Opinion ID: 186282
Heading Depth: 2
Heading Rank: 2

Heading: Arbitrary-and-Capricious Claim

Text: 44 We can much more easily dispose of SBC's second challenge-that the scale of the fine imposed by the Commission is arbitrary and capricious. As discussed, the Act makes it unlawful willfully or repeatedly [to] fail[] to comply substantially with the terms and conditions of any ... instrument or authorization issued by the Commission. 47 U.S.C. § 503(b)(1)(A). FCC regulations authorize the Commission to assess a fine of up to $120,000 for each such individual violation or each day of a continuing violation, up to a maximum fine of $1.2 million for any single act or failure to act. 47 C.F.R. § 1.80(b)(2). Factors the Commission shall take into account in determining the size of the fine include the nature, circumstances, extent, and gravity of the violation, as well as ability to pay. 47 U.S.C. § 503(b)(2)(D). 45 The FCC imposed a fine of $6 million in this case because it considered SBC's refusal to provide shared-transport service to complete intraLATA toll calls five separate acts, one in each of the former Ameritech states. Forfeiture Order ¶ 23. It imposed the maximum $1.2 million for each such violation because SBC had failed to provide such service in each of these states beginning October 8, 2000, 12 months after the close of the merger, and continuing at least until May 14, 2001, and therefore constituted five individual continuing violations. Id. ¶ 26; NAL ¶ 21. 46 We hold that the FCC's application of these statutory factors to impose a fine of $6 million was reasonable. SBC argues it was not because SBC undertook to offer shared-transport service (short of offering such service to complete intraLATA toll calls) expeditiously and in good faith consistent with its understanding of the merger conditions. SBC Br. at 36. Still, it remains true, as discussed above and as the FCC found, that SBC's failure to offer shared-transport service in five separate states violated the clear terms of the merger condition and that this noncompliance continued for some time. The FCC was well within its discretion in finding that this recalcitrant behavior was substantial and widespread. 47 Similarly unavailing is SBC's complaint that the Commission's finding below that its failure to provide such service had an adverse impact on competition. Apart from competitive impact, other independent factors the FCC considered more than justify the extent of the fine. The FCC's primary reason for imposing such a large fine was the need to deter SBC, a sophisticated, profit-maximizing business whose 2001 operating revenues were nearly $46 billion, from violating the clear terms of merger conditions for which it had specifically bargained, conditions that themselves arose from the need to protect the public interest against the adverse competitive effects from the merger of SBC and Ameritech. Forfeiture Order ¶ 24. As discussed, a company's ability to pay is a statutory factor the FCC may consider, and it is reasonable to expect that a larger fine might be necessary to deter a large company like SBC. 48 The FCC also linked the amount of the forfeiture necessary to deter SBC from violating paragraph 56 of the conditions not simply to SBC's overall revenues, but also to the amount SBC stood to gain from taking that particular action. The FCC noted, specifically, that SBC benefitted by causing its competitors the inconvenience of litigating over the extent of SBC's shared-transport obligations in the five Ameritech states. Id. That reasoning was eminently sensible. When its competitors suffer, SBC benefits, and therefore it privately benefitted from inflicting harm on its competitors. Because the amount of deterrence necessary to prevent an action from occurring depends on both a company's revenues and the private benefit to the company of taking the action, there is a rational relationship between this factor and the seriousness of the fine the FCC imposed. The FCC may have not considered other factors relevant to that calculus, but that does not change the fact that there is a rational relationship between these two factors and the extent of the fine.