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At its meeting today, the FCC vacated its 2007 Order mandating an online public file and the filing of the Form 355 “Enhanced Disclosure” form that detailed the public interest service of television broadcasters. But these requirements are not gone, as the Commission has adopted a Further Notice of Proposed Rulemaking asking to reinstate an obligation for an online public file, and a Notice of Inquiry is apparently circulating at the FCC that would propose a substitute for the Form 355. The proposal for the new online public file apparently also suggests including new information in the online file, including information about sponsorship identification and copies of shared service agreements. While the text of the FCC order is not yet out, from the information provided at the FCC meeting, the following matters appear to be on the table at the FCC:

• The FCC proposes that TV broadcasters will need to have an online public file, submitted to and maintained on servers at the FCC rather than on each individual station's website
  • Several Commissioners suggest that the Commission will develop a mechanism for accessible storage of online public files, which may be searchable by the public
  • The online public file form will automatically import other FCC filings that are required to be in the file
  • Until the FCC electronic database is perfected, the documents will be placed online in their current formats
• Letters from the public concerning station operations are proposed to be excluded from the online file out of privacy concerns, though broadcasters will still need to keep those letters in a public file at the station.
• The online public file is proposed to include the political file, which was exempt under the 2007 rule as it would be too burdensome to update that report rapidly during an election season
• The online file is proposed to include additional material not now required to be in the public file, including:
  • Copies of shared services agreements
  • Sponsorship identification information that is now only broadcast on air in connection with the program in which sponsored material is included
• The FCC is currently considering a Notice of Inquiry, a draft of which is apparently circulating among the Commissioners now, that proposes some form of enhanced disclosure form that will replace the Form 355 (and the current Quarterly Programs Issues list) to document the public service provided by TV broadcasters

Reactions of the Commissioners varied.  Commissioner Copps urged the FCC to not only require the compilation and accessibility of information about the public service provided by broadcasters, but also standards that would allow the public to complain if they did not believe that a station adequately served the needs of the local community.  Commissioner McDowell (who voted against the adoption of the Form 355) said that he feared that the FCC was again moving down the road toward burdensome regulation, and might even be facing constitutional issues about some of its proposals.  Commissioner Clyburn claimed that the public files of many broadcasters were in the deep recesses of broadcast stations, in dilapidated filing cabinets, and the materials in the files were prepared in small fonts – and visits to these files was time consuming and burdensome for those wanting to review this material.  Chairman Genachowski principally talked about the efficiencies of electronic documents, cataloging the many ways that the FCC has provided information online, including moving many other FCC obligations to online filings. 

This is obviously a very important issue for broadcasters, as the potential for new burdensome regulations clearly exists. We wrote about many of the problems with the Form 355 (see, e.g. our article here), and the new file may well impose similar burdens (especially in connection with the obligation to document sponsorship identification material, and at election time with respect to the political file). Moreover, while these proposals are for TV broadcasters only, one can expect that, if they are adopted, there will be proposals to extend them to radio at some point in the future. We will have more about this proposal once the text of the item is released, and will add links to this article once the statements of the Commissioners the FCC public notice are available.

Update - 10/27/2012, 1:15 PM - The Public Notice of the FCC action, which is not very informative, is available here. 

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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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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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In the last few weeks, I've been asked several times by broadcasters whether an ad should be considered an "issue ad."   Usually, the ad in question deals with some sort of faintly controversial issue, and the broadcaster seems torn about how to classify the ad.   In many ways, the answer is almost irrelevant as, other than some public file obligations, whether or not an ad is an issue ad has little practical significance.  Issue ads are not entitled to special rates - lowest unit rates are reserved for candidate ads.  They are not entitled to special placement in broadcast schedules.  As there is no Fairness Doctrine, there isn't even a requirement that you treat both sides of an issue in the same fashion (except perhaps, where a Fairness obligation may still arise if the issue being discussed is a candidate in an election, when the last remnant of Fairness, the Zapple Doctrine, has not officially been declared dead).  So why worry about whether or not something is an issue ad?

