April 25, 2008

Why Major Retailers Ignore the FCC

As many of us have heard, next February the nation-wide transition to digital TV will begin. This means that if you own a TV that receives analog-only signals, you are out of luck. In order for it to work, you will need to purchase some sort of converter box.

Currently, the FCC has placed a ban on importing and manufacturing analog TV sets. The purpose behind this is that the transition to digital will be easier if all new TV sets sold on the market are capable of receiving digital signals. However, analog TVs that retailer currently have, in stock, can still be sold. The catch is that retailers are required to place a warning sign next to them that says they won't work next year without the purchase of a special converter box.

Major retailers including Target, Sears, Circuit City, and Wal-Mart have all chosen not to comply with this rule. This seems unusual, as large retailers seem like the ones most likely to comply with federal rules and regulations. However, when looking at the costs and benefits associated with this situation it is easy to see why they don’t comply.

If a person was considering buying an analog television and saw a sign next to it saying it would not work in a year unless they were to buy another piece of equipment, they are more likely to just buy a digital TV. In that case, the large retailers would be stuck with large quantities of outdated TVs. Also, the penalties they receive for failing to comply with the FCC are not that severe. For example, Wal-Mart received a fine of about $900,000. $900,000 to the largest retailer in the world is nothing more than pocket change. They probably made more than that just from selling the analog TVs. Here, the benefits of getting rid of old TVs, and freeing up warehouse and shelf space, far outweigh the $900,000 fine. If the FCC does not want these retailers to deceive consumers, they need to up the penalty for doing so.

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