FCC Fines

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The potential perils of foreclosing on a radio station were evident in a Consent Decree released by the FCC’s Media Bureau yesterday, agreeing to an $11,000 penalty to be paid to the FCC U.S. Treasury before a station could be sold by a receiver to help pay off the debts of an AM radio station owner. The fine was imposed both for an unauthorized transfer of control of the licensee of the station, and because of the failure of the receiver appointed by the Court to keep the FCC fully appraised of the status of the control of the licensee company while FCC approval for the receiver’s control of the station was still pending before the FCC. What this case really shows is that in any foreclosure on a broadcast station where there are competing creditors, an uncooperative debtor or anyone else who could possibly contest the process, anyone attempting to collect obligations owed by a broadcaster needs to proceed very carefully, keep the FCC fully informed of the entire process surrounding the exercise of the creditor’s rights, and be advised by an attorney or advisor very familiar with FCC process in addition to counsel in the local court proceedings. Plus, local counsel and FCC counsel need to work together at each stage of the process to make sure that the proper approvals are obtained from the FCC before the local court actions are implemented.

This case demonstrates, like a case we wrote about last week, the complicated interplay between the actions of local courts enforcing private actions and the FCC enforcing the Communications Act. In this case, the orders of the local courts and other authorities dealing with the receivership of station assets and the stock of the licensee company changed over time. The failure to keep the FCC appraised of those changes really led to the $11,000 fine. The receiver initially asked that he be approved to become the “assignee” of the station, as the court order appeared to indicate that he would receive the assets of the debtor’s estate. In the FCC’s eyes, an “assignment of license” is when the assets and license of a station change hands, so that a new licensee is now the operator of the station. Here, later action of the local court changed the nature of the action to one where the receiver, instead of getting the assets of the debtor, would instead be receiving its stock. Where the licensee remains the same, but a new owner takes control, as was the case here where the receiver took control of the stock of the licensee, the FCC deems that to be a “transfer of control.” That was significant to the FCC in this case.
Continue Reading Broadcast Creditors Beware – $11,000 Fine Imposed for FCC Reporting Shortcomings in an AM Foreclosure Action

The FCC yesterday released an order fining a public broadcaster $10,000 for failing to prepare and place in its public file 13 consecutive quarterly issues programs lists. The licensee had pleaded that the radio station fine should be reduced given that the public file failure began when it acquired the station from a local…

The FCC’s new contest rules for broadcasters, allowing the disclosure of material terms on the Internet rather than reading them on the air, becomes effective upon the publication in the Federal Register of their approval by the Office of Management and Budget. OMB approval has been obtained, and the Federal Register publication is scheduled to…

In a Public Notice released yesterday, the FCC announced that all Form 398 Annual Children’s Television Programming Reports, which report on the amount of educational and informational programming directed to children was broadcast by any TV station in the prior quarter, need to be filed in the FCC’s new Licensing and Management System (LMS). The FCC is migrating all TV broadcast filings to this new system, and the next Form 398, due by April 10 to report on programming broadcast by stations in the first quarter of this year, must be filed in this system.  While LMS has been available for stations to use for these reports since last June, beginning with the reports due in April, no more reports can be filed in the FCC’s old KidVid Filing System.

The Notice was also interesting as it stated that broadcasters need to check their online public files to make sure that these reports are timely uploaded into the file. While the FCC is supposed to automatically link the form as filed with the Commission to the station’s online public inspection file, the notice states that station licensees need to manually upload the report to the online public file if the link is not made within 10 days of the end of the calendar quarter. So if the new system does not quickly upload the report to your public file, you need to do it yourself.
Continue Reading FCC Announces that All Quarterly Children’s Television Reports Need to be Filed in New LMS Filing System Starting March 31 – And that Stations Need to Make Sure that these Reports Reach the Online Public File By April 10

