In the largest forfeiture ever imposed by the agency, the Federal Communications Commission (FCC) issued a $120 million fine against Adrian Abramovich and the companies he controlled for placing over 96 million “spoofed” robocalls as part of a campaign to sell third-party vacation packages. The case has received significant attention as an example of the growing issue of spoofed robocalls, with lawmakers recently grilling Mr. Abramovich about his operations. The item took the lead spot at the agency’s May meeting and is emblematic of the Pai FCC’s continued focus on illegal robocalls as a top enforcement priority. While questions remain regarding the FCC’s ability to collect the unprecedented fine, there is no question that the FCC and Congress intend to take a hard look at robocalling issues this year, with significant reforms already teed up for consideration.

The Truth in Caller ID Act prohibits certain forms of “spoofing,” which involves the alteration of caller ID information. While Congress recognized certain benign uses of spoofing, federal law prohibits the deliberate falsification of caller ID information with the intent to harm or defraud consumers or unlawfully obtain something of value. Back in June 2017, the FCC accused Mr. Abramovich and his companies of placing millions of illegal robocalls that used spoofing to make the calls appear to be from local numbers to increase the likelihood that the called party would pick up, a practice known as “neighbor spoofing.” The robocalls indicated that they came from well-known travel companies like TripAdvisor, but in reality the robocalls directed consumers to foreign call centers that had no relationship with the companies. Mr. Abramovich did not deny that his companies placed the spoofed robocalls, but argued that he lacked the requisite intent to defraud or cause harm, and noted that only a fraction of the consumers targeted actually answered the robocalls. Mr. Abramovich also argued that the third-party companies that hired to him to run the robocall campaign and the carriers that transmitted the robocalls should share in the liability for the violations.

The FCC disagreed. First, the FCC found that the use of neighbor spoofing and the references to well-known travel companies demonstrated an intent to defraud consumers. The FCC also found that Mr. Abramovich intended to harm the travel companies by trading on their goodwill and harmed consumers by spoofing their phone numbers, resulting in angry return calls by robocall recipients. Second, the FCC rejected the argument that liability should be based on the number of consumers who actually answered, explaining that the Truth in Caller ID Act only requires that a spoofed call be placed with fraudulent intent, not that the call actually reach a consumer. Finally, the FCC emphasized that Mr. Abramovich and his companies, not the third-party travel companies or the carriers, actually placed the spoofed robocalls and therefore bore sole responsibility for the violations. In fact, the FCC stated that the spoofed robocalls harmed the carriers by burdening their networks and engendering consumer complaints.

The fine is important for reasons beyond its size. For one, the fine came less than a year after the FCC issued the associated notice of apparent liability – an unusually quick turnaround for such a complex case that represents a shift to accelerated enforcement in line with Chairman Pai’s prior calls for a one-year deadline for forfeiture orders. Moreover, the FCC imposed the record-setting fine despite Mr. Abramovich’s claims that he cannot pay it. The FCC is required by the Communications Act to consider a party’s ability to pay when assessing forfeitures. As a result, the FCC historically will reduce a fine to approximately 2-8% of a party’s gross revenues in response to an inability to pay claim and significantly lowered fines under this framework just over a year ago. However, inability to pay is just one factor in the FCC’s forfeiture analysis and the agency determined that the repeated, intentional, and egregious nature of Mr. Abramovich’s violations warranted the unprecedented fine. While the FCC’s rejection of the inability to pay claim is not unprecedented, it leaves open the question of whether and how the FCC expects Mr. Abramovich to pay the fine. In many cases, parties receiving large fines can negotiate lower settlements with the Department of Justice when it brings a collection action on behalf of the FCC, but such settlements are not guaranteed. As a result, it appears the FCC’s primary goal was to establish a strong precedent to deter future violators rather than to actually receive payment.

Two Commissioner statements on the item also deserve attention. Although voting to approve the fine, Commissioner O’Rielly dissented in part, questioning the FCC’s assertion that spoofed robocalls cause harm regardless of whether consumers actually hear the message. Commissioner O’Rielly agreed that Mr. Abramovich and his companies intended to defraud call recipients, but he did not find sufficient evidence to indicate that Mr. Abramovich and his companies specifically considered the potential harm to consumers with spoofed numbers or the referenced travel companies. The dissent appears concerned that the FCC automatically will infer an intent to harm any time neighbor spoofing is used, even when such spoofing does not involve fraud, creating a strict liability regime. Meanwhile, Commissioner Rosenworcel highlighted the need for comprehensive regulatory reform to combat illegal robocalls. Specifically, Commissioner Rosenworcel noted the recent federal court decision setting aside key aspects of the FCC’s robocalling rules and requiring the FCC to revisit its definition of an autodialer. The Commissioner also pointed to the glut of outstanding petitions at the agency seeking exemptions and technical limitations to the robocalling rules. The Commissioner signaled that the FCC’s focus on robocalling issues will involve as much rulemaking as enforcement.