.37, and $1,500,000 in civil penalties and prohibiting Kelly from serving as an officer or director of a public company; ordering Spencer to pay disgorgement in the amount of $2,156,905.15, plus prejudgment interest thereon in the amount of $262,616.15, and $580,478.70 in civil penalties; and ordering Ward to pay disgorgement in the amount of $1,224,215.28, plus prejudgment interest thereon in the amount of $149,055.46, and $200,464 in civil penalties.
The Commodity Futures Trading Commission ("CFTC") and California and Hawaii state regulators, the California Department of Financial Protection and Innovation and the Hawaii Department of Commerce and Consumer Affairs also obtained a final judgment in their parallel action, CFTC et al. v. Red Rock Secured LLC, Shade Johnson-Kelly a/k/a Sean Kelly, and Anthony Spencer, No. 2:23-CV-03680-RGK-PVC (C.D. Cal. filed May 15, 2023). The amounts owed by Red Rock, Kelly, and Spencer to the SEC will be offset by any payments they make to the CFTC in connection with its final judgment.
The SEC's investigation was conducted by Michael Ellis and Elzbieta Wraga of the SEC's New York Regional Office and was supervised by Hane L. Kim and Tejal D. Shah of the New York Regional Office. Alex Lefferts of the Enforcement Division's Office of Investigative and Market Analytics assisted with the investigation. The SEC's litigation was led by Jack Kaufman, Debra Jaroslawicz, and Corinna Provey Adamson, under the supervision of Ms. Shah, Preethi Krishnamurthy, Ms. Kim, and Liora Sukhatme, and with the assistance of Ms. Wraga, Nicole Forbes, Rachna Kapur, and Craig Messing.
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Original text here: https://www.sec.gov/litigation/litreleases/lr-25996
Litigation: SEC Vs. Magna Group, Magna Equities II, MG Partners, Joshua Sason, Marc Manuel
WASHINGTON, May 8 -- The Securities and Exchange Commission issued the following litigation release (No. 19-cv-1459; S.D.N.Y filed Feb. 15, 2019) involving Magna Group LLC, Magna Equities II LLC, MG Partners Ltd, Joshua Sason, Marc Manuel:* * *
SEC Obtains Final Judgments Against Participants in Illegal Microcap Securities Offerings
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On May 2, 2024, the U.S. District Court for the Southern District of New York entered final consent judgments against two individuals and their related businesses that participated in illegal microcap securities offerings. Entry of the judgments, and the ... Show Full Article WASHINGTON, May 8 -- The Securities and Exchange Commission issued the following litigation release (No. 19-cv-1459; S.D.N.Y filed Feb. 15, 2019) involving Magna Group LLC, Magna Equities II LLC, MG Partners Ltd, Joshua Sason, Marc Manuel: * * * SEC Obtains Final Judgments Against Participants in Illegal Microcap Securities Offerings * * * On May 2, 2024, the U.S. District Court for the Southern District of New York entered final consent judgments against two individuals and their related businesses that participated in illegal microcap securities offerings. Entry of the judgments, and theSEC's consent to the dismissal of certain fraud claims, resolves all remaining claims in the SEC's February 15, 2019 complaint against Magna Group, LLC, Magna Equities II, LLC, and MG Partners, Ltd (collectively, the "Magna Entities"), as well as Joshua Sason, the founder and owner of the Magna Entities, and Marc Manuel, the Magna Entities' former head of research and due diligence. The complaint alleged, among other things, that those defendants participated in the offer and sale of certain securities without a registration statement or any applicable exemption to registration requirements.
Without admitting the allegations in the SEC's complaint, Sason, Manuel, and the Magna Entities consented to the entry of final judgments that provide for the following relief:
* Sason is permanently enjoined from violating Sections 5(a) and 5(c) of the Securities Act, and was ordered to pay disgorgement of $450,000 plus prejudgment interest of $38,610.54.
* Manuel is permanently enjoined from violating Sections 5(a) and 5(c) of the Securities Act, was ordered to pay a civil monetary penalty of $90,000, and is barred from participating in any offering of a penny stock for two years.
* Magna Group, LLC, is permanently enjoined from violating Sections 5(a), 5(c), and 17(a)(3) of the Securities Act, and was ordered to pay disgorgement of $394,032.86 plus prejudgment interest of $33,808.50, and a civil monetary penalty of $70,000.
* Magna Equities II, LLC, is permanently enjoined from violating Sections 5(a) and 5(c) of the Securities Act, and was ordered to pay disgorgement of $692,983.57 plus prejudgment interest of $59,958.83, and a civil monetary penalty of $65,000.
* MG Partners, Ltd, is permanently enjoined from violating Sections 5(a) and 5(c) of the Securities Act, and was ordered to pay disgorgement of $692,983.57 plus prejudgment interest of $59,958.83, and a civil monetary penalty of $65,000.
The SEC's litigation is led by Daniel Loss, David Zetlin-Jones, Eric Taffet, and Lee A. Greenwood. The case is being supervised by Sheldon L. Pollock.
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Original text here: https://www.sec.gov/litigation/litreleases/lr-25997
Federal Election Commission: PoliticalMeetings.com
WASHINGTON, May 8 -- The Federal Election Commission issued the following advisory opinion document (No. AOR 2024-03) on May 7, 2024:* * *
On May 1, 2024, the Commission considered an advisory opinion request from PoliticalMeetings.com, LLC (PM.com).
The request asked whether the company may establish a system allowing its service subscribers to make small, monthly contributions to participating candidates and national political parties. The recipient committees would be required to provide PM.com non-public information about their meetings, including links to fundraisers (including links to ... Show Full Article WASHINGTON, May 8 -- The Federal Election Commission issued the following advisory opinion document (No. AOR 2024-03) on May 7, 2024: * * * On May 1, 2024, the Commission considered an advisory opinion request from PoliticalMeetings.com, LLC (PM.com). The request asked whether the company may establish a system allowing its service subscribers to make small, monthly contributions to participating candidates and national political parties. The recipient committees would be required to provide PM.com non-public information about their meetings, including links to fundraisers (including links toother fundraising sites) and events, which would then be available to the subscribers.
The Commission considered two draft advisory opinions but did not approve either of the drafts by the required four affirmative votes. The Commission concluded its consideration of the request without issuing an advisory opinion.
