Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-07-01190/USCOURTS-caDC-07-01190-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
Star Wireless, LLC
Petitioner
United States of America
Respondent

Document Text:

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 13, 2008 Decided April 22, 2008

No. 07-1190

STAR WIRELESS, LLC,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

On Petition for Review of an Order of the

Federal Communications Commission

John F. Cooney argued the cause for petitioner. With him

on the brief were Emilio W. Cividanes and Ronald M. Jacobs.

Joseph R. Palmore, Deputy General Counsel, Federal

Communications Commission, argued the cause for respondents.

With him on the brief were Thomas O. Barnett, Assistant

Attorney General, U.S. Department of Justice, Robert B.

Nicholson and Robert J. Wiggers, Attorneys, Matthew B. Berry,

General Counsel, Federal Communications Commission, Daniel

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M. Armstrong, Associate General Counsel, and Laurel R.

Bergold, Counsel.

Before: HENDERSON, ROGERS and BROWN, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: Star Wireless, LLC (“Star”),

challenges the imposition of a monetary forfeiture for violating

the Federal Communications Commission’s “anti-collusion

rule,” 47 C.F.R. § 1.2105(c). The principal issue is whether the

Commission’s interpretation of its rule was not “ascertainably

certain” when the relevant interactions between Star and

Northeast Communications of Wisconsin (“Northeast”)

occurred. Star also contends that the Commission’s application

of the rule was arbitrary and capricious because the harm

addressed by the rule did not occur and its application thus

violated Star’s commercial speech rights. We deny the petition.

I.

Under the Communications Act, the Commission has the

authority to grant licenses through a competitive bidding process

to applicants seeking to use the electromagnetic spectrum. See

47 U.S.C. §§ 301, 308-09. Among the goals of this process are

“promoting economic opportunity and competition . . . .

recovery for the public of a portion of the value of the public

spectrum resource . . . and avoidance of unjust enrichment

through the methods employed to award uses of [the

electromagnetic spectrum].” Id. §§ 309(j)(3)(B); (C). The

Commission’s auction process for electromagnetic spectrum

includes various stages. As relevant, participants are required to

fill out a “short-form” application providing preliminary

information. 47 C.F.R. § 1.2105(a). The Commission may

require applicants for a license to submit an “upfront payment,”

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to be applied against any payment made as part of a winning

bid, id. § 1.2106 (“upfront payment rule”); when these payments

are not made, the Commission’s regulations provide that this

party “will be ineligible to bid [and] its application will be

dismissed,” id. § 1.2106(c). 

 

The Commission’s anti-collusion rule is aimed, in part, at

“strengthen[ing] confidence in the . . . bidding process.” In the

Matter of Implementation of Section 309(j) of the

Communications Act – Competitive Bidding, 9 FCCR 2348,

2386 (1994) (“Anti-Collusion Rule Purposes”). The rule

prohibits:

all applicants for licenses in any of the same

geographic license areas [who are not members of a

joint bidding arrangement identified on the short-form]

from cooperating or collaborating with respect to,

discussing with each other, or disclosing to each other

in any manner the substance of their own, or each

other’s, or any other competing applicants’ bids or

bidding strategies, or discussing or negotiating

settlement agreements, until after the down payment

deadline.

47 C.F.R. § 1.2105(c)(1). For purposes of the anti-collusion

rule, the term applicant is defined to include “all controlling

interests in the entity submitting a short-form application to

participate in an auction.” Id. § 1.2105(c)(7)(i). 

On March 20, 2002, the Commission issued a public notice

announcing procedures to be used in “Auction 44" for licenses

in the 698-746 MHZ band. Public Notice, Auction of Licenses

in the 698-746 MHZ Band Scheduled for June 19, 2002, 17

FCCR 4935 (2002) (“March 20 Public Notice”). Star filed to

bid for all 740 licenses to be auctioned, and appointed David G.

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Behenna (“Behenna”) as its authorized bidder. Northeast filed

to bid for 734 licences, and appointed Patrick D. Riordan

(“Riordan”) as one of its authorized bidders. Neither Northeast

nor Star listed each other as cooperating or collaborating on their

short-forms. On June 7, 2002, the Commission publicly

identified applicants, including Star, that were qualified to bid.

Northeast, which had not submitted an upfront payment, was not

among them. Public Notice, Auction of Licenses for 698-746

MHZ Band, 17 FCCR 10,700, 10,708-13, 10,732 (2002). 