The FCC yesterday released, and trumpeted, a Consent Decree reached with Cumulus Radio for a violation at one of its New Hampshire stations where full sponsorship identification announcements were not made on issue ads promoting an electric company’s construction project in New Hampshire.  In the Consent Decree, Cumulus agreed to pay a $540,000 penalty to the FCC for the violations of the rules – plus it agreed to institute a company-wide compliance program to make sure that similar violations did not occur in the future.  In connection with the fine, the FCC released a press release highlighting the fine and the importance of identifying the true sponsor of issue advertising.  Travis LeBlanc, Chief of the FCC’s Enforcement Bureau stated “While failure to disclose these identities generally misleads the public, it is particularly concerning when consumers are duped into supporting controversial environmental projects.”  This fine is yet another example of the enhanced enforcement of all FCC rules by the new Enforcement Bureau, enforcement that has been controversial both among those being regulated and even among the FCC Commissioners themselves.  What was behind this extreme penalty, which probably dwarfs the profits that this radio station will make for the next several decades?

According to the FCC’s Consent Decree, the Cumulus station broadcast 178 announcements promoting the Northern Pass Project, a proposed hydro-electric project involving the construction of 180 miles of power lines in Canada and New Hampshire.  While the actual texts of the announcements were not provided in the FCC decision, and apparently included several versions of the ad, all supported the approval of the Northern Pass project, but none included the language “paid for” or “sponsored by” Northern Pass Transmission LLC, the full name of the company that paid for the ads and was behind the project.  Cumulus claimed that the station’s employees believed that references in the ads to the Northern Pass project were sufficient to inform the public of who was behind the ads, the FCC says that is not enough – the full name of the sponsor, making clear that it was the sponsor of the ad, is required.  This is not the first time that the FCC has, in the context of the Consent Decree, imposed a big penalty for a lack of a full sponsorship identification on broadcast programming but, outside of the context of “payola” violations, this may well be the largest fine imposed on a radio station for this kind of violation.
Continue Reading $540,000 FCC Penalty for Cumulus Station Missing Formal Sponsorship Identification on Issue Ad Campaign

In a recent decision, the FCC made clear that when there is a transfer of control of a station through the sale of the stock of the licensee company, the new owners are not absolved of any FCC violations that may have taken place when the old owners controlled the company. In this case, the old owners had various main studio, public file and issues programs lists issues, along with some compliance problems with late-filed Children’s Television Reports. While the FCC cancelled a fine on the licensee for reasons unrelated to the transfer of the stock (issuing an admonition instead), it went out of its way to emphasize that a new owner of the stock of a licensee company remains liable for the conduct of a predecessor controlling owner. The sale of stock, and the FCC’s approval of that sale, does not remove the threat of fines for violations that occurred when the old owner still controlled the company.

We wrote here about a similar warning in connection with a case decided several years ago. Assignments of license, where the FCC approves the sale of a station to a new licensee, seemingly do provide the new owner with some degree of protection against problems with FCC compliance that occurred during the watch of the old owner – but that is because the licensee has changed. (Note however, as we wrote here, if a compliance issue was discovered by the FCC before the sale, it is possible that the FCC could go after the old licensee for a fine, even after a sale has been completed). But, where the licensee remains the same, the FCC looks to the licensee company for compliance, regardless of who owns that company.
Continue Reading Buyers of Broadcast Stations Through Stock Transfer Beware – Liability for Fines of Prior Owner Can Still be Imposed After the Transfer

The FCC requires each full-power broadcast station, commercial and noncommercial, to maintain a public inspection file.  Even though this is a longstanding FCC requirement, there are always questions about what goes into the file, and how long those materials must be retained.  The week before last, I conducted a webinar for about 20 state broadcast associations on the FCC’s public file requirements for broadcast stations.  The slides from that presentation, outlining the requirements for the file, and the required retention period for many of the documents that make up that file, are available here.

While many broadcasters wonder if the public file is really worth the time that it takes to maintain given the nonexistent traffic to view that file at most stations, the FCC has continued to insist on its importance – fining or otherwise sanctioning stations for missing or late filed documents.  See, for instance, this case admonishing a TV station for failing to get all of its documents into its online public file in a timely fashion (an admonishment is the equivalent of putting a demerit in the station’s permanent record that could be considered as a prior violation in assessing fines if the FCC finds the station in violation for some other offence).  Particularly at license renewal time, a complete public file can be crucial, as missing documents lead to big fines (see, for instance, our articles here and here), and failure to disclose those missing documents can lead to even more harsh penalties (see our article here).  So maintaining an accurate and complete public file is important.  Quarterly issues programs lists are often the most overlooked requirement.
Continue Reading The Care and Feeding of the Broadcast Public Inspection File – Requirements and Retention Periods, A Presentation on the Issues

