How do you advertise a business that sells tobacco products and has the word “cigarette” in its name? Apparently, you don’t, at least not on radio and TV stations – based on the teachings of the Public Notice released by the FCC this week, entering into a consent decree with a broadcaster. In exchange for
Last week, the FCC Commissioners appeared before Congress for an "oversight hearing." In such hearings, Congressmen often raise many different issues that may be on their mind – everything from issues about the administration of the FCC to detailed policy issues. In the hearing before the Senate Commerce Committee last week, one issue arose that broadcasters should monitor carefully to see what develops. During the course of the hearing, the FCC Commissioners were asked why the FCC had not taken steps to make sure that the sponsors of political advertisements were disclosed on the air. While the FCC rules already require disclosure of the sponsor of any ad, and enhanced disclosure for political ads or other "issue ads" on matters of public importance, what were the Senators after in this line of inquiry?
It appears that the Senators were asking the FCC to ask for more information about the source of the money used by political action groups to buy television advertising time on election issues – including the money used by PACs, SuperPACs and the other types of advocacy groups that spent so much money in the last election cycle, and are already beginning to run ads in states that have Senate races that are likely to be hotly contested in 2014. What do the FCC rules currently require?
The FCC proposed a $44,000 fine on a Chicago radio station for running 11 announcements that did not contain a sponsorship identification. This fine was not for 11 different announcements for different groups, but instead a single announcement run 11 times. Each airing of the announcement triggered a $4000 fine (which is the amount of the FCC "base fine" for a sponsorship identification violation). According to the FCC decision, a group called the Workers Independent News ("WIN") bought 2 two-hour programs, one one-hour program, and a number of shorter promotional announcements for those programs. 11 of the promotional announcements did not specifically state that they were sponsored. Instead, these 11 announcements – each 90 seconds long – consisted of an interviewer, identifying himself as being with Workers Independent News, discussing a local issue with local legislator. While the announcement did open with a mention of WIN, it didn’t specifically say that they had paid for the spot. Presumably, the FCC feared that the spot sounded like a program element, perhaps even a news interview (even though it ran in a commercial break), and held that the mere reference to WIN without any explicit statement that the spot was paid for by that group was not enough to convey sponsorship of the ad or to meet the FCC rules requiring sponsorship identification.
The decision here shows how seriously the FCC takes the issue of being able to identify who is trying to influence listeners by providing some form of valuable consideration to a broadcast station in exchange for the broadcast of a message. This issue is the subject of an FCC rulemaking proceeding, has previously led to fines for other stations (though rarely ones of this magnitude, even where the FCC has found whole programs or portions of programs to have been sponsored – see, for example, the cases we’ve written about here and here dealing with "video news releases"), and has become part of the proposals for the new on-line public file, suggesting that sponsorship identification information be made available for any "pay-for-play" programming in such a file. The issue has even become important in the online world, with the FTC issuing rules that require similar sponsorship identification even in connection with social media posts for which the author has received consideration (see our summary of the FTC order here).
The full text of the FCC’s Order overturning its 2007 decision on online public inspection files for TV broadcasters and the adoption of the Form 355 "enhanced disclosure form" has now been released. This order, adopted at the FCC’s open meeting this week (held on October 27, 2011, which we wrote about here), also contains a Further Notice of Proposed Rulemaking again suggesting an online public file, but this time it would be one hosted by the FCC. In reading the full text, more details of the FCC’s proposal become clear. As set forth below, the Order suggests everything from a future application of these rules to radio once the bugs have been worked out, to an examination of whether a station needs to save Facebook posts and other social media comments in the same way that it preserves letters from the public and emails about station operations, to a proposal for stations to document in their files information about all "pay for play" sponsorships. Comments on these proposals, and the others summarized below, which include a request for detailed information about the costs of compliance with the proposals, are due 30 days from when the order is published in the Federal Register, with Reply Comments due only 15 days thereafter. The FCC, after sitting on these obligations for almost 5 years, now seems to be ready to move quickly.
In reaching it’s decision, the order first discusses some proposals that it was rejecting – some for the time being. For radio broadcasters, the most important of the rejected thoughts was the extension of this rule to radio. The Commission noted that there were proposals pending and ripe for action as part of the Localism proceeding (which we summarized here), to extend the online public file obligations to radio. In this week’s order, the FCC decided that it was not yet ready to apply these rules to radio. The Commission noted that there might need to be differences in the rules for radio (implying that, at least partially, there might be resource issues making it difficult for radio broadcasters to comply with these rules), and also finding that it would be better to see how an online file works for TV before extending the rule to radio. But, from the statements made in the Order, there is no question but that, at some point in the future, some form of the obligations that are proposed for TV will also be proposed for radio broadcasters.
