12. Enhanced Enforcement
Enforcement of laws and rules is a critical component of the Commission's consumer protection efforts. Enforcement can be effective in two ways: (1) informally, when we call attention to potential violations by carriers and seek to achieve compliance without any official sanctions; and (2) formally, when we take actions against carriers for violations of our laws and regulations. Enforcement actions encourage compliance with our regulatory regime by punishing unlawful behavior and serving as a deterrent to potential wrongdoers.
A number of commenters express support for enhancing enforcement.281 At the same time, however, some parties provide general comments that a call for enhanced enforcement is hollow without more rules,282 while others voiced due process concerns.283 Specific comments that directed our enforcement efforts are addressed below.
To facilitate rapid identification of telecommunications carriers engaged in fraudulent conduct, we will expand the scope of our existing toll-free hotline to address fraud. We direct Commission staff to publicize how consumers can use our hotline specifically to report allegations of fraud. Allegations that a telecommunications carrier or its dealer or agent is engaged in fraudulent practices will receive priority attention by our staff.
12.2 Increased Cooperation with Local Law Enforcement Personnel
While consumer protection is a primary goal of the Commission, we are not the only state body tasked with protecting consumers. Notably the AG and local DAs are the principal enforcers of California's general anti-fraud laws, Civil Code Sections 17200 and 17500, as well as the state's Criminal Code. Many acts that violate the P.U. Code or our rules also violate one or both of the cited Civil Code sections or some portion of the Criminal Code.
There are significant advantages to collaborating with the AG and DAs. Often the AG and DAs are able to use their broader enforcement authority to seek greater penalties than we could attain at Commission. The Commission is limited to pursuing enforcement actions under the P.U. Code and our rules. The AG and DAs, however, may bring actions not only under the P.U. Code,284 but also under general anti-fraud laws and the criminal code. Remedies under the Unfair Competition Law are cumulative and in addition to remedies that may be imposed under other laws like the P.U. Code.285
These law enforcement officials' enforcement of general consumer protection laws is especially important with respect to telecommunications matters outside our jurisdiction or over which our jurisdiction may not be clear. Matters outside our jurisdiction include those involving certain prepaid phone services and the sale or resale of telecommunications equipment. The AG and DAs, unlike Commission staff, can reach actors engaging in such activities through their application of general state consumer protection laws. Also where Commission jurisdiction is not clear or is otherwise disputable, prosecution of the case by the AG or DAs may avoid lengthy litigation over jurisdictional issues and provide the most effective, timely relief to consumers.
Given the broader enforcement authority of local law enforcement officials, we direct Commission staff to engage in the practice of collaborative law enforcement. No enforcement action at the Commission should be launched without staff first considering whether a matter would be best addressed by the AG, a DA, or other government agency. If a matter can be best addressed outside the Commission, the staff should promptly refer the matter to outside law enforcement officials.
Furthermore we pledge to use our expertise, experience, and investigative and information gathering abilities to assist outside law enforcement officials that are developing and prosecuting cases. There are a variety of ways in which we can work closely with law enforcement officials to provide relief to consumers injured by unscrupulous or fraudulent conduct. Collaboration may include, but is not limited to, detailed complaint analysis to help law enforcement officials build their case or determine if there are concurrent violations of our statutes and regulations and other state statutes; preparation of witnesses for cases brought by state or federal prosecutors; regular meetings between our staff and DAs from around the state; and similar actions designed to bring enforcement officials, with their greater array of civil and criminal penalties, to bear on people and companies who defraud or otherwise take advantage of vulnerable consumers.
Finally we direct Commission staff to begin participating in a preexisting conference call that regularly occurs among various state AG and public utilities commission personnel. This call will help our staff become aware of developing trends and state best practices in responding to illegal carrier activities.
We intend to support this increased collaboration with law enforcement officials, in part, though additional funding we are requesting from the Legislature. We plan to devote specific funds to interagency cooperation, and to hire CPSD employees who will be tasked with working cooperatively with local law enforcement officials. We expect that at least one Commission employee will be solely devoted to developing and furthering relationships with outside law enforcement officials, and acting as a liaison on cases developed by Commission staff and prosecuted by outside law enforcement officials.
12.3 Further Collaboration with Federal Government Officials
DOD/FEA recommends that we better coordinate with federal government officials as well.286 It identifies two important objectives for this federal-state cooperation. First, the DOD/FEA states that we should work to better collaborate on related enforcement activities.287 Second, the DOD/FEA recommends that we seek "to identify and create opportunities for each of these groups to benefit from the experiences of the other."288
We agree with the DOD/FEA that there are significant advantages to working in conjunction with federal government officials. Federal officials, such as those employed by the FCC or Federal Trade Commission ("FTC"), sometimes can pursue enforcement actions or remedies that are unavailable to Commission staff. For example, matters involving interstate communications or information services may be outside of our jurisdiction and better handled by the FCC. Also there is much that we can learn from federal government officials. They may be able to help us identify and proactively address problems before they become visible at the state level, or help us develop internal procedures that help us respond to issues that reach us.
We direct Commission staff to further explore and build upon these areas of mutual interest with appropriate FCC and FTC personnel. Specifically we ask Commission staff to explore the possibility of drafting a Memorandum of Understanding ("MOU") with the FCC on how we may jointly address matters, like VoIP, that are regulated primarily at the federal level, but nonetheless generate complaints at our state Commission. We also direct Commission staff to rejoin the State and National Action Plan ("SNAP") call, where state and FCC officials discuss general consumer issues.289
12.4 Creation of a Special Telecommunications Consumer Fraud Unit
An area of great concern for this Commission is consumer fraud relating to telecommunications. We hereby direct the creation of a special Telecommunications Consumer Fraud Unit within CPSD. This Unit will be dedicated to investigating, documenting, and resolving allegations of telecommunications consumer fraud. Activities of Unit members will include monitoring fraud and complaint hotline trends; investigating alleged violations of the P.U. Code and specific Commission rules; meeting regularly with outside law enforcement officials in order to compare information and coordinate enforcement activities; and reporting periodically to the Commission on the activities of Fraud Unit members, including the degree to which they are partnering with outside law enforcement officials.