The principal reason is the public file. Commission rules require that the sponsor of an issue ad be identified in a broadcaster's public file, along with the sponsor's principal officers or directors.  This is required for any ad dealing with a controversial issue of public importance.  The ad does not need to deal with a political issue, or one to be considered by a government body.  Any controversial issue of public importance merits the public file treatment.  For ads dealing with a "federal issue", one to be considered by the US Congress, any Federal administrative agency or any other branch of the United States government, additional disclosures need to be made in the file (which we have listed before), setting out all the information that you would need to provide with respect to a candidate ad - including the price paid for the ad and the schedule on which the ad will run. 

It has been suggested to me that an issue ad needs to be identified so as to decide whether the ad needs to have a "paid for" or "sponsored by" tag at the end to identify its sponsor.  In fact, any ad where the sponsor of the ad is unclear - even a pure commercial ad needs to have a "paid for" or "sponsored  by tag."  For instance, a few years ago, a station was fined when a local chamber of commerce was buying time to promote all the businesses in its town, and the chamber was never identified in the ad - much less as the sponsor of that ad.  When the ad is for a product, and the maker of the product is that sponsor, the Commission considers the identification of the product to be sufficient sponsorship identification.  But where the actual sponsor is someone else, and it is not clear from the ad who the sponsor is, a broadcaster is required to identify that sponsor.

So, in considering whether a spot is an issue ad, why go through the trouble of worrying too much about it.  If it deals with something that looks controversial, err on the side of caution.  Consider it an issue ad, place notice in your public file, and go on with your business!

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On December 1, 2009,  FTC revised Guidelines went into effect updating policies dealing with advertising using testimonials and endorsements, specifically affecting celebrity endorsements and sponsorship disclosure.  These revised guidelines directly impact the established practices of broadcasters and new media companies.  These revised endorsement and testimonial guidelines effectively ban the old standard “results not typical” disclaimer so commonly in use in connection with a great deal of testimonial advertising, confirm independent liability for the “endorser” (including celebrities) for false product or service claims, and expand and clarify the need for disclosure of “material connections”, that is consideration (money and other “freebies”) received by new media companies in connection with reviews or other online coverage of products or services.  It is vital that media companies, in particular new media, understand the key provisions of these guidelines to make sure that they don’t become a target of any FTC enforcement action.  The FTC has indicated that for now at least, its focus will be on enforcement in the new media world (bloggers, social media, viral campaigns) and other “non-traditional” advertising (celebrity guests on news and entertainment shows, endorsements by media personnel such as on-air DJ’s).

Like all FTC Guidance concerning advertising, the revised guidelines are specific regulations, but instead they set out standards (in essence a safe harbor) that outline how the FTC will review advertising to determine if it is “false and deceptive” or otherwise misleading to the consumer in violation of Section 5 of the FTC Act.  The revised guidelines provide specific examples as to how they will apply to insure sufficient disclosure so that the listener has all the background necessary to be able to evaluate the strength of the endorsement for him or herself.  For broadcast advertising, the new guidelines make clear that endorsers can themselves be liable for misleading statements made during a product pitch.  So a radio announcer paid to try a diet plan or some other product and to report about its results on the air needs to be sure not only that his statements are truthful, but that the “results” claimed are in line with what the advertiser can actually prove for the product through clinical study and research.  The radio pitchman cannot turn a blind eye to claims that are inherently incredible.  In the past, a simple disclosure that "your results may vary" or "these results are not necessarily typical" was sufficient.  Today, that disclaimer is no longer enough.  Instead, the new guidelines state that any testimonial about the results of using a product be accompanied with a disclosure of the results that a typical user can expect to get from the product.  So the announcer must be informed as to what results can be expected by the typical user, and that these results are objectively verifiable, so that the proper disclosure can be made.  As the announcer (or the station) can now be liable for statements made in such testimonials, stations should take care to be prepared to make the required disclosures. 

The FTC guidelines also discuss the requirement that testimonial ads make clear that they are sponsored by the advertiser. Most broadcasters should already be familiar with these requirements, as the FCC imposes similar obligations that broadcasters disclose promotional consideration provided by the sponsors of any on-air material, i.e. they must disclose when anything of value has been received for any programming aired on the station. This obligation may be simple for the station to recognize when it is one of its own announcers making a pitch for a product during the course of his show as part of a paid advertisement, or where an advertiser has paid to have a celebrity guest or other corporate pitch person appear as part of a non-advertising program segment. Where it is not so easy is when some other celebrity makes an on-air pitch for a product that they have been paid to pitch (during a talk show for example), but the station may not have prior notice of that sponsorship. This is an issue under either the FTC guidelines or the FCC rules, and broadcasters need to do diligence to make sure that celebrities appearing on locally produced programs, or even during syndicated programs, make clear when they are paid to pitch for some product or service, where the pitch is not otherwise clear to the consumer (see our post here on that subject).  

