Posted on May 15, 2012 by David Silverman

Some PACs Stop Running "Electioneering Communication" Ads to Avoid Reporting Requirements

In recent days we have seen political action committees (PACs) claiming they are "prohibited" from running political ads in primary states due to "new rules" regarding "electioneering communications."  As explained below, these claims are incorrect.  What they are really doing is trying to avoid the need to reveal the identity of their contributors, following a US District Court decision in March.

Under Federal Election law, an "electioneering communication" is a broadcast, cable or satellite communication that refers to a clearly identified candidate for federal office within 30 days of a primary or 60 days of an election, targeted to 50,000 or more people in the state or district the candidate seeks to represent. For President and Vice Presidential candidates, an "electioneering communication" is one that can be received by 50,000 or more people within 30 days of a state primary or the nominating convention.

By federal statute, sponsors of "electioneering communications" must disclose the names and addresses of each donor who contributed $1000 or more to the sponsoring organization. This is is the provision that led to the US District Court decision at issue.

The Federal Election Commission (FEC) enacted a rule requiring disclosure of donors whose donation was made "for the purpose of furthering electioneering communications."  Maryland Rep. Chris Van Hollen challenged this rule on grounds that it created a loophole in the law.  According to Van Hollen, fewer than 10% of the contributors to electioneering communications in 2010 were disclosed to the FEC.

The US District Court agreed with Van Hollen, holding that the statute requires disclosure of ALL contributors of $1000 or more to organizations placing "electioneering communications," even if the contributions were not made for the specific purpose of funding the electioneering communication.  The number of contributors that would need to be disclosed under this ruling could be quite high, particularly since the US Supreme Court allowed corporations and unions to fund independent electioneering communications in its landmark 2009 Citizens United case discussed here.

 So, while some PACs erroneously claim they are "prohibited" from running electioneering communications due to a recent "FCC" ruling, the truth is that they do not want to subject themselves to the broad disclosure requirements established in the Van Hollen case.  The case is on appeal to the DC Circuit, so we should soon know whether the FEC or the US District Court was right in their respective interpretations of the disclosure statute.

In the meantime, "electioneering communications" can be avoided by not referring to a specific candidate, by avoiding states where primaries are to occur within 30 days or by communicating the message to fewer than 50,000 people.  While these ads will still be considered "independent expenditures" that have their own FEC reporting requirements, they are not nearly as burdensome as those recently imposed by the court on "electioneering communications."
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Posted on March 12, 2012 by David Silverman

MARCH MADNESS: An Unusual Case of Reverse Confusion

As we wrote about last year around this time, MARCH MADNESS is a term that is protected by trademark law.  It is owned by the March Madness Athletic Association (MMAA), a joint venture between the NCAA and the Illinois High School Athletic Association (IHSA).   The IHSA was actually first to begin using this mark to describe its high school basketball tournament in the 1940s. 

Brent Musburger brought MARCH MADNESS to public attention in using that term to describe the NCAA college basketball tournament, during which many hearts are broken each year....if you are lucky enough to have a team that made it this far. (Northwestern came this close to its first NCAA appearance.)

Normally, this would be a case of so-called "reverse confusion," in which the junior user of a mark (here, the NCAA) is so much bigger than the senior user of the mark (the IHSA) that the public thinks the mark belongs to the junior user.  In the typical reverse confusion case, the senior user can stop the junior user from using the mark.  But that did not happen here.  Why? 

In the typical reverse confusion case, the junior user adopts the senior user's mark and that can be stopped by the senior user.  But here, the public began using MARCH MADNESS to refer to the NCAA tournament before the NCAA began using the term itself.  The federal court that heard this trademark infringement action ruled that the IHSA could not stop the NCAA from using MARCH MADNESS because that term had entered the public domain as a nickname for the NCAA tournament before the NCAA adopted the mark itself.  Accordingly, the court held that the mark was subject to dual use by both NCAA and IHSA, who now own it jointly through the MMAA.

What does this mean for broadcasters?  It means your talent can discuss MARCH MADNESS all they like without fear of reprisal, so long as the term is not used to sell or promote goods or services.  The NCAA may not be as aggressive in protecting MARCH MADNESS as the NFL is in protecting SUPER BOWL, but the unauthorized commercial use of either term is prohibited by trademark law.  This means no "March Madness Sales" without authorization from the MMAA, which owns the trademark and related marketing rights to MARCH MADNESS.

 
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Posted on July 8, 2011 by David Silverman

FCC Confirms $4000 Fine For Televising Video News Release Without Sponsorship ID

 

The FCC has issued a Forfeiture Order, confirming a $4000 fine levied against a Minneapolis TV station for airing a video news release ("VNR") without sponsorship identification.  This case was previously discussed in our March 25th blog entry, when the Commission issued a Notice of Apparent Liability ("NAL") against the station for this violation.  The primary lesson to be learned from this decision is that video supplied for free may require sponsorship ID if furnished for the purpose of identifying a product or furthering a sponsor's message beyond any independent (i.e., newsworthy) reason a station has for airing it.

