Broadcast Law Blog : Broadcast Lawyer & Attorney : Broadcast Law Blog : Seattle, Los Angeles, Washington D.C., New York, San Francisco, Shanghai

While it remains to be seen whether the NAB's request for a stay of these requirements will be granted, the FCC plans to schedule user testing and educational webinars in the near future to ensure that users know how to upload documents to the FCC's website intended for this purpose, and perhaps to ensure that the website can handle the anticipated traffic. 

While TV broadcasters should begin preparing for this requirement, it would be wise to stay tuned for further developments.

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."

The most controversial part of the FCC's proposal has become the issue of putting the political file online - and that is also the part of the file that seems to be the principal target of the public interest groups.  In a story run in January on public radio's On the Media, Steve Waldman, who was in charge of the FCC Future of Media Report (which we summarized here when it was released as the report on The Information Needs of Communities), suggests that broadcasters' opposition - that there is too much information that comes in too fast during political season to be put online without substantial inconvenience and expense - somehow shows that broadcasters are not making the best use of technology, implying that the online public file should be viewed as a way of streamlining the stations' recordkeeping. Listen to that interview here.

But this completely misses the mark.  Few, if any, TV stations don't already use computerized sales and logging (i.e. scheduling) systems to manage their advertising sales and its insertions into broadcast programming.  TV stations are hardly the technological backwaters suggested in the interview.  The issue is not computerizing the station's business records.  Instead, the real issue is computerizing the records and making them available to the public in a format that the FCC dictates - a format that has not even been developed and will certainly not be the same format in which stations keep their internal records. 

The FCC several years ago asked for the online reporting on station ownership in a form redesigned by the FCC supposedly to allow it to be searchable by the public.  That public search function still has not been available well over two and a half years after the form first went online, and most stations find the system to be very user-unfriendly and time-consuming to prepare.  And Ownership Reports are filed only once every two years.  For reports that need to be updated daily - even hourly at the height of political season - it is simply unreasonable assume that there will not be a substantial burden on broadcasters to convert their information to an FCC-mandated format to report on the dozens of political buyers who are buying and running ads on a daily basis on many television stations in the weeks leading up to any election. 

While there have been some rumors that the FCC is thinking about backing off of the demand for a searchable database in which to upload these forms, even scanning and uploading the forms onto an FCC database of some description will require a whole new burden on broadcasters (see our article here about the FCC's obligation to evaluate that burden). 

Just what is the justification for this burden?  It does not seem to be one that is rooted in Communications laws, or in fact to have anything to do with the operations of television stations. Instead, public interest groups seem to be saying that the public has a right to know how much is being spent on broadcast advertising by candidates and third-party groups - right down to the amount that is spent by particular candidates on particular stations for a particular flight of advertising spots - and that these facts should be available nationwide. So, rather than focusing on facts that reveal how a broadcaster is serving its community, as most FCC regulations do, the justification for the online political file is one of looking at information about candidate and PAC spending in Federal races.  Is this a justification for imposing burdens on broadcasters?  Shouldn't these burdens instead be put on the candidates that these groups seem to want to regulate - the candidates and PACs?

While much of the focus on the effort to force broadcasters to put their public file online has been focused on the political file, that is not the only issue that could cause concern.  As we wrote when we summarized the proposal advanced by the FCC in its notice of proposed rulemaking, we are also concerned about the brand new requirement for broadcasters to post information about sponsorship identification in their online file.  The proposal for this information was not really spelled out in detail in the NPRM, and it is not information that is currently required in the public file (with the limited exception of sponsorship information for issue advertising).  What will this new obligation entail?

We may not have long to wait to find out.  Rumors had been that the FCC was trying to get the item ready for the March open meeting - a deadline that was obviously missed.  Now the target seems to be April.  So, as broadcasters head to Las Vegas for their annual convention in the middle of the month, they may well be facing new obligations so that the public can learn how much candidates are spending on their stations. 

An opinion released several weeks ago by the US Court of Appeals for the First Circuit sheds some light on whether statements made in the context of a third party political ad are defamatory.  The ad at issue there was a negative campaign ad against a candidate for the Maine State Senate.  The ad stated that the candidate, as a town selectman (equivalent to city council) "voted to cancel the $10,000 fireworks celebration for the Fourth of July," while also "[giving] 10,000 taxpayer dollars to a political organization."  The ad then stated that "It's wrong for [the candidate] to give your money to a political organization, and it was wrong for [him] to cancel your 4th of July celebration."

The candidate claimed that the word "wrong" implied that he had committed a crime and that the words "political organization" implied that it was the candidate's own organization, therefore implying that he had stolen town funds for his own organization.  The court disagreed and granted the defendant's motion to dismiss.  Why?