The FTC guidelines on new media have created garnered the greatest attention in the popular press. The guidelines expanded the need to disclose "material connections" between an advertiser and endorser in circumstances where the connection might not be obvious to the consumer. In this context, the FTC made explicit application of the Guideline's principles to bloggers and other "non traditional" media. The rules may actually be more stringent for new media than for traditional media (including radio and television). The FTC's believes that people expect that a newspaper or broadcast reviewer, for example, may have received the books they review, or saw the movie they critique, for free. However, the public is unlikely to be harmed as the traditional media reviewer has an unbiased editor or supervisor to review their comments, so the reviewer's opinions are less likely to be swayed by the free stuff they receive. The FTC distinguishes the blogger, who receives "swag" directly and may not have any sort of supervision and review for his or her on-line comments. Thus, the FTC guidelines suggest that the fact that the blogger got the free stuff is not public knowledge, and thus the receipt of the free stuff must be disclosed (even for low-value product samples if there is a continuous flow of such items). The key is whether the reviewer reasonably expects to continue to receive free product for review. Advertisers are required to train and monitor "their" bloggers for compliance and to insure product claims aren't being made beyond what the advertiser could otherwise support. Radio stations that have independent bloggers or other new media producers, who are not under the direct supervision of station management, may need to be sure that these people are aware of the need to disclose the "material connections" with advertisers or promoters of products, and that bloggers or other new media producers who have disclosed "material connections" not make claims about products that the product's owner could not itself make in advertising that it runs.

The FTC has provided numerous examples of what it sees as permissible and not permisible in the Report on this subject. Broadcasters should become familiar with these guidelines, and use them as an opportunity to refresh themselves on FCC sponsorship identification requirements as well. Don’t get caught by a too aggressive promotional campaign.

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On November 10, Davis Wright Tremaine's David Oxenford and Bobby Baker, the head of the FCC's Office of Political Broadcasting, conducted a webinar on the FCC's political broadcasting rules and policies.  The webinar originated from Lansing, Michigan, before an audience of Michigan Broadcasters, and was webcast to broadcasters in 13 other states.  Topics discussed included reasonable access, equal opportunities, lowest unit charges, and political sponsorship identification and public file rules. 

Seminar participants were provided with Davis Wright Tremaine's Political Broadcasting Guide, available here.  The PowerPoint presentation used in the seminar is available here.

 

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Davis Wright Tremaine attorneys Amber Husbands and David Oxenford conducted a webinar on August 26, 2009 for the Kansas Association of Broadcasters, discussing legal issues of importance to on-air talent.  Issues discussed included broadcast indecency, station contests, sponsorship identification and payola issues, potential liability that can arise from the use of social media and newsroom issues.  The newsroom issues included libel, slander and defamation; invasion of privacy; issues about taping and hidden cameras; and possible newsgathering torts including trespassing.

A copy of the PowerPoint presentation used with this presentation can be found here. 

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A story in today's Wall Street Journal discusses the significant amount of money being spent on television advertising for and against pending proposals for health care reform.  As we have written before, broadcasters are required to keep in their public file information about advertising dealing with Federal issues - records as detailed as those kept for political candidates.  Information in the file should include not only the sponsor of the ad, but also when the spots are scheduled to run (and, after the fact, when they did in fact run), the class of time purchased, and the price paid for the advertising.  Clearly, the health care issue is a Federal issue, as it is being considered by the US Congress in Washington.  So remember to keep your public file up to date with this required information. 

Section 315 of the Communications Act deals with these issues, stating that these records must be kept for any request to purchase time on a "political matter of national importance", which is defined as any matter relating to a candidate or Federal election or "a national legislative issue of public importance."  Clearly, health care would fit in that definition.  The specific information to be kept in the file includes:

• If the request to purchase time is accepted or rejected
• Dates on which the ad is run
• The rates charged by the station
• Class of time purchased
• The issue to which the ad refers
• The name of the purchaser of the advertising time including:
  • The name, address and phone number of a contact person
  • A list of the chief executive officers or members of the executive committee or board of directors of the sponsoring organization.