Resources
* AOR 2024-03 (https://www.fec.gov/data/legal/advisory-opinions/2024-03/)
* Commission consideration of AOR 2024-03 (https://www.fec.gov/updates/may-01-2024-open-meeting/)
Author
Romy Adame-Wilson, Communications Specialist
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Original text here: https://www.fec.gov/updates/aor-2024-03/
FLRA Issues Decision Regarding VA, Veterans Health Administration, American Federation of Government Employees, National Veterans Affairs Council
WASHINGTON, May 8 -- The Federal Labor Relations Authority issued the following decision (Case No. 0-AR-5834) on May 6, 2024:* * *
Before the Authority: Susan Tsui Grundmann, Chairman, and Colleen Duffy Kiko, Member
I. Statement of the Case
The Union filed a grievance alleging the Agency violated a past practice by not allowing employees in firefighter positions to satisfy Agency training and accreditation requirements with state-accredited certification training. Arbitrator A. Martin Herring found the grievance procedurally arbitrable under the parties' collective bargaining agreement (CBA), ... Show Full Article WASHINGTON, May 8 -- The Federal Labor Relations Authority issued the following decision (Case No. 0-AR-5834) on May 6, 2024: * * * Before the Authority: Susan Tsui Grundmann, Chairman, and Colleen Duffy Kiko, Member I. Statement of the Case The Union filed a grievance alleging the Agency violated a past practice by not allowing employees in firefighter positions to satisfy Agency training and accreditation requirements with state-accredited certification training. Arbitrator A. Martin Herring found the grievance procedurally arbitrable under the parties' collective bargaining agreement (CBA),and concluded the Agency acted contrary to the past practice in the manner the Union alleged. The Agency filed exceptions on essence, nonfact, and contrary-to-law grounds. For the reasons explained below, we partially dismiss and partially deny some of the exceptions. However, we are unable to determine whether the award is contrary to management's right to assign work under Sec. 7106(a)(2)(B) of the Federal Service Labor-Management Relations Statute (the Statute).[1] Therefore, we remand this matter to the parties for resubmission to the Arbitrator for further findings, absent settlement.
II. Background and Arbitrator's Award
The Union represents Agency firefighters. In June 2020, the Agency implemented Agency Directive 7718 (the directive). As relevant here, the directive states "all [Agency] fire departments must participate in an accredited certification program."[2] It also requires firefighters to have specific certifications and maintain those certifications through training consistent with standards established by the National Fire Protection Association.[3]
The Union filed a grievance alleging an Agency manager notified firefighters at the Agency's Bath, New York facility (Bath facility) in June 2021 that they could receive training and certifications to satisfy the directive's requirements only from nationally accredited programs (accreditation requirement). The grievance alleged the accreditation requirement violated Agency policy and a past practice whereby the Agency permitted firefighters to satisfy the directive's requirements by receiving training from state accredited certification programs. The grievance also alleged the Agency violated the CBA and committed an unfair labor practice (ULP) by not providing the Union with notice and an opportunity to bargain before implementing the accreditation requirement. The Agency denied the grievance, and the parties proceeded to arbitration.
The parties did not stipulate to, and the Arbitrator did not frame, any issues. However, the Arbitrator resolved - as threshold matters - two procedural-arbitrability issues. First, he addressed the Agency's argument that the grievance was not timely filed under Article 43, Section 11.A of the CBA (Art. 43(11)(A)).[4] The Arbitrator rejected this argument because the Agency failed to raise it within forty five days of receipt of the grievance, as required by Article 43, Section 11.B of the CBA,[5] and because he found the grievance - which was "of [a] continuing nature"[6] - was timely filed. Second, the Agency argued that because the Union had failed to prove any change in accreditation policy, the grievance could not have been filed timely under Art. 43(11)(A).[7] According to the Arbitrator, the Agency's position "that the grievance [was] not arbitral by reason of it being of a de minimis nature [was] not supported by convincing evidence."[8] Therefore, the Arbitrator concluded the grievance was arbitrable.
As to the merits, although the Arbitrator noted elsewhere in the award that the grievance alleged the Agency violated Articles 2, 3, 47, and 49 of the CBA,[9] he did not reference those CBA articles in his merits analysis. Instead, he observed that, as a general matter, "[i]t is an arbitrator's duty . . . to attempt to determine how the parties interpreted the agreement by their behavior."[10] He then determined that a past practice existed whereby the Agency permitted firefighters to satisfy training and certification requirements through state accredited programs (the past practice).[11]
In finding the past practice, the Arbitrator did not expressly interpret any of the articles cited in the grievance. Rather, he found the parties "openly acknowledged and accepted for [twenty-two] years the practice of accreditation at the Bath [facility]."[12] Additionally, the Arbitrator found "[n]o credible evidence was presented . . . that the state of New York process[,] which is accredited, is not acceptable as a nationally accredited process."[13] Based on these findings, the Arbitrator concluded the past practice was "enforceable,"[14] and he directed the Agency to continue the past practice "to satisfy the training requirement and accreditation requirement in [Agency] directives[] until and unless the parties agree to another mutually acceptable accreditation program."[15] Having reached this conclusion, the Arbitrator further concluded he "need not address" the Union's ULP claim.[16]
On September 7, 2022, the Agency filed exceptions to the award, and on October 5, 2022, the Union filed an opposition to the Agency's exceptions. On September 26, 2023, the Authority issued Consumer Financial Protection Bureau (CFPB),[17] which revised the test the Authority will apply in cases where parties file management-rights exceptions to arbitration awards finding CBA violations. The Authority allowed the parties to file additional briefs concerning how the CFPB test should apply in this case. The Agency filed its supplemental brief on October 25, 2023, and the Union filed its supplemental brief on October 27, 2023.
III. Preliminary Matter: Sections 2425.4(c) and 2429.5 of the Authority's Regulations bar some of the Agency's arguments.
Under Sec.Sec. 2425.4(c) and 2429.5 of the Authority's Regulations, the Authority will not consider any evidence or arguments that could have been, but were not, presented to the arbitrator.[18] Citing Article 43, Section 2.A and Article 47, Section 2.A of the CBA (Art. 43(2)(A) and Art. 47(2)(A), respectively), the Agency argues the Arbitrator's finding that the grievance was arbitrable fails to draw its essence from the CBA and is contrary to law.[19] The Agency also argues the award conflicts with management's right to direct employees under Sec. 7106(a)(2)(A) of the Statute.[20]
Before the Arbitrator, the Agency challenged the grievance's arbitrability under several provisions of the CBA,[21] and also argued the award conflicts with management's right to assign work under Sec. 7106(a)(2)(B) of the Statute.[22] However, it did not make arguments concerning Art. 43(2)(A), Art. 47(2)(A), or management's right to direct employees under Sec. 7106(a)(2)(A).[23] Because the Agency could have, but did not, raise Art. 43(2)(A), Art. 47(2)(A), or Sec. 7106(a)(2)(A) before the Arbitrator, it cannot do so now.[24] Therefore, we dismiss those arguments under Sec.Sec. 2425.4(c) and 2429.5 of the Authority's Regulations.
