Posted on July 26, 2011 by David Oxenford

$12,000 Consent Decree Payment Demonstrates FCC Concerns About Sponsorship Identification Policies

A consent decree entered into by a radio broadcaster, which included a $12,000 "voluntary contribution" to the US Treasury, demonstrates once again the FCC's concerns about sponsorship identification issues.  The week before last, we wrote about the FCC fine levied on a television broadcaster for not including sufficient sponsorship information when a "video news release" was broadcast on a local television station without disclosing that the video footage had been produced by the automobile company whose products were featured.  The recent FCC Report on the Information Needs of Local Communities (formerly known as the Future of Media report) also focused on the need for more disclosure in connection with sponsored material carried on broadcast stations and other media (see our summary here).  With a long outstanding Rulemaking proceeding on these issues that remains unresolved (see our summary here), the Commission almost appears as if it is setting its policies in these areas through case law rather than through the rulemaking process.

In this most recent "payola" case, a complaint was lodged against a Texas radio station owned by Emmis Broadcasting alleging that the host of one music program was receiving compensation from a local music club, a local record store, and a manager of local bands in exchange for featuring music on the show.  The allegation contended that other local bands could not get their music played on this show without sponsoring Station events hosted by this particular personality.  The Consent Decree does not resolve the question of whether these allegations were true, but instead requires that the licensee make the voluntary contribution, adopt procedures to make sure that Station employees are aware of the requirements of the sponsorship identification rules, and report  to the Commission on a regular basis on the actions taken by the licensee to ensure compliance with the FCC rules.  In addition to general requirements that the Station educate its employees about the sponsorship identification rules, the Consent Decree also contained conditions setting forth rules governing the relationship that station employees could have with record labels, even though the decree makes no mention of any allegations of improper consideration having come from record companies.  These conditions were ones that appear to have come from consent decrees entered into with a number of broadcasters 4 years ago in the last major FCC payola investigation (which we wrote about here).

This Consent Decree, together with the other recent Commission actions targeting sponsorship issues, reminds broadcasters to be careful to disclose anything of value received by a station in exchange for any on-air content.  As I've warned broadcasters many times, it's not the fact that you were paid to say something on the air that is a problem, it's the lack of disclosure of the payment.  If the message that is conveyed about the product or service is not clearly a commercial message,  then you need to disclose the sponsorship.  Even in a traditional commercial, if it is not clear who bought the commercial, disclosure needs to be made in connection with the commercial itself (where, for instance, the sponsor is not the actual provider of the product or service, e.g. where an ad for a store is bought by the mall owner and not the store itself).  

So watch your employees to make sure that, if they get something for free in exchange for any on-air mention, they need to disclose that the free stuff that they got.  If your on-air DJ got free donuts from the bakery next to the station in exchange for saying on-the-air how good they were, mention that they got the donuts for free.  If a TV station got a doctor from a local hospital to be an on-air commentator on health issues as part of a deal for the hospital to buy ad time, mention that the health segment of the news was sponsored.  Even if you get free tickets to a concert with the understanding that you'll give them away on-air and promote the show - mention that the promoter gave you the tickets when you give them away.  Disclose the free stuff - and avoid the need to negotiate a consent decree like that done in the recent case. 
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Posted on June 9, 2011 by David Oxenford

When Can Underwriting Announcements Be Run on Noncommercial Radio and TV Stations?

The question has recently arisen as to when underwriting announcements can be aired on noncommercial radio and TV stations.  The New York Times recently quoted me on the subject in an article discussing the plans of PBS to experiment with putting underwriting announcements in programming, rather than merely in the breaks between the end of one program and the beginning of the next.  The FCC rules for both radio and TV state, in italics, that the scheduling of underwriting announcements "may not interrupt regular programming."  What does that mean?

In 1982, in adopting the rules as to the timing of sponsorship announcements and the acknowledgment of donations, the FCC relied on what was then a recently-enacted statute addressing the sponsorship of public broadcasting programming.  The House of Representatives report adopting that legislation contained language interpreting the meaning of the prohibition against these announcements interrupting regular programming.  The FCC relied on that language in adopting the rules currently on the book.  There, Congress said that announcements could be run "at the beginning and end of programs,...between identifiable segments of a longer program" or, in the absence of identifiable segments, during "station breaks" where the flow of programming was "not unduly disrupted."  For radio, this seems like a much easier test to meet, as there are always breaks in programs, e.g. between stories on a news program like Morning Edition, between guests on a program like Fresh Air, or between music sets on a noncommercial music-oriented station.  For TV, the issue is somewhat more complicated, thus the questions that the Times wrote about in connection with the PBS tests.