First, the court held that a political candidate is "public" figure.  In order for a statement to be defamatory against a public figure, the statement must be made with "actual malice," which means that it must be made with knowledge of falsity or with "reckless disregard for the truth."  The court held that this standard could not be met here because the word "wrong" does not necessarily mean that the candidate broke the law.  Although the court did not elaborate on this, the word "wrong" is often used to convey the speaker's opinion rather than as a statement of fact.  In other words, in a political ad, one party often believes that what the other party does is "wrong," even though it is neither criminal nor immoral. A statement presented as an opinion generally is not defamatory.

The court also refused to draw the inference that the "political organization" referred to in the ad was the candidate's own organization.  In essence, the entire ad was an opinion that the candidate's use of $10,000 would have been better spent on fireworks rather than on a political organization of any kind, and there is nothing defamatory about that allegation/opinion.

In this particular case, the court also found that the allegations were true, which is an absolute defense to defamation, as noted above.  However, for purposes of ruling on the motion to dismiss, the court viewed the allegations in the most favorable light to the plaintiff (the non-dismissing party) and still found that the statements were not defamatory, even if untrue.

The lesson to be learned is that political speech is subject to strong First Amendment protection.  Most of the negative ads do not need to be taken down, even if you get a cease and desist letter.  You may need to be concerned if the statements made are potentially defamatory, charging that a candidate has committed a crime or an immoral or unethical act.  And you should request substantiation of any potentially defamatory claims made in the ad.  But merely stating that a candidate did something "wrong" does not necessarily imply criminality or unethical behavior.  It may simply be "wrong" in the eyes of the advertiser, and that is a mere opinion.

Of course, if there is any question about the content of a political ad, you should consult with legal counsel.  This is one area where it is better to be safe than sorry.

Radio Issues

Radio has fewer unique issues on the front burner in Washington, but at least one is of incredible significance - the performance royalty.  Here are some of the issues facing radio broadcasters:

Performance Royalty:  Even though the performance royalty will have to start from scratch in the new Congress after dying in the Congressional session that just ended (despite having cleared both the House and Senate Judiciary committees for the first time), advocates of the royalty have made clear that they will be pushing on this bill again in the new session of Congress which began this week.  Look for the settlement talks with the NAB to restart now that everyone has returned from their holidays.  As with most issues, this is not an easy one, as the NAB put what many broadcasters thought was its best deal on the table in the Fall, only to have that deal rejected out of hand by the pro-royalty forces.  So don't look for any quick resolution of the issues this year. 

LPFM/FM Translator Issues: At the very end of 2010, Congress passed the long-delayed legislation clearing LPFM stations to operate on channels that are third-adjacent to full power FM operations.  Look to the FCC to adopt rules to implement this legislation, and to finally resolve the issues of what to do with the FM translators left from the 2003 translator window.

General Broadcast Issues

There are numerous issues before the FCC that affect both radio and television broadcasters, some of which have been pending for many years, ripe for resolution, while others are raised in proceedings that are just beginning.  These include:

Multiple Ownership Rules Review:  Last year, the FCC issued its Notice of Inquiry to start its Quadrennial Review of the FCC's ownership rules.  Broadcasters hope that the FCC looks at the relaxation of small market duopoly rules for television and the sub-caps (limiting the number of AM and FM stations that one party can own) for radio, while some public interest groups are seeking tighter rules on ownership, including potentially cracking down on shared service agreements in television.  While the FCC had hoped to have this proceeding close to resolution by this point, the Commission has yet to even issue a Notice of Proposed Rulemaking setting out specific proposals, as certain academic studies on which the FCC planned to rely in making conclusions about the media marketplace, have been delayed.  Delay in resolving ownership issues should  really not be a surprise, as the appeals of the 2003 FCC decision revising the ownership rules, and of the FCC's decision in 2007 slightly relaxing the broadcast-newspaper cross-ownership rules, are still pending.  Look for more action in this proceeding, though probably no decision, this year.

Localism Rules and the Future of Media:  FCC's proposals to impose specific rules on how broadcasters serve the public interest, advanced in its "localism proceeding," are over 5 years old.  The rules that it adopted for television stations mandating on-line public files and detailed reporting on the quantity of news, public affairs, local programming, civic programming , election programming, independently produced programming and many other categories of programing, were adopted over 3 years ago, but have never become effective.  Some had thought that the FCC might be spurred to final action on some of these proposals after its special task force on the Future of Media issued its report as to how media should best serve the needs and interests of residents of their communities.  That report was supposed to have been issued by the end of 2010.  Obviously, that target was not met, so the consideration of all the localism issues seem to be stalled.  But don't be surprised to see that report in the first part of this year, spurring more FCC discussion about these issues - though probably in the form of further comments on the meaning of the report and the impact of its findings on these pending proceedings. 