Also, it is important to note that the FCC’s Localism proceeding is not dead yet. While this week’s Order stems from the FCC’s Future of Media Report (renamed the Report on the Information Needs of Communities), and that report recommended that the Localism proceeding be terminated, this Order did not do that. The Commission notes its plans to start a new proceeding designed to force broadcasters to complete a more comprehensive report on their public interest programming. That proceeding may be where the looming Localism proposals are finally dealt with. Statements at the meeting and passages in the Order make clear that the examination of the public interest obligations for broadcasters will begin with a Notice of Inquiry, which is a most preliminary stage of an FCC proceeding (which would be followed by a Notice of Proposed Rulemaking after the inquiry comments are reviewed) and then an Order. So final resolution of these issues seem to be far down the road. If that is the case, will the Localism proposals stay on the table until the Order in this new proceeding is adopted? It is certainly unclear from the Commission’s statements thus far.
A consent decree entered into by a radio broadcaster, which included a $12,000 "voluntary contribution" to the US Treasury, demonstrates once again the FCC’s concerns about sponsorship identification issues. The week before last, we wrote about the FCC fine levied on a television broadcaster for not including sufficient sponsorship information when a "video news release" was broadcast on a local television station without disclosing that the video footage had been produced by the automobile company whose products were featured. The recent FCC Report on the Information Needs of Local Communities (formerly known as the Future of Media report) also focused on the need for more disclosure in connection with sponsored material carried on broadcast stations and other media (see our summary here). With a long outstanding Rulemaking proceeding on these issues that remains unresolved (see our summary here), the Commission almost appears as if it is setting its policies in these areas through case law rather than through the rulemaking process.
In this most recent "payola" case, a complaint was lodged against a Texas radio station owned by Emmis Broadcasting alleging that the host of one music program was receiving compensation from a local music club, a local record store, and a manager of local bands in exchange for featuring music on the show. The allegation contended that other local bands could not get their music played on this show without sponsoring Station events hosted by this particular personality. The Consent Decree does not resolve the question of whether these allegations were true, but instead requires that the licensee make the voluntary contribution, adopt procedures to make sure that Station employees are aware of the requirements of the sponsorship identification rules, and report to the Commission on a regular basis on the actions taken by the licensee to ensure compliance with the FCC rules. In addition to general requirements that the Station educate its employees about the sponsorship identification rules, the Consent Decree also contained conditions setting forth rules governing the relationship that station employees could have with record labels, even though the decree makes no mention of any allegations of improper consideration having come from record companies. These conditions were ones that appear to have come from consent decrees entered into with a number of broadcasters 4 years ago in the last major FCC payola investigation (which we wrote about here).
The FCC has issued a Forfeiture Order, confirming a $4000 fine levied against a Minneapolis TV station for airing a video news release ("VNR") without sponsorship identification. This case was previously discussed in our March 25th blog entry, when the Commission issued a Notice of Apparent Liability ("NAL") against the station for this violation. The primary lesson to be learned from this decision is that video supplied for free may require sponsorship ID if furnished for the purpose of identifying a product or furthering a sponsor’s message beyond any independent (i.e., newsworthy) reason a station has for airing it.
In arguing against the NAL, the station put forth several arguments, all of which were rejected by the FCC. The station argued that its use of a video supplied by General Motors for a story about the popularity of convertibles in the summer was equivalent to use of a company press release, which the FCC has found acceptable in the past. But the FCC said that use of a press release without sponsorship ID is permitted only if references to products or brand names are "transient or fleeting." Here, by contrast, the FCC found the identification of GM cars to be "disproportionate to the subject matter of the news report."
Politico ran a story last week, indicating that a number of radio talk show hosts were paid to endorse, during their shows, certain causes and groups that might be of interest to their listeners. The article suggests that the endorsements included live read commercials, as well as other comments made during the course of the program, as asides or during discussions of the issues of the day. While we have not reviewed any of these programs, and have no idea if the story is accurate or how any paid mentions were handled during the program, radio stations do need to be cautious in this area, and consider the sponsorship identification issues that may be raised by such conduct. And this consideration is not just in connection with political talk programs – but wherever any on-air talent receives consideration for making a plug for a product or service on the station.
This issue has already been a big deal on the video side of the media house, with both broadcasters and cable companies having been fined for including material in their programs without disclosing that they had received consideration for the inclusion of the material. Recently, we wrote about two TV stations who were fined by the FCC for broadcasting "video news releases", where the stations broadcast content from third parties which was deemed to have a promotional message included for the third party’s product, where the station did not specifically disclose that the video material had been provided at no charge to the station. The provision of the tape alone was deemed to be consideration. Almost four years ago, we wrote about another station that was hit with a fine when a syndicated TV talk show host was revealed to have been receiving government money to promote a government program (No Child Left Behind), was promoting that government program during his show, and not mentioning that he had received this consideration. The station was fined – even though they did not produce the program, as they had not inquired about whether any sort of consideration had been received by the host. The Communications Act puts the burden on stations to reveal sponsors when consideration has been paid for the airing of any programming, and the FCC has said that this burden requires that the station take efforts to make sure that all programming – even that coming from syndicators – complies with the rules.