On August 28, 2002, Star began bidding on licenses in

California and Florida. That same day, Behenna left Riordan a

voice-mail, requesting that Riordan call him back only if

Northeast was not participating in the auction. On August 29,

2002, at approximately 9:18 am, Eastern time, Riordan called

Behenna, and they talked for approximately six minutes.

Behenna asked if Northeast was interested in any markets, and

Riordan identified four or five Wisconsin markets as being of

interest. Less than forty minutes after this conversation, Star

began to bid for licenses in specific Wisconsin markets

identified by Riordan, abandoning its prior bids for licenses in

California and Florida. By the end of the auction, Star was the

highest bidder in three of the Wisconsin markets discussed with

Northeast.

On September 6, 2002, before the end of the auction

process, Star informed the Commission of Behenna’s and

Riordan’s interactions on August 28 and 29. By letter from its

counsel, Star explained that Behenna had “mistakenly believed

that the Commission’s anti-collusion rules allowed

communications with an entity that had filed a short-form

application but was later deemed not qualified to participate in

an auction.” Letter from E. Ashton Johnston, Esq. & Paul W.

Jamieson, Esq., to Marlene H. Dortch, Secretary of the

Commission (Sept. 6, 2002). On August 27, 2003, the

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Commission issued a Notice of Apparent Liability (“NAL”) for

violation of the anti-collusion rule, proposing forfeiture of

$100,000. 

The Commission issued Forfeiture Notices on September

22, 2004, based on its findings that Star and Northeast had

“engaged in collusive conduct during a Commission-conducted

auction in 2002, in willful and repeated violation of section

1.2105(c).” In re Application of Star Wireless, LLC, 19 FCCR

18,626, 18,626 (2004); accord In re Application of Northeast

Communications of Wisconsin, Inc., 19 FCCR 18,635, 18,635

(2004). Finally, on May 4, 2007, the Commission affirmed its

findings of willful violations in denying Star’s application of

review and Northeast’s petition for reconsideration, but reduced

the forfeitures for each company to $75,000 because neither had

engaged in previous violations of Commission rules. In the

Matter of Star Wireless, LLC and Northeast Communications of

Wisconsin, Inc., 22 FCCR 8943, 8943-44 (2007) (“Order on

Review”). Observing that neither its rules nor the public notices

for Auction 44 had conditioned the term “applicant” upon the

outcome of review of the short-form applications or receipt of

upfront payments, the Commission found that Northeast

remained an applicant despite not having made an upfront

payment. Observing further that “the plain language of the anticollusion rule clearly states that applicants are prohibited from

discussing not only their own bids and bidding strategies but

also those of any other applicants that applied to bid in the same

auction markets,” id. at 8947, the Commission rejected

arguments that the rule was vague, inconsistent, or

unconstitutional, finding that Star and Northeast had ample

notice and engaged in precisely such prohibited discussions.

The Commission explained that the anti-collusion rule protected

“the integrity of the Commission’s auctions,” that it “exist[ed]

only during the time period between the short-form application

filing deadline and the post-auction down payment deadline,”

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and that it “protect[ed] a valid governmental interest without

infringing unduly on the First Amendment rights of auction

participants.” Id. at 8951-52. In the Commission’s view, Star’s

and Northeast’s interaction “present[ed] a good example of a

reason the Commission clearly prohibits certain communications

under the anti-collusion rule: an applicant that is not qualified to

bid in an auction nevertheless secretly influences a bidding

applicant to obtain the licenses it desires.” Id. 

Star petitions for review. The court will deny a petition for

review of an order by the Commission unless it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A). The

Commission’s interpretation of its own rules is “entitled to

controlling weight unless it is plainly erroneous or inconsistent

with the regulation.” Ballard v. Comm’r of Internal Revenue,

544 U.S. 40, 70 (2005) (internal quotation omitted). 

II. 

In assessing forfeitures against regulated entities, the

Commission is required to provide “adequate notice of the

substance of the rule.” PMD Produce Brokerage Corp. v.

USDA, 234 F.3d 48, 52 (D.C. Cir. 2000). The court must

consider “whether by reviewing the regulation[] and other public

statements issued by the agency, a regulated party acting in good

faith would be able to identify, with ascertainable certainty, the

standards with which the agency expects parties to conform.”

Trinity Broad. of Fla., Inc. v. FCC, 211 F.3d 618, 628 (D.C. Cir.

2000) (internal quotations omitted). 