In arguing against the NAL, the station put forth several arguments, all of which were rejected by the FCC.  The station argued that its use of a video supplied by General Motors for a story about the popularity of convertibles in the summer was equivalent to use of a company press release, which the FCC has found acceptable in the past.  But the FCC said that use of a press release without sponsorship ID is permitted only if references to products or brand names are "transient or fleeting."  Here, by contrast, the FCC found the identification of GM cars to be "disproportionate to the subject matter of the news report."

The station also argued that it paid its parent network for the video.  While the FCC acknowleged that station payment for video usually indicates an independent motive for airing it, the FCC rejected that argument here, finding that payments between the station and its network were "little more than intercompany accounting ledger entries."  Furthermore, the network did not pay for the video, which was received unsolicited.

The Commission reaffirmed its earlier finding that this forfeiture does not violate the station's First Amendment rights or the anti-censorship provisions of the Communications Act.  Rather, the Commission noted that the sponsorship identification rules are merely disclosure requirements that do not restrict speech in any way.

This decision reinforces the need for TV stations to be aware of commercially supplied videos, whether or not they are supplied with or in exchange for money or any other consideration.  If a station's use of such video contains anything more than "transient or fleeting" images of commercial products, sponsorship identification may well be required.  In this case, the station could have complied merely by providing a visual credit stating "Video provided by General Motors."  RTNDA guidelines on the use of VNRs can be found here. 
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Posted on July 29, 2009 by David Oxenford

A Full Five Person FCC - What's Next For Broadcasters?

For the first time since the term of FCC Commissioner Tate expired and Chairman Martin resigned, the FCC will be back to full strength with the Senate's approval of new FCC Commissioners Mignon Clyburn and Meredith Attwell Baker.  What issues of importance to broadcasters will the Commission, now headed by Chairman Julius Genachowski, take up in coming months?   The new Chairman, who gave a number of interviews last week with the trade and popular press, emphasized the importance of the broadband rollout.  Beyond that, his priorities for the broadcast media were not detailed.  He did, however, emphasize, that any broadcast regulation (specifically referencing the mandatory review of the broadcast ownership rules that must begin next year), would have to take into account the realities of the marketplace - including the current economic conditions.

Beyond that, there were few clues as to the new FCC's priorities in the broadcast world.  But, even though there are no indications of the FCC's priorities, there are many open broadcast issues that the Commission will, sooner or later, need to resolve.  Some involve fundamental questions of priorities - trying to decide which user of the spectrum should be preferred over others.  Other issues deal with questions of what kind of public service obligations broadcasters will face.  And yet another set of issues deal with just the nitty gritty technical issues with which the FCC is often faced.  Let's look at some of these open issues that may affect the broadcast industry. 

In the first category - the issues of priorities of one type of service over another, issues include the following:

  • The priorities between LPFM stations and FM translators and full power stations (see our posts here and here on that issue)
  • Final resolution of the White Spaces issues - implementing the FCC's decision to make TV spectrum available for use by wireless devices, or reconsidering that decision based on the pending appeals by the television industry
  • Deciding whether to take TV channels 5 and 6 and change them into radio channels (see our post here), when a limited number of full power TV stations, as well as a number of LPTV stations are currently using the channels
  • Making a decision about increased HD radio power, which some other FM stations that rely on service at the fringes of their protected contours or or beyond worry would interfere by such power increases

In the second category of issues - the question of what public interest regulations the Commission should impose on broadcasters, issues include:

  • Dealing with the Petitions for Reconsideration of the FCC's decisions to require TV stations to put their public files on line and to complete the Form 355 detailing all of their public service programming in minute detail - rules adopted in late 2006 but never implemented or even sent to the Office and Management and Budget for review of their compliance with the Paperwork Reduction Act
  • Resolution of the FCC's localism proceeding proposing regulations including:
    • A return to mandatory main studios in the station's city of license
    • Manned main studios during all hours of station operations
    • Mandatory public service obligations for broadcasters
    • Consideration of the process for the selection of music on broadcast stations and whether more local music should be required
    •   Potential extension of the TV public file and Form 355 obligations set out above to radio
  • Issues about the Arbitron PPM and whether it discriminates against minority owned stations
  • Resolution of the rural radio proceeding which includes questions about what kind of service stations need to provide to their city of license
  • Decisions on the proposals to mandate stricter sponsorship identification rules allegedly to protect the consumer from being influenced by undisclosed sponsors

Other more technical or procedural issues are also pending before the Commission, including:

And, of course, there are those issues that never go away.  Indecency cases are still pending before the Courts, so the Commission may once again have to face that issue.  And there is that little question of the Fairness Doctrine that just refuses to go away.  I'm sure that there are other issues that have escaped my mind while I'm writing this - but even if there were not, it is clear that the new Commission has plenty to keep it busy without even needing to bring up any new issues for the broadcaster.  And Congress can always give the FCC new things to do, like reregulating children's television programming or restricting prescription drug advertising.  Let's hope that these keep the Commission plenty busy for now, and that they don't have time to start anything new. 
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Posted on January 27, 2008 by David Oxenford

Does the FCC's Approval of the Clear Channel Transfer of Control Provide a Window Into the Future?

