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A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddnddddddd"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCdddddd>400000000009>9+@04242079$4+<744440-909020!!!4002-2--42O4020(($4+90-+!!94)0400000000000G2-2-2-2-2-744040404094949494-004240402-40220044002-2-2-2-442-7-7077-7-94944444$42++)7474444(4)0(N$2+00020000-00000000t0>77+0c<<&&209<!!&>>400000000009>9+@04242079$4+<744440-909020!!!4002-2--42O4020(($4+90-+!!9-002240000000>00-$000000+0000000222224744444049999224000000G-----0400000+04444-227 yO-  .U X-x #Xj\  P6G; DXP# Federal Communications Commission`(#=DA 98 363 ă  yxdddy . X vK #C\  P6QP#Before the  yO#C\  P6QP#Federal Communications Commission  yO"Washington, D.C. 20554 ă  X-In the Matter of:j#Xj\  P6G; DXP#)  X-j)pp FILE No. ENF97003 Long Distance Services, Inc.j)  X-j)pp NAL/Acct. No. 716EF0002  X-j) ă Apparent Liability for Forfeiture j) l  X0 -' ORDER OF FORFEITURE lU  X - Adopted: February 24, 1998V Released: February 25 Z$Q , 1998 X` hp x (#%'0*,.8135@8:to LDS, Inc. contained a forged signature and an incorrect zip code. The Putnam LOA also   included Putnam's maiden name, which she claims not to have used since she was married over   \eight years ago. Wetherill states in his complaint that the LOA switching his long distance   carrier to LDS, Inc. bears his wife's authentic signature, but that he does not believe that the   document contained any language authorizing a change of their long distance carrier at the time it was signed.  Xy-  p3.` ` Subsequent to the filing of the above complaints, the Enforcement Division   [("Division") of the Common Carrier Bureau ("Bureau") sent letters to LDS, Inc. requesting that   LDS, Inc. provide specific information regarding the allegations raised in the Putnam and  X4-  Wetherill complaints.4ZH$ yO?- LԍNotice of Informal Complaint No. IS9610972 (August 13, 1996) (Putnam Notice) and Notice of Informal Complaint No. IS9617351 (September 17, 1996) (Wetherill Notice). LDS, Inc. never responded to the Division letter regarding Putnam. It   did, however, respond to the Wetherill complaint. In its response, LDS, Inc. states that although   it received a "valid" LOA from the Wetherills, upon their request, it would "rerate" their phone   bill to the previous carrier's rates if those rates were less expensive. Based on the information   provided in the Putnam and Wetherill complaints, LDS, Inc.'s response to the Division, and the Bureau's investigation of the matter, the Bureau issued the NAL against LDS, Inc.  X-  4.` ` On June 2, 1997, LDS, Inc. filed a voluntary Chapter 11 petition in the United  X|-States Bankruptcy Court for the Eastern District of Michigan.<|H$ {O- ԍIn re Long Distance Services, Inc., Bankruptcy Case No. 9749212G. Although the provisions of the   automatic stay contained in 11 U.S.C.  362(a) are quite broad, the stay is not allencompassing. In particular,   : sections 362(b)(4) and (5) except from the stay both "the commencement or continuation of an action or proceeding"   .and "the enforcement of a judgment, other than a money judgment obtained in an action or proceeding by a   Jgovernmental unit to enforce such governmental unit's police or regulator powers." 11 U.S.C.  362(b)(4) and (5). Issuance of this Order of Forfeiture against LDS, Inc. falls within this "police power" exception to the automatic stay.< "N, ,N(N(ZZ"  X-  III. CONTENTIONS AND DISCUSSION lU  X-  5.` ` In its Response, LDS, Inc. contests the Bureau's finding of apparent liability for   kwillful or repeated violations of the Commission's rules governing PICchange conversions.   "LDS, Inc argues that if a forfeiture is imposed at all, it should be reduced because: 1)  X-  discrepancies in the LOA signed by the Wetherills constitute a de minimis violation of the   Commission's rules; 2) the Commission rule at issue violates the First Amendment; 3) the Bureau   failed to consider all of the statutorily mandated factors in deriving the proposed forfeiture   amounts; and 4) LDS, Inc. is taking comprehensive steps to minimize the likelihood of future  X3-problems.B3H$ yO -ԍResponse at 716.B  X - A. ` ` The Wetherill Complaint  X -  p6.