Administrative Monetary Penalties: the answer to all our woes?

The CRTC has today renewed the licences held by Shaw for cable systems it operates throughout western Canada for five years. The maximum licence term is seven years. The CRTC said that this shorter-than-possible licence term “will permit the Commission to review at an earlier date the licensees’ compliance with the Broadcasting Distribution Regulations and their conditions of licence”.

Interestingly, attached to the CRTC’s decision are “Additional considerations of the hearing Panel”. In twelve paragraphs, the panel of Commissioners that heard Shaw’s renewal applications (and also its application to acquire the Canwest TV stations) sets out the case for Parliament to give the CRTC powers to levy Administrative Monetary Penalties (AMPs). The CRTC has asked for these powers several times when it has appeared before the House of Commons Standing Committee on Canadian Heritage.

For those who are curious, the difference between the CRTC itself and the hearing panel is that the hearing panel that heard Shaw’s renewal applications consisted of five Commissioners: CRTC Chair Konrad von Finckenstein; acting Vice-Chairman, Broadcasting, Rita Cugini; Vice-Chairman, Telecommunications, Len Katz; Commissioner Peter Menzies and Commissioner Marc Patrone. This information is not published in the CRTC’s decision, but is available by reviewing the written transcript of the CRTC’s 20 September 2010 public hearing in Calgary, Alberta. While CRTC panels make decisions about the matters they hear, they must consult with the full Commission; the composition of panels is decided by the CRTC’s Chairman. The full CRTC consists of the hearing panel members noted above, and seven other Commissioners: Louise Poirier, Elizabeth Duncan, Michel Morin, Timothy Denton, Candice Molnar, Suzanne Lamarre and Stephen B. Simpson.

Why devote an entire blog to these ‘additional considerations’ of the Calgary panel that heard (and approved) Shaw’s applications?

Over the past twenty years it has become increasingly common for individual Commissioners to write separate reasons for CRTC decisions, much the way that individual judges on a panel of judges will issue concurring or dissenting reasons separate from those of their colleagues. For the most part, CRTC Commissioners who attach separate reasons want to express their dissent from their colleagues’ decision.

To my knowledge, today’s decision marks one of the first times that something other than dissenting reasons, assenting reasons or information-based appendices, have been attached to a CRTC decision. The CRTC’s decision does not comment on the panel’s ‘additional comments’ other than to note in its italicized preface, that the comments are attached to the decision.

The CRTC’s lack of comment about the panel’s ‘additional comments’ makes it impossible to say for certain why the comments were attached separately, rather than incorporated into the decision itself. It’s possible that the CRTC viewed the panel’s comments as obiter – the term used to describe comments made in courts’ decisions that refer to matters not directly relevant to a specific case. It’s also possible that the CRTC viewed the comments as not relevant to the decision itself – but nevertheless wished to send a message about an issue it considers important, without resorting to the trouble and cost of a public CRTC hearing. Whatever the reason, the rarity of this content makes it worthy of review.

Supposing the panel’s ‘additional comments’ are a message – what does the message say? In brief, the panel argues the CRTC’s existing toolbox is “sub-optimal” for dealing with licensees like Shaw who breach the CRTC’s regulations. (The CRTC said that during 2009 and part of 2010, Shaw was months late in making required payments to the Canadian Media Fund, contrary to its broadcasting distribution regulations.)

The panel wants the government to amend the CRTC Act to permit the CRTC to levy administrative monetary penalties (AMPs), and notes that most G20 members have given their communications regulators this authority. The panel claims that its ability to deal with regulatory breaches is “less effective and more costly” than AMPs, and that short-term renewals “do not always act as a deterrent”. Finally, the panel acknowledges the existing authority under the Broadcasting Act to call licensees to a hearing and to register mandatory orders with a Court, but says “we find this to be time-consuming, costly and process-laden.”