IV. Analysis and Conclusions
A. The Agency's exceptions do not challenge a separate and independent ground for the Arbitrator's arbitrability ruling.
The Agency argues the Arbitrator's finding that the grievance was timely filed fails to draw its essence from Art. 43(11)(A), and is contrary to law.[25] The Agency also argues the Arbitrator's failure to "enforc[e] the parties' agreed upon limits on national grievances" fails to draw its essence from Article 47, Section 4.B (Art. 47(4)(B)),[26] and is contrary to law.[27] Specifically, the Agency contends the Arbitrator ignored its arguments that the grievance was improperly filed as a national grievance and that he could not "assume jurisdiction over a grievance's merits when the party invoking arbitration fail[ed] to comply with procedural requirements that are specifically enumerated in [Art. 47(4)(B)]."[28]
The Authority has repeatedly held that when an arbitrator bases an award on separate and independent grounds, an appealing party must establish that all of the grounds are deficient before the Authority will set the award aside.[29] If the excepting party does not demonstrate that the award is deficient on a ground the arbitrator relied on, and the award would stand on that ground alone, then it is unnecessary to address exceptions to the other grounds.[30]
The Arbitrator relied on two separate determinations to find the grievance procedurally arbitrable. Specifically, he found that the Union timely filed the grievance, and that the Agency failed to timely raise its arbitrability challenges.[31] The Agency does not challenge the Arbitrator's finding that it untimely raised its arbitrability challenges. That finding alone provides a separate and independent basis for the Arbitrator's arbitrability determination.[32] Although the Arbitrator did not explicitly address the Agency's Art. 47(4)(B) claim that the grievance was inarbitrable because it was improperly filed, that claim is encompassed by his finding that the Agency's arbitrability claims were untimely.[33] Therefore, we do not consider the Agency's remaining challenges to the Arbitrator's arbitrability determination.[34]
B. The award is not based on a nonfact.
The Agency argues the Arbitrator's past practice finding is based on a nonfact.[35] To establish that an award is based on a nonfact, the excepting party must demonstrate that a central fact underlying the award is clearly erroneous, but for which the arbitrator would have reached a different result.[36] However, disagreement with an arbitrator's evaluation of evidence, including the weight to be accorded such evidence, does not establish that an award is based on a nonfact.[37]
The Agency argues the Arbitrator's past practice finding is based on the nonfact that "the parties openly acknowledged and accepted for [twenty two] years the practice of accreditation at the Bath [facility]."[38] Specifically, the Agency argues that the Arbitrator failed to credit allegedly uncontradicted testimony of an Agency witness demonstrating the Agency did not knowingly acquiesce to the past practice, and that the Union did not present sufficient evidence to the contrary.[39] However, these arguments merely challenge the Arbitrator's evaluation of the evidence and, therefore, do not provide a basis for finding the award is based on a nonfact.[40] As such, we deny the Agency's nonfact exception.
C. We partially deny the Agency's contrary-to-law exception, but remand the award for further findings.
The Agency argues the award is contrary to law for several reasons.[41] When resolving a contrary-to-law exception, the Authority reviews any question of law raised by the exception and the award de novo.[42] Applying a de novo standard of review, the Authority assesses whether the arbitrator's legal conclusions are consistent with the applicable standard of law.[43] In making that assessment, the Authority defers to the arbitrator's underlying factual findings unless the excepting party establishes that they are nonfacts.[44] An exception based on a misunderstanding of an arbitrator's award does not demonstrate the award is contrary to law.[45]
First, the Agency argues the Arbitrator erred, as a matter of law, in finding there was more than a de minimis change in a condition of employment requiring the Agency to bargain.[46] The Agency misunderstands the award. At arbitration, the Agency argued that the grievance was untimely because the Union failed to provide sufficient evidence that any change took place within thirty days of the grievance's filing.[47] In determining the grievance's arbitrability, the Arbitrator rejected the Agency's argument that "the grievance is not arbitral by reason of it being of a de minimis nature" because he found the evidence did not support that argument.[48] The Arbitrator's determination was not made in the context of addressing the Agency's duty to bargain. Indeed, the Arbitrator found it unnecessary to resolve whether there was a change to a condition of employment that triggered the Agency's duty to bargain, nor did he direct the parties to bargain.[49] Because the Agency misunderstands the award, this argument provides no basis for finding the award contrary to law.[50]
The Agency also disputes the Arbitrator's finding of whether a past practice exists.[51] The Authority views an exception to an arbitrator's finding of whether a past practice exists as raising a nonfact claim.[52] As this contrary-to-law argument reiterates the Agency's nonfact argument, which we have rejected, we also deny this argument.[53]
The Agency further argues the award conflicts with management's right to assign work under Sec. 7106(a)(2)(B) of the Statute.[54] In CFPB, the Authority "emphasize[d]" that the management-rights test it established in that decision "will apply only in cases where an arbitrator is enforcing a CBA provision."[55] Here, the Arbitrator explained that it was not his duty "to guess or put his interpretation of the language of the CBA agreement but rather to attempt to determine how the parties interpreted the agreement by their behavior."[56] However, in finding a past practice, he did not discuss any of the CBA provisions cited in the grievance, expressly find that the Agency violated the CBA, or state that the past practice was evidence of how the parties "interpreted" any CBA provision.[57] Further, the Arbitrator directed the Agency to continue the past practice of permitting the state accreditation "to satisfy the training requirement and accreditation requirement" set forth in the directive.[58]
The Agency asserts the Arbitrator failed to find a contract violation,[59] and CFPB is therefore inapplicable.[60] The Union, on the other hand, argues the past practice was "negotiated by the parties" as an "enforceable appropriate arrangement."[61] The Union asserts the directive is "the law, rule, or regulation serving as the basis of the Arbitrator's [past practice] determination,"[62] but also refers to the directive as the "agreement" the parties modified by past practice.[63] Upon reviewing the award, we cannot determine whether the Arbitrator was enforcing a CBA provision, the directive, or something else. To the extent the Arbitrator was enforcing the directive, he did not address whether the parties negotiated the directive.[64] For these reasons, we are unable to resolve the Agency's contrary-to-law exception, including determining whether the CFPB test applies here.[65]
Where an arbitrator's findings are insufficient for the Authority to determine whether the award is deficient on the grounds raised by a party's exceptions, the Authority will remand the award.[66] Accordingly, we remand the award to the parties for resubmission to arbitration, absent settlement, for further findings. Consistent with this decision, the resulting award should explain the bases - contractual or otherwise - for directing the parties to continue the past practice; explain any applications or interpretations of the parties' agreement; and provide adequate factual findings.