In a decision released last Friday, the FCC made clear how far it is willing to go in extending to noncommercial stations leniency for fines for violations of its rules. As we have written before, the FCC changed its policy in a case in which we were involved so as to mitigate harsh penalties for first-time paperwork violations when those violations were by student-run college radio stations. So, if a noncommercial student-run station is found to have missed several years of Quarterly Issues Programs Lists or failed to timely file Biennial Ownership Reports, instead of a fine that would exceed $10,000 had a commercial broadcaster committed the same violations, the noncommercial licensee will usually be able to reach a consent decree with the FCC, reducing the fine to something like $1000 or $1500, but also including a plan to ensure compliance in the future and a requirement for periodic reports to the FCC on the success of that plan. But the FCC made clear that this policy applied only to paperwork violations, and technical operations of the station would not be covered. In a decision released on Friday, the FCC demonstrated that for technical violations, and violations that go beyond your typical paperwork issues, those fines will be higher.

In Friday’s decision, the licensee of an Atlantic City noncommercial radio station filed its license application four years late, long after the station’s license had expired. Thus, for that period, it had been operating without a license. In addition, it had not prepared Quarterly Issues Programs Lists for the entire prior license term and the current one, did not file any Biennial Ownership Reports. Finally, the station had been operating with an antenna that was more than 2 meters below where its license said that it was supposed to be. While the FCC reached a settlement with the licensee, it broke out the “civil penalty” (i.e. a fine) paid by the licensee into two parts. For the missing ownership reports and Quarterly Issues Programs lists, a penalty of $1500 was imposed for violations that would probably have cost a commercial operator many multiples of that amount (see, e.g. our article here about a $10,000 fine for a commercial operator missing Quarterly Issues Programs Lists). But the FCC also asked for an additional $4750 for the late-filed license renewal and the antenna that was several feet below where it was supposed to be. While these might also be less than what a commercial broadcaster would pay for similar violations (see fines issued today, here, here and here, of $1500 each to three broadcasters who filed renewal applications late, but still within the period before their prior licenses had expired, noting that the typical fine for such a violation was $3000, but reducing that amount because of a clean record in the past or inability to pay a higher amount), they do demonstrate that the Commission’s willingness to negotiate minimal penalties for noncommercial broadcasters does have its limits.
Continue Reading The Limits on FCC Leniency on Fines for Noncommercial Broadcast Stations

Today, the FCC published notice in the Federal Register of the adoption of the new simplified rules for publicizing the material rules for contests conducted by broadcasters. This publication was for purposes of review by the Office of Management and Budget under the Paperwork Reduction Act, a review necessary before any new rules requiring…

A decision that noncommercial broadcasters should note was released by the Commission last week. The decision was one that upheld a 2012 consent decree where, to resolve objections against the sale of a noncommercial radio station owned by the University of San Francisco, the Media Bureau imposed a fine of $50,000 for a pre-sale LMA which paid the licensee more than the costs of the operation of the station (we wrote about that case and a similar case resolved earlier this year, here). While last week’s decision did not tread any new ground, the fact that the full Commission upheld a determination that a $50,000 fine was an appropriate sanction for a noncommercial station that entered into an LMA that paid it more than its out-of-pocket expenses reinforces the importance of assessing the consideration paid to any noncommercial broadcaster for the sale of programming time on their stations. A noncommercial station can accept funds sufficient to reimburse it for the costs of its operations during the time that the program aired, but it cannot receive more than that reimbursement in the way of compensation for programming time.

As we wrote in January following the release by the FCC of a similar decision, with a similar fine, in another case where a noncommercial licensee was paid more than its expenses by an LMA programmer, the FCC does not want noncommercial stations to be looked at as revenue generating operations for their licensees. If the station is paid for programming, any payments should simply cover station expenses. Last week’s decision looked at other issues too.
Continue Reading FCC Upholds $50,000 Penalty for Noncommercial LMA Where Licensee Paid More than its Operational Expenses