The panel then concludes that “AMPs offer the benefit of allowing the Commission to deal with offenders and repeat offenders in the most direct and timely manner possible. This would also be consistent with the goals of providing regulatory certainty and making sure that “the punishment fits the crime.””

Wow ! This strong language would lead any reasonable person to conclude that the CRTC is very serious about regulatory non-compliance, and only needs one tiny amendment from Parliament to leap at the chance to ensure full compliance.

Who could oppose changes that will introduce law and order?

And who could disagree with any of the panel’s calm, objective-sounding arguments?

Before we wholeheartedly endorse AMPs, however, here are some questions we should be asking.

First, what do we know about the effectiveness of AMPs? Has the CRTC undertaken any studies to show how the AMP regime would work in Canada’s broadcasting system? In mid-2009 I asked the CRTC for any research it had undertaken, because I wondered whether why the CRTC was recommending AMPs. The materials I received from the Commission in late 2009 did not include any empirical studies or research about AMPs.

We are entitled to wonder about the evidence to support the CRTC's call for AMPs, because this is not the first time the CRTC has argued it needs more and stronger powers to do its job properly. In 1991 it convinced Parliament that the only tool it needed to ensure regulatory compliance, was the power to issue mandatory orders. Parliament accepted the CRTC’s suggestion. Now, if a broadcaster declines to obey a mandatory order, the CRTC can ask a court to enforce the order (presumably through other penalties). Dozens of mandatory orders later, the CRTC has obviously changed its mind about the utility of mandatory orders – but why?

As for the but-other-countries-do-this-already argument, what do we know about the impact of their AMPs on deterring regulatory non-compliance in their countries? The United States seems to rely heavily on the AMP system – does it work?: in the tragic case this past April when at least 25 miners died in a West Virginia coal mine, the mine’s owner had been cited for 1,342 other safety violations from 2005 to 2010, for which the US Mine Safety and Health Administration had proposed a total of $1.89 million in fines (source: Steven Mufson, “Massey Energy has litany of critics, violations” The Washington Post (6 April 2010)). If the first 1,340 or so safety violations and associated fines did not work to ensure health and safety compliance in the US, what evidence exists to show that AMPs will work in Canadian broadcasting to obtain compliance with the CRTC's rules?

And do we know anything about the CRTC’s current approach to AMPs? At the end of October, the CRTC issued a press release advising that Telus had agreed to terminate certain telecommunications activities, that the CRTC would not sanction those activities with its AMP powers for telemarketing, and that Telus had also agreed to give financial support to a specific university program. The interesting difference between AMPs and charitable donations, of course, is that unlike donations, fines cannot be used to reduce taxable income. Could the same thing happen on the broadcasting side?: suppose a major broadcaster made its payments to the CMF late – could it decline to admit fault and make a large charitable donation elsewhere? Could Canadians appeal this non-decision? Would Canadians necessarily know that such non-decisions are being made?

Second, even without an empirical assessment of whether AMPs work ‘better’ than the CRTC’s existing powers, what are the policy implications of AMPs? Currently Parliament (through the CRTC) regulates broadcasting because it uses a natural resource owned by all Canadians – spectrum. Parliament specifically limits the use of broadcasting spectrum by limiting the duration of a broadcasting licence to a maximum of seven years. Licences need not be renewed – and one of the key reasons for non-renewal is regulatory non-compliance. The non-renewal of Genex' licence for CHOI-FMl in 2004 is an example. If AMPs are introduced, could broadcasters argue that their licences must always be renewed, because if they have breached regulations, they have literally already paid for that offence? Would short-term renewals – and the very slim opportunity these present for members of the public to seek change from broadcasters – disappear?

Third, the panel’s discussion of AMPs omits the fact that the existing Broadcasting Act specifically makes it an offence to breach either a CRTC regulation or a condition of licence. Under subsection 32(2)(b) of the Act if a broadcaster is convicted of breaching a regulation courts can levy stiff financial penalties–up to $250,000 for a corporation’s first breach of a regulation or order.