V. Decision
We partially dismiss and partially deny the Agency's exceptions, and we remand this case for action consistent with this decision.
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Footnotes:
[1] 5 U.S.C. Sec. 7106(a)(2)(B).
[2] Exceptions, Ex. 5, Directive at 11.
[3] Id. at 12.
[4] This provision requires national-level grievances to be filed within thirty days of the act or occurrence giving rise to the grievance, or the date the party became aware or should have become aware of the act or occurrence. Exceptions, Ex. 2, CBA (CBA) at 233.
[5] As relevant here, this provision requires a "final written decision, including any position on grievability or arbitrability, . . . be rendered by the respondent within [forty-five] days of receipt of the grievance." Id. The Agency's decision denying the grievance did not allege that the grievance is not grievable or arbitrable. See Exceptions, Ex. 8, Agency Grievance Resp. at 1-4.
[6] Award at 3.
[7] Exceptions, Ex. 12 (Agency Post-Hr'g Br.) at 7-8 (arguing that because the Union had not provided evidence of a change in policy within thirty days of the grievance, the grievance should be found untimely).
[8] Award at 3.
[9] Id. at 2. Article 2 states that the parties are governed by applicable laws, rules, and regulations. CBA at 6. Article 3 concerns labor-management cooperation. Id. at 9-11. Article 47 addresses mid-term bargaining. Id. at 242 44. Article 49 concerns the parties' rights and responsibilities "imposed" by the Statute and the CBA. Id. at 250-53.
[10] Award at 3.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] Id. at 4.
[16] Id. at 3.
[17] 73 FLRA 670 (2023).
[18] 5 C.F.R. Sec.Sec. 2425.4(c), 2429.5; U.S. DHS, Citizenship & Immigr. Servs., 73 FLRA 82, 83-84 (2022) (citing 5 C.F.R. Sec.Sec. 2425.4(c), 2429.5; AFGE, Loc. 3627, 70 FLRA 627, 627 (2018)).
[19] Exceptions Br. at 7, 9.
[20] Id. at 11-13 (citing 5 U.S.C. Sec. 7106(a)(2)(A)); Agency Supp. Br. at 2.
[21] Agency Post-Hr'g Br. at 6-9.
[22] 5 U.S.C. Sec. 7106(a)(2)(B).
[23] Agency Post-Hr'g Br. at 6-9 (arguing grievance was not arbitrable), 15 17 (arguing award conflicts with Sec. 7106(a)(2)(B)).
[24] U.S. Dep't of the Army, U.S. Army Garrison, Picatinny Arsenal, N.J., 73 FLRA 700, 701 (2023) (barring arbitrability challenges because excepting party could have, but did not, raise them to arbitrator); SSA, 69 FLRA 208, 209 (2016) (barring argument concerning right to direct employees because excepting party could have, but did not, raise it to arbitrator).
[25] Exceptions Br. at 7-8.
[26] Id. at 9. Article 47(4)(B) states, in relevant part, that "[p]roposed changes in personnel policies, practices, or working conditions affecting the interests of two or more local unions within a facility shall require notice to a party designated by the [National Veterans Affairs Council] President with a copy to the affected local unions." CBA at 244.
[27] Exceptions Br. at 8-9.
[28] Id. at 9.
[29] U.S. Dep't of VA, 73 FLRA 660, 661 (2023) (VA) (citing AFGE, Loc. 2338, 73 FLRA 510, 513 (2023) (Local 2338)).
[30] Id. (citing Local 2338, 73 FLRA at 513-14).
[31] Award at 3.
[32] See, e.g., VA, 73 FLRA at 661-62; U.S. Dep't of the Army, White Sands Missile Range, White Sands Missile Range, N.M., 67 FLRA 619, 625 (2014) (denying exceptions challenging procedural-arbitrability determination where an unchallenged finding of waiver provided a "separate and independent basis" for the determination).
[33] We note the Agency did not assert the Arbitrator exceeded his authority by failing to address an issue.
[34] VA, 73 FLRA at 662 (where arbitrator relied on "two separate determinations to find the . . . grievance arbitrable," and exceptions did not successfully challenge one of those determinations, Authority did not address exceptions concerning the other determination).
[35] Exceptions Br. at 13-14.
[36] AFGE, Loc. 4156, 73 FLRA 588, 590 (2023) (Local 4156) (citing U.S. Dep't of HHS, 73 FLRA 95, 96 (2022)).
[37] Id. (citing U.S. Dep't of VA, John J. Pershing VA Med. Ctr., Poplar Bluff, Mo., 73 FLRA 67, 70 71 (2022) (Member Kiko concurring on other grounds)).
[38] Exceptions Br. at 14.
[39] Id.
[40] Local 4156, 73 FLRA at 590 (citing AFGE, Loc. 2142, 72 FLRA 764, 765 66 (2022) (Chairman DuBester concurring)).
[41] Exceptions Br. at 10-13.
[42] AFGE, Council 222, 73 FLRA 54, 55 (2022) (citing U.S. Dep't of the Interior, Bureau of Land Mgmt., Eugene Dist., Portland, Ore., 68 FLRA 178, 180 (2015) (Interior)).
[43] Id.
[44] Id. (citing Interior, 68 FLRA at 180-81).
[45] U.S. Dep't of the Interior, Nat'l Park Serv., 73 FLRA 220, 221 (2022) (Interior II) (citing GSA, E. Distrib. Ctr., Burlington, N.J., 68 FLRA 70, 73 (2014) (Member Pizzella dissenting on other grounds)).
[46] Exceptions Br. at 10-11
[47] Agency Post-Hr'g Br. at 7-8.
[48] Award at 3. As discussed previously, the Arbitrator also found the Agency's arbitrability arguments were untimely, which provides a separate and independent basis for his arbitrability determination.
[49] Id. To the extent the Agency also argues the Arbitrator failed to recognize that its de minimis argument pertained to its duty to bargain over a change to a condition of employment, Exceptions Br. at 10 n.1, we note the Agency did not assert the Arbitrator exceeded his authority by failing to address this issue.