Star contends that the Commission’s interpretation of the

anti-collusion rule was not “ascertainably certain” at the time of

its communications with Northeast because the plain text of the

rule does not specify whether Northeast remained an applicant

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1

 The Commission is unpersuasive in maintaining that Star

waived its right to contend that it was not given sufficient notice of the

anti-collusion rule’s scope. See Time Warner Entm’t Co. v. FCC, 144

F.3d 75, 81 (D.C. Cir. 1998). 

after failing to make the required upfront payment. At the time

of the auction, Star maintains, the upfront payment rule could be

reasonably interpreted as resulting in immediate dismissal of an

application by an entity that did not make the required payment.

Star relatedly contends that neither Auction 44 materials nor

previous Commission publications sufficiently set forth the

Commission’s interpretation of the interaction of the anticollusion and upfront payment rules.1

Even assuming Star has advanced plausible alternative

interpretations of the anti-collusion rule that would make its

application to Northeast uncertain, the Commission

convincingly responds that the regulated community was on

notice regarding the relevant scope of the anti-collusion rule.

Multiple Commission documents regarding Auction 44 noted

the applicability of the anti-collusion rule to “applicants for the

same geographic license area,” March 20 Public Notice, 17

FCCR at 4944; accord Public Notice, Auction of Licenses for

698-746 MHZ Band: Status of FCC Form 175 Applications to

Participate in the Auction, 17 FCCR 9415, 9418 (May 24,

2002). Additionally, before any public announcements

regarding Auction 44 were issued, Commission staff had

provided guidance explicitly noting that the anti-collusion rule

extended to applicants who “filed a short-form . . . . even though

[they are] not [] bidder[s] in the auction.” Letter to Robert

Pettit, Esq., from Margaret W. Wiener, Chief, Auctions and

Industry Analysis Division, of the Commission, 16 FCCR

10,080, 10,080 (WTB 2000) (“Robert Pettit”). The Commission

listed Robert Pettit as one of the sources explaining the scope of

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the anti-collusion rule in a public notice regarding Auction 44

issued prior to the discussions at issue between Star and

Northeast. March 20 Public Notice, 17 FCCR at 5008.

Star’s attempts to obscure the clarity of Robert Pettit’s

guidance are unavailing. Intervening changes to the anticollusion rule after Robert Pettit’sissuance, see In the Matter of

Amendment of Part 1 of the Commission’s Rules –- Competitive

Bidding Procedures, 16 FCCR 17,546, 17,546 (2001), were

unrelated to Robert Pettit’s conclusion. In any event, Robert

Pettit was cited by the Commission as authority concerning the

scope of the anti-collusion rule in the March 20 Public Notice,

a publication specifically related to Auction 44 issued after the

rule-change. This constituted sufficient notice to Star that the

anti-collusion rule still applied to short-form filers that did not

make an upfront payment. Star’s reliance on Satellite

Broadcasting Co. v. FCC, 824 F.2d 1, 3, & n.4 (D.C. Cir. 1987),

is also misplaced, as Robert Pettit was an official interpretation

issued by the Commission’s staff under delegated authority,

which has “the same force and effect . . . [as] other actions of the

Commission.” 47 U.S.C. § 155(c)(3). Further, Star points to no

Commission documents or any authority that contradicted

Robert Pettit’s conclusion. The minor potential ambiguities

contained in Auction 44 materials issued after March 20, 2002,

were insufficient to bring into question Robert Pettit’s definitive

interpretation of the anti-collusion rule. As presented by Star’s

brief, subsequent Commission pronouncements at most included

reminders of the anti-collusion rule that could be interpreted as

being directed only to “bidders” rather than “applicants” but, on

their face, still applied to Star and could not be rationally

construed as altering the Commission’s prior articulation of the

anti-collusion rule. We note that the Commission has clarified

its instructions with regard to the anti-collusion rule, see, e.g.,

Auction of 700 MHZ Band Licenses Scheduled for January 24,

2008, 22 FCCR 18,141, 18,149 (2007), but this change does not

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mean that its previous warnings were not sufficient to put the

regulated community on notice concerning the scope of the rule.

III.

Star’s other contentions do not require extended discussion.