` ` Contentions: LDS, Inc. claims that the Wetherill LOA constitutes only a de  X -  minimis violation of the Commission's PICchange rules because the basis of the Wetherills'   =complaint, and the source of their confusion, actually involves a promotion that complies with  X-  Commission rules.?oH$ yO-ԍResponse at 9.? LDS, Inc. asserts that the inducement about which the Wetherills complain   involves a raffle to win a Ford Explorer, the promotion for which is on another document,   separated by perforation from the LOA, in compliance with the Commission's rules. LDS, Inc.   concedes that the first sentence of the Wetherill LOA, which includes a promotion for the "Hugs  X:-  not Drugs" campaign, may not comply with Section 64.1150(c) of the Commission's rules.:H$ yO- ԍ47 C.F.R.  64.1150(c). Section 64.1150(c) states that, "The letter of agency shall not be combined with inducements of any kind on the same document." It  X#-  argues, however, that because the Wetherills were not confused by this language, it is only a de  X-  .minimis violation of our rules.@ WH$ yO-ԍResponse at 17.@ LDS, Inc. further claims that it removed the "Hugs not Drugs"  X-  \promotion from all its LOAs in June 1996, one month after the Wetherill LOA was signed.E H$ yO-ԍResponse at 9.E   LDS, Inc. maintains that because of the minimal violation at issue and the remedial step of   removing the Hugs not Drugs promotion from all of its LOAs, no forfeiture should be entered based upon the Wetherill complaint.  X- '7.` ` Discussion:Section 64.1150 of the Commission's rules prohibits the combination  Xo-  [of an LOA with inducements of any kind on the same document. "owH$ {O$- ԍ47 C.F.R.  64.1150 (c); see also 47 C.F.R.  64.1150 (b), which provides that: "The letter of agency shall   be a separate document . . . whose sole purpose is to authorize an interexchange carrier to initiate a primary   interexchange carrier change. The letter of agency must be signed and dated by the subscriber to the telephone line(s) requesting the primary interexchange carrier change." These rules for proper LOA"oa ,N(N(ZZ"   iform and content were implemented to prohibit certain deceptive or confusing marketing practices   xutilized by some IXCs and were intended to significantly reduce consumer confusion over the use  X-  and function of the LOA.[ H$ {OK-ԍLOA Order, 10 FCC Rcd at 9560.[ Specifically, the Commission determined that the combination of   Zpromotions or inducements of any kind with LOA language is inherently confusing, which is why   the rules require that the sole purpose of the LOA be to authorize an interexchange carrier to  X-  initiate a PIC change.k ZH$ {O-ԍSee 47 C.F.R.  64.1150(b) and supra n. 11.k We therefore find unavailing LDS, Inc.'s attempts to minimize the   manner in which the LOA in question violates Section 64.1150 (b) and (c) of our rules.   Moreover, according to their informal complaint, the Wetherills were, in fact, clearly confused  XH-  about the purpose of the LOA they signed in May 1996.HH$ yO -ԍBenjamin Wetherill, Informal Complaint No. IS9617351 (August 28, 1996) ("Wetherill Complaint"). LDS, Inc. incorrectly characterizes   =the source of the Wetherill's confusion. LDS, Inc. asserts that the Wetherills complained only   about the Ford Explorer promotion, which, LDS, Inc. says, complies with the Commission's rules   {for proper LOA form and content; not the "Hugs not Drugs" campaign, which, LDS, Inc.   0concedes, violates our rules. This characterization is not, in fact, accurate. Instead, the   =Wetherills claim that they did not remember any language authorizing the change of their long  X -  distance carrier on the LOA they signed.K |H$ yO-ԍWetherill Complaint at 1. K They only remember that Mrs. Wetherill signed a   raffle ticket to win a Ford Explorer and that some of the raffle money would be donated to the  X-  "Hugs not Drugs" Campaign.: H$ {OM-ԍId.: That inclusion of language offering consumers the opportunity   ito donate a portion of their monthly phone bill to the Hugs not Drugs campaign on the same page   as the language authorizing the change in long distance carriers is in direct violation of Section 64.1150 (b) and (c) of our rules.  X- B.` ` Constitutionality of 47 C.F.R.  64.1150  X-  8.` ` Contentions: LDS, Inc. also contends that, under the Supreme Court's decision  X-  in Rubin v. Coors Brewing Co., Section 64.1150 of the Commission's rules imposes an  X-  /impermissible restriction on commercial speech, in violation of the First Amendment.H$ {O!-ԍResponse at 9, citing Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) (Rubin v. Coors). The  X-  yCourt in Rubin v. Coors, applying the test developed in Central Hudson Gas & Electric Corp.  X-  v. Public Service Comm'n of New York,r"0 H$ {Ox$- ԍ447 U.S. 557 (1980) (Central Hudson). The Central Hudson case identified several factors that courts should consider in determining whether a regulation of commercial speech survives First Amendment scrutiny:  nXFor commercial speech to come within [the First Amendment], it at least must concern lawful"&,N(N(&"  ~activity and not be misleading. Next, we ask whether the asserted governmental interest is  Psubstantial. If both inquiries yield positive answers, we must determine whether the regulation  ^directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.   {Ox-Id. at 566.r struck down a provision of the Federal Alcohol"B,N(N(ZZo"   <Administration Act ("FAAA") which prohibited beer containers from displaying alcohol content.   =The Government argued that the ban was necessary to suppress the threat of "strength wars"   among brewers, who, without the regulation, would seek to compete in the marketplace based on   the potency of their beer. The Court ruled that the labeling provision could not directly and   ymaterially advance this aim, because other provisions of the same Act directly undermined and  X-  counteracted its effects.]BH$ {O -ԍRubin v. Coors, 514 U.S. at 489.] Specifically, the Court cited a provision of the FAAA that allowed the   Kdisclosure of alcohol content in advertising, which the Court reasoned "would seem to constitute  X_-  a more influential weapon in any strength war than labels."B_H$ {O-ԍId. at 488.B In addition, the FAAA provision  XH-  at issue before the Court required that alcohol content be disclosed on wine and spirit labels, even  X3-  when both have higher alcohol content than beer.@3f H$ {OJ-ԍId.@ The Court also ruled that the labeling   provision was more extensive than necessary, because available alternatives to the labeling ban  X -would prove less intrusive to the First Amendment's protection of commercial speech.E H$ {O-ԍId. at 49091.E  X -  9.` ` Applying the reasoning employed by the Rubin Court, LDS, Inc. argues that  X -  [dichotomies exist in Section 64.1150 of the Commission's rulesH H$ yO-ԍ47 C.F.R.  64.1150.H that make it impossible for the   rule to advance directly and materially the Commission's aim in implementing it. LDS, Inc.   claims that while subsection (b) generally bans combining an inducement and an LOA in a single  X}-  idocument,K}H$ yOH-ԍ47 C.F.R.  64.1150(b).K subsection (d) specifically sanctions the combination of one type of inducement, the  Xf-  issuance of negotiable instruments, with the LOA language prescribed in subsection (e).NfH$ yO!-ԍ47 C.F.R.  64.1150(d)(e).N LDS,   Inc. asserts that if one of the goals of implementing the rule was to eliminate potential confusion  X8-  >regarding the effect of the LOA form,~Z8:H$ {O#%- ԍSee LOA Order, which indicates that, "These rules and policies prohibit certain deceptive or confusing   Lmarketing practices of some interexchange carriers (IXCs) and are intended to significantly reduce consumer confusion over the use and function of the LOA." 10 FCC Rcd at 956061.~ the discrepancy between subsections (b) and (d) is"8\,N(N(ZZf"  X-  unlikely to directly and materially advance this aim, making the rule unconstitutional.@H$ yOy-ԍResponse at 13.@ LDS,   Inc. also argues that Section 64.1150 is unconstitutional because the interests served by the rule could be achieved through equally viable, yet less restrictive means.  X-   10.` ` Discussion: The Commission addressed the constitutionality of Section 64.1150  X-  yin the LOA Order.^XH$ {O-ԍLOA Order, 10 FCC Rcd at 956869.^ It determined that the new rule met the tests set out by the Supreme Court   .for permissible government regulation of commercial speech under the First Amendment. The   Commission concluded that the new regulations were similar to the "time, place, and manner"  XJ-  restrictions permitted in Virginia State Board of Pharmacy v. Virginia Citizens Consumer  X5-  Council, 5H$ yO - kԍ425 U.S. 748 (1976). The Supreme Court held that it is permissible to use some restrictions on the time,   Zplace, and manner of commercial speech provided that they are justified without reference to the content of the   regulated speech, that they serve a significant government interest, and that in so doing they leave open ample alternative channels for the communication of the information. 425 U.S. at 771. in that they do not prohibit any speech, commercial or otherwise. Rather, they merely  X -  .require that the manner of delivery of that speech not confuse or mislead the consumer._ H$ {O-ԍSee LOA Order, 10 FCC Rcd at 9569._ The   LCommission further determined that it chose the least restrictive method of regulation because   .it did not propose to restrict IXCs' use of their promotional materials, but merely specified that  X -such materials be separate or severable from the actual document that authorizes a PIC change.: d H$ {O-ԍId.:  X -   11.` ` We believe that the Commission's reasoning upholding the constitutionality of  X-  Section 64.1150 in the LOA Order is unaffected by the Court's holding in Rubin v. Coors. Our   rules on proper LOA form and content do not contain the regulatory dichotomies overturned in  Xj-  .Rubin v. Coors. As discussed above, the Commission's rules do not prohibit any speech, but   .rather require that the manner of delivery of that speech not confuse or mislead the consumer.   