Telecom Industry Groups Claim FCC Cannot Impose Fines Following Jarkesy Incident

Several major telecom trade groups are urging the Federal Communications Commission to reevaluate its enforcement practices, contending that after a significant Supreme Court ruling last year, the FCC may no longer have the authority to issue fines. This push comes following the June 2024 decision in SEC v. Jarkesy, which determined that the Securities and Exchange Commission could not impose civil fines without a jury trial. Notable groups such as CTIA, NCTA, USTelecom, and others highlighted this legal precedent in a recent petition they submitted on Thursday.

An additional catalyst for this plea emerged from a recent Fifth Circuit ruling that invalidated a $57 million fine issued by the FCC to AT&T. The court interpreted the Jarkesy decision as implying that AT&T’s right to a fair jury trial had been violated due to the internal enforcement process employed by the FCC. Citing these developments, the telecom industry groups stated in their petition that the FCC’s enforcement process is now deemed unconstitutional based on the Jarkesy ruling and additional case law.

Prior to the Jarkesy decision, the FCC had levied substantial fines totaling over $200 million against the three major 5G carriers for their failure to properly screen third parties acquiring customer location data. This action was taken in response to reports of a sheriff’s office misusing this sensitive information. While Verizon and T-Mobile are still awaiting final judgments on their cases, it appears that the courts handling these challenges may have differing perspectives on the constitutional implications compared to the Fifth Circuit’s stance. Should this split in rulings persist, the matter may ultimately be brought before the Supreme Court for resolution.

In light of these developments, FCC Chairman Brendan Carr, who had expressed dissent towards these fines when initially imposed, underlined the importance of reviewing the agency’s enforcement protocols post-Jarkesy. Additionally, Republican Commissioner Nathan Simington declared his intention to challenge all enforcement actions until a thorough review of the enforcement rules was conducted. Despite the Fifth Circuit’s ruling, Chairman Carr emphasized his disagreement with the decision, affirming the FCC’s authority to impose fines and take necessary corrective actions.

Legal experts have noted that the FCC’s ability to enforce compliance through monetary penalties could be significantly hampered by these recent legal interpretations. Chair Carr has notably utilized the FCC’s enforcement powers to advance his policy agenda, which includes scrutinizing diversity initiatives undertaken by companies like Verizon and Comcast. Furthermore, he has issued warnings to companies regarding potential merger approvals being contingent on the reversal of certain practices.

While industry stakeholders did not explicitly call for a jury trial in their petition, they emphasized the need for enhanced transparency and predictability within the FCC’s investigative processes. Key requests included independent reviews of investigations, opportunities for firms to review and refute liability notices before public disclosures, and clearer guidelines around the issuance of letters of inquiry. The petition, endorsed by prominent law firms and industry associations, seeks to mitigate potential delays in regulatory approvals resulting from ongoing enforcement actions.