By Robert Emeritz
Re-establishing its policy of strict adherence to the auction bid withdrawal
rule, the Federal Communications Commission upheld Jan. 14 a decision of its
Wireless Telecommunications Bureau denying requests from five bidders in an
auction of FM broadcast construction permits for relief from the payment
obligations arising from their withdrawals of provisionally winning bids (Barry P. Lunderville, College Creek Broadcasting,
Inc., and Cumulus Licensing LLC Petition for Reconsideration Connoisseur Media,
LLC Application for Review Nassau Broadcasting Holdings, Inc. Petition for
Reconsideration, FCC, FCC 13-7, 01/14/13).
When establishing the procedures for a particular auction, the Commission
may, under the competitive bidding rules, elect to allow bidders to withdraw
provisionally winning bids prior to the close of the auction. Bidders that
withdraw bids must pay the difference between the withdrawn bid and the
subsequent winning bid, if the subsequent winning bid was less than the
withdrawn bid. No payment is owed if the subsequent winning bid is more than the
During an auction of FM construction permits, five petitioners withdrew
provisionally winning bids in the later rounds (second half) of the auction.
When the permits involved remained unsold at the close of the auction, the
Bureau imposed interim bid withdrawal payments of three percent of the withdrawn
bids, as then required by section 1.2104(g) of the FCC's Rules.
The bidders sought reduction or cancellation of their assessed bid withdrawal
payments. The Wireless Bureau found that none of the petitioners had
demonstrated any basis for such a waiver, and the Commission agreed.
The Commission noted the importance of the bid withdrawal payment requirement
to the fulfillment of the statutory objectives set forth in the grant of the
Commission's authority to award licenses by auction. “By forcing each bidder to
consider carefully the costs that may be incurred by withdrawing a bid, the rule
deters 'insincere bidding' that may interfere with auction dynamics, including
by distorting price information. Regardless of bidder motives, insincere bids
can reduce the efficiency of the competitive bidding mechanism,” the Commission
observed, particularly when the withdrawal occurs later in the auction, when
other bidders have fewer opportunities to adjust their strategies.
“Whatever the reason for such bids, the bid withdrawal payment requirement
'compels bidders who may ultimately withdraw to consider the external
consequences of both how much they bid and the timing of their withdrawal.'
Setting bid withdrawal payments at an appropriate level also 'precisely'
protects the government from the loss of revenue associated with bid
All five petitioners claimed that the Commission had established grounds for
a waiver in a earlier decision, Advance Acquisition, Inc. Request for Waiver
of Bid Withdrawal Payment, 22 FCC Rcd 18846 (WTB 2007). In addressing
Advance's request, the Commission notes, the Bureau found the final bid
withdrawal payment in that instance to be “exceptionally high in comparison with
previous bid withdrawal payments in that it is the only bid withdrawal payment
ever assessed that both exceeds $4 million and represents more than 200 percent
of the [subsequent] winning bid for the permit or license”; that is, the bid
withdrawal payment was “higher than necessary to serve the purpose of the
The Commission rejects the Advance principle. “We believe that
our pre-Advancebid withdrawal decisions outline a much more objective
waiver policy with respect to bid withdrawal payments that best promotes the
purposes of the auction rules and the integrity of the auction process, while
allowing for waivers in special circumstances where the application of the rule
does not serve its purposes or otherwise does not serve the public interest,”
the Commission rules, “expressly overruling the Bureau's analysis in that
“The payments owed here were a direct consequence of each bidder's own
decisions and actions, including its bidding strategies, after being fully
informed of the auction rules and procedures that would apply to its bids.
Neither our auction rules, nor any actions of Commission staff, caused the
petitioners to make the specific bids they submitted on the subject construction
permits in Auction 37. Only a bidder can assess the value to it of the
license/construction permit and make the decision to submit a specific bid
amount. Under such circumstances, it is fair to both the bidder withdrawing its
bid, and to the other bidders who formulated and submitted their bids under the
same rules and constraints, to hold all bidders to the consequences of their
bidding decisions,” the Commission concludes.