But the panel ignores this power, and instead writes that since, in the last ten months 68 of 127 radio stations received short-term renewals, “one can only wonder whether the regulatory tools presently at the Commission’s disposal are sufficient to incent compliance.” One could also wonder why broadcasters’ breaches are not being prosecuted, if this CRTC panel believes that short-term renewals do not deter non-compliance? In face, have theren been any prosecutions for breaches of the CRTC's regulations or conditions of licence since 1990? If the answer is yes, where has the CRTC reported such cases?

Some will say that it is silly to prosecute a radio station because the broadcaster failed to play a sufficient amount of Canadian programming. Culture, shmulture. But doesn’t the complete failure to prosecute leave the even worse impression that Canadians’ access to Canadian programming, and protecting Canadians’ employing in their own domestic cultural industry, are entirely unworthy of any serious protection at all? What if we took the same approach to all behaviour that Parliament has defined to be an offence?

Fourth, what is the potential financial impact of AMPs on broadcasters? The CRTC’s panel seems to argue that its own costs would be reduced by using AMPs instead of hearings, to address non-compliance. I don’t know off hand how many hearings the CRTC has held this year or last to assess non-compliance, but I do know that non-compliance is common in some parts of the broadcasting system. As part of my master’s degree in law I undertook an empirical analysis of more than thirty years’ worth of the CRTC’s radio decisions with respect to non-compliance. The results, published in Dalhousie’s Canadian Journal of Law and Technology in November 2006, were that most radio licensees breach the CRTC’s regulations at some point. Would this mean that the CRTC would be gaining access to a new, never-ending revenue stream? And what would the CRTC do with not-for-profit broadcasters, such as campus radio stations, who frequently breach the rules as they depend on non-expert volunteers?: could they pay AMPs using money they collect from students?

Finally, are there any alternatives to AMPs that could do even more to ensure that Parliament’s broadcasting policy is met? For while one of the CRTC's responsiblities must be to enforce its own rules, surely its overriding goal is to ensure that Parliament's broadcasting policy is implemented. Are there better mechanisms for encouraging broadcasters to meet those objectives? Some countries, for example, have permitted applications to be made for licences that have already been granted – this is known as a competitive licence renewal system. Why not make it easier for the general public to know how a broadcaster is performing, and then permit others to apply for that licence if the broadcaster is not meeting a clearly measureable set of objectives from Parliament? Knowing that others could apply for the right to use its licence, wouldn’t a rational broadcaster not only comply with the CRTC’s requirements – but strive to do even more, or risk the loss of its investments? Allowing others to compete for the right to hold these valuable licences is arguably closer to a marketplace discipline approach, than the administration or negotiation of regulatory penalties by government officials.

The CRTC plays a vital role in Canada. The industries it regulates earned some $55 billion in 2010 alone, employed thousands of Canadians, and gave millions of Canadians a chance to hear and see programs made in Canada that informed, entertained and enlightened them. As an advanced industrialized country, Canada’s public policies should be grounded in evidence, and should serve the public interest. But Canada’s Broadcasting Act does not even require the CRTC to serve the public interest.

To achieve Parliament’s carefully-thought out objectives (in section 3 of the Broadcasting Act), the CRTC must enforce its own rules and policies, using all of the tools at its disposal – in an open and transparent manner. If the CRTC can prove that despite the full use of its existing authority, it cannot achieve Parliament’s objectives, then Parliament should be concerned, and act accordingly.

But if Parliament in its wisdom were to decide to give the CRTC fining authority, Canadians should also hope that it introduces six additional words to the CRTC Act. After stipulating in section 4 that members of the Commission (i.e., Commissioners) must work full time, Parliament should require them to do one more thing:

A full-time member shall devote the whole of his time
to the performance of his duties under this Act,

and shall serve the public interest.