Payola Settlement in the Works?
According to reports, the Commissioners are considering a proposal, circulated by the Enforcement Bureau, to settle the FCC’s ongoing payola investigation, which was prompted in part by Eliot Spitzer’s well-publicized settlements with various radio and record companies in New York State. The hollywoodreporteresq.com posted a story that cites industry and government sources as saying the FCC is close to resolving the investigation into alleged payola infractions by radio broadcasters and record labels.
The article seems to confirm recent reports that the FCC has agreed to allow assignment applications to proceed even where they involved stations against which payola allegations were pending, as long as the seller agreed to remain liable for any FCC misconduct that was later found, even though the seller would no longer own the station. Allowing sales to occur despite pending allegations of misconduct, through these so-called "tolling agreements," indicate that the Commission has determined that the misconduct (at least in the cases in which they were allowed) won't result in a license revocation (though a fine is still quite possible).
The Commission’s investigation has been underway for some time, after being prompted by Mr. Spitzer’s investigations. At the time the FCC’s investigation commenced in 2005, Commissioner Adelstein predicted that the practices unearthed “may represent the most widespread and flagrant violation of any FCC rules in the history of American broadcasting.” Early in 2006, letters of inquiry were issued to Clear Channel Communications Inc., CBS Radio Inc., Entercom Communications Corp. and Citadel Broadcasting, and the proposed settlement presumably would include some or all of these broadcasters. The story reports that the settlement calls for a commitment by the parties to better educate people in the industry about proper conduct and avoiding payola, as well as their commitment to dedicate some specific amount of airtime to independently produced music. In exchange, the broadcasters would avoid an admission of wrongdoing.
The current payola restrictions grow out of prohibitions in the Communications Act and the FCC Rules requiring that, whenever a broadcaster receives something of value in exchange for the broadcast of specific material, the broadcaster acknowledge on-the-air that the broadcast material was paid for or sponsored by the party that paid the consideration. The sponsorship identification rules require broadcasters to inform listeners when they have been paid to air certain material and by whom. For more information about payola and avoiding potential infractions, see our bulletin on the subject.