Unlike the FAAA regulatory scheme, Section 64.1150 does not impose different disclosure   requirements on different products; checks must include the very same authorizing language as  X-  any other document.K  H$ yO -ԍ47 C.F.R.  64.1150(d).K Section 64.1150 also generally requires that the language authorizing the   change of long distance service be kept separate from promotional materials or inducements  X-  =except when the inducement involves a negotiable instrument.K! H$ {O$-ԍId.  64.1150(c).K When a check is used as the   inducement, the language authorizing the change of long distance service may be contained on   Lthe check if placed near the signature line on the back of the check. The check cannot contain   =any promotional language or material, but only the language necessary to make it a negotiable"!,N(N(ZZ"  X-  jinstrument and a notice that by signing the check, the customer is authorizing a PIC change.K"H$ {Oy-ԍId.  64.1150(d).K   xFurthermore, the Commission's decision not to impose the same "separate or severable" condition   <on checks, as it did all other inducements, is the least restrictive regulatory approach because the   immediate and direct transfer of a cash benefit makes the nature and purpose of the inducement  X-  [quite clear.a#ZH$ {O-ԍSee LOA Order, 10 FCC Rcd at 9573. a Therefore, by allowing authorizing language to be placed on the back of a check,   the Commission chose the least restrictive means in which to protect consumers from misleading   and deceptive practices. For these reasons, we find that LDS, Inc. failed to present a persuasive  X_-  argument to counter the Commission's finding in the LOA Order finding the restrictions on LOA   form and content contained in Section 64.1150 of the Commission's rules constitute a permissible time, place, and manner restriction on speech.  X - C.` ` Forfeiture Amount   X -` ` 1. Factors Considered  X -   12.` ` Contentions: LDS, Inc. next argues that even if the Commission determines that   ka forfeiture is required, the amount imposed by the NAL is inappropriate. In support of this   argument, LDS, Inc. claims that the Bureau failed to consider all statutorilymandated factors  Xd-  when determining the forfeiture amounts proposed in the NAL.@$dH$ yO-ԍResponse at 16.@ Specifically, LDS, Inc. argues   that the Bureau should have considered its relative lack of market share or power and its limited  X6-  =financial resources before it proposed a $80,000 forfeiture.:%6|H$ {Oc-ԍId.: LDS, Inc. asserts that while it has   substantially lower revenues than companies against which the Bureau has issued forfeitures in the past, it was not assessed a proportionately lower forfeiture.  X-   13.` ` Discussion: Section 503(b)(2) of the Communications Act authorizes the   Commission to assess a forfeiture of up to one hundred ten thousand dollars ($110,000) for each   violation, or each day of a continuing violation, up to a statutory maximum of one million, one  X-  >hundred thousand dollars ($1,100,000) for a single act or failure to act.S&"H$ yOT!- ԍ47 U.S.C.  503(b)(2)(B); 47 C.F.R. 1.80. The Commission recently amended its rules by adding a new   subsection to its monetary forfeiture provisions that incorporates the inflation adjustment requirements contained in  yO"-  the Debt Collection Improvement Act of 1996 (Pub. L. 104134, Sec. 31001, 110 Stat. 1321,  ), enacted on April  {O#-26, 1996. See In the Matter of Amendment of Section 1.80 of the Commission's Rules, 12 FCC Rcd 1038 (1997).S In exercising such   Kauthority, the Commission is required to take into account "the nature, circumstances, extent, and   gravity of the violation and, with respect to the violator, the degree of culpability, and history of"g &,N(N(ZZ"  X-  jprior offenses, ability to pay, and such other matters as justice may require."M'H$ yOy-ԍ47 U.S.C.  503(b)(2)(D).M Considerations   =of size and relative market share are noticeably absent from these factors. We note, moreover,   that notwithstanding LDS, Inc.'s characterization of its size and relative lack of market share,   records maintained by the Bureau's Consumer Protection staff indicate that from May 1996   through February 1997, 1,882 consumer complaints were filed with the Commission against LDS,   Inc. We expect all carriers, regardless of size and market share, to follow the Commission's rules.  XH- 2. ` ` LDS, Inc.'s Remedial Actions  X -  q 14.