Challenging the Commission’s application of the anti-collusion

rule as arbitrary and capricious, Star contends that its

communication with Northeast did not cause the harm against

which the rule was directed, and consequently the rule’s

application penalized “constitutionally protected commercial

speech.” Petitioner’s Br. at 28. Star also maintains that the

Commission provided no explanation for treating it differently

from similarly situated entities exempted from application of the

anti-collusion rule. However, as the Commission observes,

general bright-line prophylactic measures, such as the anticollusion rule, are appropriate when “the probability of abuse in

transactions between related organizations is significant enough

that it is more efficient to prevent the opportunity for abuse from

arising than it is to try to detect actual incidents of abuse.”

Biloxi Reg’l Med. Ctr. v. Bowen, 835 F.2d 345, 350 (D.C. Cir.

1987); accord Weinberger v. Salfi, 422 U.S. 749, 776 (1975). 

Star asserts that its communications with Northeast could

not have resulted in lower immediate auction prices. But Star

ignores the potential for certain types of collusion to undermine

Commission auctions in ways that do not immediately result in

lower prices being paid. Forbidding participants in the auction

process from communicating directly serves the goal of

preventing such collusion, and thus “strengthen[s] confidence in

the [] bidding process,” Anti-Collusion Rule Purposes, 9 FCCR

at 2386. As the Commission noted, the interactions of Star and

Northeast are a “good example,” Order on Review, 22 FCCR at

8951, of behavior that could undermine the Commission’s

auction processes: Star learned with certainty which markets

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Northeast was focusing on, significantly narrowing the field

from the initial 734 licenses in which Northeast had publicly

expressed an interest. This insight gave Star an informational

advantage over other auction participants; such insider dealing,

especially if widespread, could reduce non-colluding parties’

incentive to participate in future auctions. It is true that the anticollusion rule includes a series of exemptions whereby entities

not competing in the same market may contact each other,

allowing communications that could arguably undermine the

integrity of the auction process in various ways. However, an

agency need not address all problems at once. See U.S. Cellular

Corp. v. FCC, 254 F.3d 78, 86 (D.C. Cir. 2001). Instead, its

rules may solve first those problems it prioritizes. 

 

Finally, Star contends that the Commission’s levying of a

forfeiture violated the Communication Act, which “provides that

the [Commission] may impose a forfeiture only on an entity that

‘willfully or repeatedly failed to comply with . . . any rule,

regulation, or order issued by the Commission.’” Petitioner’s Br.

at 35 (quoting 47 U.S.C. § 503(b)(1)(B)). To the extent Star

seeks to challenge the Commission’s finding that it engaged in

“repeated” violations, the Commission did not rely on the

number of violations by Star in the Order on Review; while the

2004 Forfeiture Order against Star discussed repeated behavior,

it specifically noted that “even if the behavior constituted only

one violation . . . forfeiture is still appropriate,” 19 FCCR at

18,632. To the extent Star seeks to challenge the Commission’s

interpretation of statutory text and legislative history in arriving

at its definition of “willful” as meaning “consciously” rather

than “with intent,” Star did not preserve the issue. Neither Star

nor Northeast raised this issue before the Commission, and we

therefore do not address it. See Coal. for Noncommercial Media

v. FCC, 249 F.3d 1005, 1009 (D.C. Cir. 2001) (citing 47 U.S.C.

§ 405); see also Rogers Radio Commc’ns Servs., Inc. v. FCC,

751 F.2d 408, 413 n.14 (D.C. Cir. 1985). Although the Order

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on Review relied on a definition of “willful,” this does not mean

that the Commission would have necessarily understood that its

pre-existing definition was being challenged. See Time Warner

Entm’t Co., 144 F.3d at 81. Insofar as Star would claim the

definition of “willful” was mistaken, it should have provided

the Commission an opportunity to re-examine its definition

rather than now inviting this court to engage in a “freewheeling

policy inquiry,” Verizon Tel. Cos. v. FCC, 292 F.3d 903, 910

(D.C. Cir. 2002). Star’s position that it would have been futile

to challenge the Commission’s definition “[g]iven the

[Commission’s] 40-year history of applying the same

interpretation,” Petitioner’s Reply Br. at 18, is unconvincing

because Star points to nothing concrete to support its claim of

futility, see Action for Children’s Television v. FCC, 564 F.2d

458, 469 (D.C. Cir. 1977), such as a plain desire by the

Commission to “rapidly expedit[e]” a review process,

Omnipoint Corp. v. FCC, 78 F.3d 620, 635 (D.C. Cir. 1996).

See also Chadmoore Commc’ns, Inc. v. FCC, 113 F.3d 235,

239-40 (D.C. Cir. 1997). 

Accordingly, we deny the petition for review.

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