Fines

Sections 2107 and 2108 authorize us to assess a fine from $500 to $20,000 for each violation of any order, decision, rule or requirement of the Commission. In this proceeding, the number of offenses is roughly 10,773, the total PIC disputes recorded by LECs and other carriers. However, CSD recommends a fine for 7,000 offenses in deferrence to Vista's contention of error in calculating total PIC disputes. We agree that this is a reasonable estimate for this purpose. Thus, the range of a fine under Section 2107 for these offenses is between $3.5 million and $140 million. Within this range, CSD recommends a fine of $12,000 per offense, or a total fine of $84 million.

In determining the amount of a fine, we look to the criteria we set in D.98-12-075, Appendix B, which has provided guidance in all subsequent Commission cases where such issues arise. Thus, in setting the amount of the fine in this proceeding, the facts are evaluated based upon the following criteria:

We require each public utility to fully comply with all relevant statutes, rules, regulations and Commission orders, and we expressly order each utility to do so as a condition of our approval of its authority to operate. Since such compliance is the cornerstone of our regulation, the disregard of a relevant statute, rule, regulation or Commission order is a substantial violation and in this case one which harmed thousands of customers. Therefore, we consider the estimated 7,000 violations of Sections 702 and 2889.5 in this proceeding to warrant a significant fine. However, as Vista points out, the telemarketers' acts which violated the statute were unauthorized by Vista and in violation of specific terms of the contract employing the telemarketing companies. Although Vista should have been more diligent in monitoring its telemarketers, Vista did terminate offending telemarketers, respond to complaints, and issue refunds it concluded were warranted. This conduct by Vista should be considered a substantial mitigating factor in setting the fine.

Vista reported a net loss in 1998 of $4.6 million, with gross revenues of $40 million nationwide. Thus, it appears not to have the ability to pay a fine in the high end of the recommended range. The ability to pay a fine is a factor weighed in setting the fine. Prior cases also consider the unjust enrichment from revenues a company receives from customers who have been switched to its service. In this proceeding, there is no record upon which to estimate these revenues. However, Pacific automatically switched customers back to their long distance carrier of choice upon hearing their complaint. Thus, the actual level of such revenues may be significantly lower than the number of slamming incidents might suggest. These factors suggest a fine in the lower end of the range.

The public interest in slamming cases is significant because the customer's right to choose a long distance carrier is crucial to the competitive environment in telecommunications. Customers were promptly switched back to their carrier of choice although not all have received refunds; also, Vista promptly fired offending telemarketers and ceased all telemarketing in California in November 1998. Thus, the damage to competition has been minimized.

In sum, Vista has committed many slamming violations, but has taken steps to minimize harm and rectify the situation with the limited information regarding complaints that it possesses. Vista performed its own investigation of customer complaints it received directly, and Vista provided refunds where it concluded refunds were appropriate. We also note that certain occurrences prevent Vista from resolving PIC disputes as quickly as we would wish. There is a lag in Vista receiving the total number of PIC disputes because that information goes first to the underlying interexchange carriers in whose name these disputes are recorded. At no time prior to this proceeding did Vista receive the names, addresses and telephone numbers of customers filing PIC disputes. However, now that Vista has this information, it is able and willing to continue to investigate each PIC dispute and provide full restitution for fees and increased rates to customers who were slammed.

Consideration of the totality of circumstances reveals a mix of aggravating and mitigating factors. Since a third-party verifier committed the unlawful acts, a fine of $3.5 million is warranted.

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