` ` Contentions: LDS, Inc. also urges the Bureau to consider its voluntarily   zimplemented remedial measures when determining the appropriate forfeiture amount. These  X -  remedial measures include the suspension of all LOA solicitation as of January 16, 1997;V(Z XH$ {O- ԍSee Declaration of Allan Barash in Support of LDS, Inc.'s Response to Notice of Apparent Liability for   ;Forfeiture ("Barash Declaration") at 2. Allan Barash is the president of LDS, Inc. His declaration accompanied the Response filed on January 16, 1997.V the   jrevision of LDS, Inc. marketing agreements to include a clause requiring the marketer to adhere   to "all local, state, and federal laws, rules and regulations governing the marketing, promotion  X -  jand sale of long distance telephone services;"e) zH$ yO-ԍBarash Declaration, Exhibit A,  3B. e and the imposition of an affirmative obligation   on marketers to acquire an accurate and true written consent or authorization of any customer   who determines that he or she wished to transfer long distance service from his or her current  Xb-  carrier to LDS, Inc.Z*b H$ yO-ԍBarash Declaration, Exhibit A at  N. Z LDS, Inc. also claims to be in the process of reorganizing its consumer  XK-  iinquiry and complaint practices and procedures.+zKH$ yO- ԍThe reorganization purportedly includes: instituting a postcard response to all LOA signers that gives them   two weeks to cancel the LOA; restructuring LDS, Inc.'s customer service department to more effectively receive,   process, and respond to consumer questions and complaints; requiring responses to consumers within specified time   Kframes; standardizing the complaint form to consistently capture relevant data and permit statistical tracking of   Zcomplaints; compiling, on a periodic basis, internal statistics concerning complaints received for monitoring and   action; instituting a training program for customer service personnel to enable them to be more responsive to  {OF -complains and deal with customers in a prompt and sensitive manner. See Response at 6. While LDS, Inc. recognizes that these remedial   measures cannot alter the circumstances that lead to the Wetherill and Putnam complaints, it   hopes that "they will help the Commission understand that LDS, Inc. is making a conscientious   .effort, within the limits of its size and resources, to revise its internal practices and procedures  X-to promote compliance with FCC rules and to minimize the likelihood of future complaints."?,H$ yO|%-ԍResponse at 7.?  X-  215.` ` Discussion: We recognize LDS, Inc's voluntarily implemented remedial measures"l,,N(N(ZZ"   but agree with its admission that the measures do not alter what happened in the case of the  X-  Wetherills and Putnam.:-H$ {Ob-ԍId.: Further, we have concerns about the sincerity of "revisions to internal  X-  practices and procedures to promote compliance with FCC rules":.ZH$ {O-ԍId.: that are contingent upon limits   yof size and resources. All common carriers are required to comply with the Commission's rules,   regardless of size or resources, particularly those rules targeted to protect consumers from  X-  deceptive practices. We also note that despite its claims of "conscientious efforts":/H$ {O* -ԍId.: to change   its practices, LDS, Inc. failed to provide timely and comprehensive information and proposals   =requested at an April 23, 1997 meeting with the Commission staff. Under these circumstances, we find no basis in LDS, Inc's Response to warrant a reduction of the forfeiture amount.  X -/} IV. CONCLUSION ĐlU  X -  `16.` ` After reviewing the information filed by LDS, Inc. in its Response, we find that   yLDS, Inc. has failed to identify facts or circumstances to persuade us that there is any basis for   reconsidering the NAL. Neither has LDS, Inc. shown any mitigating circumstances sufficient to warrant a reduction of the $80,000 forfeiture penalty for which it is liable.  Xy-6 V. ORDERING CLAUSES ĐlU  XK-  B17.` ` Accordingly, IT IS ORDERED pursuant to Section 503(b) of the Act, 47 U.S.C.    503(b), Section 1.80(f)(4) of the Commission's rules, 47 C.F.R.  1.80(f)(4), and the authority   Mdelegated in Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291,   that LDS, Inc. SHALL FORFEIT to the United States Government the sum of eighty thousand   dollars ($80,000) for violating the Commission's rules and orders governing primary interexchange carrier conversions. " ~/,N(N(ZZ4"  X-  o18.` ` IT IS FURTHER ORDERED that a copy of this Order of Forfeiture shall be sent   [by certified United States mail to Allan Barash, President, LDS, Inc., 50 West Big Beaver Road, Troy, Michigan 48084.  Xv-` `  hh,V FEDERAL COMMUNICATIONS COMMISSION ` `  hh,VA. Richard Metzger, Jr. ` `  hh,VChief, Common Carrier Bureau