Best Buy challenges FCC over analog TV sales penalty

The Federal Communications Commission says Best Buy and other retailers must pay more than $3 million in fines for selling analog TVs without labels that explain the sets won't work after the digital TV switchover next February.

In a 41-page legal document filed last week (and dug up by Ars Technica), Best Buy essentially says, "Oh yeah? Make us."

There have been many bumps along the way to the February 2009 switch to all-digital TV in the U.S. The FCC is spearheading the transition and has established deadlines to help it along. Best Buy alone was fined $280,000 after FCC enforcement agents found analog TVs for sale in the store without this label, which the commission had previously decreed should be attached to all TVs without a digital tuner:

This television receiver has only an analog broadcast tuner and will require a converter box after February 17, 2009, to receive over-the-air broadcasts with an antenna because of the nation's transition to digital broadcasting. Analog-only TVs should continue to work as before with cable and satellite TV services, gaming consoles, VCRs, DVD players, and similar products. For more information, call the Federal Communications Commission at 1-888-225-5322 (TTY: 1-888-835-5322) or visit the Commission's digital television Web site at: www.dtv.gov.

Best Buy and other retailers like Sears, Wal-Mart Stores, and CompUSA were found to be in violation of these rules. But were the rules enforceable in the first place? That's where it gets a bit sticky.

Instead of paying the measly fine, Best Buy responded in meticulous detail to the FCC's Notice of Apparent Liability, issued last month. Here's a summary of the retailer's five main points on why it believes it doesn't have to pay a cent.

1. You can't make us label anything
Best Buy's attorneys point out that never before has the commission had jurisdiction over retailers, and twice before when it tried to, an appellate court invalidated it.

2. We didn't do it on purpose
The FCC accused Best Buy of purposely selling analog TVs without labels. Best Buy says that's not true, details its efforts to comply, and says the burden should be on the FCC to prove the intention of the retailer.

3. We tried our best
Best Buy details the steps it took to ensure the right boxes were labeled, but admits that it was difficult to determine which boxes needed them. Products with similar model numbers sometimes made it hard to figure out which had just an analog tuner and which had an analog and a digital tuner.

4. Your agents messed up
The retailer points out that some violations pointed out by FCC enforcement agents were just wrong. It does so to point out to the FCC that it's not accusing the commission of purposely making errors, so the FCC shouldn't accuse Best Buy of the same. Also, Best Buy is trying to show how difficult the process is of determining which boxes need labels.

5. You didn't go about this the right way
Best Buy quibbles with the process with which the Notice of Apparent Liability was carried out. It says that it didn't get public comment on the retail Labeling Rule, and also calls the NAL "procedurally invalid" because it wasn't give enough notice of its violation or time to respond.

The amount of money ($280,000) is so small that the retailer is likely not concerned about the fine. Rather, it's trying to make a point about the reach of the FCC's arm in handling the DTV transition.

The outcome will turn on what an appellate court has to say about this. And though Best Buy has a fairly good case, it's a tough call as to how it will turn out, according to Barbara Esbin, senior fellow and director of The Center for Communications and Competition Policy at the Progress and Freedom Foundation.

"There is no law that says the FCC had jurisdiction to promulgate and enforce a labeling rule," she said in an interview. "But the FCC doesn't claim it has express authorization."

What the agency relies on to regulate labeling by retailers is the same as used in the regulation of cable television services back in the 1960s.

"The FCC relied on this doctrine that it has some regulatory authority that is not expressly given, but is in the subject matter of the authority it has over wire and radio communication devices and reasonably ancillary to its express jurisdiction over that entity and its equipment," according to Esbin.

Indeed, when asked to cite the statute giving it authority to regulate retailers' labeling, an FCC spokeswoman pointed to the Code of Federal Regulations that govern the FCC, but are not laws.

"I can't say Best Buy has a slam dunk argument, but they have reasonably good claims," said Esbin. "The labeling rule imposed on retailers rather than on manufacturers are not reasonably ancillary to express jurisdiction."

Besides that, Best Buy (along with other retailers) appears to have gone way out of its way to comply with the FCC on the transition. Best Buy, for instance, was the first retailer to stop selling analog TVs last fall--and from a look at its argument, like a straight-A student who gets criticized by overly demanding parents for getting a B in math, it just wants a break, and maybe, the benefit of the doubt.

Despite that, the FCC probably isn't going to let this one go, so stay tuned.