This information needs to be put into the public file as soon as possible, and maintained for a minimum of two years.  To avoid potential legal issues in dealing with these controversial topics, keep your file up to date. 

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A recent stir was created when a Midwestern television company was reported to have signed a contract with a state government agency, promising to market the agency and its programs throughout the state.  This promotion was to include a segment in the company's televised news promoting the effects of the work of the agency.  Questions were immediately raised about whether this was prohibited by FCC rules.  But, when the news pieces ran, the company was very careful to state after these segments that they were sponsored by the station and the state agency.  As the FCC has no rules about what can be included in the "news" (and probably could not consistent with the First Amendment), the only real issue was one of sponsorship identification.  As the licensee did here, if the sponsor of the story is identified, making clear to the public who was attempting to persuade them on the issue addressed, there should be no FCC issues.

This is different from the issues that have arisen previously at the FCC, where there have been fines levied against television stations and cable systems for airing programming that was sponsored, but for which no sponsorship identification was provided (see our posts here and here).  This includes the video news release or VNR issues, where the FCC has fined stations for using news actualities provided by groups with a financial interest in the issue that was being addressed, but without identifying the fact that the material was provided by the interested parties.  Where a program addresses a controversial issue of public importance, the disclosure rules are more strict, requiring that the station not only disclose that it received money to air a story - but to also disclose anything that it got from the interested party - including tapes or scripts.

As we have written, the entire sponsorship identification field is under review in the Commission's proceeding which is to consider embedded advertising, product placement, and the whole gamut of broadcast sponsorship issues.  In that proceeding, the FCC made clear that broadcasters have an obligation to make sure that no one is receiving any undisclosed consideration for the placement of any type of promotion for a good or service into a program.  Broadcasters have this obligation, according the FCC, even if the program is being produced by a third party.  Thus, broadcasters should be asking for certifications from their program producers that they have not received anything of value in exchange for featuring a product or service or, if they have, that it is disclosed.  As we wrote last year, one television broadcaster was fined when an on-air host who produced his own show was found to have received consideration for the point of view that he expressed - something not revealed in his program, and something that the station did not inquire about.

Broadcasters, whether radio or TV, should use care when accepting anything of value in exchange for agreeing to broadcast any material on the air - whether it be music or news or any other type of programming.  We wrote about some of the considerations that stations should use in connection with payola concerns, which is really another aspect of the same issue.  With the FCC's scrutiny on this area, stations need to err on the side of caution, and be sure to identify sponsored programming whenever it appears. 

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We’re not even in what most would consider election season - except for the two states with off-year governor’s contests and those other states with various state and municipal elections. Yet political ads are running on broadcast stations across the country.  Republican groups have announced plans to run ads attacking certain Democratic Congressmen who are perceived as vulnerable, while certain Democratic interest groups have run ads about the positions of Republicans on the Obama stimulus package and the President’s proposed budget.   In addition to these ads targeting specific potential candidates, there are issue ads running across the country on various issues pending before Congress, or likely to be considered by Congress in the near term. These ads often have a tag line “write or call your Congressman and tell him to vote No” on whatever bill is being discussed. While these are not ads for political candidates that require lowest unit rates or specific equal opportunities, they do give rise to political file issues.  Stations need to remember to observe these requirements and put the required information into their public file to avoid FCC issues.

Under provisions of the Bipartisan Campaign Reform Act, when a station runs an ad addressing a “Federal issue”, the station must keep in its public file essentially all the same information about the ad that it would maintain for a candidate ad. The station must identify the spot and the schedule that its sponsor has purchased, the identify of the sponsor (name, address and list of principal executive officers or directors), the class of time purchased, and the price paid for the ads.  Federal issues are ones that deal with a Federal election or with any issue to be considered by Congress or any Federal government agency.

Even ads dealing with state or local issues (e.g. school bond issues, zoning disputes, state ballot initiatives) require some public file disclosures.  While stations do not need to provide information about the entire schedule and the price of spots purchased in connection with controversial issues of state or local importance, they do need to maintain in their public file a list of the sponsoring organization's chief executive officers, the members of its executive committee, or its directors.  Maintain those files – and stay out of potential FCC trouble.