As discussed in the Times article, it seems to me that there are many noncommercial TV programs that have many natural breaks in their programs where underwriting announcements can be run without unduly disrupting the natural flow of the programming - breaks that sometimes are used for station promotional announcements.  Between segments on a segmented Nature program, or on a show like Antiques Roadshow, where the program evaluates several different items as to its value and authenticity, there would seem to be room for natural pauses between each item into which an underwriting announcement could be inserted.  Even in dramatic programming, between scene changes or in other natural breaks in the action, one could determine that the flow of the programming was not unduly interrupted by an underwriting announcement.  These are close questions that each station needs to evaluate on their own, to achieve compliance with the FCC's somewhat nebulous standards.

One consideration in all of this is simply the nature of noncommercial programs.  One reason that many noncommercial stations attract significant audiences is the mere fact that they are noncommercial.  If there are too many breaks in the programs, with too many announcements that looks and feel like commercials, stations risk turning off their audiences.  And, of course, stations need to be sure that they follow FCC restrictions on the content of underwriting announcements, avoiding calls to action, qualitative claims about sponsors, and price and sale information.  For more on these subjects, see my recent presentation to the Maine and Connecticut Broadcasters Associations,here.

Obviously, as governmental and other sources of funding become harder to find, public broadcasting stations need to look to the acknowledgment of contributors through these underwriting announcements as a more and more important source of financial stability.  It has been almost 30 years since these underwriting rules were adopted by the FCC, and most have remained pretty much unchanged since their adoption.  Perhaps, in today's new media world, the FCC should reexamine these rules and see if some further liberalization and clarification is not in order.  Maybe that will even be addressed in the Future of Media report to be released later today. 
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Posted on March 25, 2011 by David Oxenford

FCC Fines Two TV Stations $4000 For Airing Video News Releases Without Sponsorship Identification, Even Though the Stations Were Not Paid for the Broadcast

The FCC has issued two Notices of Apparent Liability, each proposing fines of $4000 to TV station licensees, both for airing video news releases ("VNR") in news or information programs without sponsorship identifications.  In both cases, the station received the VNRs for free, but was paid nothing for including them in their programming.  The station had no indication that any other party supplying the VNRs were paid for providing them to the station.  Nevertheless, relying on some very old statements of policy contained in an FCC Public Notice from 1975, the FCC concluded that the provision of the VNRs in and of themselves, constituted valuable consideration to the station, and the fact that they highlighted the commercial products of the companies that produced them "to an extent disproportionate to the subject matter of the film", mandated a sponsorship identification.

Both cases rely on an FCC Public Notice, first issued in 1963 and updated in 1975 (which I have been unable to locate on the FCC's website), which sets out examples of how to comply with the sponsorship identification rules. These two old Public Notices were cited, but not reproduced, in a 2005 Public Notice, warning broadcasters to be careful with their use of VNRs.  The specific example cited by the FCC was one set out in these notices dealing with a film on scenic roadtrips provided by a bus company.  In the examples provided, the FCC stated that if the video did not show the bus company's name, or the bus company's name was shown only "fleetingly" in pictured of the highway in a manner reasonably related to the program, there would be no sponsorship identification requirement.  In cases where the bus company's name was clearly shown, "disproportionate to the subject matter of the film", then sponsorship identification would be required "as the broadcaster has impliedly agreed to broadcast an identification beyond that reasonably related to the subject matter of the film."  Based on these examples, the FCC levied the fines in the cases just released.  An examination of the facts of these cases is important to understand these fines and how far the FCC ruling in these cases extends.

The first case involved a broadcast by a television station in Minneapolis, which aired in its news program a video news release on new car designs from General Motors, specifically the popularity of convertibles.   The excerpt broadcast on the station mentioned only GM cars, and mentioned 3 different brands, talked about the company in almost every paragraph, and contained 12 different visuals of GM cars.  Thus, it was found by the FCC to show the products disproportionately to the topic of the broadcast, and to need a sponsorship identification.  The FCC rejected the licensees arguments that this ruling infringed on the station's editorial discretion and First Amendment rights, and that it was no different than airing parts of a press release from some company. 

The second case was, to me, a much closer call.  In a health program sponsored by a local hospital, a New Jersey TV station aired a report on how to fight a cold.  The report talked about how taking products with zinc at the outset of a cold could reduce the length and severity of the cold.  The report mentioned the "Zicam Travel Well Survey by Harris Interactive", and had a clip of one doctor saying that "an internasal preparation, like Zicam" could reduce the severity of a cold.  These were the only verbal mentions of Zicam, though the FCC states that there were 4 different visual shots of the Zicam product. As Zicam was the only product mentioned, and the referenced to Zicam were clearly identifiable, the FCC found that this VNR also violated the standards set out above.

