In a consent decree released earlier this week, the FCC fined the parties to a LMA for an FM radio station in Colorado $8000 because the FCC believed that the programmer paid too many of the licensee’s expenses directly. According to the decision, the programmer paid certain debts of the licensee directly, including the licensee’s obligations on its tower lease, and the cost of its telephone line to the main studio. These issues came to light as the programmer filed to acquire the station from the licensee, whose station it had programmed for over a decade.
What does this tell parties to an LMA? Don’t have the programmer pay expenses of the licensee directly. The FCC requires that the licensee maintain control over its station. Some of the ways that this control is demonstrated is by having the licensee continue to provide the transmission plant for the station, and to maintain employees at the main studio and continue to have a phone line to those employees. The licensee should continue to write a check for those expenses, even if the money that fills the bank account for that check is paid to the licensee by the programmer. Failing to meet these obligations is viewed by the FCC as an unauthorized transfer of control of the station. This decision is consistent with past Commission decisions on these kinds of agreements (see, for instance, this case which we discussed 5 years ago). It is the FCC’s view that the licensee must continue that direct legal relationship with those that provide these services by paying them for their services – so it should write the check, not the programmer.