[50] Interior II, 73 FLRA at 221.
[51] Exceptions Br. at 12.
[52] U.S. Dep't of Transp., FAA, 65 FLRA 171, 172 n.3 (2010) (citing U.S. Dep't of the Army, Corps of Eng'rs, Nw. Div. & Seattle Dist., 64 FLRA 405, 408 n.5 (2010)).
[53] See, e.g., AFGE, Loc. 2052, Council of Prison Locs. 33, 73 FLRA 59, 61 n.20 (2022) (denying contrary to-law exception based on the same arguments as rejected essence exception (citing U.S. Dep't of VA, Denver Reg'l Off., 70 FLRA 870, 871 n.16 (2018) (Member DuBester concurring))).
[54] Exceptions Br. at 11-13; Agency Supp. Br. at 2.
[55] CFPB, 73 FLRA at 676 (emphasis added).
[56] Award at 3.
[57] Id.
[58] Id. at 4.
[59] Exceptions Br. at 12; Agency Supp. Br. at 2.
[60] Agency Supp. Br. at 2.
[61] Union Supp. Br. at 9; Opp'n Br. at 15.
[62] Opp'n Br. at 15; see Agency's Supp. Br. at 2 (arguing revised management-rights test in CFPB inapplicable where "the Union argued [the directive], not the parties' CBA, was 'the law, rule, or regulation serving as the basis of the Arbitrator's determination" (quoting Opp'n Br. at 15)).
[63] Union Supp. Br. at 13.
[64] See CFPB, 73 FLRA at 676 n.85 (interpreting "CBA provision" in a broad sense "to include agency rules and regulations that were negotiated with unions" (emphasis added)).
[65] The Union asserts that the CFPB test conflicts with the Authority's Regulations because it shifts the burden to the opposing party to demonstrate that one of the subsections of Sec. 7106(b) applies. Union Supp. Br. at 5-8. Because we are remanding for clarification of the award's basis, and it is currently unclear whether CFPB even applies in this case, we find it would be premature to address the Union's argument at this time. See, e.g., U.S. DOJ, Fed. BOP, Fed. Corr. Inst., Mendota, Cal., 73 FLRA 788, 791 (2024) (finding it premature to address arguments when remanding award); Fed. Educ. Ass'n, Stateside Region, 73 FLRA 32, 35 (2022) (declining to address certain arguments when remanding award (citing U.S. DHS, U.S. Citizenship & Immigr. Servs., 68 FLRA 272, 275 (2015); AFGE, Loc. 3529, 57 FLRA 464, 467 n.4 (2001))).
[66] U.S. DOJ, Fed. BOP, Metro. Corr. Ctr., San Diego, Cal., 73 FLRA 495, 497 (2023) (where the arbitrator failed to explain or support conclusions, remanding because the Authority was unable to determine whether the award was deficient on grounds raised by exceptions (citing U.S. DHS, U.S. Citizenship & Immigr. Servs., 72 FLRA 146, 148 (2021) (Chairman DuBester dissenting in part on other grounds); U.S. Dep't of HHS, 72 FLRA 522, 524 (2021) (Chairman DuBester concurring))).
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Original text here: https://www.flra.gov/decisions/v73/73-168.html
FCC Wireline Competition Bureau Issues Public Notice: Network Change Notification Filed By Verizon N.Y.
WASHINGTON, May 8 -- The Federal Communications Commission's Wireline Competition Bureau issued the following public notice (WC Docket No. 24-139) on May 7, 2024:* * *
Re: Network Change Certification Received
Verizon New York Inc. (Verizon), an incumbent local exchange carrier (LEC), has filed certification that public notice of network change(s) has been provided through its publicly accessible Internet site, as required by section 51.329(a)(2) of the rules of the Federal Communications Commission (FCC or Commission)./1 Upon initial review the filing appears to be complete./2 Specific network ... Show Full Article WASHINGTON, May 8 -- The Federal Communications Commission's Wireline Competition Bureau issued the following public notice (WC Docket No. 24-139) on May 7, 2024: * * * Re: Network Change Certification Received Verizon New York Inc. (Verizon), an incumbent local exchange carrier (LEC), has filed certification that public notice of network change(s) has been provided through its publicly accessible Internet site, as required by section 51.329(a)(2) of the rules of the Federal Communications Commission (FCC or Commission)./1 Upon initial review the filing appears to be complete./2 Specific networkchange information can be obtained on the Internet at: https://www.verizon.com/about/termsconditions/network-disclosures.
The incumbent LEC's certification(s) refer(s) to the change(s) identified below:
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[View table in the link at bottom.]
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Incumbent LEC contact:
Jennifer E. Pelzman
Manager, Legal Support - Federal Regulatory and Legal Affairs
Verizon
1300 I Street, NW, Suite 500 East
Washington, D.C. 20005
Phone: (202) 515-2463
The network change(s) identified herein shall be implemented no earlier than six months after the incumbent LEC provided notice pursuant to section 51.329(a)./3 Interested parties may comment on this network change notice using the Internet by accessing the ECFS: http://apps.fcc.gov/ecfs. Filers should follow the instructions provided on the Web site for submitting comments. Generally, only one copy of an electronic submission must be filed. In completing the transmittal screen, filers should include their full name, U.S. Postal Service mailing address, and the applicable docket number. Interested parties also may comment on this network change notice by sending an e-mail to NetworkChange@fcc.gov. The subject line of the e-mail must include the correct NCD Report Number or docket number in order for the comments to be considered in conjunction with this proceeding. All information submitted including names and addresses will be publicly available via the web. After the effective implementation date(s), this proceeding shall be terminated, and the docket will be closed.
This proceeding is considered a "permit but disclose" proceeding for purposes of the Commission's ex parte rules./4 Participants in this proceeding should familiarize themselves with the Commission's ex parte rules. Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b).
People with Disabilities: We ask that requests for accommodations be made as soon as possible in order to allow the agency to satisfy such requests whenever possible. Send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at (202) 418-0530.
For further information, please contact Michaela Mastroianni at (202) 418-1521, email: Michaela.Mastroianni@fcc.gov, in the Competition Policy Division, Wireline Competition Bureau.
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Footnotes:
1/ See 47 CFR Sec. 51.329(a)(2).
2/ See 47 CFR Sec.Sec. 51.325 through 51.335.
3/ See 47 CFR Sec. 51.331(a)(1); see also 47 CFR Sec. 51.329(a).