These cases force broadcasters to be very aggressive in reviewing any film, video, or presumably audio programming that comes to them from any source, to see if it clearly identifies a product, and appears to push the product of a single company.  it would appear that this case will require that the station make inquiries to see if such productions do in fact originate from a company trying to push its products and, if so, the station must make an on-air acknowledgment of that fact when the program segment is aired.  It would seem that many broadcasters already acknowledge when they use film or video from received from some other source, but these new fines make clear that this practice must be integrated into every station's policies now.
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Posted on February 11, 2011 by David Oxenford

FCC Underwriting Rules for Noncommercial Radio and TV - A Seminar on the Issues

Fines for noncommercial broadcasters who air acknowledgments of their donors and contributors that sound too much like commercials have been a problem area for many noncommercial educational radio and television stations, and have resulted in significant fines from the FCC.  The FCC allows "enhanced underwriting announcements" that identify a sponsor, what their business is, and where they are located, but such information must be provided in an objective, non-promotional manner.  Earlier this week, I conducted a seminar for noncommercial broadcast stations who are members of the Maine Association of Broadcasters and the Connecticut Broadcasters Association.  During the seminar, we discussed the FCC rules that govern fundraising done on such stations.  The PowerPoint slides from that presentation are available here, and provide an outline of the FCC rules on underwriting, promotions, fundraising and related issues, with samples of announcements that have led to FCC fines for noncommercial stations.

We have written many times about FCC issues related to fundraising and other matters relevant to  noncommercial stations.  We have written articles about cases where the FCC fined stations for enhanced underwriting announcements that were too enhanced, and violated FCC standards by containing prohibited calls to action, inducements to buy, price information or qualitative claims (see, for instance, articles here and here).  Another article discussed fines issued by the FCC for improper underwriting announcements where the announcements were of excessive length, and where the announcement ran in programming that was not originated by the station and from which the station received no consideration.  Another article discussed the FCC prohibition on noncommercial stations interrupting their regular programming to raise funds for charitable groups other than the licensee.  You can scroll though other articles we have written on other legal issues for noncommercial broadcasters by clicking here.  Watch our blog for other issues that relate to noncommercial broadcasters to stay up-to-date on the latest developments about which you should be aware. 

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Posted on June 17, 2010 by David Oxenford

Noncommercial FM Station Fined $12,500 for Sponsorship Acknowledgments That Were Too Commercial

Stations that are licensed as "noncommercial educational" stations are prohibited by the FCC from running commercials - seemingly a pretty straightforward prohibition.  Yet drawing the line between a prohibited commercial and a permissible sponsorship acknowledgment is sometimes difficult in these days of "enhanced underwriting."   In a recent case, the FCC fined a noncommercial radio station $12,500 for repeatedly airing 4 announcements from sponsors that the Commission found to have crossed the line by being overly promotional.  These announcements, which appear to have been recordings of unscripted sponsor acknowledgments, demonstrate how carefully noncommercial stations must police their sponsorship announcements to avoid risking an FCC sanction.

The announcements in these cases are worth reviewing. Some have subtle promotional messages, while the areas of concern are more clear in others.  But in reaching its decision, the Commission goes through a close analysis of the wording of each announcement to see if the announcement contains "comparative or qualitative descriptions, price information, calls to action, or inducements to buy, sell, rent or lease", all prohibited language in a noncommercial sponsorship identification.  So, when one of the announcement referred to "beautiful Harley Davidson light trucks" sold by a local auto dealer who sponsored the station, the FCC found that this was a qualitative claim that went over the line.  Similarly, statements that "we have it here" or "where we are proud to be Mexicans" (these announcements having been run on a Spanish-language station in California) were found to be attempts to qualitatively distinguish this dealer from others, or to be inducements to buy - a prohibited call to action.  And a specific statement that "no downpayment" would be required on a purchase constituted the kind of price information that should not be contained in a sponsorship acknowledgment.  Another announcement for a local tire store had similar problems in the content of the ads, using phrases such as stating that the company "knows about tires" and that the company's product "reduces [the] loss [of tire] pressure" and "has less risk of suffering damages . . . last longer and [is] not too expensive cause you to save more . . . [and] save more in gas per mileage."

As evidenced by this decision, noncommercial broadcasters need to concentrate on the facts when delivering a sponsorship acknowledgment.  A station can identify the sponsor and provide a non-promotional description of what business they are in, and provide contact or location information.  But they need to keep these product identification statements short and generic, and avoid all that stuff that sometimes makes commercials on commercial stations interesting - the music, the hype, the reason why one business is better or different from its competitors, and the real push to make the listener want to patronize the sponsor.  We've written about some other cases where underwriting acknowledgments have gone too far and prompted FCC fines, here and here.  There is a fine line between the permissible and the prohibited, but it is one that noncommercial stations must carefully walk to avoid FCC penalties. 
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