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According to numerous press articles, including this one in Multichannel News, the FCC has begun an investigation into several commentators on TV news programs to see if they were receiving payments or other consideration for presenting a particular viewpoint on military issues on which they were interviewed.  According to press reports, the FCC has sent letters requesting information about the arrangements to both television networks and the commentators themselves.  This investigation would appear to be a continuation of the FCC's concern about undisclosed sponsors of programming attempting to convince the public of a particular position on any controversial issue of public importance.

This investigation seems to be very similar to a case about which we wrote last year, where the FCC issued fines to a station group that aired programming that included commentator Armstrong Williams, who had been receiving consideration to speak in support of the No Child Left Behind program.  The FCC has also been looking at similar issues in its Sponsorship Identification and Embedded Advertising Proceeding, about which we wrote here.  In both of these proceedings, the FCC has warned broadcasters that they need to assess whether anyone who is supplying programming material to the station is receiving consideration for the views expressed on that programming, particularly where that programming involves something that could be considered a controversial issue of public importance.  Thus, stations should be asking networks, program syndicators, and others appearing on a program whether they are receiving any consideration for the views that they are about to express - particularly where that is not clear from the context of the program.  While the FCC has not explicitly so stated, it would seem like an interview of an author about his new book or an actor about his new movie would clearly imply that the author or actor received consideration.  But where someone is expressing an opinion on some matter where it is unclear that there is any commercial or financial interest, and such an interest does indeed exist, the station should be aware  of that interest and disclose that connection on-air.  See our discussion here for another case where the FCC imposed fines on a cable system for not disclosing such interests.  One more thing to worry about!

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The American Issues Project has recently started running a controversial new television ad attacking Barrack Obama for his connections to former Weather Underground figure William Ayers.  The text of the ad is reported here.  While reportedly some cable outlets (including Fox News) have refused to air the ad, numerous broadcast stations are also wondering what the legal implications of running the ad may be.  We have already seen many other attack ads being run by third-party groups - including political parties, long-standing activist groups like Move On.org, as well as from new organizations like American Issues Project which have seemingly been formed recently.  As the use of such ads will no doubt increase as we get closer to the November election, it is important that broadcasters understand the issues that may arise in connection with such ads under various laws dealing with political broadcasting.  Legal issues that must be considered arise not only under FCC rules, but also potentially in civil courts for liability that may arise from the content of the ad.  Broadcast stations are under no obligation to run ads by third party groups, and stations have a full right to reject those ads based on their content.  This is in contrast to ads by Federal candidates, who have a right of reasonable access to all broadcast stations, and whose ads cannot be censored by the stations.  As a candidate's ad cannot be censored, the station has no liability for its contents.  In contrast, as the station has the full discretion as to whether or not it will run a third-party ad, it could have liability for defamation or other liabilities that might arise from the content of such ads that it decides to accept and put on the air.  

The standards for proving defamation (libel and slander) of a public figure are high, but if the ad does contain some clearly false statements, the standard could in fact be met.   Basically, to have liability, the station needs to run an ad containing a false statement either knowing that the ad is untrue or with "reckless disregard" for the truthfulness of the statements made.  This is referred to as the "malice standard."  Essentially, once a station is put on notice that the ad may be untrue (usually by a letter from the candidate being attacked, or from their lawyers),  the station needs to do their own fact checking to satisfy themselves that there is a basis for the claims made or, theoretically, the station could itself be subject to liability for defamation if the claims prove to be untrue.  A few years ago, some TV stations in Texas ended up having to pay a candidate because they ran an ad by an attack group that was shown to contain false statements, and the ad was run even after the candidate complained that the statements were untrue.  These determinations are often difficult to make as the ad's creators usually have hundreds of pages of documentation that they say supports their claims, while the person being attacked usually has documentation to refute the claims.  Thus, the determination as to whether or not to run the ad is a decision that each station needs to make after consultation with their lawyers, and after careful review of the spot and the backing documentation.

The stations also need to comply with FCC rules.  First, the stations need to make sure that the ad has the required sponsorship identification identifying the true sponsor of the ad, in writing for at least 4 seconds at 4% of screen height.  Under FEC rules, there must also be a verbal identification of the sponsor.  In addition, the station needs to comply with all of the public file requirements.

