On March 10, Atrium Hospitality LP entered into a consent decree with the Federal Communications Commission. The agreement included a burdensome compliance plan and a $35,000 penalty for the hotel and asset management company. Atrium is just the most recent organization whose primary area of work extends beyond telecommunications to be investigated and ultimately penalized by the FCC.
In many industries, cell phones still have not replaced hand-held radios, which are often used for internal communications by security services, cleaning staff, and maintenance teams. These radios are used at manufacturing and industrial facilities, hotels, golf courses, athletic stadiums, and many other facilities that rely on private radios for staff communication.
These radios require Federal Communications Commission licenses, and failure to comply with FCC regulatory requirements can result in significant consequences—including increased oversight, onerous compliance measures, and financial penalties. The risk of non-compliance rises when companies merge, grow, or engage in other events that result in a transfer of control.
The FCC regulates interstate and international communications by cable, radio, satellite, television, and wire nationwide. As part of its mission, the FCC investigates complaints and the conduct of its licensees and may take enforcement actions for violations of its rules. Investigations can result from failure to properly transfer the control of any FCC license.
This reach is in fact broad. In the case of Atrium Hospitality, the company was subject to an FCC investigation for not seeking required approval before acquiring 25 wireless licenses. Atrium had acquired the assets of John Q. Hammons Hotels, Inc., including the FCC licenses, following a bankruptcy reorganization. Because of this failure to seek the required permission from the FCC, Atrium Hospitality, had few options but to enter into the consent decree.
Atrium is not alone. Constellation Club Parent, Inc. operates and owns golf courses and country clubs; its yearly revenue is nearly $1.7 billion. On May 15, 2019, the FCC entered into a consent decree with Constellation Club after a transaction involving a merger resulted in the transfer of control of FCC radio licenses without compliance with FCC protocol. The company held wireless radio station licenses used to operate the business, communicate, and coordinate with other employees, and even to control golf courses—tasks that were part of everyday business operations. This violation resulted in a consent decree, leading to a rigorous compliance plan and a fine of $24,975.
Constellation Club’s problems with the FCC did not end with this initial consent decree. As part of the consent decree’s obligations, on May 17, 2021, Constellation Club filed its 24-month compliance report—and disclosed multiple additional instances of non-compliance with regard to its radio licenses. On multiple occasions, Constellation Club subsidiaries acquired or sold properties that held wireless radio licenses without obtaining FCC consent. Additionally, Constellation Club did not comply with the reporting requirement of the consent decree—the entity mischaracterized information and failed to note instances of non-compliance in other filings.
These additional violations ultimately led to another consent decree with the FCC. The new agreement contains additional requirements, including additional compliance measures and a $275,000 civil penalty.
While the financial penalties in these instances may not be substantial, the FCC can and does levy seven-figure penalties for similar violations. The price for not complying with FCC requirements can be detrimental, if not financial then in terms of negative publicity and being subjected to rigorous compliance requirements. Any company holding FCC licenses should be at the ready to seek out proper FCC approval when engaging in any event that may transfer control of those licenses.
* The author would like to thank Summer Associate Melanie N. Fineman for her assistance in drafting this article.