4/ 47 CFR Sec. 1.1200 et seq.
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Original text plus table here: https://docs.fcc.gov/public/attachments/DOC-402423A1.pdf
FCC Media Bureau Issues Public Notice on Independent Programming Notice of Proposed Rulemaking Comment Dates
WASHINGTON, May 8 -- The Federal Communications Commission's Media Bureau issued the following public notice (MB Docket No. 24-115) on May 7, 2024:* * *
On April 19, 2024, the Commission released a Notice of Proposed Rulemaking seeking comment on the current state of the marketplace for diverse and independent programming and the obstacles faced by independent programmers seeking carriage on multichannel video programming distributors and online platforms./1
The NPRM set deadlines for filing comments and reply comments at 30 and 60 days, respectively, after publication of the NPRM in the Federal ... Show Full Article WASHINGTON, May 8 -- The Federal Communications Commission's Media Bureau issued the following public notice (MB Docket No. 24-115) on May 7, 2024: * * * On April 19, 2024, the Commission released a Notice of Proposed Rulemaking seeking comment on the current state of the marketplace for diverse and independent programming and the obstacles faced by independent programmers seeking carriage on multichannel video programming distributors and online platforms./1 The NPRM set deadlines for filing comments and reply comments at 30 and 60 days, respectively, after publication of the NPRM in the FederalRegister./2
By this Public Notice, the Media Bureau announces that the NPRM was published in the Federal Register on May 7, 2024./3 Comments must be submitted no later than June 6, 2024. Reply Comments must be submitted no later than July 8, 2024. Commenters should follow the filing instructions provided in paragraph 36 of the NPRM./4 The NPRM is also available on the Commission's website./5
For additional information on this proceeding, contact Kathy Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, (202) 418-7454. Press inquiries should be directed to Nancy Murphy (202) 418-1043, Nancy.Murphy@fcc.gov.
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Footnotes:
1/ Fostering Independent and Diverse Sources of Video Programming, Notice of Proposed Rulemaking, MB Docket No. 24-115, FCC 24-44 (rel. Apr. 19, 2024) (NPRM).
2/ See id. at 1.
3/ Federal Communications Commission, Fostering Independent and Diverse Sources of Video Programming, Proposed Rule, 89 Fed. Reg. 38007 (May 7, 2024).
4/ NPRM at 19, para. 36.
5/ https://docs.fcc.gov/public/attachments/FCC-24-44A1.pdf.
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Original text here: https://docs.fcc.gov/public/attachments/DA-24-431A1.pdf
FCC Commissioner Simington Issues Dissent on Safeguarding, Securing He Open Internet, Restoring Internet Freedom
WASHINGTON, May 8 -- The Federal Communications Commission issued the following dissent on May 7, 2024, by Commissioner Nathan Simington on an action entitled "Safeguarding and Securing the Open Internet and Restoring Internet Freedom, Declaratory Ruling, Order, Report and Order, and Order on Reconsideration" (WC Docket Nos. 23-320, 17-108).* * *
Net neutrality is one of those catchphrases that tricks you into thinking that there is no other side of the argument. Who, after all, would support net non-neutrality? Who would support net discrimination? That sounds almost like opposing milk for ... Show Full Article WASHINGTON, May 8 -- The Federal Communications Commission issued the following dissent on May 7, 2024, by Commissioner Nathan Simington on an action entitled "Safeguarding and Securing the Open Internet and Restoring Internet Freedom, Declaratory Ruling, Order, Report and Order, and Order on Reconsideration" (WC Docket Nos. 23-320, 17-108). * * * Net neutrality is one of those catchphrases that tricks you into thinking that there is no other side of the argument. Who, after all, would support net non-neutrality? Who would support net discrimination? That sounds almost like opposing milk forbabies.
But while political activists can hide behind empty catchphrases and slogans, ISPs and their customers have to contend with the real world. The internet is a limited capacity network, and performance characteristics like bandwidth, latency, and jitter are scarce resources that need to be allocated, ideally in a way that promotes competition and maximizes value to consumers. This is not an abstract point. High latency or jitter means not just choppy video calls and lagging video games but also unreliable control of physical systems like drones, cars, and industrial machinery. Conversely, high latency has little to no perceivable effect on web browsing or video streaming. So, it benefits the public for ISPs to be able to offer special low latency routing and make sure that only applications that benefit from it receive it.
Don't take my word for it. Professor Tim Wu himself, in the very same 2003 paper in which he coined the term "network neutrality," conceded that treating all internet traffic equally would not benefit consumers./1 He asked his readers to "[c]onsider that it doesn't matter whether an email arrives now or a few milliseconds later. But it certainly matters for applications that want to carry voice or video."/2 He counsels that "[d]elivering the full possible range of applications either requires an impracticable upgrade of the entire network, or some tolerance of close vertical relationships" through which different kinds of traffic could be handled differently./3
This seems to fly in the face of the tired net neutrality catchphrase: "no blocking, no throttling, and no paid prioritization." A Commission mandate to not throttle traffic would prohibit ISPs from prioritizing the delivery of video call data over web browsing data, even when the user's subjective web browsing experience would be unaffected. And even if a ban on throttling were sufficiently caveated, a ban on paid prioritization would mean that ISPs must determine by diktat which kinds of traffic are more worthy than others, and somehow enforce that in the face of perverse incentives for everyone to mark all of their traffic as being of utmost importance. It would be like not allowing the post office to charge more for overnight delivery, but instead requiring it to determine for itself which kinds of packages are important and to trust senders to not always claim that their box contains perishable medicine. Indeed, to distinguish between different kinds of traffic is the opposite of "neutrality," it is discrimination. But it's desirable discrimination. The kind of discrimination that allows you to pay more for your package to arrive overnight instead of in two weeks.
This is why every time the Commission has attempted to impose net neutrality, it has had to create various exceptions. Inevitably, the exceptions are so expansive that they swallow the rule, so narrow that they fail to accommodate necessary traffic differentiation practices, or so vague that they stunt action through legal uncertainty rather than proscription. In any case, "no blocking, no throttling, and no paid prioritization" is reduced to an empty catchphrase, and the exceptions themselves become the real rules. It's no coincidence that this is exactly where Professor Wu went wrong in his 2003 paper. He proposed a law prohibiting broadband providers from "impos[ing] restrictions on the use of an Internet connection" and then lists six exceptions that, at best, provide no actionable principles by which to guide conduct, or at worst, countenance the Commission and ISPs sitting as central planners of the Internet and decreeing which kinds of traffic are more worthy than others./4
It's been over 20 years since Professor Wu wrote his article, but it might as well have been yesterday. It is a testament to just how much net neutrality has become an object of political piety, instead of sober analysis, that the order we approve today is hardly more sophisticated and nuanced than Professor Wu's first cut at the topic in 2003.