EEO Rules:  The FCC recently issued some fines for EEO violations by broadcasters, but there are fundamental issues about the FCC's policies that have not been addressed in the 7 years since these rules were first adopted.  Proposals to extend the rules to part time employees, and to require the filing of FCC Form 395 (the form that classifies all employees by race and gender), are still pending.  Also pending are proposals sought in requests for reconsideration of the adoption of the EEO rules that would make the EEO rules comport with today's reality - such as the proposals to allow Internet-based EEO recruiting.  More recently, minority organizations suggested that the enforcement of the rules be suspended until they could be made tougher, as these organizations did not believe that the rules were sufficiently stringent to encourage diversity in the broadcast workforce.  Maybe this will be the year that some of these outstanding issues are finally resolved.

Political Rules:  As more and more money makes its way into the broadcast marketplace for political advertising following the Supreme Court's Citizens United decision, some have suggested that a comprehensive review of the FCC's political rules is in order.  These rules were last reviewed almost 20 years ago, and since then, there have been major campaign reform acts (e.g. the McCain-Feingold campaign reform act or BCRA), and significant Supreme Court decisions repealing portions of that Act.  Sales practices at broadcast stations have also changed, and the FCC has a long-outstanding proceeding on how Internet-based ad sales of remnant broadcast advertising inventory affect lowest unit rates.  With this being an off year before what will no doubt be a huge political year in 2012, if the FCC is going to review the political rules, this would be the time that it should be done.

--------------------------------------------------------------------

Many other issues may be decided through Court actions.  We just saw a ruling on indecency issues this week, and the appeals on that subject may well bring the issue back to the Supreme Court.  So expect more thrashing about on indecency this year, as a final court decision will likely be some ways down the road. 

While not really DC issues, copyright proceedings to determine ASCAP and BMI rates for both radio and TV could also be important.  Renewing old agreements or, particularly for radio, the potential reduction of obligations for music royalties to these organizations, are likely to be the subject of litigation that will take place this year.  Noncommercial broadcasters may also have to asses these issues, as the Copyright Royalty Board has just issued a notice commencing a proceeding to decide the royalties paid ASCAP, BMI and SESAC by noncommercial broadcasters for the next 5 years.

With their online activities becoming more and more important to broadcasters, actions that could affect advertising and on-line programming become ever more important.  One of the major areas likely to be considered this year that could affect online businesses is in the area of privacy regulation.  Both the FTC and the Commerce Department recently issued proposals for privacy regulation (see summaries of these reports from our firm's Broadband Law Advisor Blog, here and here), and Congress has been considering this area as well.  Look for more action here, and assess its potential impact on Internet advertising, recommendation software and other business practices. 

These are but some of the legal and regulatory issues that will be facing broadcasters in the upcoming year.  Each year, we make these predictions, and there are always numerous other issues arise that we did not anticipate.  So watch the trade press and the pages of this blog to see what trouble Washington can make for broadcasters as this year progresses.

Most of the cease and desist letters cite a 1961 FCC ruling titled Licensee Responsibility With Respect to the Broadcast of False, Misleading or Deceptive Advertising."  What those letters fail to mention is that this ruling concerned a Federal Trade Commission crackdown on false, misleading or deceptive commercial advertising.  It was unrelated to political advertising.

The cease and desist letter may also cite the 1950 Third Circuit opinion in Felix v. Westinghouse, which held that broadcast stations may be liable for defamation in the absence of a candidate "use."  There was nothing in that opinion hinting at media liability for political ads that are false and misleading but not defamatory.

Indeed, the FCC has actually made the following statement on multiple occasions:  "With respect to allegations of false and misleading statements by political candidates or their supporters, the Commission believes that the public interest will best be served through 'robust, wide-open' debate." citing the US Supreme Court decision in New York Times v. Sullivan.

Of course, the Commission has also been quick to point out that it "would be most concerned if substantial evidence were presented that a licensee had acted in bad faith or deliberately discriminated against a political candidate."

So, what is a broadcaster or cable operator to do with those cease and desist letters?  The best and safest course of action is to provide a copy of the letter to the ad's sponsor and ask for substantiation of the claims made in the ad.  That way, you have fulfilled your obligation to avoid having acted in bad faith or recklessly.