To enhance the capabilities of the Telecommunications Consumer Fraud Unit, we are requesting funds for new CPSD employees.290 These additional Telecommunications Consumer Fraud Unit members will be used in our analyzing and preparing cases for enforcement actions led by the Commission or referred to outside law enforcement personnel.
Part of the Fraud Unit's preparation of cases will include efforts to validate allegations of misconduct. We agree with the Wireless Carriers that we need to remedy deficiencies in our current complaint verification efforts.291 Activities of Fraud Unit personnel, therefore, may include distinguishing between inquiries and complaints, interviewing complainants, and providing an assessment of the validity and seriousness of complaints.292
Additionally we direct CPSD to investigate Greenlining's recommendation that we invite a deputy AG or DA (who is still employed with his home agency) to join the Commission's Telecommunications Consumer Fraud Unit.293 While we find no basis for CTIA's concern that inclusion of an outside law enforcement official will "reduce the possibility of informal resolution of consumer issues,"294 we recognize that staff will need to evaluate whether this proposal is feasible, especially given existing demands on AG and DA personnel.
Enforcement proceedings involve a number of steps. DRA correctly observes that enforcement actions can be very costly and take years to resolve,295 and during this time consumers may continue to be harmed while a matter is investigated and litigated.
If it wants to initiate a formal enforcement action, CPSD first must acquire an Order Instituting and Investigation ("OII") from the Commission. CPSD, to acquire the Commission's approval, prepares a draft OII that states the findings of staff's informal investigations and staff's conclusion that a law or regulation had been violated. The Commission, in closed Executive Session, reviews this draft OII, and votes whether to issue the OII and initiate a formal investigation. If the Commission issues the OII, the case is assigned an ALJ, and CPSD begins the "formal" part of the investigation. Hearings are held, and evidence is presented. At the conclusion of the formal investigation, the ALJ prepares a presiding officer decision that may be appealed to the full Commission.
We do not believe that this lengthy OII process is sufficient to respond to carriers that fail to comply with laws governing verification of consumers' intent to switch to a new telecommunications carrier.296 Alternate procedures are necessary to ensure that we eliminate slamming as a marketing practice and provide consumers in California with a competitive telecommunications marketplace where consumer choice is respected.
One possible alternative to the OII process is a citation forfeiture program, which we have used in transportation and utility safety regulation.297 Under this procedure, a carrier is cited for violations of applicable law, such as the Household Goods Carriers Act. The carrier then is given the option of contesting the charges and requesting a formal hearing, or paying a fine. The program has been expanded and the fines increased by the Commission as circumstances have warranted.
We direct the CPSD Director, in consultation with the Chief ALJ and the General Counsel, to investigate the feasibility and potential effectiveness of instituting a similar citation forfeiture program for violations of slamming statutes. This examination should include opportunities for industry and consumer input. If such a program is deemed effective for enforcement of the Commission's slamming rules, Commission staff shall bring forward a detailed proposal for a citation forfeiture program for the Commission's consideration. The proposed citation program must include adequate protections of carriers' due process rights, and specifically must provide carriers' the opportunity to appeal a citation.
Additionally, and more generally, we direct the Executive Director to examine our current investigative and enforcement process and provide the Commission with any other recommendations on how to streamline and/or increase the effectiveness of the process. One proposal the Executive Director should examine is whether, and in what circumstances, CPSD should be able file a complaint directly with the Commission in order to initiate an investigation of a telecommunications carrier.
281 DOD/FEA Opening Comments, p. 15; Greenlining Opening Comments, p. 4; LIF Opening Comments, p. 5.
282 AG Opening Comments, p. 41; Consumer Groups Opening Comments, pp. 23-24; DRA Opening Comments, p. 23; Greenlining Opening Comments, p. 5.
283 Wireless Carriers Opening Comments, p. 12.
284 Cal. Pub. Util. Code § 2101 ("Upon the request of the commission, the Attorney General or the district attorney of the proper county or city and county shall aid in any investigation, hearing, or trial had under the provisions of this part, and shall institute and prosecute actions or proceedings for the enforcement of the provisions of the Constitution and statutes of this State affecting public utilities and for the punishment of all violations thereof.").
285 Cal. Bus. & Prof. Code §§ 17205, 17534.5.
286 DOD/FEA Opening Comments, p. 16.
287 Id.
288 Id.
289 The Commission participated in the SNAP call in the past, but no longer is an active participant.
290 Specifically our BCP, which is currently under review by the Administration and Legislature, requests nine new CPSD employees.
291 Wireless Carriers Opening Comments, p. 13. But see Consumer Groups Reply Comments, p. 5 (characterizing these suggestions as further "stonewalling" on behalf of the carriers)..
292 Id.
293 Greenlining Opening Comments, pp. 4-5.
294 CTIA Reply Comments, p. 4.
295 DRA Opening Comments, p. 20.
296 P.U. Code § 2889.5 and 47 CFR 64.1120(c)(3)(iii) set forth rules that carriers must follow when acquiring a new customer.
297 The Commission created the citation forfeiture program for the transportation arena in 1968. Originally designed as an inexpensive and efficient means to address transportation rate violations by motor vehicle carriers, the resolution was extended in 1970 to all highway carriers.