The central exception that this order relies upon is "reasonable network management practices." The order defines a "network management practice" as one that has a primarily technical, rather than business, justification. And it says such practices are reasonable only if they are primarily aimed at a "legitimate network purpose./5" Those legitimate network purposes include security, blocking unwanted traffic, and alleviating congestion. But the order casts skepticism on the legitimacy of congestion-alleviating measures that are not agnostic to "source, destination, content, application or service./6" With all of these vague definitions and skepticism, it's not clear that there is room for prioritizing the latency of real-time applications.
The escape valve for the rigidity of being unable to use market mechanisms for reasonable network management is yet another exception, the exclusion of non-BIAS data services from the rules. But the order can't even tell us what a non-BIAS data service is, and refuses to give a definition. It says non-BIAS data services are typically only used to reach a small number of internet endpoints, provide application-level services, and use "network management to isolate [their] capacity from that used by broadband Internet access services." But just in case that definition was not unhelpful enough, the order makes clear that a service could meet all of these criteria but still not be deemed a non-BIAS data service./7 It goes on to say that, to make sure this exception is not used to avoid the net neutrality rules, the Commission will be skeptical of any services that could function just as well (how well is just as well?) over the open internet. And in a further hit to any sense of certainty this exception might impart, the order says that these services should not "have a negative effect on the performance of BIAS . . . or the capacity available for BIAS over time" (emphasis added)./8 But the whole point of this exception is supposed to be that traffic from a specialized service (like a remote-controlled surgery) will be routed more quickly and reliably, at the expense of other traffic (like web browsing).
The vitality of this exception is further cast into doubt by language in the order stating that the Commission is "likely to find that connectivity used for video conferencing offered to consumers would evade the protections we establish for BIAS if the video-conferencing provider is paying the BIAS provider for prioritized delivery./9" But how else, other than through payment, is an ISP supposed to tell apart different kinds of video conferencing, like virtual reality video conferencing? And how is it supposed to weigh prioritization of those against other prioritized use cases altogether? Without a market mechanism, the ISP and Commission have to sit as central planner and decide what's important, instead of allowing consumers and businesses tell them with the price they are willing to pay.
Amazingly, somehow concerned that these inadequate and vague exceptions might still provide too much freedom of action for ISPs, the order imposes a general conduct standard, under which the Commission reserves the right to find an operator in violation of net neutrality rules even if it didn't violate them. The general conduct standard prohibits any person from "unreasonably interfer[ing]" with end users' ability to use the internet as they wish and edge providers ability to offer the services they want to. But just in case that vague formulation goes too far, it too has its own exception, for "reasonable network management."/10
To the extent these rules guide conduct, they do it by making it very legally risky for an ISP to invest in innovative internet routing offerings. Perhaps if the broadband industry were plagued with anticompetitive behavior, then the benefits of discouraging and punishing such conduct would outweigh the risks of overly stringent or vague regulations stifling investment and innovation, but remarkably, this order identifies no major instances of anticompetitive conduct by ISPs in their internet routing decisions in the last decade.
The action we take today is to offer a solution in search of a problem. It's hard to imagine a more brazen violation of our duty under the Administrative Procedures Act to refrain from arbitrary and capricious rulemaking. Further, Section 10 of the Communications Act itself requires the Commission to forbear from applying any part of Title II that is unnecessary for preventing wrongdoing, protecting consumers, or otherwise protecting the public interest. This order fails that test throughout.
Even more significant than the misguided adoption of net neutrality rules is the declaratory ruling's imposition of Title II of the Communications Act on the broadband industry. The Commission is flip-flopping, yet again, on whether broadband is a "telecommunications service" subject to regulation under Parts I and II of Title II./11
This reclassification is how the Commission gives itself the power to impose net neutrality rules, but also much more. Parts I and II of Title II combine to create one of the most comprehensive suites of regulatory authority known to any agency in this country. With this reclassification, the Commission could claim the power to require prior authorization for the deployment of every new inch of fiber, every new service offering, every contract, every interconnection agreement, and every change in price in the broadband industry. The Commission could force ISPs to allow their competitors to use their infrastructure. It could even require ISPs to continue offering service indefinitely in unprofitable areas, essentially seizing their private property. Instead of asking what the Commission can do under Title II, the better question is what it cannot do. The sobering answer: not much.
For now at least, the Commission is forbearing from many of these authorities, but that should be of little comfort to the broadband industry. The Commission is always one notice and comment period away from reversing course on any of these forbearances and imposing stringent regulations whenever it sees fit. Take rate regulation. My colleagues have all promised Congress they have no plans to impose rate regulations under Section 201, but plans can change quickly. It's not hard to imagine my Democratic colleagues turning to rate regulation if the Affordable Connectivity Program (ACP) is not reauthorized by Congress or if the federal courts strike down the Digital Discrimination Order, two Commission programs that operate as de facto rate regulation already.
Is the reclassification of broadband as a Title II service legal? Commissioner Carr, and many commenters, make a compelling case that it is not. On the other hand, proponents of applying Title II to ISPs point to the D.C. Circuit upholding the 2015 Open Internet Order, to supportive dicta from the same court when it considered the 2017 Restoring Internet Freedom Order, and to Justice Scalia's dissent in the BrandX case, in which the Supreme Court upheld the classification of broadband as not a Title II service. As those decisions show, the federal courts have let the Commission have it either way, as an exercise of Chevron deference.
But if the Supreme Court abolishes Chevron deference this summer, as many expect, then they will face a new question when they consider challenges to the present order. Instead of being able to say that the Commission's interpretation is reasonable enough in the face of some statutory ambiguity, they will have to determine whether our declaratory reasoning reflects the best read of the law. I urge the courts to take this opportunity to settle once and for all whether ISPs are subject to Title II--either as "common carriers" or "telecommunications carriers"--and put an end to this embarrassing and harmful regulatory whiplash. The legitimacy of the Commission is called into question if after every change of administration, it reverses course on a question so fundamental as whether broadband is a common carriage service. This uncertainty also robs regulated companies and their customers of the confidence in their rights and responsibilities that the rule of law is supposed to provide them, the confidence that forms the cornerstone of investment and innovation.
