Government Defends FCC Against Dahua, Hikvision Equipment Challenge

DOJ and the FCC on Monday defended the commission’s order last year further clamping down on gear from Chinese companies, preventing the sale of yet-to-be authorized equipment in the U.S. (see 2211230065). Dahua USA and Hikvision USA challenged the order, which implements the 2021 Secure Equipment Act, questioning whether the FCC exceeded its legal authority (docket 23-1032). The case is in the U.S. Court of Appeals for the D.C. Circuit. Oral argument isn't scheduled.

In a June pleading, Dahua and Hikvision raised deference issues, in light of the major questions doctrine laid out by the U.S. Supreme Court last year in West Virginia v. EPA (see 2306090030). Some court watchers say that strategy may not work (see 2306200050).

“Much of petitioners’ challenge to the Order rests on the agency’s interpretation of the Secured Networks Act that it had adopted when implementing the Covered List in 2020,” the government responded Monday: “That challenge is untimely; it is also foreclosed in light of Congress’s subsequent ratification of that reading. In any case, the Order on review is a reasonable exercise of the authority that Congress has conferred on the FCC in the course of their dialogue on how best to protect the nation’s communications infrastructure from national security threats.”

Handing down the order last year, the FCC said it had authority to do so under the secure networks act and other laws, including Section 302 of the Communications Act, the pleading said. Section 302 gives the FCC authority “to make rules ‘consistent with the public interest, convenience, and necessity’ ‘governing the interference potential of devices which…are capable’ of causing harmful interference gave it the power to address the interference potential of devices in accordance with the agency’s other statutory responsibilities,” the government said: The FCC concluded the November order “’will help ensure that equipment that carriers include in their networks will not include such unlawful interception capabilities’ because covered equipment ‘is far more likely to be subject to unauthorized access.’”

The government directly counters arguments that the agency acted beyond what Congress had intended.

In seeking to protect the security of U.S. networks “the FCC and Congress have engaged in an extended and productive dialogue,” the pleading said. It noted that in 2018, the FCC proposed to prohibit the use of some federal subsidies to buy equipment made by two Chinese-government-owned firms, Huawei and ZTE. Congress subsequently passed the 2019 National Defense Authorization Act containing “a similar prohibition covering all federal funds” including “video surveillance equipment from petitioners Dahua and Hikvision that was used for certain identified purposes.”

The federal pleading cites the Chevron doctrine, though the Supreme Court is widely expected to use a pending case, Loper Bright Enterprises v. Raimondo, to limit or even overrule Chevron (see 2307180033).

Petitioners assert that because the 2019 NDAA applies to the “government as a whole, the FCC’s explication of the term ‘critical infrastructure’ does not deserve deference under Chevron,” said a footnote to the pleading: “But while this term is incorporated from the 2019 NDAA, the agency interpreted its scope only for the purposes of its own rules -- without purporting to say what the term means in other contexts, such as the 2019 NDAA procurement restrictions. Chevron deference is therefore appropriate. In any case, the agency’s interpretation was appropriate under any standard of review.”