Payola and Sponsorship Identification

In a Federal Trade Commission notice published last week, the agency warned the advertising industry that penalties could be coming for the use of deceptive endorsements.  The FTC not only released the notice, but it also sent a letter (a version of which is available here) to hundreds of businesses (a list is here) – advertisers, advertising agencies, and a few media companies – reminding them of the FTC’s concerns about deceptive endorsements in advertising.  While the FTC makes clear that this list of recipients of the letter does not indicate that any of them did anything wrong, it does make clear that the FTC takes this issue very seriously and wants to highlight the issue for the entire advertising ecosystem.  The letter reminds businesses that violations can lead to fines of up to $43,792 per violation and other penalties.

What are the FTC concerns?  The FTC said that prohibited practices “include, but are not limited to: falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.”  In other words, when an endorser says something about a product, the FTC is expecting that the endorser used the product and the statements that it makes about the product are accurate and reflect what consumers can expect from that product.  This is not the first time that the FTC has raised these issues.
Continue Reading FTC Reminds Advertisers That Deceptive Endorsements in Advertising Can Lead to Penalties

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The Federal Trade Commission issued a press release which warns advertisers to avoid misleading endorsements. The FTC also sent a

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • In anticipation of this week’s deadline for payment of annual regulatory fees – 11:59 pm, Eastern Daylight Time on Friday,

As Fall approaches and kids head back to school, be sure not to lose track of the regulatory dates and deadlines in September.  We outline some of those dates below.  One date is applicable to all commercial broadcasters, the obligation to pay regulatory fees.  While the exact due date has not yet been announced, look for that announcement any day as the Commission adopted the decision setting those fees last week.  See the Report and Order, here, for more details and to see what your station owes.  As part of that proceeding, the FCC also decided to seek comment on assessing fees in the future on users of unlicensed spectrum, especially large tech companies.  Many such users manufacture devices or provide other applications that use spectrum or otherwise benefit from FCC regulation, but right now do not pay fees.  Watch for comment dates on this proposal in the near future.  The Notice of Proposed Rulemaking begins on page 38, here.

Comment dates have been set for parties that want to weigh in on the FCC’s media ownership rules.  They have until September 2 to file their comments in the 2018 Quadrennial Review proceeding, which focuses most heavily on local radio ownership regulation.  These comments are to refresh the record with updated information about the state of the media marketplace since initial comments in the proceeding were filed over two years ago.  Reply comments are due by October 1.  We wrote more about this review of media ownership, here.
Continue Reading September Regulatory Dates for Broadcasters: Regulatory Fees, Media Ownership and Sponsorship Identification Comments, Auction Applications, and More

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The FCC and FEMA conducted their annual Nationwide Test of the EAS system on Wednesday, August 11. All broadcasters should

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • In the run-up to the August 11 National EAS Test, the FCC released a Public Notice reminding broadcasters to ensure

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The FCC this week adopted revisions to certain EAS rules. Among other actions, the new rules (1) will change the

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The Copyright Royalty Board (CRB) released its long-awaited decision on streaming royalties for 2021-2025, finding that the rates applicable to

The trade press in the last few days has been full of news about a letter of inquiry from two Congressmen to Spotify asking for details about Spotify’s promotional royalty rates where, in exchange for lowered royalties, songs to which these rates apply may be played more frequently, as Spotify factors in lower costs into its music selection algorithms.  The Congressional letter asks whether this promotional approach is already in operation, and if it will lead to a “race to the bottom” forcing lower royalties on artists, resulting in economic losses to these artists.  While the implication is that negotiation over royalty rates is a new phenomenon, in fact such negotiations are common in the digital music marketplace and, based on the way that Congress itself established the royalties for music services, they are inherent in that system.  In effect, this Congressional letter seems to be asking for Spotify to forego a private business transaction by which it lowers its costs of doing business through providing its business partners something that they want – more exposure for certain music.

Indeed, as we have written before, these negotiations over royalty rates are required to operate in the digital music marketplace.  Royalties paid to performers and record labels for the use of music by an interactive music service like Spotify are not set by governmental decision (there is no Copyright Royalty Board setting a default rate as there is for noninteractive music services – see our article here).  Instead, the rates are set by private business negotiations where there is a give-and-take between the parties over various considerations – including the promotional benefits when songs are featured on certain playlists provided by services like Spotify.  Certainly, there are counterweights to any downward pressure on all royalty rates, as listeners to an on-demand service like Spotify want to hear the hits.  So Spotify needs to pay for those hits to attract and retain its listeners.  In some cases, artists have determined that there is insufficient promotional value to the playing of their music on an interactive service and that no royalty would be enough to compensate them for perceived lost sales of their music when it is featured on an interactive service.  As we wrote here, these artists may deny an interactive service the use of all their music, or portions of their catalog.  In other cases, as in the instances that apparently gave rise to the Congressional letter, record companies or artists may feel that it is important that their music get exposure, so they will be willing to accept lower royalties in exchange for wider exposure to their music to consumers that such plays deliver.  In other cases, other promotional benefits may be given to the copyright holders for lower royalties (in fact, initially, the record companies received equity positions in Spotify, presumably to help convince them to make their music available at rates that Spotify thought it could afford).  Royalties in the interactive music marketplace are simply the result of a marketplace negotiation, as Congress intended when they adopted Section 114 of the Copyright Act providing for digital performance rights for sound recordings.
Continue Reading Congress Asks Spotify for Information About Promotional Royalty Rates – Is This Much Ado About the Way the Interactive Music Marketplace is Designed to Work?

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • At the FCC’s regular monthly Open Meeting, the Commissioners voted to adopt new rules mandating sponsorship identification of foreign government-provided