 

For any request to a station by a third-party group asking to buy ads dealing with Federal candidates, the station's public file should contain the following information about each request:

1) The name of the group sponsoring the ad

2) Its principal officers or its directors

3) Whether the request to buy time was accepted or rejected

4) If the schedule was accepted, the date and approximate time the spots will run

5) The class of time purchased

6) The rate charged

7) The name of the candidate to which the ad refers

8) After the spots have run, the exact time the spots ran

More information about these rules and the other laws dealing with political broadcasting issues for broadcast stations can be found in our Political Broadcasting Guide. 

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The Federal Election Commission ruled recently that it would not grant a waiver of the requirements for a verbal sponsorship identification on ads by an interest group, the Club for Growth, which wanted to run 10 and 15 second commercials opposing Federal candidates for Congress. Because of the abbreviated length of the commercials, the organization wanted the FEC to waive the requirement that there be a verbal identification of the sponsor as the commercial was too short to be able to fit such a message while still conveying their principle message.  The Club promised to have the required written disclosures on the ads, but the FEC said that this was insufficient as Federal law does not make any exception to the requirement for the verbal announcements on television commercials.  Thus, television stations should expect that third party ads dealing with Federal elections should contain both a written and verbal sponsorship identification.

The verbal identification need only identify the sponsor of the ad and state the sponsor's responsibility for the ad.  Thus, a verbal statement that "The Club for Growth PAC is responsible for the content of this advertisement" is sufficient to meet the requirements of the rule, while the written statement needs to be more detailed - containing not only the verbal identification, but also an address or website for the sponsor and the fact that the ad was not authorized by any candidate.  The written material must be at least 4 percent of screen height and must last at least 4 seconds.  These are the FEC rules regulating the advertiser, which are very similar to the FCC rules for political advertisements.  For details on the FCC's sponsorship identification requirements and other political broadcasting rules and laws applicable to broadcast stations, see our Political Broadcasting Guide. 

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Last week, the FCC commenced its long anticipated proceeding to reexamine its sponsorship identification rules. This proceeding has been rumored for over six months, having appeared on an agenda for a Commission open meeting in December, only to be pulled from the agenda days before it was to have been voted on. The Commission has initiated this proceeding, to a great degree, at the urging of Commissioner Adelstein who has been vocal in his concerns that the broadcast and advertising industries, in adopting advertising techniques to respond to technological and marketplace changes, has been exposing the public to commercial messages without their knowledge.  One of the principal practices of concern to the Commission, though not the only one, is embedded advertising (as the Commission refers to product placement and product integration into the dialog and/or plot of a program). While many of the trade press reports have focused on embedded advertising, this proceeding is wide-ranging and important to the broadcast, cable and advertising industries. Comments on the proceeding will be due 60 days after its publication in the Federal Register, with replies 30 days later.   We have prepared an Advisory, summarizing the issues raised by the Commission in this proceeding, which can be found here.

According to trade press reports, this proceeding was initially planned as a Notice of Proposed Rulemaking (NPRM), which would have proposed rules which, after public comment, could have been immediately adopted. After significant lobbying from the advertising community, the Notice was released in two parts. First, there is a Notice of Inquiry (NOI), asking a series of questions about the current state of advertising on broadcast and cable outlets, and asking how the Commission should amend its rules to deal with new advertising techniques. Second, the Commission’s announcement contains an NPRM with respect to certain specific items, including proposing to clarify the type of sponsorship identification necessary in television advertising, the extension of the sponsorship identification rules beyond local origination cablecasting to cable network programming, and clarification of the rules with respect to live-read radio commercials. The specifics of the NOI and the NPRM are set forth in our Advisory. 

Also of interest was the Commission's discussion of the background of the sponsorship identification rules.  In its discussion, the Commission raised a number of issues with common broadcast techniques and whether or not these were consistent with existing precedent - some of that precedent dating back 40 years.  For instance, the FCC cited a policy statement from the 1960s that stated that "teaser" announcements of a few seconds duration were impermissible if the sponsor was not clear from the teaser itself, even if the sponsor became clear in a later announcement in the same program.  The use of "cwickies" by the CW Network was identified as a potential area of concern by the FCC.

