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November 1, 2014

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First Mediaworks


05/10/04 How The FCC Should Determine Fines

Legend has it that traffic along Highway 101 in San Francisco was creeping at a snail’s pace, and the only cars moving right along were those in the commuter lane. Suddenly, a red Rolls Royce convertible zipped by in the commuter lane. A motorcycle cop pulled the Rolls over to give the driver a ticket for driving without passengers in the commuter lane. The driver turned out to be Larry Ellison, chairman of Oracle.

According also to legend, this is almost a daily occurrence for Ellison, who would rather pay a couple hundred bucks in fines each time he gets caught than waste his time in traffic. After all, this billionaire’s time is probably worth tens of thousands of dollars per hour. The $200 fine may be a big deal to an average citizen, but it’s not much money to someone with a huge bank account.

In Sweden, the police could not control the problem of speeding because wealthy violators would pay the fines and continue to speed. When legislators examined the problem, they realized that fines would not stop people unless the fine was proportionate to the income bracket of the person violating the law. Therefore, the government began basing fines on the income of the person speeding.

The police have a database of income levels that are entered into a formula that involves a combination of income and severity of crime. Violations less than 12 mph over the limit mean a fixed fee in the $400-$600 range, but violations more than 12 mph above the limit kick the fine into a percentage of net income. In one example, a well-known hockey player was caught speeding on two occasions. In one case, he was going 14 mph over the speed limit and was fined $71,400; in the other case, he was fined $44,100.

The U.S. Congress thinks it is solving a problem by increasing indecency fines by 10 times, but this system is seriously flawed. For instance, a small-market broadcaster would be put out of business by a fine of $500,000, which may be many times his annual profitability — it could be more than the value of his entire property. On the other hand, a company such as Viacom could pay many $500,000 fines and probably wouldn’t even flinch.

Fines, therefore, should be based on a formula that takes into account the financial capacity of the company violating the law. Fines are intended to make people think twice before breaking the law. If the fine is of no financial significance, paying it becomes an inconvenience, rather than a financial hardship. Unless there is true financial hardship, these indecency fines are nothing more than the cost of doing business, and violations will continue.


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