Last week, the FCC approved the long-pending application for the transfer of control of Clear Channel Broadcasting from its public shareholder to several private equity funds. Even though the application had been pending at the FCC for over a year, the Commission’s decision was notable for the paucity of issues that were discussed. The decision approves the transfer, conditioned on certain divestitures by the Company and by the equity funds that will control the new company, including divestitures previously ordered by the Commission in connection with the investment of one of these funds in Univision Broadcasting but not yet completed, and rejects three petitions that, from the Commission’s description, did not involve fundamental issues about the nature of the overall transaction, but were instead devoted to certain limited issues, in two cases involving actions in a single market. The divestiture conditions were approved seemingly as a matter of course, and do not provide any new insights into the law concerning the FCC’s attribution rules (unlike the recent decision approving the transfer of control of Ion Television, about which we wrote here, which contained an extensive detailed discussion of what it takes to make an ownership interest “nonattributable” for purposes of the FCC multiple ownership rules). Given the lack of controversy in the Commission's order, what is perhaps most noteworthy about the decision are the concurring statements of the two Democratic Commissioners, which may provide some indication of the concerns of the Commission should we have a Democratic-controlled Commission following this year’s Presidential election.

Of course, as we’ve described in our posts about the FCC’s Localism Notice of Proposed Rulemaking (here), and the new rules regarding Enhanced Disclosure requirements for television broadcasters (here), the Commission has already begun to act in a far more regulatory manner than any other Commission in the past 20 years. Yet the issues raised by the Democrats in this decision are in areas not yet considered by the Commission. Commissioner Copps expresses his concern about the role of private equity in broadcast ownership, and whether such ownership is in the public interest. In numerous proceedings and in response to the presentation made at the FCC’s January meeting by the Media Bureau, Copps has suggested that private equity should be investigated, both to determine whether the Commission is fully aware of all ownership ties of the companies involved, and also (as emphasized in this case) for the potential economic impact on the operations of the broadcast stations caused by the new debt involved in the acquisition. Here, Commissioner Copps questions whether the announcement of a potential downgrade of the bonds of the Company if these deals occur should have been of more concern to the Commission. Private equity should be aware that, in a future FCC, an investigation of the economics of their operations should be expected.

Commissioner Adelstein, on the other hand, was concerned not so much about structural issues of the major investors, but instead about the operational affects of consolidated ownership. He has expressed these sorts of concerns previously in connection with questions of payola and other pay-for-play situations that may exist at broadcast stations, and in connection with the selection of music at radio stations owned by big owners. Here, his concern was about the advertising practices of consolidated owners, and as to whether these practices made it difficult for non-consolidated owners to compete. A petition was filed against the transaction alleging that Clear Channel unfairly competed by giving advertisers who spend 100% of their budget on Clear Channel stations some sort of discount or benefit. While the Commission found no concerns with such discounts (implying that they would be more concerned with a requirement that an advertiser, in order to buy any time on a station, spend 100% of its budget on co-owned stations), Commissioner Adelstein suggested that the Commission should have spent more time analyzing the advertising practices to insure that they were in the public interest.

These comments may provide a hint of where Commission policy will go in the future. Already, the Democratic Commissioners have been incredibly successful for members of the minority party in pushing their agenda at the Commission. If they become a majority, who knows what will happen?
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Posted on January 14, 2008 by David Oxenford

Advertising Issues on Washington's Agenda for 2008

As 2007 wound to an end, advertising issues figured prominently on the agenda of Washington agencies, including both the FCC and the FTC.  While the FCC is looking at specific regulatory requirements governing broadcast advertising, the FTC is investigating the privacy issues raised by advertising conducted by on-line companies.  In November, the FTC held a two day set of workshops and panels where interested parties discussed issues of behavioral advertising - advertising that can be targeted to individuals based on their history of Internet use, and whether or not regulation of these practices was necessary.  The wide-ranging discussion is summarized on our firm's Privacy and Security Blog, here.  After gathering this testimony, we will see if the FTC decides to proceed to propose any regulations dealing with this sort of personalized, on-line advertising.

At the FCC, there are two separate proceedings dealing with advertising issues for broadcasters.  The first came about as part of the FCC's diversity initiatives adopted at its December meeting.  There, the Commission determined that broadcasters will need to certify in their renewal applications that they have not discriminated in their advertising practices.  While this proposal was adopted at the Commission's December 18 meeting, the full text of the decision has yet to be released, so we do not know the specifics of this new requirement.

The FCC was also planning to consider at its December 18 meeting the commencement of a new proceeding to inquire as to whether it should adopt new rules or policies for embedded advertising - advertising that is incorporated into broadcast programming rather being than placed into a stand-alone commercial.  That order was removed from the FCC's agenda at the last moment, but will no doubt reappear at some point during 2008.  Together with other issues dealing with sponsorship identification in video news releases (see our description of a recent enforcement action here) and in connection with payola allegations, the Commission will be exploring whether broadcasters are trying to persuade their audiences to take action without giving the audience sufficient warning that they are being persuaded. 

All of these issues will be addressed in coming months - so advertising practices may well have to be modified to respond to Washington dictates in the new year.
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