In a Public Notice issued yesterday, the FCC asked for comments from the public on whether broadcast stations should be able to enforce “Last In, First Out” (“LIFO”) pricing against political candidates in election races.  During the 45 days before a primary election or the 60 days before a general election, for advertising buys by a political candidate’s authorized campaign committee, a station cannot charge more than the lowest price charged to the station’s best commercial advertiser for that same class of advertising time.   What the Commission asks in its Public Notice is whether the practice of stations of deciding that particular classes of advertising time are effectively sold out discriminates against candidates – as candidates routinely buy their advertising time late in an election cycle.  These issues come up often, particularly late in any political window as demands on the advertising inventory of stations can become very tight as an election approaches.

So what does this petition ask?  First, let’s take a step back and look at how lowest unit charges work in broadcast (and cable) political advertising.  An easy example would be where a candidate wants to buy a fixed position advertisement on a radio station during its morning drive program.  For that ad, a candidate can be charged no more than the lowest price that the station charged to any commercial advertiser for a similar fixed-position spot that runs in that same time period.  Different classes of time have different lowest unit rates.  That means that, in that same morning drive program, there might be a lowest rate for these fixed position adverting spots that are guaranteed to run at the time that they are scheduled, but a lower price for spots that can be preempted by higher priced spots.  If there are different make-good rights associated with a class of preemptible time (e.g. one type of spot must be “made-good” by the station within a week if it is preempted, while another might just need to be made-good within the next month), both of those classes could have different lowest rates.  See more about lowest unit rate here and here. 

In political windows, and at other times when advertising is in short supply, stations establish policies that govern when an advertiser can buy time of a particular class.  If, for instance, a TV station knows that it will have 6 advertising breaks where it can sell local ads in a particular program, and it already has 6 advertisers who have committed to buy time of various classes during that program, it would make no sense to sell an advertising spot at the lowest preemptible rate when it knows that any new spot in that class will be preempted.  And that is where the issue seemingly comes up for the candidates whose representatives filed the complaint that led to the Public Notice.  While the complaint talks about LIFO policies, it seems that it really is asking whether a station can say that it is sold out of a particular class of time when it has sold all of the spots of that class that are likely to clear (actually air) on the station during the specified time period.

Basically, the complaint argues that candidates, who by the very nature of the political process buy advertising time at the last minute when they get funds to do so or as necessary to respond to campaign developments as election day approaches, can’t buy their advertising spots early.  So they rarely are one of the first advertisers to buy advertising time in a particular class of time.  While the complaint does not go into detail, it would seem that they are saying that, if, when a candidate comes to a station to buy spots, they are told that the time is already sold out at a particular level, as only spots that were previously sold to commercial advertisers have any chance of actually clearing, then the candidates routinely will not get the best rates or even access to the station.  Their only alternative to get spots on the air is to buy at higher rates to “bump” the commercial advertisers who bought the preemptible time, or to buy in different time periods or programs.  Based on its analysis, the complaint asks for alternative findings.

First, the complaint suggests that to be treated in the “same manner as the station’s most favored advertiser” (a formulation of the rules that has often been used by the FCC), the candidate needs to be treated as if their spots were bought early, even if they are purchased at the last minute.  Alternatively, the FCC is asked to investigate if a station ever has made an exception to its LIFO policies, and allowed an advertiser to buy in a particular class of time even though it came in later than another advertiser (or if it preserved a preemptible spot of a later buyer, bumping a spot of someone who bought a spot of the same class at an earlier time, when spots of higher classes are purchased and bump some of the preemptible spots).  If stations decide to bump selectively then, argues the complaint, the station needs to extend these preferences to candidates. 

A ruling in favor of the complaint could create all sorts of quandaries for the broadcaster.  If candidates are treated as if they bought first even when they didn’t, the candidate is not being treated in the same way as a station’s most favored advertiser.  Instead, the candidate is being treated better than the most favored advertiser.   Stations will never be able to tell commercial advertisers that their spots will clear as the political candidate would seemingly always be able to come in and purchase sold-out time if the candidate is treated as the first-in even if it buys last.  As these issues usually arise in the last days of the election, stations will be left scrambling to fill candidate orders at the last moment – and bumping their commercial advertisers – and the airwaves will be even more congested with political spots in the last days before an election than they already are.  Seemingly stations will rarely if ever be in a position to say that they are sold out.

This is obviously a very complicated issue that stations and candidates will need to carefully evaluate.  If you operate a station in a state that has high political demand, watch this proceeding carefully, as it could have a big impact especially during next year’s election period when the Presidential race will no doubt put huge demands on station’s advertising inventory as we near Election Day.  Comments are due on this issue on March 2, with replies on March 17.

For more on the FCC’s political rules, see our Political Broadcasting Guide, here.