Fed’s Investigation of Digital Sign Industry:  How Did They Start? What are the Requirements? How to Comply?

The Fed’s Digital Matter is at an End

Here is a paper prepared and submitted by Yaron Dori and Ani Gevorkian for the sign industry.
Yaron is a partner and Ani is an associate at Covington in Washington.  Covington is one of the top global law firms and specializes in FCC and FTC law.  https://www.cov.com/en/about

The two have prepared an article for the sign industry which explains the FCC’s Investigations Into the Digital Sign Industry:  How Did They Start? What are the Requirements? How to Comply?

The final upshot of the paper prepared by Covington is, the Federal Communications Commission matter in question should be one of the past for the Billboard Industry.

Was it ever a concern for you?  Is the matter resolved? We welcome your comments.

 

The FCC’s Investigations Into the Digital Sign Industry:

How Did They Start? What are the Requirements? How to Comply?

 

by Yaron Dori and Ani Gevorkian
Covington & Burling LLP

The Federal Communications Commission (FCC) recently concluded a number of investigations into the digital sign industry.  These investigations, which focused primarily on device authorization and labeling practices, have raised questions about the role FCC regulations can play in the digital sign industry and the steps companies can take toward compliance.

This article is intended to address these issues.

How Did They Start?

Although it is not clear what prompted the FCC to investigate the digital sign industry, the FCC’s investigations appear to have commenced shortly after the launch in May 2017 of a marketing campaign by Watchfire Signs (which is owned by a New York-based private equity firm), claiming that the digital signs of its competitors did not comply with FCC requirements.

FCC enforcement investigations can be the result of such claims, as companies sometimes try to use such regulatory levers to focus scrutiny on their competitors.  Irrespective of what prompted the FCC’s investigations in this case, it appears that the FCC began to transmit letters of inquiry to digital sign companies in June 2017 to investigate these allegations.  It is not clear how many or which digital sign companies (or suppliers) received FCC letters, but it seems reasonably clear that the FCC’s investigation was broad, as a number of digital sign companies have since entered into consent decrees to resolve FCC inquiries into their practices.

What are the Requirements?

The FCC is an important government agency, but its rules tend to be most familiar to entities that it regulates frequently and directly:  radio and television stations, telephone companies, and satellite providers.  It is perhaps for this reason that digital sign companies were not aware of the extent to which certain FCC rules applied to their businesses.

The FCC rules most relevant to digital sign companies are premised on preventing harmful interference to users of electromagnetic spectrum.

The FCC rules most relevant to digital sign companies are premised on preventing harmful interference to users of electromagnetic spectrum.  The FCC is statutorily charged with managing this spectrum for use by a range of entities, and to ensure that entities that use and rely on spectrum on either a licensed or unlicensed basis (or both) are not impeded by interference.

Because all electronic devices emit some level of radiofrequency (RF) energy, and because RF energy that exceeds certain thresholds can cause interference, Section 302 of the Communications Act of 1934 authorizes the FCC to regulate devices that emit RF energy.  The FCC has exercised this authority by establishing technical rules for RF devices, and one of the primary ways through which the FCC ensures that RF devices operate within prescribed energy thresholds is through its equipment authorization rules.

RF devices must comply with certain prescribed rules before they can be operated, imported, marketed or sold in the United States.

Under these rules, RF devices must comply with certain prescribed rules before they can be operated, imported, marketed or sold in the United States.  Because these rules can be complex, we have summarized and grouped them into five categories:

1. Equipment Authorization. All devices that emit RF energy, whether intentionally or unintentionally, must be authorized.  The FCC today has two different procedures for authorization:  (1) Certification, or (2) a Supplier’s Declaration of Conformity (SDoC).  The required procedure depends on the type of equipment at issue.  Because unintentional radiators (such as digital circuitry) are approved using the SDoC procedure, in most instances digital signs should be eligible for authorization under the SDoC procedure.  Under either approach, the equipment at issue must be tested at the outset to ensure that it conforms to prescribed technical limits (see below).  Testing can be undertaken through an FCC-accredited laboratory, and in some cases it can be done internally.  However, any testing facility must, at a minimum, maintain a record of the measurement facilities and the measurements made, consistent with FCC rules.
2. Technical Limits. As previously noted, authorization depends on conformance to prescribed technical limits.  The limits most relevant to digital sign manufacturers pertain to RF energy conductivity (e., conducted limits) and emissions (i.e., emissions limits).  The requirements for both are set forth in the FCC’s rules.  In order for equipment to be authorized, the applicable Certification or SDoC process must confirm that these limits will not be exceeded.
3. Restriction on Operating and Marketing, Importing, and Selling Unauthorized Devices. Under the FCC’s rules, a device — and thus a digital sign — cannot be operated, marketed, imported or sold unless and until it has been authorized.  Although the FCC has at times recognized that some degree of operation, importation, or marketing prior to certification (such as at trade shows) can facilitate technological development and therefore has adopted some limited exceptions to this prohibition, these exceptions are narrow in scope.
4. Labeling. The FCC’s rules require devices to be labeled before they enter commercial channels.  The specifics of the labeling requirement depend on the nature and type of the authorization process used.  Digital signs in particular must bear a label with specific language set forth in the FCC’s rules.
5. Information to User. The FCC’s rules require that certain information be disclosed to users or customers of RF devices.  This required information is set forth in the FCC’s rules, which state that it must be included in the user manual or instruction manual.

As the above suggests, companies should understand whether the digital sign equipment they intend to operate, market, import or sell has been authorized pursuant to the relevant FCC rules.

How to Comply?

As the above suggests, companies should understand whether the digital sign equipment they intend to operate, market, import or sell has been authorized pursuant to the relevant FCC rules.  If it has not, they should take steps to secure such authorization.  This can be done by working with a consultant or an accredited FCC testing facility, and, if needed, by making certain technical adjustments to the equipment to ensure that it conforms to technical limits.

Digital sign companies also should take steps to document their compliance, and to meet labeling and disclosure obligations for the user or instruction manual.  If a user or instruction manual is not typically distributed when the digital sign is installed, companies should consider some other way to document the required disclosures to customers and seek the advice of counsel to be certain that their approach will pass regulatory muster.

It is not clear that the FCC historically has policed digital sign company compliance, but in the wake of recent investigations it is possible that it might.  It also is common for the FCC to investigate spectrum interference complaints; so if a digital sign that exceeds FCC-prescribed technical limits causes interference to others, it is possible that, too, may lead to an investigation.  Should the FCC investigate a company’s practices, it would be advisable for the company to retain counsel experienced in FCC matters.  The FCC appears to have concluded — or is in the process of concluding — the investigations that began in June 2017, but future investigations are possible, especially if the FCC receives interference complaints.

Other Considerations

The FCC is not the only agency that can affect a digital sign company’s compliance.  The Federal Trade Commission (FTC) can play a role, too.  Indeed, Section 5 of the FTC Act prohibits unfair or deceptive acts or practices, and one form of deception on which the FTC has focused in recent years is “Made in USA” claims.  Companies sometimes make such claims in an effort to appeal to customers, but as the FTC has explained, such claims can be made only if “all or virtually of” of the product is made in the USA based on a range of factors, including the proportion of the product’s total manufacturing costs attributable to U.S. parts and processing, how far removed any foreign content is from the finished product, and the importance of the foreign content or processing to the overall function of the product.

The FTC’s “Made in the U.S.A.” jurisprudence was applied directly to the digital sign industry in late 2017 when the FTC concluded an investigation into Watchfire for making such claims.  As a result of the investigation, Watchfire altered its marketing materials and practices regarding these claims, presumably to avoid a deception action under Section 5 of the FTC Act.