FCC Proposes Changes to Direct-to-Consumer and Importation Rules for Pre-Authorization RF Devices

Section 302 of the Communications Act empowers the FCC to create rules governing the interference potential of devices capable of emitting radio frequency energy and which can cause harm to consumers or other radio communications.  This authority covers multitudes of everyday consumer objects, from toaster ovens to the most advanced mobile communication devices. To keep pace with the speed of innovation and consumer demand, the FCC regularly updates its equipment authorization rules for such devices.  In its petition, CTA argued that the FCC’s existing rules act as a “speed bump” in the race to develop and deploy new products and do not reflect the current direct-to-consumer online marketplace.

The first proposal would permit the conditional marketing, but not delivery, of RF devices by manufacturers directly to consumers prior to equipment authorization.  Under the FCC’s Rules, “marketing” includes, among other things, the lease, sale or advertising of a device.  Though the FCC’s current rules generally prohibit the marketing of RF devices prior to equipment authorization, an existing exception allows for conditional pre-sales between manufacturers and wholesalers and retailers.  Proponents of the rule change argue that this exception is outdated and too limited in light of the modern online marketplace that accounts for billions of dollars in successful crowdfunded projects, such as Kickstarter campaigns and pre-orders for conceptual products.  Proponents argue that by extending the exception for conditional sales to consumers, manufacturers can better anticipate and meet consumer demand and reduce the potential financial risk of unsuccessful ventures, while still prohibiting the actual delivery of unauthorized devices to consumers.

The FCC seeks public comment on this proposal, including the potential benefits and risks of the proposed changes, other rule changes that would complement the proposed changes or better serve the FCC’s goals, and whether there are certain devices that require more stringent safeguards.  Further, while the FCC believes that most consumers understand the mechanics of a crowdfunded project (i.e., the marketed product may not be delivered if the seller-specified conditions are not met), it seeks comment on whether sellers should make additional disclosures beyond a general display to consumers clarifying the conditional nature of the sale at the time of offer.  Commenters are also encouraged to respond to specific questions regarding recordkeeping, device labeling, enforcement and remedies for consumers for undelivered devices.

The second proposal would impact the importation of RF devices prior to authorization by permitting such devices to be imported for new pre-sale activities, such as imaging, packaging, delivery to retail locations, and loading devices with software to demonstrate certain features and capabilities.  The FCC currently allows small numbers of pre-authorization RF devices to be imported into the country for limited purposes, such as displays at trade shows, compliance testing, repair, use by the federal government, or (in very limited numbers) personal use.  The FCC and industry advocates argue that adding these new pre-sale activities would allow sales associates and consumers to familiarize themselves more quickly with new devices and facilitate more “timely purchase decisions.” This, the FCC concludes, is an important step toward maintaining the nation’s global leadership in emerging industries, such as 5G, Internet of Things, and augmented and virtual reality devices, while still guarding against the release of unauthorized or otherwise noncompliant devices.

The FCC notes that the proposed rule would be limited to devices that require “Certification,” the most demanding form of equipment authorization, and seeks comment on additional conditions proposed by CTA, including: (1) an import limit of 4,000 devices; (2) manufacturers must have a reasonable basis to believe authorization will be granted within 30 days of importation; (3) devices must have temporary labels indicating that they cannot be displayed or advertised prior to authorization; (4) devices must remain under the ownership of manufacturers, though possession may be transferred prior to authorization; and (5) manufacturers must have processes in place to retrieve products in the event that authorization is denied.

The public is encouraged to comment on the benefits and risks associated with the proposal and whether the change would conflict with or require modifications to other rules.  The FCC also asks for comment on the proposed conditions, how the conditions and importation process would be implemented and documented, and whether the FCC should consider coordinating with other relevant federal agencies, such as the Federal Trade Commission or Customs and Border Protection.

Comments are due February 11 and Reply Comments are due February 26.  Contact any of the Communications practice group attorneys if you have questions or would like to file comments.

A PDF version of this article can be found at FCC Proposes Changes to Direct-to-Consumer and Importation Rules for Pre-Authorization RF Devices.