When is an FCC Fine Excessive? - The 2% Solution
In two recent FCC decisions, one dealing with a commercial operator and that other with a noncommercial licensee, the Commission's staff addressed the issue of how large an FCC fine could be imposed on a broadcaster without that fine being subject to reduction because of the licensee's inability to pay. In the first case, a commercial station was fined for violations of the EAS rules. As we've written before, EAS seems to be the most common violation found at broadcast stations by FCC inspectors. However, what is most notable about this decision is not the violation, but the Commission's discussion of the penalty for that violation. As in many cases, the licensee argued that, as it had experienced several years of financial losses, the amount of its fine should be reduced as the payment of that fine would impose a financial burden on it. The FCC rejected the argument, finding that as the fine was less than 2% of the licensee's gross revenues, it was not excessive. The Commission stated that, while profits and losses may be important in determining whether a licensee can pay a fine, in most cases, if the fine is less than 2% of gross revenues, it will not be considered excessive even if the licensee has not been making a profit as it it not a significant overall expense. Therefore, the Commission refused to reduce the fine because of financial hardship argument.
In the noncommercial case, the applicant claimed that a fine that it was issued for not having any quarterly programs issues lists in it public file should have been reduced because that fine would significantly deplete the station's budget that had been allocated to it by the School District with which it was associated. However, the licensee only provided the FCC with information concerning the budget allotted to the radio station, and it did not provide any financial information about finances of the licensee school district. Without that information, the Commission stated that it could not determine that the fine was excessive, so it did not reduce the fine on the basis of financial hardship. Clearly, the Commission is not anxious to reduce a fine based on the licensees financial inability to pay, so a licensee looking for such a reduction must carefully document its request showing that the fine would impose a financial hardship.