The Commission also questioned whether there was a need for sponsorship identifications in interview programs where there was consideration given to the program for the inclusion of broadcast material.  The FCC worried about "hidden commercials."  That discussion was most likely triggered by the concerns over Video News Releases ("VNRs") and by payments to spokesmen to plug government programs without disclosing that they had been paid (as in the Armstrong Williams program which was the subject of a fine about which we wrote here, and the recent controversy about ex-military officers who offered on-air opinions on the War on Terror without disclosing their financial connections to the Defense Department).  However, it would seemingly have a far greater impact.  In watching television programs in the last few days, I've been wondering how far the FCC's concern could go.  On virtually every talk program, from the late night programs like the Daily Show or the Leno or Letterman, to daytime TV programs like Oprah or the Today Show, one staple is the author who is plugging his or her book or the actor plugging his or her movie.  Could the provision of the guest on these programs for no payment by the TV show be construed as the receipt of valuable consideration by the book publishers or movie companies who are paying the costs of the promotional tour by the author or actor?  Watching another cable television talk program, I noted the presence of numerous coffee cups with a recognizable logo on the desk of the hosts.  Was that coffee paid for by the hosts, or was it provided by the coffee company just for the promotional value of having its cups appear on screen?  While FCC policy currently allows the provision of material used in a program at no charge if the material is not unnecessarily highlighted in the program (so the piano may be provided by Steinway and its logo may be seen when the focus is on the player's fingers, there is no tight focus on the logo nor is there a plug at the end of the concerto remarking on how amazing the piano was).  But would even the existing indirect plugs be permitted (without a sponsorship identification) if rules were adopted to address some of the concerns expressed by the FCC. 

The way that the advertising and broadcasting businesses work together could be profoundly affected by this proceeding.  Read our Advisory, read the FCC's Notice, and watch for the comment date.  Think about the concerns that should be addressed by the Commission before enacting any new rules in this area, and let them know of these concerns before any new rules are adopted. 

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The FCC has released its agenda for its December 18 meeting - and it promises to be one of the most important,and potentially most contentious, in recent memory.  On the agenda is the Commission's long awaited decision on the Chairman's broadcast multiple ownership plan relaxing broadcast-newspaper cross-ownership rules (see our summary here).  Also, the FCC will consider a Further Notice of Proposed Rulemaking on Localism issues (pending issues summarized here) following the conclusion of its nationwide hearings on the topic, as well as an Order and Further Notice of Proposed Rulemaking on initiatives to encourage broadcast ownership by minorities and other new entrants (summary here).  For cable companies, the Commission has scheduled a proposed order on national ownership limits.  And, in addition to all these issues on ownership matters, the FCC will also consider revising its sponsorship identification rules to determine if new rules need to be adopted to cover "embedded advertising", i.e. product placement in broadcast programs.  All told, these rules could result in fundamental changes in the media landscape.

The broadcast ownership items, dealing with broadcast-newspaper cross-ownership, localism and diversity initiatives, all grow out of the Commission's attempts to change the broadcast ownership rules in 2003.  That attempt was largely rejected by the Third Circuit Court of Appeals, which remanded most of the rules back to the FCC for further consideration, including considerations about their impact on minority ownership.  The localism proceeding was also an outgrowth of that proceeding, started as an attempt by the Commission to deal with consolidation critics who felt that the public had been shut out of the process of determining the rules in 2003, and claiming that big media was neglecting the needs and interests of local audiences.

The cable ownership item has also been hanging around for years, after previous attempts at rule changes were rejected by the courts.  Broadcast local ownership caps, including the rules that prohibit the common ownership of two television stations in the same market ("TV duopoly") unless there are eight independent television owners (and forbidding any combination of any of stations in the top 4 in audience ratings in a market), have also been thrown out by the Courts as being insufficiently justified, yet these rules were not mentioned in the Chairman's proposal as to the resolution of this proceeding.  See our memo here for a discussion of other broadcast ownership issues not discussed in the Chairman's proposals.  We will see if these issues are discussed in the final order in this adopted in this proceeding.

Finally, the Commission will consider an issue that only recently has jumped into play - the initiation of a proceeding to determine if the FCC's sponsorship identification rules are sufficient to deal with product placement in broadcast programming.  With the recent proliferation of TiVos and other digital video recorders ("DVRs"), some broadcast programmers have taken to including products in the body of programs so that they will still be seen even if the viewer fast-forwards through the true commercial message.  While we will not know the specifics of the FCC proposal until the meeting next week, we can expect that the Commission will want to consider tougher disclosure requirements to let the public know who is trying to persuade them to buy a product.