But do you need to pull the ad?  You might, but generally speaking, only if the ad is potentially defamatory.  Defamation is broadly defined as reputational harm, usually resulting from untrue statements alleging crime, fraud, dishonesty or immoral conduct.  Cease and desist letters arguing about a candidate's position on a particular bill or the effect of legislation are generally not alleging anything that would be considered defamatory, even if false.  These ads generally do NOT need to be pulled.  Similarly, cease and desist letters arguing that a political ad contains footage protected by copyright are likely to concern material protected by the law of fair use.

If, on the other hand, an ad alleges that a candidate committed a crime or other immoral act, it may be wise to consider pulling the ad pending receipt of substantiation for the claims made by the third party sponsor.  Truth is an absolute defense to defamation.  Broadcasters and cable operators face potential liability in running potentially defamatory ads, but only for for acting with actual malice or reckless disregard of the truth. 

The bottom line, however, is that most third party political spots do not make claims that are potentially defamatory.  The FCC and the First Amendment strongly support the airing of political viewpoints, even if those viewpoints are potentially false.  For the most part, there is no need to worry about threatening cease and desist letters regarding political ads, but it is always wise to get substantiation and to be more careful with ads that are potentially defamatory.

The issue is really whether, by charging candidates the lowest unit rates when they have forfeited their rights to that rate, the stations are giving the candidates illegal campaign contributions – i.e. financial benefits from the station's corporate owners in the form of discounted rates. This is not the first time the issue has come up – in several past elections it has been brought to the Federal Election Commission who has, each time, tied in a 3-3 vote as to whether the practice was prohibited. Thus, the issue has remained unsettled. Television stations, and the candidates who have received the discounts, have argued that the candidates are not getting something at below market rates as, by definition, the LUR is the rate charged to the station’s best commercial customer.  Thus, that rate has been charged commercially and hence is not a “contribution” to the candidate, but is a service given for value. Those arguing on the other side contend that, in practice, candidates get benefits by being allowed to buy these spots at rates that most commercial clients could not obtain, and thus client’s are in fact getting a benefit.

For more information on the sponsorship identification requirements for political ads, see our Political Broadcasting Guide.  And watch these pages to see if the issues are resolved in time for this election, or if they will continue to be unresolved even if they reach the FEC once again.

 Some of the other aspects of Lowest Unit Rates as discussed in our Political Broadcasting Guide:

 What is a class of time?

A class is a type of spot that has unique rights and characteristics. For instance, spots that run

in different dayparts which have different rates are of a different class, e.g. morning drive is a

different class from mid-day, which is different from afternoon drive. Each of those classes

would have its own lowest unit rate.

Even within a given daypart, a station may have spots of many different classes.  Basically, a spot is of a different class if it has different rights. Thus, in any daypart, there may be multiple classes of time, each with its own lowest unit rate. For instance, a preemptible spot would be of a different class than a fixed position spot each with a different lowest unit rate even if they both run during the same daypart. Different rotations can also be different classes with their own lowest unit rate, e.g. a spot which could run anytime between 6 a.m. and midnight could be a different class from one that can run between 6 a.m. and 6 p.m. If the stations sells these rotations, and sells them with differing rates, rights of preemption, or make good privileges, then they would be of a different class and each would have a different lowest unit rate. A candidate can buy spots of any of those classes at the lowest unit rate for that class, and he gets the same rights that commercial advertisers who buy that spot get (e.g. if the candidate buys spots in a 6 a.m. to midnight rotation, his spots are treated just like those of a commercial advertiser who buys those spots and they can run anywhere between those hours).

What commercial spots do you look at in determining the lowest unit rate for a given class

of time?

You look at the spots of that class running at the same time as the candidate s spots. You need

not look any further than those spots running (or being offered on a rate card) during the 45 days

before a primary or the 60 days before a general election. But even within the 45 and 60 day

periods, the rates can change. If, for instance, a long term package sets your lowest unit rate for a

particular class of time, and the last spot from that package is run midway through the political

window, after the last spot from the package runs, the rates for that class of time can go up for

the rest of the political window. Similarly, if spots are sold on a demand basis, the lowest unit

rate can change on an almost daily basis. If there are fire sales of spots during particular

periods within a window, the lowest unit charge for the fire sale does not set the rates for periods

outside of the fire sale period.

Do candidates have to buy in volume to get volume discounts?

No. Candidates get the benefit of all volume discounts, even if they do not buy in volume. For

instance, if spots are $10 each, or 12 for $100, the candidate can buy one spot for $8.33 (100

divided by 12) even though a commercial advertiser would have to spend $100 to get the volume

discount.

Check out the Guide for further information about these and other topics dealing with the law of political advertising.