osewalrus (osewalrus) wrote,

FCC Indecency Decision

The Supremes released its opinion in the broadcast indecency case. The extremely narrow unanimous opinion, I suspect, reflects the inability of a majority of the court to agree on the constitutional issues.

As an administrative law case, however, this may have significant implications for other agencies. Whenever agencies have enforcement power over complicated rules and statutes, there is a difficult balance between the standard judicial practice of applying the law to the facts of the case and providing adequate notice to people about what the law *is* so they can avoid prosecution (either civil or criminal).

For example, suppose I tell my psychiatrist in the course of therapy that my company is going down the tubes and our next quarter results will be a disaster beyond what anyone is expecting. My psychiatrist goes to his computer after our session and shorts my company's stock. Is the analyst guilty of insider trading? Or does the SEC have to go back and do a rulemaking and say "the relevant definition also includes a psychiatrist."

Agencies with complicated jurisdictions usually work around this in a couple of ways. First, there is a rule of reason test that if a reasonable person would understand the behavior to likely be included under the rule. They are on notice. Anyone who has parented a child has run into the "exact words" defense, with the usual response that "if I tell you to clean up your room you know that means actually put your clean clothes away not shove them under the bed!" In addition, agencies rely on the availability of asking first if you have doubts. If I want to know how the IRS will treat a transaction for tax purposes, for example, I can ask for a letter ruling about my explicit case. If I want to get an agency to declare what someone else is doing violates the rules, I can get a declaratory ruling, which translates as: "please say whether this specific conduct does or doesn't violate the law/your rules." This caries no penalty, since the agency is issuing an interpretive ruling not engaging in a civil or criminal prosecution. Finally, even in a civil or criminal enforcement, the agency may waive any penalty in recognition that the outcome was fairly hard to predict in this case.

The Fox decision changes this calculus somewhat by holding that because the FCC was shifting policy, the broadcasters could not have predicted their conduct would be held to be indecent. Had the court simply relied on the lengthy procedural history it cited, coupled with the First Amendment concern, the case would be indeed a very narrow holding. But the Court went on to include the idea of "reputational damage." Despite the fact that the FCC stated it would impose no fine, or use the indecency violation for any other purpose, the broadcasters still suffered damage to their reputation from the finding of a violation, triggering the concern about vagueness.

If interpreted broadly, this would make it much more difficult for agencies such as the IRS or the SEC to find that complex conduct violates the law -- even when there is no penalty. How much specificity must there be in the rules? Is there a continuing idea of a zone of reasonableness, or must the law/regulation be specific as to every aspect of an offense? Those quick to say that exacting specificity should always be required are invited to spend an afternoon with a recalcitrant 6 year old to see how difficult this is in practice.

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