The FCC today heard from its Future of Media task force, when its head, Steven Waldman presented a summary of its contents at its monthly meeting. At the same time, the task force issued its 475 page report – which spends most of its time talking about the history of media and the current media landscape, and only a handful of pages presenting specific recommendations for FCC action. The task force initially had a very broad mandate, to examine the media and how it was serving local informational needs of citizens, and to recommend actions not only for the FCC, but also for other agencies who might have jurisdiction over various media entities that the FCC does not regulate. Those suggestions, too, were few in the report as finally issued. What were the big headlines for broadcasters? The report suggests that the last remnants of the Fairness Doctrine be repealed, and that the FCC’s localism proceeding be terminated – though some form of enhanced disclosure form be adopted for broadcasters to report about their treatment of local issues of public importance, and that this information, and the rest of a broadcaster’s public file, be kept online so that it would be more easily accessible to the public and to researchers. Online disclosures were also suggested for sponsorship information, particularly with respect to paid content included in news and informational programming. And proposals for expansion of LPFMs and for allowing noncommercial stations to raise funds for other nonprofit entities were also included in the report.
While we have not yet closely read the entire 475 page report, which was tiled The Information Needs of Communities: The Changing Media Landscape in a Broadband Age, we can provide some information about some of the FCC’s recommendations, and some observations about the recommendations, the process, and the reactions that it received. One of the most important things to remember is that this was simply a study. As Commissioner McDowell observed at the FCC meeting, it is not an FCC action, and it is not even a formal proposal for FCC action. Instead, the report is simply a set of recommendations that this particular group of FCC employees and consultants came up with. Before any real regulatory requirements can come out of this, in most cases, the FCC must first adopt a Notice of Proposed Rulemaking, or a series of such notices, and ask for public comment on these proposals. That may take some time, if there is action on these suggestions at all. There are some proposals, however, such as the suggestion that certain LPFM rules be adopted in the FCC’s review of the Local Community Radio Act so as to find availability for LPFM stations in urban areas, that could be handled as part of some proceedings that are already underway.
The FCC has issued two Notices of Apparent Liability, each proposing fines of $4000 to TV station licensees, both for airing video news releases ("VNR") in news or information programs without sponsorship identifications. In both cases, the station received the VNRs for free, but was paid nothing for including them in their programming. The station had no indication that any other party supplying the VNRs were paid for providing them to the station. Nevertheless, relying on some very old statements of policy contained in an FCC Public Notice from 1975, the FCC concluded that the provision of the VNRs in and of themselves, constituted valuable consideration to the station, and the fact that they highlighted the commercial products of the companies that produced them "to an extent disproportionate to the subject matter of the film", mandated a sponsorship identification.
Both cases rely on an FCC Public Notice, first issued in 1963 and updated in 1975 (which I have been unable to locate on the FCC’s website), which sets out examples of how to comply with the sponsorship identification rules. These two old Public Notices were cited, but not reproduced, in a 2005 Public Notice, warning broadcasters to be careful with their use of VNRs. The specific example cited by the FCC was one set out in these notices dealing with a film on scenic roadtrips provided by a bus company. In the examples provided, the FCC stated that if the video did not show the bus company’s name, or the bus company’s name was shown only "fleetingly" in pictured of the highway in a manner reasonably related to the program, there would be no sponsorship identification requirement. In cases where the bus company’s name was clearly shown, "disproportionate to the subject matter of the film", then sponsorship identification would be required "as the broadcaster has impliedly agreed to broadcast an identification beyond that reasonably related to the subject matter of the film." Based on these examples, the FCC levied the fines in the cases just released. An examination of the facts of these cases is important to understand these fines and how far the FCC ruling in these cases extends.
Many broadcasters, both television and radio, have been running the NAB spots on the Future of Television. Those spots contain a description of the service available from local television stations and the new technologies that over-the-air television are in the process of deploying, and end with the suggestion that the Future of Broadcast Television lies in "technology not regulation from Washington DC." Obviously, these ads are geared to address some of the many legislative and administrative issues facing TV broadcasters – including the proposals to take back some of the TV spectrum for wireless broadband uses. Given that these spots could be arguably be seen as addressing Federal issues, to be safe, they should be identified as issue ads in stations’ public inspection files, and appropriate information about those spots should be placed in the files.
The NAB, in announcing the availability of these spots, suggested this same precaution. We’ve written before about issue ads, and the need to place notations in the public file about these ads. For instance, when stations ran ads on the broadcast performance royalty, we suggested that same treatment (and proponents of the royalty complained that broadcasters might not be making such notations). What needs to go in the public file? As the issues are Federal ones (as opposed to state and local issues that have lesser disclosure obligations), the requirements are similar to those that apply to political candidates.