The nuts and bolts of legal issues for broadcasters were highlighted in two sessions in which I participated at last week’s joint convention of the Oregon and Washington State Broadcasters Associations, held in Stephenson, Washington, on the Columbia River that divides the two states. Initially, I conducted a seminar for broadcasters providing a refresher on their
In the FCC’s recent Report and Order on Diversity, released earlier this year, the Commission announced new requirements for all broadcast station’s advertising sales contracts. The new FCC rule requires that all advertising contracts contain clauses ensuring that there is no discrimination based on race or gender in the sale of advertising time. This new requirement, which took effect in July, not only requires broadcasters to have these non-discrimination clauses in their advertising sales contracts, but will also require that broadcasters certify as to the existence of such clauses in their next license renewal application. Thus, to be sure that you can make such certifications, you must revise your advertising contracts to include a nondiscrimination provision, such as the one set out below, if you have not done so already.
These new measures are intended to increase participation in the broadcast industry by businesses owned by women and minorities. The Commission was concerned that some advertising contracts include either explicit or implicit “no urban/no Spanish” dictates. Such contractual limitations, the Commission explained, may violate U.S. anti-discrimination laws by either presuming that certain minority groups cannot be persuaded to buy the advertiser’s product or service, or worse, intentionally minimizing the number African Americans or Hispanics patronizing advertisers’ businesses.
We recently wrote about the controversy before the FCC about Arbitron‘s roll-out of the Portable People Meter ("PPM"). A number of broadcast groups, particularly those who target minority audiences with their programming, have requested that the FCC hold a hearing as to whether the introduction of the PPM in a number of major radio markets should be allowed, arguing that it has the potential to discriminate against minority audiences and to decrease diversity in the media. Arbitron and other broadcast groups have opposed the initiation of that proceeding, arguing that the regulation of a ratings service exceeds the FCC’s regulatory authority. Now, the opponents of the PPM have sough relief from a number of state and local governments, with the Attorneys General of New York and New Jersey filing suit to prevent the initiation of service by Arbitron. The office of New York Attorney General Andrew Cuomo issued this Press Release, and that of New Jersey Attorney General Anne Milgram issued this Release, citing the reasons for the suit. Both claim that the use of PPM technology, which they claim has methodological flaws, is a deceptive trade practice by a monopoly provider of services. The NJ suit goes on to claim that the disparate effect of the claimed inaccurate measurements on minority and ethnic stations violated the state’s anti-discrimination laws. Arbitron of course denies these claims.
The lawsuits have received substantial coverage in both the popular and trade press. Today’s Washington Post has an article discussing the controversy. Citing an interview with Alfred Liggins of Radio One, a leading radio group targeting African American listeners, the article suggests that the PPM may take a while for stations to adapt to, but once they do, even minority-targeted stations can obtain valuable programming feedback from the new methodology, as it allows feedback as the ratings information in days rather than the months that that the current diary system requires. This rapid feedback allows broadcasters to make programming adjustments that will allow them to maintain or improve their ratings position. Mark Ramsey’s Hear 2.0 blog looks at some anomalies in the PPM in specific demographics, but in another post concludes that despite whatever shortcomings the PPM may have, the industry needs to work with Arbitron on insuring that the PPM works – as an automated system is inherently more reliable than the diary method that relies on listeners recalling and accurately writing down their radio listening.
At its December meeting, at the same time as it adopted rules relaxing the newspaper-broadcast cross-ownership rules, the FCC adopted new rules to expand diversity in the ownership of broadcast stations, encouraging new entrants into such ownership. The full text of that decision was just released last week, providing a number of specific rule changes adopted to promote diverse ownership, as well as a number of proposals for changes on which it requests further comment. Comments on the proposed changes will be due 30 days after this order is published in the Federal Register. As this proceeding involves extensive changes and proposals, we will cover it in two parts. This post will focus on the rule changes that have already been made – a subsequent post will cover the proposed changes. The new rules deal not only with ownership rule modifications, but also with issues of discrimination in the sale of broadcast stations and in the sale of advertising on broadcast stations, new rules that leave some important unanswered questions.
The rules that the Commission adopted were for the benefit of "designated entities." Essentially, to avoid constitutional issues of preferences based on race or gender, the definition of a designated entity adopted by the Commission is based on the size of the business, and not the characteristics of the owners. A small business is one designated as such by the Small Business Administration classification system. Essentially, a radio business is small if it had less than $6.5 million in revenue in the preceding year. A television company is small if it had less than $13 million in revenues. These tests take into account not only the revenue of the particular entity, but also entities that are under common control, and those of parent companies. For FCC purposes, investment by larger companies in the proposed FCC licensee is permissible as long as the designated entity is in voting control of the proposed FCC licensee and meets one of three tests as to equity ownership: (1) the designated entity holds at least 30% of the equity of the proposed licensee, or (2) it holds at least 15% of the equity and no other person or entity holds more than 25%, or (3) in a public company, regardless of the equity ownership, the designated entity must be in voting control of the company.
As 2007 wound to an end, advertising issues figured prominently on the agenda of Washington agencies, including both the FCC and the FTC. While the FCC is looking at specific regulatory requirements governing broadcast advertising, the FTC is investigating the privacy issues raised by advertising conducted by on-line companies. In November, the FTC held a two day set of workshops and panels where interested parties discussed issues of behavioral advertising – advertising that can be targeted to individuals based on their history of Internet use, and whether or not regulation of these practices was necessary. The wide-ranging discussion is summarized on our firm’s Privacy and Security Blog, here. After gathering this testimony, we will see if the FTC decides to proceed to propose any regulations dealing with this sort of personalized, on-line advertising.
At the FCC, there are two separate proceedings dealing with advertising issues for broadcasters. The first came about as part of the FCC’s diversity initiatives adopted at its December meeting. There, the Commission determined that broadcasters will need to certify in their renewal applications that they have not discriminated in their advertising practices. While this proposal was adopted at the Commission’s December 18 meeting, the full text of the decision has yet to be released, so we do not know the specifics of this new requirement.