I want to specifically note that if the Court dispenses with Chevron deference, the reasonableness of the Commission's position on whether this or that Title II authority is necessary to serve the public interest becomes irrelevant to the question of whether the Title II reclassification is legal. After all, the political merits or demerits of a law do not usually bear on its interpretation. But these forbearance and non-forbearance decisions do have to meet the criteria of Section 10 of the Act, which as I already explained, require the Commission forebear from applying any part of Title II unless it needs those authorities to prevent wrongful practices, protect consumers, or otherwise serve the public interest. Today's decision not to forbear from various sections of Title II repeatedly fails to meet this standard.
One thing is clear: nothing in the law required the Commission to take this action today. The D.C. Circuit upheld the 2017 Restoring Internet Freedom Order, in which the Commission ruled that broadband was not subject to Title II of the Act. The Supreme Court declined to hear an appeal from that case. We would be on the firmest of legal ground to keep that order in effect. Given the demonstrated lack of necessity for Title II authority over broadband, we would have been wise to do so.
The 2015 Open Internet Order dispensed with the traditional justification of Title II BIAS classification under the "local monopoly" theory. This pivot was clearly warranted because, by 2015, broadband internet was already becoming multimodal; cable and fiber were beginning to be more effectively supplemented or replaced by satellite and fixed wireless, and the local monopoly theory was going to be more and more a mere relic of the Bell System landline era as time went on. The 2015 Commission correctly called this trend. We have seen low-latency, high-speed satellite and fixed wireless explode in uptake since, both domestically and abroad.
This created a problem for the 2015 Commission. If the local monopoly theory is off the table, what new basis could be found to justify a Title II BIAS classification order? The 2015 Commission decided upon, and the present one has also adopted, a novel "gatekeeper theory"/12 that places Title II obligations upon any intermediary between a consumer and a service by characterizing such "gatekeeper" as a terminating monopoly even in the absence of market power analysis./13
This may, however, prove too much. Gatekeepers that otherwise do not resemble terminating monopolies abound on the Internet. For example, app stores and platforms have been described as "gatekeepers"/14 and leverage their intermediary capacities to generate much of their revenue. With the last mile out of the equation, does the FCC have a principled reason to exclude platforms from gatekeeper analysis, or are we just going after BIAS because it's a quadrennial tradition?
While we waste our time and saddle a well-functioning industry with unnecessary rules and investment-stifling legal uncertainty, this Commission continues to give a free pass to the real villains of the free and open internet: large edge providers. There is no bigger threat to free speech in this country than the edge providers who have anointed themselves the arbiters of which ideas are allowed to be expressed and which are not. Every day, they abuse their market power, and positions as gatekeepers in the digital marketplace, to pick and choose who is allowed to speak and who is not. They keep armies of advocates on their payroll whose sole task is to prevent Americans from sharing and reading about dissenting views on issues of national importance. And they maintain their market power through anticompetitive practices like refusing interconnection with competing platforms.
We need to put an end to these abuses. All options should be on the table. I am calling for a thorough inquiry into the Commission's potential authority over social media and other internet companies. Whether we can find the powers we need in Title II of the Communications Act, in Section 230, or in other existing or new legislation, no stone should be left unturned.
Sadly, this order today is part of the edge providers' agenda to insulate their abusive monopolies from competition. Major ISPs are among the few companies well-positioned to challenge the market power of Google and Facebook in the advertising market, or of Amazon and Microsoft in the cloud hosting business. But internet platform companies have successfully convinced the Commission to make such competition illegal. Themselves unrestrained by any comprehensive federal privacy laws, these edge providers are aggressively lobbying the Commission to adopt privacy rules that ban ISPs from running the exact same kind of advertising networks that they themselves do. And net neutrality rules will make it very difficult for ISPs to use their physical facilities across the country to build competitors to cloud services like AWS and Azure, lest they be accused of prioritizing their own traffic or violating the general conduct standard.
For all of these reasons, I dissent.
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Footnotes:
1/ Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. on Telecomm. & High Tech. L. 141 (2003).
2/ Id. at 148.
3/ Id. at 149.
4/ Id. at 166-7.
5/ Safeguard and Securing the Open Internet and Restoring Internet Freedom, WC Docket Nos. 23-320, 17-108, Declaratory Ruling, Order, Report and Order, and Order on Reconsideration (April 25, 2024) ("2024 Open Internet Order") at Sect. 568.
6/ Id. at Sect. 575.
7/ Id. at Sect. 195.
8/ Id. at Sect. 197.
9/ Id.
10/ 2024 Open Internet Order at Sect. 516.
11/ It is often said that a service is either an "information service" or a "telecommunications service" under the Communications Act, but this is not strictly true. First, there is a third category, "common carriers"--defined as anyone "engaged as a common carrier for hire[] in interstate or foreign communication by wire or radio"--that are subject to Part I but not Part II of Title II. Notably, and unlike the definition of "telecommunications," the definition of "common carrier" does not contain the caveat that the transmission must be "without change in the form or content of the information as sent and received." All telecommunications services are common carrier services, but the opposite is not true. Second, nowhere does the Act say that an information service cannot also be a common carrier service. The significance of this is that when properly addressing what services are subject to Title II, we need to consider the possibility that a service might be properly classified as a common carrier service despite not meeting the definition of a telecommunications service. In that case, it would be subject to (most of) Part I of Title II, but not Part II. It is likely, for example, that online communications systems like email and instant messaging are properly classified as common carriage services under the Act, since they hold themselves as open to the public for carriage of communication by wire or radio. Supporting this, Section 2 of the Act contemplates the existence of common carriers that are "engaged in foreign or interstate communication solely through physical connection with the facilities of another carrier..." and makes only Sections 201 through 205 of the Act applicable to them.
12/ Protecting and Promoting the Open Internet, WC Docket No. 14-28, Report and Order on Remand, Declaratory Ruling, and Order, 30 FCC Rcd 5601 (2015) at Sect. 78-84.
13/ See Lawrence J. Spivak, What are the Bounds of FCC Authority over Broadband Service Providers? A Review of the Recent Case Law, Vol. 18 No. 7, J. of Internet L., p. 1, 28 at fn. 88 (January 2015).
14/ See, e.g., John Bergmayer, Public Knowledge, Tending the Garden: How to Ensure that App Stores Put Users First (June 2020) at p. 8 (https://publicknowledge.org/policy/tending-the-garden-how-to-ensure-that-app-stores-putusers-first/).
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Original text here: https://docs.fcc.gov/public/attachments/FCC-24-52A5.pdf