With all of these crucially important and very controversial items on the agenda, the meeting will be one worth watching.  And, with the Commission's recent track record of starting controversial meetings hours after their scheduled time (the last meeting starting after 9 PM), interested parties may want to bring a sleeping bag and some provisions in case the Commission again gets a late start on its work.

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The FCC has taken the unusual step of issuing a Notice of Apparent Liability, i.e. an announcement that it has fined a broadcaster, against two TV station owners for failing to provide a sponsorship identification for political material sponsored by another Federal agency--the Department of Education ("DOE").  The proposed fines for these two broadcasters totaled over $70,000.  In connection with the same broadcasts, the Commission also issued a citation against the producer of the programs for failing to include a disclosure of the sponsor of the programs, warning that company that it would be fined if it were to engage in such activity in the future, even though the entity was not an FCC licensee.  These actions demonstrate the concern of the Commission over programs that attempt to influence the public, particularly those dealing with controversial issues of public importance, where those who have paid to do the convincing are not evident to the public.

These cases all stem from programs associated with conservative political commentator Armstrong Williams, who was paid by DOE to promote the controversial No Child Left Behind Act ("NCLBA") supported by the current administration.  He did so on two television programs:  his own show, titled "The Right Side with Armstrong Williams" and on "America's Black Forum," where he appeared as a guest.  These shows were aired by various television stations without any sponsorship identification to indicate that Williams was paid by DOE to promote NCLBA on the air.

In one case, the television broadcaster received $100 per broadcast for airing Right Side, but failed to reveal that it had received any consideration.  The broadcaster claimed that the consideration received was "nominal," which is generally an exception to the sponsorship ID requirement.  However, the FCC noted that the exception for "nominal" consideration applies only to "service or property" and not to "money," holding that receipt of any money, even if only a small sum, triggers the requirement for sponsorship identification.

In the other case, the broadcaster received no monetary consideration for airing an episode of America's Black Forum titled "2004 Election Countdown," in which Williams discussed NCLBA.  However, the Commission noted that this program contained discussion of a "controversial issue of public importance."  Because the videotape was provided to the station without charge, however, FCC rules require sponsorship identification, even if no monetary consideration is received. 

If "controversial issue of public importance" sounds familiar, that is the same type of programming subject to the FCC's former Fairness Doctrine, which required stations to air opposing viewpoints.  Although the Fairness Doctrine is no longer enforced by the FCC (but see here for a discussion of its possible return), programming aired on a station that discusses such issues are still subject to the sponsorship identification rules.  Although the FCC did not discuss it in this case, the same rule that triggers sponsorship identification requirements for programming addressing a controversial issue of public importance also triggers a requirement that the station include in its public file the name and address of the sponsoring organization and a list of its principal officers or directors.  For Federal issues, the Bipartisan Campaign Reform Act ("BCRA") also requires that stations place in their public files information as to the amounts paid to the station for any such programming (including advertising spots) and the schedule on which those spots will be run - essentially the same information as is provided for a spot purchased by a political candidate.

This decisions comes less than a month after the Commission's decision, about which we wrote here, to fine a cable operator for running Video News Releases without proper sponsorship identification.  The decisions show that the Commission is intent on enforcing sponsorship ID requirements for sponsored messages delivered in the form of news....even if the broadcaster or cable operator is not fully aware of the facts as to who was paying for their viewpoints to be put on the air.

Although the broadcasters in this most recent decision are likely to appeal the proposed fines levied by the FCC, the lessons to be learned include:  1) receipt of any money in exchange for airing programming, regardless of how small the sum, requires sponsorship identification; 2) the receipt of anything -even a tape or script - dealing with a controversial issue of public importance triggers the requirement for a sponsorship identification; and 3)  broadcasters and cable operators have an affirmative duty to conduct a good faith inquiry into any programming provided by third parties in which political matters are discussed to determine if the program provider received any consideration.  Although it may be difficult to determine whether a speaker's statement of a political viewpoint is due to the belief of the speaker or is the result of the speaker receiving compensation (especially if that position is also the speaker's belief), the FCC has made clear that any programming where the speaker is compensated for presenting his views should make the public aware of who is paying to have that viewpoint expressed. 

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